by Jack Welch
Wal-Mart’s low prices and its large workforce, of course, have a cumulative effect on the local and national economies where the company operates. Low prices keep inflation down, while the employees’ purchasing power keeps demand high.
This is evil?
Now, there are critics who assert that Wal-Mart undermines America’s economy by making it impossible for small businesses to get off the ground, let alone survive. But that claim just doesn’t make sense. As a competitor, Wal-Mart really goes nowhere near the technology startups that are the lifeblood of the American economy—the burgeoning little technology ventures in Silicon Valley, the futuristic biotech labs in Boston and California, the innovative Internet “plays” popping up everywhere. As for more traditional start-ups—the kinds making products—if anything, they can be helped by Wal-Mart, which has shown it will give a chance to entrepreneurs gutsy enough to play their game. We know, for instance, of a Miami businesswoman, Tam Tran, who bootstrapped Anise Cosmetics, a nail polish and treatment company, but was able to jumpstart it into a national success because Wal-Mart had the resources and insight to take a chance on her unique product line. Two executives from the company helped Tam formulate a new marketing message and improve her packaging before launching her products in 1,400 Wal-Mart stores. “They were creative and proactive with me,” she wrote us not long ago. “No other retailer took the time to even consider us. They were fair and most professional.”
OK, so maybe Wal-Mart doesn’t annihilate entrepreneurs. But as other critics claim, what about communities? Doesn’t Wal-Mart wipe out mom-and-pop stores—the little pharmacies, hardware, furniture, and grocery stores—which took much better care of customers and employees?
Alas, this line of thinking is a case of nostalgia for a time that never was.
Yes, Wal-Mart has meant the end of many local stores, and yes, at some of them, customers might have been greeted by name when they walked in the door. But it was these same customers who chose to shop at Wal-Mart when it came to town, because low prices, apparently, meant more to their quality of life than a wave and a smile. No conspiracy; just the free market at work.
As for better-cared-for employees—nonsense. In most small towns, the store owner was the one who drove the best car, lived in the fanciest house, and belonged to the local country club. Meanwhile, his employees weren’t exactly sharing the wealth. They rarely had life insurance or health benefits, and they certainly did not receive much in the way of training or big salaries. And few of these store owners had plans for growth or expansion; their lives were pretty nicely set. That was good for them but a killer for any employees seeking life-changing careers.
Critics also lambaste Wal-Mart for being brutal to its suppliers. It’s hard to negotiate, they say, with the company that “owns” the channel. Be it swing sets or beef jerky, you sell to Wal-Mart on its terms, or you don’t sell at all.
We’d say this is pretty true. Wal-Mart’s huge market share gives it substantial leverage over its suppliers. But in decades of negotiating with them at General Electric, for example, Wal-Mart buyers were never unethical or unfair. They were just tough. GE won plenty of negotiations with Wal-Mart and lost a few. But losing had its upside. It forced GE to look inside itself to see how it could do its job better—to lower its manufacturing costs, for instance, or to be more flexible in how a product was designed or packaged.
Ultimately, prices stayed low and the customer won. And that is what drives Wal-Mart—keeping its customers satisfied—and why it keeps increasing its sales and profits.
Yes, there will be casualties because of Wal-Mart’s success. Some competitors will certainly fold to its business model, and some jobs will be lost in the process. But in that way, Wal-Mart is no different from Toyota in the automotive industry. When Toyota arrived in the 1970s, it too was accused of upsetting the status quo. Decades have passed, and most people now accept that Toyota simply had a better way of doing business. Its value proposition to consumers raised the standards of the entire industry, requiring many car companies that had lost their manufacturing and design edge to wake up, reinvent their ways, and start making better cars for a lot less.
Toyota was a change agent, and as such, has done more for society than any failing company.
And that’s the Wal-Mart story too. It’s a great company that helps consumers and employees win and grow, and as long as it does, it will too—deservedly so.
THE REAL VERDICT ON BUSINESS
In the days and weeks after the Enron verdicts were handed down in May 2006, there was an understandable focus on the victims of the company’s collapse: employees who lost their jobs and pensions, shareholders who collectively lost billions of dollars, and residents of Houston, where Enron played a large charitable role.
These victims, it was said, could take only cold comfort in the verdicts. Yes, the system worked. In fact, the old system worked, since Jeff Skilling and Ken Lay were tried under laws that were on the books long before the passage of the Sarbanes-Oxley Act in 2002. But the convictions, everyone rightly agreed, could not bring back all that lost money or repair all those disrupted lives.
Nor, we would add, do they seem likely to bring back the optimism, confidence, and courage that made business so much fun.
Yes, fun. Remember? Before business-writ-large became demonized by Enron and other companies where wrongdoing was found, being in business felt different. The bursting of the dot-com bubble certainly had an impact, but we’re talking about a phenomenon that supersedes that. It’s hard to quantify, but we sense a kind of fear and trembling everywhere we go. People worry about taking risks. They’re anxious about the future. They’re hesitant to say they love work. In short, business has lost some of its spark. What an unnecessary shame.
Why? Because if there is one thing the corporate scandals have shown us, it’s that bad behavior is actually pretty rare. The Wall Street Journal estimates that about one thousand people have been convicted of corporate crimes since July 2002. That’s one thousand—not ten thousand or even a hundred thousand—out of the tens of millions of businesspeople. Not every case of bad behavior has been uncovered, but an overwhelming number of businesses play by the rules, and most of the time, the rules work.
