Comments

That's nothing to thank Mr. Welch for.
Scientists dicovered stakeholder value a long time ago.
Seems like nobody cared - until now.

Posted by Andreas Buschmeier at March 13, 2009 11:31 AM

Well,knowing Welch's history, I wouldn't recommend anyone bringing him in - companies can't (and shouldn't) afford that kind of over-the-top, luxury-spending overhead...which leads right to "cut at the top."

Based on my experience in Corporate America, most companies could cut at least the top 2 levels of management and survive, even thrive. There are whole herds of "Exec VPs" and such - and people have no idea what they do. The old musical, "How to Succeed in Business" where the young man from the mail room set up his office and pretended to be an exec was only a slight exaggeration.

Posted by Mary Schmidt at March 13, 2009 11:35 AM

Brilliant comment Mary. Your experience of ‘Corporate America’ mirrors my own in UK healthcare. More front line employees and fewer managers will improve patient care – I’m convinced of it. I don’t support bringing in consultants as a first step. Most organisations can sort their own problems without bringing in consultants (even though I am one) I strongly believe companies can sort out their own problems and save themselves shed loads of money.

In my 35 years in healthcare I saw the birth of a whole new industry of accountants and managers who provide negative value to the patient experience. I’m staggered when I recall my last corporate healthcare job (I left 4 years ago). We sent invoices between departments in the same organisation to re-charge patient services – this is just crazy because each end of the process had someone in the finance department to process the invoice and of course those people needed a manager who needed a manager … and so it goes on - This is just crazy.

I don’t know about applying the same mantra to all industries but I am sure the brilliant statisticians (like my friend Steve Prevette) could prove objectively there is a correlation between reducing management and increasing productivity. My gut tells me I’m right – I wish I could prove it.

If you are out there Steve how about it? Do you know if there is objective evidence?

Posted by Trevor Gay at March 13, 2009 12:11 PM

GE lost its Triple-A credit rating today. Do you think they'll return mainly to producing products? Perhaps there is, after all, value in the diversity of industries and leaders. When one fails the others do not necessarily have to.

Instead of focusing on what is done best, many large companies and their many diverse subsidiaries, seem to go way beyond their core competencies and fail over time. Is there like a big lesson here?

I'm wondering if Mr. Immelt called Mr. Welch.

Mary - I always appreciate your comments. Thank you!

Posted by Judith Ellis at March 13, 2009 12:11 PM

No disagreement here...I suggest we reduce the number of financial analysts and increase the number of first line supervisors

Posted by Mike Neiss at March 13, 2009 12:17 PM

The complaint about layers of management is all well and good but let's ask why they're there. Very often, it's in response to a) legislation; or b) customer pressures. Examples?

Sarbanes-Oxley in the US is being repeated around the world, already in Japan and coming in Europe. Result: my company this year will spend around €2m partly to tweak our systems but largely to document and prove they do what they should; we've also appointed 2 people full time to administer the ongoing system the legislation requires. (We're not allowed to use the quality system paperwork, it all has to be in J-SOX format!)

And talking of quality: we do a fair bit of business in the auto industry. So we have to have a quality manual, because several very large customers will only trade with quality registered companies. Around Europe, we employ about a dozen people just to administer them. Now add in the Environmental systems some companies want. And there's data security looming on the horizon - one full-timer already!

We have to devote manhours and manhours to reporting how much plastic was contained in the packaging of some of the products we sold each year. We have to do spot audits of a certain percentage of the business each year - above and beyond the quality audits. And on it goes.

So whinge all you want about layers of management and non-value adding employees. But if you want to do something positive, please strip away the layers and layers and layers of legislation and red tape that is strangling modern business and let us get on with business.

Posted by Mark JF at March 13, 2009 12:57 PM

Mark...excellent points. One can look at the mess we have here in corporate governance and reach a pretty easy conclusion that Sarbanes-Oxley didn't really add the value that was hoped for. However, I still can't get past wondering if corporations didnt bring this on themselves. There is just too much evidence they will not self govern in the best common good left to their own devices. I am a free market advocate, but it may have gone too far for no oversight. I too come from a background in auto, largely in the quality field, and have seen the waste first hand, often forcing so much useless paperwork that the "real" work gets ignored. So you are right on there. I think a place to start is the wasteful reporting systems the corps come up with themselves...you are probably knowledgeable about Ford's 8D system..it turned out to be nothing more than punitive paperwork to cya. But your comments did cause me to think a bit...thanks

Posted by Mike Neiss at March 13, 2009 1:09 PM

Mark, your post brought to my mind the idea of most corporations always stating 'Our people are our greatest asset', but we some companies laying off staff and perks and not using talent development strategies.

