Well Jack, we’re delighted to see you here. You said you’d never write another book,
what made you write this one?>>Well, I went around the world for the
last three and a half years, talking to audiences like
this and listening to questions. The first book was an autobiography. It was all about me. And this book is trying to codify some
things that I learned in business, in response to
these questions. So this book, hopefully, is about you. And hopefully about audiences and some of the things that people have been
challenged by in picking a company to work for,
working for a bad boss, or anything.>>The book’s called Winning, so what is
Winning anyway?>>I think Winning is without question
about defining what your objectives are. Clearly laying them out, and then going
for it with everything you’ve got, and getting
there.>>So one of the things in the book that
you’re quite outspoken about is, candor. You say let me tell you about the biggest
dirty little secret in business. That in every culture, in every country,
in every society, and social class there’s this
lack of candor. Why is that so important, why is it so
hard, how do you change that?>>I think you have to build an
organization, it’s quite good in a small start-up, where people are
all comfortable with each other, they know what the mission is, they
understand the values, they reward the values, and they go after
it with a passion. In a bureaucracy, it tends to get more and
more subjective. The pressure is from the side, from the
top, from underneath. People are afraid to speak out. And what it does, it slows you down. It, really puts gum in the years. And it really doesn’t improve the
workplace. People, I’m being told what they’re doing well and how they can improve the
evaluation process is not frequent enough we get into
this I’m too kind to evaluate my team. This morning I was in San Jose with about
500 executives from start up companies down there and some
pretty strong tech companies Intel and others, and I asked the 400 people how
many people thought they had straightforward relationships in their
company with their peers and with their
associates. I didn’t get four hands. Four hands, that’s frightening. It’s sort of frightening that people are
sitting in organization and don’t feel that people are laying it on straight
and telling it like it. What’s your experience?>>I was lucky to work for a good company where over time we really
developed this honest feedback. But it wasnt that way when I first joined.>>It takes real time.>>it takes real leadership and
commitment, yeah.>>And [UNKNOWN] reward that value. In the end, you get the behaviors you
reward. If you reward candor, if you reward
straightforward talk, you will get it. If you, on the other hand, don’t do that. You’ll get close to the best behavior.>>You’ve also been outspoken, not only on
candor, but on differentiation. That part of candor’s to be honest with
people about where they stand. And, you’re noted for this top 20, middle
70, bottom 10,>>Noted is a kind word. [LAUGH] [NOISE].>>Tell us a little bit more about
differentiation, and, shouldn’t we be a little tougher on
student grading, perhaps? [NOISE].>>Well I think you, I think you probably
get a differentiating school. And you recognize who the top students are, and you recognize where the middle
is. And you recognize the bottom. The thing that’s crazy is, why is grading
and differentiation okay in the fourth grade through getting an MBA, but
it in no way is applicable to adults. It’s nuts. Why you would end up having this false
kindness, where you don’t tell people where they stand until
you run into trouble. So on my view is, take care of the top 20 and this isn’t a permanent thing, it
changes all the time. But take that top 20, make ’em feel loved. How you give them cash, give him rewards
in the soul, in the wallet. Do everything for him. That middle 70, show them what they need
to do to get in the top 20, and that bottom ten, tell them not that, that why they basically should move
on. And don’t do it in a guillotine job. Have a conversation that goes over a year
or so about what their shortfalls are. Tell them they’re in the bottom ten. Don’t give em a raise of any kind. Don’t give them 2 or 3%, that fake raise
that keeps people hanging around. Cut off the, the salary issue and then ask
him to leave. And, let’s say, over the next several
months, work together to get you in the right
place. That’s so much better. In these crazy situations, companies in,
in the Valley here, they run into trouble. What’ll they do? They gotta cut costs. They, they gonna have a layoff. They walk into people and they say, look,
Joe, Mary, we’ve got to cut you back, we’ve got to take you
out. We need to cut costs now. And they say why us? And they say, but you weren’t that good. And then they say, but we’ve been here 12
years and nobody ever told us that. That’s what happens in this false kindness
thing. People get misled. And then, if you do it too late in your
career, I maintain that not having the
differentiation is the cruelest form of manager. The cruelest thing. If you have the responsibility, if you lead people, they should know where they
stand. As you go out from school here now, with
shiny MBAs, when you go work with somebody, initially
it’s gonna be about you. You’ll be a leader. You’ll be an integral contributor, staring
in something and starting something up or doing
something else. But it’ll be about you. The day you become a leader, managing five, eight, ten people, it becomes about
them. And your future is tied to them. You no longer do the nitty gritty little
stuff. You build them into great people. And you get a kick out of that, and then you get the benefits of their success as
you go up. If you keep doing what you started doing
when you joined the place, doing your job, your project rather than building your
team, you go nowhere in a layered society.>>In the book, you use candor and
differentiation and a few other things, mission and values
and voice and dignity as what you call first
principles, you just got to have this in a company to be
successful. Are you surprised at how few organizations
really have these first principles?>>Shocked. I mean it is, mission and values are the most gobbley gooked conversation
pieces in companies. I mean, a mission statement ought to be so
clear. It ought to exactly know where you’re
gonna go. Define it clearly and go after it. Not have this mission of goodness and all
of these other words that get in our mission
statements. Make it very clear what you want to be. And then have the values, which I call
behaviors. Values in missions, values are behaviors,