We know that, and you probably do too. You just might be having a hard time admitting it these days. Some time ago, we were speaking to a group of insurance agents in Florida. They were a cheerful bunch until one man asked: “Is it just me, or do other people here feel ashamed to admit they work in business now? I mean, sort of…dirty? I know I haven’t done anything wrong and that I work with good people. But still…” There was silence, and then the crowd gave him a round of supportive applause. They were all in the tank together.
This sort of self-loathing isn’t the only worrisome fallout of the changed business climate. Managers everywhere tell us that they are spending vast quantities of time in defensive mode, heads down, chanting, “Compliance, compliance, compliance.” Now, we’re obviously for accuracy in reporting—and ironclad integrity. But the blood in the water, even five years after Enron, has too many businesses swimming in circles instead of charting new horizons.
Look, business isn’t perfect, and it never will be, as long as it is comprised of human beings. After all, we have laws galore, and people still drive above the speed limit, rob convenience stores, and of course, do far worse. The FBI raids one congressman’s office; another is indicted and resigns. A journalist at a respected newspaper fabricates stories for years. A man of the cloth takes what’s in the collection plate to fund a lavish lifestyle. Just as you could write off business because of such aberrations as Enron, you could write off all public servants, the media, and the clergy because a minute percentage of politicians, journalists, or padres. But you might as well write off all of humanity.
Business is a huge source of vitality in the world and a noble enterprise. Thriving, decent companies are everywhere, and they should be celebrated. They create jobs and opportuni
ties, provide revenue for government, and are the foundation of a free and democratic society. People who work at winning companies give back: they pay taxes, mentor in schools, volunteer at firehouses. So, don’t buy the line that Enron is business, and business is bad. Enron and the others were exceptions. Business is good. In fact, business is great.
Yes, Enron had its victims. The whole awful story is a tragedy. But we can’t let a relatively small group of companies rewrite reality and make businesspeople cower in shame and lose their courage. We can’t let business—society’s engine and great hope—be Enron’s final victim.
WHAT DO YOU CALL WINNING?
* * *
Early in my career, I heard it said, “There is no profit in winning in the world if you lose your soul.” I wonder now if that is true—if future historians will look back to our times and say, “They won personal fortunes in a new global economy, but they destroyed families, communities, and even nations.” My question to you then is: what do you call winning? Isn’t it about something more than the markets can offer?
—EDINBURGH, SCOTLAND
* * *
Winning, actually, doesn’t have anything to do with the markets. Or we should say, it doesn’t have to have anything to do with them. By our definition, winning is a personal journey. It’s about you as an individual setting a goal and achieving it. That goal could be creating and supporting a happy, healthy family. It could be founding or funding a homeless shelter. It could be teaching children to read; it could be sailing around the world.
And then again, it could be building a thriving company that succeeds in the global marketplace.
Winning is about reaching the destination you choose. It is not necessarily about profit, although it can be. But winning is, at its most fundamental, about making something of your life. It is about progress and meaning. It is about achievement.
Winning is not about destroying families, communities, and nations. Not even when the winning is done by companies taking part in the new global economy. In fact, your suggestion that economic success is somehow, by definition, morally corrupt is just dead wrong.
Look, winning in business is not a zero-sum game. In sports, when one team wins, the other loses. On the other hand, in business, when a company wins, there are usually lots of collateral winners too. A successful company’s executives and shareholders benefit, of course, but so do its employees, distributors, and suppliers. In some cases—Microsoft and Amgen are two good examples out of thousands—a company’s success has led to the creation of dozens of more companies, who supply or sell to the parent company. Sometimes they create whole new industries, with slews of new competitors. The most important thing is that all these new companies create jobs, the lifeblood of any society. When people have meaningful work, they have the freedom to set their own goals, not just survive. They can educate their children, travel, or give to charity. They can dream.
Along with creating jobs, winning companies pay taxes, as do their employees, funding countless programs, from schools to hospitals and courts.
What in all of this “destroys”?
Now, obviously, there are people in business who lose their souls to profit, as you put it. It’s an old story that, very unfortunately, gets regularly refreshed with some new account of corporate lying, cheating, or stealing. There are and always will be corrupt jerks out there, and not just in business, but in every field, from the priest-hood to politics.
But we strongly believe that most people in business, just like people in general, are good. They want to win the right way, cleanly, fairly, and by the rules. They want to start companies or help build them. They want to search every day for new ideas. They want to invent new technologies and ways of getting things done. They want a different future—a better one for themselves, their families, friends, and colleagues.
Will future historians look back on these people and say their definition of winning ruined the world?
Or might they say they made it a better place?
About the Authors
JACK WELCH began his career with the General Electric Company in 1960, and in 1981 became the company’s eighth Chairman and CEO. During his tenure, GE’s market capitalization increased by $400 billion, making it the world’s most valuable corporation. In 1999, Fortune named him the “manager of the century,” and the Financial Times recently named him one of the three most admired business leaders in the world today. Upon retiring from GE in 2001, Mr. Welch published his internationally best-selling autobiography Jack: Straight from the Gut. He now teaches at MIT’s Sloan School of Management and speaks to business leaders and students around the world.
SUZY WELCH, a noted business journalist, is the former editor of the Harvard Business Review and the author of numerous articles on leadership, change, creativity, and organizational behavior. She is currently a contributing editor of O magazine, where she writes about workplace and career issues, and Executive-in-Residence at Babson College’s Center for Women’s Leadership. Together, Suzy and Jack Welch write “The Welch Way” for BusinessWeek magazine, and their column, through The New York Times Syndicate, appears in more than thirty major newspapers around the world.
WWW.JACKWELCHWINNING.COM
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Copyright
WINNING: THE ANSWERS. Copyright © 2006 by Jack Welch, LLC. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books.
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