If you lost the entire executive management team of a corporation, would profits really suffer? http://www.tompeters.com/entries.php?note=010851.php
Long-term you need some direction, but I'm sure mid-level managers would figure it out, they'd ask their front line.

Posted by William Yatscoff at March 13, 2009 1:49 PM

Mark - "In Search" page 236 considers trust to be a fundamental secret.
In the absence of trust, more and more money will be spent on controls.
This maybe one of the differences between leadership and management.
And the last one seems to be prevailing.

Posted by gerson barbosa at March 13, 2009 1:49 PM

Mike - I think all the rules and regulations, legal or internal, are probably introduced with good intentions. However, many of them seem to have been introduced by people who either don't know and/or don't care about their impact in the real world of work. I think it would be far more appropriate for rule-makers to think about what outcomes they want and design a few simple questions or tests to check for them.

Business bringing it on themselves? Yes - sometimes. But why does every company in the land have to be legislated for if a few rogue businesses doing something stupid?

Posted by Mark JF at March 13, 2009 1:54 PM

I agree with Mark. He addresses some of the points made in President Obama's Business Roundtable yesterday. The President said that he wants to hear more from business owners, as they are better equipped being on the frontline, to work with government in developing the necessary regulation. This seems most important in moving forward. But having the confidence that you will be heard is half the battle. It appeared that the business owners in attendance had this confidence.

On issues of the economy, taxes, regulation, competitiveness, deferrals, globalization, emerging markets, and so many others, the President's responses were in-depth and thoughtful. And he listened. The business owners seemed genuinely appreciative of the opportunity to express themselves and pleased with the process in moving forward. In fact, it was noted that many business owners present had been a part of putting a plan together that would be beneficial for both business and government.

I appreciated the discussion.

Posted by Judith Ellis at March 13, 2009 2:01 PM

Mike,

Accountability on the topside of an organization and beginning the cuts there? Now I'm sure I like you. Call me when you come to Colorado and we'll have a beer or soda!

In the process of trying to look good, things can go very bad. Financial institutions are a huge example of what you're discussing and postulating.

Well done...good post. Have you ever flipped pizzas or parked cars? I'm just curious.

Posted by Scott Peters at March 13, 2009 2:02 PM

Yow! This is my first time to read your blog although I have enjoyed your writing. This is a great message.
I have grown tired of seeing everything being done for the investor. Granted, they deserve to be considered because their money helps drive things. But, as you said, bending over backwards to please the investor may be done at peril to the health of the company. Although recent times have shown how flighty investors can be, I think if we educate and nurture our relationship with them, they can add to the well being of the company.

Posted by Mike Oline at March 13, 2009 2:18 PM

Thanks Scott. I really don't want to pile on the execs...most of them are really decent people trying to do the right thing. I just have a sense that many of them bought the idea that return for shareholders was not just the most important metric, but somewhere along the way they started seeing it as the singular metric. I am a full blown capitalist, and want my shares to do well. I have just grown convinced that profit has trumped value and that chasing the short term will get us into a much deeper hole. And while I never flipped pizzas, I did flip burgers, mixed drinks, and delivered more than my share of parcels in my days.

Posted by Mike Neiss at March 13, 2009 2:56 PM

Back when I was in my late twenties working in Corporate America and attending grad school, one of my finance professors said: "The goal is not to maximize shareholder return but a reasonable return "

Which meant to me, it's not the priority. Or another way to look at it, is "because of" what you are doing at your company, your investors will get a reasonable return.

Posted by Bruce Fryer at March 13, 2009 2:57 PM

Exactly my point Bruce! And in that reasonable return is also a reasonable investment in future returns.

Posted by Mike Neiss at March 13, 2009 3:02 PM

"In the absence of trust, more and more money will be spent on controls."

Gerson - This is so good. Thank you for that.

Posted by Judith Ellis at March 13, 2009 3:18 PM

Mike,

I too worked in auto. And couldn't agree with you more. I've seen companies try implementing the Toyota Production System and get it wrong, for many reasons. (And then, as you mention with Ford's 8D's -- end up creating more work and more waste by using the system incorrectly.)

My favorite reason, though, is watching the CEO or President (or even certain levels of management) expect people at the lower levels cut waste, without doing it themselves.

I tend to not like the examples of flying corporate jets or throwing parties, because that's just a symptom. But it's hard to inspire people to work hard to eliminate waste when they see the CEO continue doing what they've always done.