the behaviors you want to achieve that
mission. And then you measure and reward as I said in the sole and the wallet, those
behaviors. And when people don’t exhibit those
behaviors and you want them and you finally have to part company with
people because they didn’t exhibit the behaviors and values you
wanted, you can’t say that they went home to spend more time,
personal time with their family. You gotta say here’s why these people
didn’t make it. They’re good people, they’re this and that
but they didn’t have our values. One of the craziest things you see in
corporate America, it’s run by lawyers in some ways, where, where you
end up with integrity violations. And people say, well, we had to let so and
so go. They want to spend more time at home. You got to say, you got to hang them
publicly for doing bad stuff. You’ve got to set the tone of your values
in your behavior, and if you’re doing it right, you can’t be
afraid to put it out there. And so I think that you set a mission, you
set the behaviors, you operate in an open
candidate, you said it takes time, build trust, transparent
fashion and you give every employee voice and dignity and you’ve got a
foundation that means something.>>You mentioned trust and I know in your
section, in your chapter on leadership and one of the key things
leaders have to earn trust. Nobody gives it to you, you’ve gotta go
out and earn it. Do you, I’d like to ask you a question today with compensation and
benefits and stuff. Do you think it’s possible that executives
can be paid so much that it’s really hard for them to win the
trust of their people? If they don’t think it’s right or fair?>>We, we have to lay out clearly what the
game is. I mean, we have a free market system. We have capitalism. It has its flaws. There’s no way to come to a perfect answer to every single, what the absolute salary
ought to be. But it ought to be pretty transparent. People ought to know what the
opportunities are, and, and the opportunities to grow on, and, and to
get it. And I don’t think salary into a, into a
lack of trust issue. I think if you, now if you got a jerk boss
getting too much my money and not building a team, of
course you’ll have it. But if you’re building a team together
around a common vision, you alone have it. But the whole issue of salary and
severance, and all these things that are big popular
subjects today. And, severance in particular is, is one
that drives everyone crazy. And, the problem with severance is, we
just one with Callie PP Arena here in this area, where she got $22
million for leaving. The problem is not Callie with her 22
million. The problem is the board at Hewlett
Packard that did not, did not have a succession plan in
place. So that when the existing CEO failed, and
they threw him out, they had to go out and get somebody, and they
had to offer them the world! To get them. If they had that succession plan that
wouldn’t have, most of these problems come at the front end of
these deals. They, they get written up and beat up on
the back end, but the problem came on, the
front end. Tyco for example, you probably all know
about Tyco and Krovloski and all the mess that they
had. They didn’t have a succession plan. So they went to Motorola to get the number
two person there, Ed Breen. Now Ed Breen is not gonna go to this tarnished place that’s a disaster
without a package. Well they had backup [UNKNOWN] up, to get,
to get Ed Breen to come there. Ed Breen had had all the negotiating
tools, because, there was nothing there. When, when we had our success session at
GE, we had three contenders at the end: Jeff ML, Bob Nardelli, who went to Home
Depot, and Jim McNerney who went to 3M. All very capable. All equally capable in, in many, many
ways. Jeff got the job. Bob goes to Home Depot. They didn’t have a succession plan. Jim goes to 3M. They didn’t have a succession plan. Jim and Bob, Jeff got a raise. Nice going, Jeff. Congratulations, you got a raise. [LAUGH] Jim and Bob, the trucks were
loading the money on the back of the van. [LAUGH] Cuz those two companies didn’t
have succession plans. So my argument is, succession plans are
the answer to controlling these outrageous severance and these other [INAUDIBLE]
where you don’t have these deals.>>Bob was here earlier in the year for a
view from the top, and he looked like he was
doing well. [LAUGH]>>You say something in the book that,
didn’t shock me, but it may shock a lot of
people. And that is, you said, you know, the chief
human resources officer is at least, if not more important, than
the chief financial officer.>>And I’ll tell you, we’re not even close
to what we have to be in this area. [COUGH] most unfortunately, I was in, I
was in Mexico giving a talk with my wife Suzie, who, by the way,
wrote this book. So I, I’m just a mouthpiece in this game. We were in Mexico for 5,000, 5,000 HR
people were, were there. We asked, I asked a question to the
audience. Raise your hand if you’re perceived by the
organization to have a seat at the table equal to the CFO. I didn’t get 50 hands. Now if I asked that question at GE, there isn’t one HR person that wouldn’t raise
their hand. Every one of them knows they’re equal to or more important than somebody counting
the numbers. I always liked to use the, the analogy if
you were coaching a baseball team or a football team, would you wanna hang around
with a team accountant, or the head of player
personnel? If you wanted to build a great team. The accountant can’t do a damn thing for
you, except tell you how much money you got left to offer to Barry
Bonds, or anybody else. But he can’t do much else. The idea that CEOs hang around with the
CFO, the grunt. The guy with the green eye-shades is
crazy. The HR person is the person that if, if they’re not the, most companies may make
them the, uh-. Picnics and plant newspaper people and the
dental plan fell out the forms. But if they use them right and they build
seasoned executives into the, these jobs they’ll be an enormous aid
to building great teams. And so we, we use the line that great HR
executives are really [INAUDIBLE] in listening to
people and parents in dissembling kids. And so they’re saying there’s an enormous
need to have these HR people be upgraded, be the
stars of the organization, by not having HR
professional’s amendment, but taking people that are in line jobs, that have a
touch. And, and [UNKNOWN] the reason why HR
convinced the only reason that HR is not received as a very
important function in companies. Everybody thinks they’re HR experts. How many of you don’t think you’re a
