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Jack Welch on the Paradoxes of Business - Thursday, December 04 2008

Submitted by spherica on Thu, 2005-03-10 21:44.

In the process of selling businesses, reorganizing and strengthening other business units, Jack Welch also started a process of changing the culture at GE. He moved GE from a stogy bureaucratic organization to a more responsive entrepreneurial company. Part of the fall out of this change was the loss of 118,000 people from GE’s payroll in a Five year period. This earned him the name of Neutron Jack. In 1984 he was named the toughest boss in America by Fortune magazine. However, while he was either selling off or closing companies, he spent millions renovating the company’s headquarters and initiating a major upgrade to their Crotonville management development center. He attracted a legend of critics. 

Welch answered his critics by noting that business is in fact a series of paradoxes:

* Spending millions on buildings that made nothing while closing down uncompetitive factories that produced goods. Both of these actions were consistent with being a world-class competitor. GE could not hire and retain the best people, while becoming the lowest cost provider of goods and services without doing both.

* Managing long term, while eating short-term. Some companies squeeze out costs at the expense of the future, while others dream about the future but deliver nothing in the short term. Welch recognized that the true test of a leader was balancing the two.

* Needing to be “hard” in order to be “soft”. Making tough-minded decisions about people and plants is a prerequisite to earning the right to discuss “soft” values like excellence and the learning organization. These things only have meaning in a performance based culture.

These paradoxes helped Welch change the face of GE rendering the Neutron and Tough Boss titles marks of greatness, not criticism they were intended to be.