(Not to mention how many CEOs or senior level managers I've seen who really have absolutely no idea what goes on day-to-day in their organizations. Managers are too busy trying to make themselves look good to tell the CEOs the truth. CEOs are too often too removed and living in a different reality.)

Some people have been talking about the points made in this post for years -- decades even -- I wonder if the 'powers-that-be' are finally ready to listen. So far, for the most part, I'm disheartened as I see more of the same.

All the best!
deb

Posted by Deb Owen at March 13, 2009 3:19 PM

"Not to mention how many CEOs or senior level managers I've seen who really have absolutely no idea what goes on day-to-day in their organizations. Managers are too busy trying to make themselves look good to tell the CEOs the truth. CEOs are too often too removed and living in a different reality."

Amen deb - beautiful words - I rest my case of the last three decades :-)

Posted by Trevor Gay at March 13, 2009 3:27 PM

Mike,

Please, pile on the executives...I've worked with them and they've earned it.

I was a bartender during college. Mixing drinks is the best job ever. When you're the only thing between a person's seat and their drink, that's power my friend. Good post and don't feel bad about the execs, they've ruined many of my friends for years to come, if not forever.

Deb-----Wonderful post! You are the future of America and you're spot on. We are with you and behind you!

Posted by Scott Peters at March 13, 2009 4:35 PM

Time to polish off and use Dr. Deming's 14 Points. This post really reflects issues that Deming documented years ago - such as focus on short term gains - and are still with us.

Posted by Steve Prevette at March 13, 2009 5:19 PM

Hey Scott we have even more in common. I worked part time behind the bar in pubs for ten years or more while working full time as a manager in healthcare. Needed the money to scrape a deposit to buy a house.

There’s no pressure like the time the pub regular off the building site in his local pub looks you in the eye and says ‘This pint is crap’ You quickly appreciate there is no committee to refer this problem to; there is no time to consult a procedure (none existed in anyway); there is no CEO to refer the problem to; there is no point in saying ‘Can you put it in writing sir and we will consider this as part of our formal complaints system.’ ; there is no customer services department.

There is just you.

That’s front line work and like you say that’s power. You sort the problem or you die (metaphorically). No manager in sight in my experience. Probably busy writing policies and procedures :-)

Posted by Trevor Gay at March 13, 2009 5:29 PM

Hey Steve!! How are you?

Posted by Trevor Gay at March 13, 2009 5:30 PM

Steve...Yes! I had the great privilege of working with the good Doctor and still rate Out of the Crisis as required reading...but few actually get through it. I remember once when we were so proud of automating our machines to do their own X bar and R charts..He just looked at us and said, as only he could, "You're a bunch of hacks". Of course these tools were meant for the operators, not for the quality department to file away for those ISO audits... :)

Posted by Mike Neiss at March 13, 2009 6:03 PM

Jack Welch is brilliant & super wealthful successful & has a lovely & smart Suzy to hang with.

Jeffie Immelt is a total hung like a hamster failure & has killed $400B of the wealth of GE - mainly by buying off the corrupt GE Board who keeps his lazy fat backside in place per their worship of deviance.

I certainly get the part about snivling & nefarious front-liners - esp. the meth & crack dealing ones that'll addict your kids in a heartbeat!

I feel TPC should go to a true pay for play forum & only those with a certified net worth of a lucky $7M or greater be allowed to EVEN comment on this site.

Is it just me or am I truly the one who understands the criminal frontline that got us into this great recession despite the peace & love I am all about?

PS - times are so bad in England that "g" is now known as "-$g" & has been living under a series of bridges near Warwickshire.

-$g showed up on esteemed Trevor's doorstep begging for gruel & was given a vicious 5 minute caning by Mr. Gay "...here are some frontline love taps ..." Trevor laughed as he thrashed a wimpering -$g until he retreated to the bog.

"Like Singapore in merry olde England ... isn't it dear ..." Trevor remarked as he opened a 2nd bottle of fine red wine (after he put away his cane).

Posted by C Love at March 13, 2009 6:55 PM

C Love is back...I love it!

Posted by Scott Peters at March 13, 2009 7:30 PM

Brilliant C Love :-)

Have a good weekend. My cane is securely locked away for the weekend so Warwickshire is a safe haven for the weekly invasion of US citizens to Shakespeare's birthplace.

Posted by Trevor Gay at March 13, 2009 7:32 PM

Sorry folks, all this talk about organization and management styles is so ... academic.

This single most important thing is PRODUCTS. The stuff or service one sells.