people person? [LAUGH] Okay? I mean, everyone thinks they are. Who, who needs a helper? Is the view. It’s wacky you need somebody that’s there
and I’d like to see a Sarbane’s Oxley law that went in, that
that were to hang triggered companies that aren’t straight forward
with the appraisal process that have the same rigor around appraising and evaluating
people as they do around the financial statement. If I didn’t have my way they’d have a
Sarbane’s Oxley that would apply to that human resource process to put discipline
in the company then you get better [UNKNOWN] from
it.>>As long as we’re on finance. Another thing that goes on a lot in the finance industry is merger and
acquisition activity. You have a chapter on M and A and among
other things you say that cultural fit is more important
than strategic fit.>>Or certainly equal to.>>Or at least as important.>>Yeah.>>And that it, but there is no cultural
fit side to an investment bank.>>That’s why I, that’s what I found out.>>[LAUGH] I mean, look I, I’m sure a lot of you are going to the Morgan Stanley thing, Goldman
Sachs and, and some of the great firms on Wall Street again but
you, you all know because you’re going there it’s, you,
you eat what you kill. And [LAUGH] it’s an environment around
where the measurement system is really my bonus, my bonus, my
bonus. And it’s a whole different pattern of
behavior than it is in a company that’s trying to transfer
ideas across businesses as a, a a, a, a desire of boundaryless
thinking is moving people around the world to build leaders
and our individual contributive stars. It’s a whole different culture, but back
to the, the MNA chapter Bob. We spent a lot of time going over some of
the aspects in MNA. One of the silly things that hap, well
first of all, one of the, one of the big, big sense is
deal heat. And we’re seeing deal heat right right
now. Money is relatively inexpensive. Look at the the bidding for MCI. I mean, it might have been a good deal at
6 billion. I don’t know how, other than, two
investment banks trying to make a killing, how it can be a good deal at 9 and a half
to 10. and, and now I don’t know where it’s, it’s
gonna stop. But as once you get a deal heat, all
rationality goes. So we talk about the, the deadly sins of
mergers and acquisitions. First one is [INAUDIBLE]. Young investment bankers like you will,
will be driving poor dumb CEO’s to do some of the stupidest things in the world,
[LAUGH] when they get at a deal reached. And, and their challenge is to kick you
out as it gets too hot. [LAUGH].>>Not Stanford NBA?>>No, no.>>[LAUGH].>>So and, and, and we talk a lot about
the conqueror syndrome, where you go in and you, you have all the answers and you throw out all, all the knowledge that was
there. Because the, the, the, the conqueror wins,
we talk about for, for, for a quiet person, the dumbest thing that quiet
people ever do, is when somebody buys the firm they’re at, they pout about the deal
and they resist. Let me tell you, if you spend billions of
dollars for a company, and you show up to see the new people, and they’re just giving you a sour face and a resistance
look. People will, will keep positive buy in
people with average IQ a lot more than they’ll keep resistors
with brains. It’s a crazy syndrome but it happens all
the time. That we sisters are not an attractive
bunch in the take over process. You’ve seen that in companies you’ve been
involved in. So we got a chapter here in winning that, that, deals with all the personal
elements. Seven deadly sins and they, emanate in,
in, in the book.>>You also have a chapter about a subject
that’s very much on the hearts and minds of our students that
is called, the right job. And you say a great job can make your life
exciting and give it meaning. The wrong job can drain the life right
outta you, so how do we get the great job? So I think that’s [LAUGH] what people
wanna know.>>Page 257. [LAUGH] We have a grid for five, five
clear cut things to then think about. One is people. When you look for a, for a job, be sure
you look for people that are like you. They laugh at the jokes you, you laugh at. They think the way you think. They have the same sensibilities. If you’re a nerd, go hang out with nerds. [LAUGH] But don’t end up confusing the
issue. Never have to put, put on a persona to be
in the job you pick. As far as opportunities are concerned,
always go to a company where there’re smarter people
around you than, than you. Where you can learn where you can grow. Don’t go to a place where you’re gonna be
the smartest person in the place. It doesn’t do much work for you. Now, I’m, I’m all for, for, for startups
and, and, and entrepreneurs. And that may be right there, if you’ve got
the idea, and you got the vision and you’re going after it
and I applaud that totally. But if you’re going to a company, that’s
worthwhile. Options are the third thing we talk about. If you’re going to a company and you’re not sure exactly what’s right. I would go to account company that has a
brand. A brand counts. Whether it’s Microsoft, J and J, GEE, you,
you, you pick the company. Wells Fargo, you pick the company. You pick a company that has a brand
because if things aren’t right for you in your first job, your brand will be very
important as you look to the next job. And people, in the company screen we used to always want wanna hire people from
DuPont. They probably weren’t any smarter than
anybody else, but we thought they were. And the same thing’s true at Microsoft. People around here wanna get a Microsoft
person. And, and they probably have a pot full of
duds. But nevertheless, [LAUGH], it’s, it’s a
it’s a wonderful, it’s, it’s another one of those chits you
have. you, you’re gonna ask [INAUDIBLE] when,
when he comes here.>>Whether he has a pot full of duds.>>Of duds.>>Yeah, right. [LAUGH].>>No, but have, but having options based
on the brand is, isn’t a blunt. The, the fourth one is ownership. Own the company you’re going to. Don’t take responsibility for the job, job
you take. Don’t blame it on somebody else. My mother wanted me to always live here. I’ve got a spouse and I can’t travel. If you’re, if, if that’s the case, make
that deal going in knowing it. But don’t then come home and kick the dog or punch the wall because that, that’s
what’s happening. And finally, work content. Be sure the work turns your crank. Don’t go to the job for an extra $10 or
$15 or whatever that number is. Go to the job ‘cuz the work turns your
crank. It really turns you on. Excites you every day. That’s what you gotta work for. You can’t go to one because, it’s, well,
it’s a job but now as I look for another one. The money, the money’s good I don’t like
