‘Go on offense when others retrench'

“Jack Welch and the 4Es of Leadership”
McGraw-Hill, 2005


This sounds like an unlikely advice in the latest book on the leadership style of former General Electric Chairman Jack Welch. After all, Mr. Welch is renowned to have a “rulebook” that the bottom 10 percent (of low performers) of the multinational giant “be fired every year.”

But, that’s the paradox of Welch and of how he views business, according to author Jeffrey A. Krames in this book “Jack Welch and the 4Es of Leadership.” Krames writes of his icon:

“You have to shrink in order to grow; you have to give up things in order to gain things. By eliminating jobs and closing unproductive factories … he was creating the means to reinvigorate the places that would spark the company’s transformation.”

Averse to keeping things hanging, Krames adds: “Welch understood that many apparent contradictions in business resolve in the face of a larger vision – and may not be contradictory at all.” This so-called propensity for giving low achievers their “walking papers” has not endeared Welch with professors of the finest graduate business schools – at least in the Philippines.

And yet this new book may provide the answer to the riddle, as it lists the 4E’S of leadership, saying: The 4E Leader has energy … energizes … has edge and … executes.

As the author describes the 4Es of leadership, one notes a consistent theme running through the discussion like a unifying thread. Jack Welch wants his leaders to have “energy” – the fuel that drives the business, the passion to get things done. He wants a leader who runs 95 miles per hour --75 miles elsewhere in the same book -- “in a 55-mile-an-hour world.” (Don’t try this inside the North Luzon Expressway!) And so he is impatient with those who lack passion for their work, and who wind up in the bottom ten percent in his organization.

The next attribute – the leader who energizes – is simply the logical consequence of a suitably driven leader, who then “sparks others to perform.” In this section, the theme recurs, quoting Peter Drucker: “One can only build on strength.” And those who are weak, reminiscent of the Darwinian “survival of the fittest,” must go.

Welch does not waste time on those who are weak links (or, pardon the pun, “weaklings”) – since how can you energize one who has no energy in the first place? I remember a training manager who dished out a homegrown philosophy with this bald statement: “Huwag magtiyagang maghanap ng kuto sa ulong kalbo!”

The Welch style acquires more edge as Author Krames discusses the last two qualities in the 4Es of Leadership – the Leader has edge and the Leader executes. The book confronts “people decisions” so that the firm retains the competitive “edge” – making the principle sound bland enough: “Use a differentiation system to keep the best and weed out the worst.” The author says it simply, downplaying the bloody process of thousands of heads rolling: “He cut costs relentlessly (including the payroll).”

Krames shows the results in two sentences: “When Welch took over, GE had revenues of about $25 billion. When he stepped down, GE was a $130 billion company.”

Ever emphasizing the need for passion and strength, the last E – the leader executes – should mean that the boss must have the managerial will to drive the company effort to its desired conclusion, meaning: positive results. The book emphasizes the need to improve the leader’s “execution quotient,” chalking up high scores in nothing less than the bottom line.

The book, meant to develop leaders around the 4Es Leadership Formula, succeeds in making us understand Mr. Welch better who actually had to adopt a “retrench” policy just so he can mount an aggressive “offense”. He narrates how the controversial retired GE Chairman likened his business team with Super Bowl winners or Olympic gold medalists with this obvious conclusion: He wants only the best in his team.

So the seeming ruthlessness, the apparent indifference to human dimensions are better understood now under the overall theme of “winning,” the title of Welch’s other book. The author, earlier in the book, gives a hint: “To Welch everything is about winning, winning in the marketplace, winning customers, winning new business, winning for shareholders.”
Come to think of it. A local business leader, when he took over a giant beverage company shocked the entire organization with downsizing decisions. Today, the company remains the most admired in Asia.

Is winning the only metric by which to measure the caliber of an executive? Or, changing the question, we ask: Can you forgive a CEO who, due to some other considerations, bring your firm down to bankruptcy? Is business a game, and heads roll as a natural consequence of the overweening desire to win?

Even philanthropists believe in the primacy of “doing well” as a pre-requisite to “doing good.” Read this book, wade through the many digressions of the author, and you will hit oil – or gold. You will have the answers, but you will also ask even more questions. Isn’t that the paradox of business?