Everything else depends on it.

What has America downsized? Pay? Benefits? Middle class? America has downsized the only thing that matters - products. CEOs have allowed Wall Street call the shots and those guys don't give a hoot about your products. All they want is your money, every quarter.

Remember how absolutely amazing America was back in the 70's to early 90's. If yes, what did you remember? Some fancy CEOs or management style? No. You remember PRODUCTS and the PEOPLE who originally created them.

We know Japan is a big economic and technological power. How many of us know the intricacies of Japanese management, culture, politics, financial market? We probably don't know a lot and shouldn't care. But we know and admire a whole lot about their PRODUCTS. Their fantastic array of consumer and industrial electronics products. Pick up a top line Nikon DSLR and admire my friends.

Now about Mr Immelt. He took the steady but amazing ship of Mr Walsh, an aircraft carrier that millions depends on for pension, and turned it into pocket escort carrier with a torpedo hole on the side. He took that gold-plated AAA rating, hard earned over decades from the amazing products of the industrial divisions, and gambled it on some foreign real estate and Wall Street securitized debt of late fame. Why the hell did he do that - gambled on businesses that has no, ZERO, relation to GE core business? Is Mr Immelt some kind of real estate whiz guru? Did he want to trump Donald Trump?

No he did it to please the Wall Street quick buck moneymen. He forgot what GE is all about. That is unforgivable recklessness. He was not hired to be a real estate man, nor to be reckless. Mr Immelt must be replaced by the next shareholders meeting.

Posted by TomK at March 13, 2009 10:57 PM

I could not agree more with Tom K’s comment on the necessity of PRODUCTS, beautiful eye-popping ones as TP trumpets. Design rules! It's very difficult to disagree with many of his words here. They ring incredibly true to me. But I did recently see an interview with Mr. Immelt on C-Span in the early hours one morning which seemed to indicate that he had a handle on things, perhaps not if the downgrade in credit rating is indicative of anything.

Did GE Financial and the purchasing of these derivatives begin with Mr. Immelt? How long has he been the CEO of GE? Didn't he come up through the ranks of GE? I think I read somewhere that Mr. Immelt's dad worked with GE for many years on aircraft engines back in the day. Speaking of products, that must have been day! But innovation today is pretty cool too. Tom K mentioned Japanese brands, but American brands, like Apple, are pretty awesome too.

Posted by Judith Ellis at March 14, 2009 12:37 AM

Trevor only some managers are spending all their time trying to look good. Those of us who view management as a craft and are motivated by building skills and great people not by climbing the ladder still at least try to do the right thing.

The company I have worked for has been medium sized and private (great fun) to huge and publically traded (boring but effective) through various mergers etc. In between we were owned some venture capatilists - that was tough (they demanded results!) but very useful because they put something INTO the business (advice, industry contacts etc) not just their money - sure their motivation was to make a big return but at least they worked for it.

So that brings a whole different argument the one that really matters - what type of company is the most fun to work for!

Posted by PaulH at March 14, 2009 4:42 AM

Let's be brutally honest here. Most Execs were trained in the art and skills of growing a business, which is the best of all worlds. However, other than turn-around specialists, few have been trained in the art of leading and managing in a sharp downturn. Much of what Tom and Jack are talking about is simply a straight to the gut talk about - "Get your priorities right". Obviously, too few business leaders know this dance.

Posted by Rodney Johnson at March 14, 2009 8:15 AM

Thanks Rodney. I certainly agree it is about priorities. A concern I have in today's business environment is how executives are being rewarded and the influence it has on setting those priorities. I would think there might be a benefit to having exec bonuses being paid on 3-5 year performance, not quarterly and annual stock prices. I believe the problem is quite complex with many forces influencing their decision making. We really need very smart, and very committed leadership.

Posted by Mike Neiss at March 14, 2009 8:37 AM

When considering companies, leaders, managers, globalization and compensation, I cannot help but to wonder about the flattening of hierarchy that the Internet has created. Many of these companies do not have the structure, power base, compensation and executive bonuses as the traditional ones. I wonder how this will play over time and how this may indeed affect traditional companies, including banks, newspapers, etc. Many have already been greatly impacted. We are most certainly in a period of deconstruction.

What most concerns me is how we will move forward. Some things seem to be occurring with or without hierarchical sanctions. We are most certainly in a period of deconstruction of what is considered stable and functional. While I understand the necessity to stabilize things, to stop the bleeding, I am equally concerned, as Deb pointed out of above, in how we will move forward. The necessity seems to be how we retain power (especially for those who have had it but not necessarily deservingly so), create structure and systems, become more competitive and innovative, and develop a core business ethic.