the work but I, but I want some money for a while until I get
work I like. I mean those things don’t work. So I think this grid is worth, I, I gave
this grid to my, to my radiologists’ doctor ‘cuz I had some
back problems and I wanted to play golf. And, he gives me needles. With steroids to try and get the back to
calm down. [LAUGH].>>So I gave him the page 257, and he’s
got his lead apron on and he’s givin’ me the shots and he’s
sayin’, sheezus, I gotta get outta here. [LAUGH].>>He said, I don’t like any of these
things that I’m doing. I don’t like the people, I don’t like the
work. [LAUGH].>>You also have a chapter on a subject
that’s very important to a lot of our students, and
that’s work life balance. And you say, look, you can get it, but you
have to earn it.>>Yeah, I think it’s right out the crack
question Bob, I, they, they’re a company. You wanna be in a family friendly,
friendly company that’s for sure. But I do think the, the work life bad
balancing is not in a company brochure. That’s a recruiting tool. What it really is, is an old-fashioned
chit system. You over deliver, you make your boss look
good. You put chips in the bag. When you need flexibility, whether it be
for ballet or whether it be for yoga or whether it be for a kid that, whatever it
is, you pull the chips back out. But it is a old fashioned chip system. And those that asize and those that
deliver get to earn flexibility. And it’s something that is clearly earned. And it’s not something that is handed to
you at the beginning of a game. We, we tell this story in the book of this
job where a friend, a friend of ours was running a
small operation, 60 people. One of the women in the job had a second
child. She had been in the company 8 years, she
was a real star she came in and said look I, I wanna work at home on Fridays and
Mondays and, come in the office for 3 days a week. Is that okay? And they said, absolutely you’re doing a
great job. You’re doing it fine and then they’re,
they’re gonna do it. Immediately, down the hall prances this
young man 6 months out of school, and he says, I’d like to get
Friday off and Monday off. And, the boss said, why? He said I wanna practice, perfect my yoga
practice. And the boss, she, she said, no. No way. And he said, you mean to say you’re making a judgement, and you’re, you’re not
qualified, I’ll tell you that right now, to make a
judgement between motherhood is more valuable than
my yoga practice. You have no right to do that. And she said I’m not making that
judgement. I’m making the judgement that you haven’t
earned a thing in the 6 months you’ve been here, therefore, you don’t get the flexibility, you’re barely doing your job
now [LAUGH]. So, that’s the way it’s always going to
be. It’s, you deliver, you get flexibility. You, if every time your boss has a report,
or needs something, desperately wants to get it and you say, I can’t be there,
things aren’t gonna go right for you. You’ve gotta find your systems that allow you to overdeliver, and then earn
flexibility.>>Jack, obviously, you’ve learned about
management by doing it. I mean, you were a manager and you learned about leadership by taking on a management
and leadership role. But since you’ve left that active life,
how much just talking about it and going around to
places like this do you think, have you learned more
by having to reflect on it, write books or
not really?>>Oh, well, I mean, you, this is a lot
easier to reflect back on, as to how it works, than
when you’re doing it. Doing it is a bunch of chaotic steps. It now looks neat. [LAUGH] But I mean, doing it are a series
of trials and err-, trial and error. This is codifying everything I know. I think I’ve, I’ve learned more in the
last 3 years than I learned in the first 40 at
work.>>Really?>>Just by understanding what I did, or
what we did. How people responded. What worked and didn’t work? I mean, when you’re, when you’re doing it,
you’re in the battlefield. Shrapnel’s coming from all sides. You’re not thinking through a lot of these
moves. I think hopefully, this book will give
people some insights that can be useful. I mean I, I’m a lot smarter writing it
today than I was when I started. So I’m I’d say that I’ve learned a hell of
a lot now.>>Thank you very much for being here
again. We really appreciate it. A question that we’ve been debating in the
Government and Politics Club was actually raised by Obama and the duds
I guess of Microsoft.>>Now that, don’t overstate that case,
[CROSSTALK] I said they may have a few duds in the middle of all
of Microsoft. We won’t misquote you, Jeff.>>Just Kidding, just kidding. So one of the, the issues they recently
pulled back their support for this bill to, for gay rights, I guess in
the state of Washington. And so the question he raised, and I’d
like to hear your view on, is how involved, or where do you draw
the line as a corporation in social policy and what’s
your view on the involvement of corporations in social policy that may not
directly relate to their business per se?>>You know in my view, and, and don’t
forget I’m from a different era. My view was clearly that you stayed out of
that. That you didn’t get involved in government
social policy and that GE state 18 miles is away from it during,
during my time. The time I don’t it’s our business right? Our, our job is to be competitive, provide valued products and services that
create jobs. And create an environment where people can
grow and flourish. That was our job. And to be non-discriminatory. But not to go to tell, [UNKNOWN] involve ourselves in government pol, policy
regarding those things. Social policy. [BLANK_AUDIO]>>Next.>>Yep, thaks. So here at the business school. We are given a lot of models and a lot of
ideas and we spend a lot of time thinking and talking about what we
would do if we were in certain situations or with
certain information. One of the things that still bothers me a
bit that I’m hoping you can shed some light on
is, when you’re out working it’s my, at least,
past experience that you’re overwhelmed with information,
that it’s not given to you. In a, you know, these are the three things
you oughta think about. So pick a model to put it into. And if you can shed some light for us on
how you take maybe 1,000 pieces of
information, find the 5 that are valuable to make a decision as a manager,
and then, then we can apply the, you know, whatever model we
have to those [INAUDIBLE].>>Well I, let me just start out by
saying, the day you go to work will be the last time you’ll think
about a model, I think. [LAUGH] Okay? [SOUND] [LAUGH] You will be involved in
real life situations. [COUGH] Well your, [COUGH] excuse me. Well your pattern of recognition will
