Sunday, September 7, 2003		Books

The company that Jack Welch built
Lalit Mohan

The GE Way Fieldbook
by Robert Slater. Tata McGraw-Hill. Pages 288. Rs 250.

A field book on any subject would normally hold interest for professionals engaged in that particular activity. But when such a book describes how a legendary business manager converted a $-25-billion company with $-1.5-billion profits into a $-123-billion giant, generating a $-10-billion bottomline, many would take notice.

Jack Welch held the reins of General Electric, a company Thomas Alva Edison founded in 1878, for 20 years till his retirement in 2000. He "built GE into the most successful American corporation of the late 20^th century," writes Slater, and was generally acknowledged as one of the most successful business leaders of his time.

The book has two broad sections. The first deals with strategy. The headings of some of the sub-sections explain what they are all about: People Are Your Greatest Asset, Reward Your Best People, Using the Brains of All Your Workers, Creating the Learning Culture, Stealing Shamelessly, Learning from Your Employees.

Time and again Slater delves into the emphasis that Welch placed on the human resources of the General Electric group. He regarded ‘people’ as the intellectual capital of the conglomerate. He encouraged them at every level to come forward with ideas. During his tenure the number of stock option holders went up from 500 to 27,000.

One of his early strategic innovations was the ‘Work-Out’ programme, which "aimed at giving everyone down to the factory floor level a chance to propose ways of improving GE’s day-to-day operations." He wanted his managers to stand in front of their employees and listen to what they had to say. Empowering the workers was an article of faith for Jack Welch.

Book 2 deals with Welch as a teacher; his lectures at GE’s training facility at Crotonville (‘The Harvard of Corporate America’), his interviews, letters and lectures and his role as a communicator.

A vital element of Welch’s strategy was ‘downsizing’. While achieving a ten-fold growth in revenue and earnings, he actually decreased the number of employees worldwide from 404,000 to 295,000 and reduced management layers in each company, earning the sobriquet ‘Neutron Jack’.

The former boss of GE has generally been allergic to bureaucracy; the American industry’s ‘military command-and-control’ system, as he calls it. He is of the view that "The less managing someone does, the better off the company is." Managers should facilitate, not control; be energisers, not enervators.

Under him GE notched a double-digit growth in earnings every year since 1992, an astonishing figure for a company of this size. "Jack Welch," writes Slater, "took the industrial giant, heavily dependent on old-line manufacturing, and turned it into a highly competitive, global-thinking, service-oriented growth engine." Today the company makes power generators and light bulbs, aircraft engines and locomotives. It dominates the financial services sector with GE Capital. It also owns NBC, one of the world largest TV networks. But it no longer makes toasters and ceiling fans.

In his attempt to make General Electric a lean and mean machine, Welch reduced drastically the number of companies and businesses. He was interested in a particular business only if GE had the potential be number one or two in the world in that area. In the restructuring process he increased the share of services (from finance to repairing aircraft engines) from 15 per cent to 75 per cent of GE’s turnover. He summed up the essence of his drive for globalisation in a clumsy, but apt, expression "boundarylessness". The boss wanted his executives to go beyond all vertical, horizontal, external and geographical boundaries. This meant borrowing ideas, removing barriers and reaching out to a vast global market.

To achieve the kind of excellence Welch was aiming for, GE he introduced the Six Sigma benchmark for controlling quality and productivity. In keeping with his unabashed advocacy of "stealing shamelessly", he picked the idea up from Motorola and modified it to suit GE’s requirements. In statistical terms it aims at no more than 3.4 defects or errors per million operations. This means 99.999997 per cent efficiency. Today Six Sigma is at the centre of GE’s growth strategy. Slater’s book gives a detailed account of how this strategy was implemented and also some several examples of how this was accomplished.

All these changes would have been impossible to achieve unless the company had its own in-house training facility. This was done at the centre at Crotonville in New York state, where the chief would himself go down to lecture. Such was his mesmerising appeal that one of the institute’s staff said of those attending the courses: "When a Harvard professor says something stupid, they say that’s stupid. When Jack Wech says something stupid, they take notes."

"The fieldbook genre," explains Slater, "is a relatively new one." Taking up the case of one company, the present volume shows how it grew so steadily and so rapidly and how others can implement its growth strategy. Consequently, the book is replete with diagnostic charts, exercises, questionnaires and graphics. The lay reader will want to skip these. Do that and The GE Way Fieldbook is an absorbing read. After all, it is always interesting to know how people make their billions.