I would suspect that a large number of businesses that are on the Internet do not have the structure that is spoken of in this post and many are doing quite well...indeed. I was speaking to such a company this past week after having used their services for some months now and needed to speak with someone. To my surprise, though it should not have been, this company is located in Ireland. I spoke with the owner actually and he informed me that his company does very well. Its operations are not in site and physical structure, not to mention the often cumbersome traditional organizational structure that seems to be more irrelevant now than anything.

I have written here more than a few times asking where have the board of directors of Wall Street banks, including GE Financial, been? What has its role been? C-Love addresses a very important point here about board of directors.

Posted by Judith Ellis at March 14, 2009 9:44 AM

Mike Neiss,

You presented some great points in your post. The lack of leadership talent is noticeable now, and will become critical as the economy picks up. It appears that the generations following the boomers will create a dearth of business leaders.

You are also right about cutting material costs. A company must maintain quality. Today (always, actually), business owners/CEOs should partner-up with their suppliers and encourage/assist them in developing higher quality (at lower cost) materials, products, or services. It works every time.

I would combine the last two points in your post. Forget Wall Street and shareholders for now. Things are so bad today that shareholders are temporarily inured to a company’s low value. Instead, concentrate on fixing your company by eliminating layers of management, opening up your books, engaging your front-line people, and spending every hour possible with those people—they are the ones who will turn your company around. This is where “leaders” are separated from “managers.”

With regard to Jack Welch. I view Jack as a brilliant guy who did the exact opposite of what he seems to be saying today. To me, he is the guy who destroyed GE’s manufacturing capability and outsourced 100,000 American jobs. He also turned GE into a financial institution when he created GE Capital, which seemed to be solely to raise shareholder value and be the darling of Wall Street. Many financial institutions had a AAA rating the same time GE Capital did—and are now gone, or going. I wonder what would have happened if Jack had been in charge of GE all the way through today? We’ll never know.

Posted by Bob Foster at March 14, 2009 2:50 PM

Yes Bob...Jack Welch did do the exact opposite and the treasurer of one of my clients say Jack actually was the father of this short term thinking. That is why I like his apparent reversal in thought...maybe others will follow. And Bob, I like your blog..will be a visitor more often...thanks Mike

Posted by Mike Neiss at March 14, 2009 3:34 PM

Brilliant, Bob. Thank you for that. I especially appreciate your lean thinking process. It's so fundamental, so basic.

Posted by Judith Ellis at March 14, 2009 4:36 PM

Hi Paul – absolutely with you 100% – I’m sorry for my sweeping generalisations about managers. Of course many are like you - treating their authority as a privilege rather than a right.

You are right that the best managers see their role as 'building skills and great people' rather than ‘climbing the ladder.’

My regular ‘anti-manager’ comments are ALWAYS aimed at the opposite types - of which there are also quite a few in my experience.

Have no fear I am totally convinced you are not one of them Paul from all your comments over the years here :-)

Posted by Trevor Gay at March 15, 2009 3:19 PM

Mr. Welch certainly turned GE from a products company to a services company, both with GE Capital and with NBC. But before we demonise too far, especially for the outsourcing, let's not forget that a) at the time this was a very prudent move with the rise of China and e-trading on the horizon; and b) he made an old fashioned 'widgets' company aware that they had to deliver service along with the widgets and the widgets had to be what people wanted, not what GE simply found easiest to make. Consider GE's situation when he took over and ask if he was so bad.

I also think this, "That's not what he did when he was in charge" line is mis-guided. When he was in charge it was a very different world and he did what he thought was best for his company at the time. Now that times have moved on, I'd say his ability to change his mind and to propose different ideas is a very good thing and a sign that he's thinking about it. I mightn't agree with everything he says but I certailnly listen carefully to a guy with his track record.

Posted by Mark JF at March 16, 2009 6:00 AM

It's going to be interesting how GE deals with this. Not only will it's financial products be impacted but it's unique major selling point for the "big hard" stuff is the finance package it can put into the deal. I remember going to a services seminar a couple of years ago - A guy there from one of GE's competitors said that GE had forced them to go into other services because they simply couldn't match GE's finance deals. They competed on services, GE competed on finance.

Posted by PaulH at March 16, 2009 9:35 AM

Amazingly wonderful observations, Mike. That was a good one to read! I have always believed that you understand your potential and grow upto your potential. It is never growth based on feedbacks!

Posted by Vijay at March 17, 2009 10:32 PM