come, come into play. Where, where all your experiences will
build, and build, and build til where when you see
something, you’ll act. Or you’ll say for example, the real estate
boom is going like this and you’ll drive into a town and
you’ll see 50 cranes everywhere. And some cherubic kid will be in, not you,
but somebody 5 years from now will be in pitching you
on, and one more reel, just one more building, and
you’ll say, look I’ve seen this before, these things don’t
grow to the sky. There’s way, there’s o, over capacity now
and there’s cranes as far as I can see. That’ll be more valuable insight to you
than any of the models you study. You’ll say get out of here, we’ve done
enough in this segment in this cycle. Let’s get him on the down side when
vacancies are high we can buy a third on the dollar. And, and so you’ll give a whole series of life experiences where your pattern
recognition will come into play. You’ll meet people in the interviewing
pro, process. You’ll do X % for 3 or 4, 4 years of
hiring. You’ll get better and better but you’ll
never get perfect. But you’ll spot a phony better. You, you, you’ll understand that degrees
mean one thing, but the day after they show up degrees
mean nothing. It’s really what they can deliver. So all these things will come to you, from
that. And I, as far as being over deluged, I, I
never found that to be a problem. I, I, I always found, you know, you’re
always short of data. You’re really always short of knowing the
final answer that’s why you gotta go. And you can’t wait for all the data. I mean anybody can make the decision in
hindsight. So you have to go with your gut, based on the experience, life experiences you have
had to hire, to invest. The fire, all those things.>>Thanks.>>We have a question over here. Dr. Welch, what is most important to you
and why?>>[LAUGH].>>You realize Jack, that’s a question we
ask all of our students that are admitted. What’s most, what matters most to you and
why?>>I, I think it changes in time. If I were here at this point in time
getting a job and paying off the loan would be
highly important. [LAUGH] All right? [COUGH] at my stage in life, teaching,
learning and money is not important. So teaching and learning is absolutely
critical to me. I love the learning process. I love the being a better family per,
person than I ever was when I was working. I, so it’s not to give back here. I like gi, giving back. I teach principles in the, in the New York
City school system. I was never gonna go teach in a city’s
principles in New York City, but when I was in my day job and today I do
that, I love doing it. So and I think things change, I, I don’t
think at any one moment in time I think at any one moment in time
that you, you can have the answer. But as you go forward hopefully, things
will change. So, I, I don’t have a particular thing now, other than learning and teaching, and
giving back. [BLANK_AUDIO]>>Where’s Derek? Should we admit him or not? [LAUGH]>>I had a question around, sort of, the ethical problems we’ve seen in a lot of
corporate America.>>Yep.>>And my question for a senior executive
like you is, is GE’s ability to stay out of these
problems based on, you know, each executive reflecting on
what sort of decisions they wanna make before they become into
situations that could be gray zones? Or is it more about setting up systems
around you and people around you to help you make the
right decisions?>>Clearly the latter. You couldn’t have 350,000 people without
systems. And you don’t have the perfect 350,000
people. But you have, you don’t see old line
companies getting in fundamental trouble. Because they’ve done everything wrong over
the last 100 years, [LAUGH] and there’s a simple, when, when I joined
GE, the first 6 months I was there, I was quizzed
constantly about price fixing, cuz GE come off a price fixing
case in the 50s. So policies were in place, we’ll never do
a price fix I don’t think again, because we’ve all been
trained we have 18 ways to catch it. In the 80s when, when I was CEO, and Cap
Weinberger was going through the $400 hammer, and the, and the toilet
seat that cost $600, et cetera. And they had a big fraud waste and abuse
thing. We had time CAD mess. And some guys were, were putting projects on one thing, and versus another pro,
project. Now in the organization. And we had a fine, and it was a big scene. We’ll never have one of those again. I mean we may have one, but it won’t get
any, any size, because we got 18,000 policies and quizzes and
tests to go through to solve ’em. So, process is what happened. If, if you go back to the Enron and the
[UNKNOWN] cases. This is a classic case of what can go
wrong. Enron, a good pipeline company, got energy
from point A to point B, had good processes in place, but
it was boring. So they decide to go into trading and they
get the slick back MBA’s with their suspenders and the whole
program and they go out and start trading
electrons. First energy, then electrons, then
everything else. And, and then, and then broadband. They start [UNKNOWN] but there was no
culture to take care of that. There was no rules of the road. There was no processes. Arthur Anderson. Arthur Anderson used to be green eye shade
grunts for 100 years. They were a great accounting firm. There wasn’t enough money in accounting. So they entered consulting in the 80s. And you’re all familiar with, you know,
what’s now [UNKNOWN]. But that was a piece of Arthur Anderson,
on the consulting side. They actually ended up in court in the 90s over dividing the profits between the
two branches. Accounting and consulting. Now, when you’ve got that, that sense of,
in a, in a company, how can you have values and, and processes
to control what was going on? They were chasing the money. So, breakdowns come when massive cultural
changes occur, or when there are no systems in place cuz
com, companies have started, like WorldCom, from a motel
in Hattiesburg Mississippi with a net of a bunch of small
acquisitions. No integration, no processes. So the, the answer to your question is
clearly the latter point you made. Companies have to test I mean in Gena for
example their online tests that people have to pass to to the, before they
can go to the next job. It’s all about integrity and violations
that gray areas that might occur. So, company does spend a lot of time and
rigor to ring that out of the system. [BLANK_AUDIO]>>We have a big queue here. Let’s work it down a little bit. Next, from the left wing, here.>>Jack growing up as a kid, the big thing
you heard about GE was GE, we bring good
things to life. Since you’ve left, the models changed to
