In this case Winning is written by Jack Welch with Suzy Welch published by HarperCollins, NY, 2005. It is book which came from question and answer sessions after presentations from Mr. Welch. Many people had questions of the next steps, what does it take to win? Mr. Welch offers his opinions from his role as the former Chairman and CEO of GE and his present consulting positions. In his travels he had seen many things go wrong as well as opportunities for improvement.
To start with you need some basics – a mission and values statement that you can live by and do on a daily basis. Those statements on the wall must be the force that guides the business through the cycles of the business.
The next thing is candor – it is often easier in the company not to speak your mind, either because it is not really asked for or because you do not need to make a job threatening stand at the moment. However if you have candor you will bring more people and their minds (most of us are in the service business) into the conversation; when the ideas are given the ideas can be debated, be expanded upon and acted upon quicker; and candor cuts costs of meetings to confirm what everyone already knows. Candor works well with budgets and appraisals – for example if the discussion is the person is not good, the written appraisal needs to reflect that.
Coming from candor the value of differentiation comes next. Mr. Welch believes company’s win when managers make a clear and meaningful distinction between top and bottom businesses and people, when they cultivate the strong and cull the weak. If everyone is treated equally and bets are sprinkled all around like the rain on the ocean, business and people lose. The job of management is to know and invest in the strong businesses or product lines and look to selling the ones that are not performing well.
On the people side – there are 3 categories: top 20% of your people; middle 70% and bottom 10%. The next step is to act when people are in the category. If you are in the top 20% there are a variety of measures to keep them there and working hard. The middle 70% needs to be engaged, motivated and those with the potential to move up are identified and help do so. Note: everyone in the 70% needs to be motivated. The bottom 10% need to leave the company. The key to the system is before dividing people into the 20-70-10 portion, implement a candid, clear-cut performance system with defined expectations, goals and timelines with a program of consistent appraisals. The problem with not doing the 20-70-10 is when there is a downturn and people are let go, it tends to be the underperforming first and they do not know because their evaluations for years was doing good.
In addition to ensure everyone has a say or stays motivated, GE used the process of Work-Out. People came together to discuss better ways to do things, how to eliminate some of the bureaucracy and roadblocks that were hindering them. Management would look at the ideas and say yes or no to the recommendations and pick to resolve 25% of the concerns within 30 days. The idea is to ensure everyone is heard and respected and that is something everyone wants and companies need to do.
Linking to dividend paying stocks, in a world where government wants to treat and demand everyone is treated equally and respectfully, companies should be doing that. The company needs to invest and expand on its profitable lines and weed out poorer performers. The tough part is putting in a system which is fair and automatically lets you know where you stand. Every company believes they hire the best, however once an employee is in, most do not do a good job for the person beyond their job title. If you invested in a dividend paying company, it has products or services which consistently produce a healthy profit, it should be a no brainer those products and services receive the greatest resources. How a company treats its employees is harder to tell and various measures arise to try to compare. Most investors look at the top 10% to see why the top 10% leave the company.
There are more questions than answers, till the next time – to raising questions.