GE imagination at work. I guess my question to you is what does
that really mean and how do you see that fitting in with the
direction of the company?>>Well I think that they, what they
worked out was [COUGH] based on my best understanding, they looked at
we bring good things to life. And it looked like it was your father’s
program. And imagination at work, convinced some ad
kid that that was more young, youthful. So, new, new team, new eyes, new slogan. Nothing wrong with that. That’s a view that they have now of going
after that’s what change is all about. And it’s supposed to be a more exciting
forward looking image for the company. But that’s, you know, we’ll see. What, what, what really matters is, is the
company delivering and they are now. We’ve just had a great quarter, we’ve had
a great year and and I, and I don’t think whether the slogan
changes or not is is critical. But I’m, you know, I’m totally supportive
of it. [BLANK_AUDIO]>>Thank you. You’ve referred several times today to
giving people rewards of the wallet and rewards of the
soul. I’m wondering if you could speak a bit
about how as a manager you thought about motivating people by giving them the
right combination of rewards that would work for
them.>>Yeah. I would, [COUGH] here’s one of the
problems. If, if, if you asked managers tomorrow, if
you all went around and did sort of a middle managers and job managers you,
and you asked the question, do you celebrate
enough? You would be shocked at how everyone will
say no, not here, we never celebrate. You know, it never happens. One of the things you can do is, when you
go out, is have small celebrations. For every little victory on the way to
reaching your vision. Excite people, give them better jobs. Send them off to training. Do things for them that aren’t
particularly right on the button merger but they’re
recognition. And you gotta do that as a, but again,
plaques don’t substitute for checks. And so you’ve gotta have a combination of
checks and plaques. And you can’t, and you can’t, Investment
banking is mainly checks. But in most corporations, people try and
get that balance right. And recognition, awards, patents, all that
stuff can be based on celebrations. And I think that’s the job of the manager. To make, to come up with that balance that feels right for your team that turns them
on. But, go ahead, follow up.>>Thank you. And how can you figure out what’s right
for your team, given that each of us would have a different answer
to what matters most to us?>>Because, ‘cuz I can’t give you the, the
concrete answer you [UNKNOWN]. You know, your question just raised that
each of you have a different view. Your job is to sense that remember, the
day you become a leader it, becomes about
them, right? If it becomes about them, your job is to
walk around with a can of water in one hand and a can of
fertilizer in the other hand. [LAUGH] And think of your team as seeds
and try and build a garden. Now you’ll up with some weeds. And you’re gonna have to cut out some
weeds. [LAUGH] But, that’s your job. It’s about building these people, you know
in my case, if, if they were dealing with me, they’d wanna
make me feel 6’4″ with hair. And that’s what you’re gonna [LAUGH] wanna
try and do. You’re gonna try and do that with your
team. And, and only you will know the change. Some people will be mo, mo, motivated by
this, some will be more motivated by this, but you’ll be the if you will, the orchestra conductor that will bring it all
together. And I can’t tell you what makes them what
is the right answer. I know one thing. Money counts. [LAUGH] It’s important. It’s an important part of the mix. And people get all caught up too much in
the plaque and the other stuff. You can’t leave that out. But I would err a little on the, on the
monetary side of the reward system.>>Dr. Welsh, I’ve admired your managerial,
leadership for a long time. So it’s an honor to have you here.>>Thank you.>>Thank you. When you spoke about getting our, the
right job for us through your first point, which I
really loved, is to go somewhere where we feel comfortable,
where people would laugh at the same kinds of jokes that we
would. My concern about that is that research
tells us that we feel most comfortable around people who
are similar to us. Be it in gender, or race, or nationality,
or socio and economic background. How do we maintain comfort but also push
ourselves to places where we can learn from a diverse environment and you know, learning from people who are different
than us?>>It’s a great question. I mean, not, but you wouldn’t wanna go to
a place where you couldn’t be yourself. I don’t think you wanna be [UNKNOWN], you
don’t wanna mirror on any, everyone you, you look at
looking like you. I think you do though, wanna be in a
place, we, we tell a story in the, in the book and I’ll now
confess it’s Suzy. We’d talk about this woman who went to
look for a job and she was looking at
consulting firms at the time, she was I think getting her MBA from the other school on the east
coast. And she showed up in this place, and she came to this one place, and the three
people waiting on the top of the stairs, and she walked in, and she fell and did a face
plant. [SOUND] Like that. And she said hi, I’m Gracie the ballerina
the ballet teacher and the three of ’em looked at her like
this, you know. What are you, weird? [LAUGH] At the end of the day, they gave
her an offer and another consulting firm gave,
gave her an offer. She was much more comfortable going to a
place that she didn’t look weird with a firm, with a line, which I think is
funny, and she thought was funny. Hi, I’m Grace, the ballet teacher, as she
did a faceplant. And they were quite serious and stiff
about the whole event. And it didn’t feel like a very good place
to hang out. Both consulting firms were great. Top three and why not go to the place you
wanted to be? I don’t think it re, it relates to, to a
personal style, as much. It’s just sensibilities. If the sensibilities are the same and,
you, if, if, if you’re somebody that likes to have fun and relax a lot, work
like hell, but, have fun doing it. And you go with a bunch of pompous stiffs,
that’s never gonna be any fun for you. And, and they can be all different shapes,
and colors. That isn’t the issue. It’s the sensibilities. [COUGH].>>With so much external praise for your management style, how do you evaluate
yourself? And what failures or shortcomings do you
think have in your career and what have you done
about it?>>Yeah I was probably too quick triggered
early on. I probably hired people on some
superficial characteristics. You know good looking and Stanford MBA,
that’s generally a pretty good package. [LAUGH] And and that may or may not be any
good after a while, okay? And so these the things that you learn. I I, at times in my career, I thought I
was too big for my breeches. And I made some bad acquisitions, because
I thought I could buy anything, it would all work
out. I think you just, you constantly reinvent
yourself. You know what you are when you, the
question that was first asked what do you wanna be, you
know, it’s gonna change. And you’re gonna get smarter as you go
along. You’re gonna learn so much. You’re gonna laugh at how little you know
now five years from now. [COUGH] And that’s the way you gotta see
it. It’s okay. I know so much more about, how managers
think, and how they feel, and, and what frustrates them, now, than I
did when I was CEO. So I think you’re gonna constantly be
learning and evaluating and making mistakes,
adapting your style. And people say, oh good, he’s changed, oh
thank, thank God you’ve changed. The whole world’s changed. I mean if you haven’t, if you don’t
change, I’m not saying change every day, but you
certainly wanna move from a learning experience to a new
platform and behavior that, that you picked up
because of experience.>>You had mentioned the importance of
differentiation in in a company that what, that aims to be
successful. And you made an analogy with academic
settings. And it seems to me that the difference is
that if I choose to be as competitive and cut throat as I want
to be in an academic setting. The only potential it has is for harm is that it might hurt me because I don’t
build relationships. If I do that in a company setting because
I ‘m trying to get ahead it undermines your
value of, of gender. [CROSSTALK].>>Your dead if you do that. In a company that’s got an value you’re,
you’re dead. You’re more dead there than you are in
school. In school, you can do it and get grades and, and take a lousy personality and go
out. In, in a company of peers will eat you
alive, and spit you out. That’s what’ll happen without behavior. So, the idea of differentiation causing a
lack of teamwork is the silliest anti-argument
in the world. And it’s brought up all the time. How do you think teams win? Do you think the Yankees pay the second baseman the same as they pay Alex
Rodriguez? And yet as a team they win. The idea of, of output of high performers
and low performers, not being able to work, immediate performers,
not being able to work, work together. If you set the behaviors you want, if you
say cut throat behavior, no sharing of ideas is, is a
killer in your culture. You get, you won’t get it. If you don’t allow it in you culture,
you’ll get it. Let’s get back to values. You set the values and the behaviors. But now, let me let you finish your
question. [LAUGH].>>As, as a manager, how do you keep track
of who is doing what? How do you know, which people are being
cut throat, and which people are just doing
their job?>>You mean of all, all of your own
people?>>All of your own people.>>You mean ten people, and you don’t
know? I mean, that’s your job. I mean, that is fundamentally the job you
are gonna have. If you got a horse’s ass there, doing bad
things. And you’d rather go on, you’ll
disintegrate your whole team. But that’s why you’re being paid they gave
you that job to figure that out. No seriously I mean that’s really what
your job is. I don’t mean to be aggressive here but
that’s what your job is.>>[LAUGH] I was hoping you could share some insight into how you manage your own
time. Particularly when you were heading a large
company. I’m sure everybody wants a piece of the CEO, everybody wants to talk to the
chairman.>>You know, I, I knew what my job was. I really understood that my job was not
managing to find a new comedy, build a jet engine, I build
a medical scanner. And within, it’s an impossible job. But I knew my job was building people,
building talent. And I came to work every day thinking
about the people process. And thinking about evaluations, when I
went to factories, I sat down with the union and talked with them about
how things were going. More to find out what the atmosphere in
the place was than to find out the specific,
specific grief. So, my job, if I, if we didn’t build all
these leaders, that now we have 35 or so, for, Fortune 500 CEOs and
for the Dow Jones 30. If we didn’t do that, we would have
failed. Cuz my job was not coming up with a,
Seinfeld com, comedy or a, an apprentice show, or any of
these things. My job was to get somebody to run that
place, who will come up with those things. So my time, which I’ll say, 65% to 75% on
that. I have three things I had to do. I had to, pick people. I had to, allocate resources, based on
what the people were selling me, eyeball to
eyeball. And I had to transfer good ideas. Generic ideas across the business. That’s all I did. I didn’t have any pricing power. Any, design issues. Any of those things, I knew my job. And so I allocated most of my time to
people.>>Thanks. Dr. Welsh, I have a question on the
appraisal system.>>Yep.>>specifically, the grading curve we
talked about. And you mentioned earlier, that, spend a
lot of time just doing whatever to keep the top
20%. For the next middle 70% you kinda tell
them to be the top 20% and the bottom 10% kinda help them out but
help them out as well. What I struggle with that it seems to be a zero sum game the moment you put it in
relative terms. The 70, middle 70% cannot make it to the
top 20% without someone in a top 20% falling out
into the middle 70%. In terms of the actual application of this
system, is there, is it, does it work because GE is
so large? Because if you tried it to, to implement
it in a small enough division or unit. You may actually lose a lot of good
people.>>Yeah, but, aren’t, aren’t you raiding
the bar all the time?>>Yes.>>Right.>>Tell me a better system to raise the
bar, all, all of the group. Give me an alternative. This is one I got that I think is one of
the best that I’ve come up with. I don’t say that it’s the only one. It what I believe is better. Now you tell me a better one to get a
better chain.>>I believe that the message is sending a
good vibe. But what I’m, what I’m uncomfortable with
is the, the bottom 10% even if they have improved in absolute terms,
we would still be asked to leave. Is, is it not [INAUDIBLE] in, in practice?>>Oh, it’s not, I mean, you’re not, you’re not, down there with a fine tooth
comb. This is all directional. But clearly you wanna get the, you don’t
wanna spend quality. It’s like ha, ha, ha, having the bad egg
on the play, playground. You don’t wanna spend your time trying to
take somebody that’s not very good. And, you wanna take great people and make the unbelievably great, that’s what your
job is. If you waste time trying to get someone over the bottom ten thresholds, you’ll be
spending a lot of energy on something that’s not very productive, and they can and they’ll do
find elsewhere. If you do it early enough in their career. So, so I just think it’s the best way to
do it. I, I, but, I, I would never sit here in
say, this is the only way. And you get it by saying, I don’t like
this because after, after I do it twice. I’ve already gotten rid, rid of the weak
people, now, now I’ve got a perfect team. That’s not true because what’ll happen is
you’ll get promoted because you’ll have a great team and if
you don’t keep doing it, somebody else is gonna into
your job and they’re gonna say, what, and what is
your, your name? What is your name? Ron, Don. So they’re gonna take Don. Don, Don got promoted. He went to another place. And then they come to Don’s job and
[CROSSTALK] well, and they’re gonna look at the
people, okay? They’re gonna look at the people. And they’re gonna say they are gonna do a
top 20 middle 70 bottom 10. They’re gonna say, my God how did he keep
that person? So you’re not doing anyone any favors
because fresh eyes will look at it differently
every time. And so I just think it’s the best way to
build a team. But I do not say it’s the only way to
build a team. I found it to be a clear-cut, it forced evaluations, it forced people to stop
winking at people, it was transparent, and people knew they got
a fair shake, one of the things that you’ll find at a
company. Somebody does a great job and they say let’s give them something for doing that
great job. You have this incredible experience
they’ll say I can’t I, I don’t wanna make the others feel bad. Well if you can’t identify what they did
and justify the great thing they did by rewarding them, he
shouldn’t do it. But if you can do it, you should do it and
make it transparent as can be. It doesn’t mean the others can’t get
something someday for something. But this idea of leveling everything, it’s
like the companies that give 100 or 500 stock
options to everybody. [INAUDIBLE] statement plan. It’s like having a dental plan. I mean, what do you gain if everybody gets
it? There, there’s no evaluation. There’s no differentiation. People, people know who’s, who’s ca, ca,
carrying the freight. And they know who is not carrying the
freight. I, i, in our company, for example, despite
this system, after seven years, the top people thought we were
tough enough on weak performance. 90 plus percent of the blind su, survey
said we were. As we went down the organization, there
was a massive complaint that we weren’t tough
enough on weak performance. The people closest to the work know who’s
pulling the oars on the boat. And so that matters how when somebody
comes in two hours late and they have to cover for them and
this and that. So the idea of being rigorous is something that absolutely increases the moral of a
company. It does not decrease the moral of the
company. No one likes the company or a unit, that [UNKNOWN] along just think of the row
boat. Four on each side. Two aren’t working on one side, what
happens to the boat? It goes right around in circles. And everyone in the organization knows
who’s carrying the freight. Your job is to find out as much as they
know. So, I, I like it. It’s the best system I’ve ever found. We build great teams and the proof is the enormous number of leaders that we build
from that system. I don’t see another one, on that, on that
system delivering that many leaders.>>Thank you.>>I think the one of your parts of legacy will be what you left behind and,
your successor. Can you shed a little light in what went
into your decision, when you were left with very
capable people at the end?>>Yeah, it’s back to the question we got
asked earlier, got all this data. A feeling, a smell. Confirmation by a board that took seven
years to come up with the answer. A lot of times seeing a lot of different
situations, we made a call. We couldn’t have gone wrong on either one,
on any one of the three. Couldn’t have gone wrong. And we made a call the best of our,, our ability, and so far it’s making us look
very good. But, I don’t have a specific, just a gut,
a feel, and so do they have a gut, and a
feel. But the other two, I mean somebody else,
some other group could have come in and picked any one of
the three. We couldn’t have lost under any
circumstances, because we spent all that time building that
thing. See, the interesting thing is, that was
our job. These companies didn’t end up with no
successes and they gotta go outside, they have failed in
their fundamental job. The board’s failed, the CEO’s failed. That’s a big, massive failure. Getting your successor, for the last six
years, was the biggest thing on my mind. But, i, it, there is no precise did he
make a deal. Bob Natelli who, who was here talking to
you, had by far the best financial results in
GE. By far, not by a little bit. By far. And, and he he still has trouble. He even said it here.>>He, he clearly does.>>He still has trouble, and I say, why
not me?>>Yeah.>>I have the best numbers. And I said to him, I can’t tell you why. [BLANK_AUDIO] [LAUGH].>>Thanks.>>One more, last question.>>Earlier this year we heard from three
senior GE executives who had been very successful in their career and
from their conversations with us it was clear that they had to make
some serious family sacrifices along the way,
to get to where they were. And, so while the opportunities for maybe,
balance were there, it didn’t appear that they took
them up. So I was wondering, from a relationship perspective whether you think, it’s the
organizations responsibility to, to deal with that or
whether it’s more up to the individual.>>I think this is an individual call,
Barbara’s balance, my balance, your balance, might not look like
other balance to any one of the others looking at it, but I
think this is something that each person has to come
to grips with themselves. I don’t think an organization can make a
balance decision for you. I just don’t think so. I think you’ve got to decide what your
priorities are. What, what’s important to you. And, and be comfortable with those
priorities. This may be not politically correct. But the organization’s job is to win. The organization, winning companies are
the only thing that count. Losing is of no value to anybody. If winning companies pay taxes they give
back. GE, at 45,000 mentors teaching kids in
inner-city schools, do you think those .coms
[UNKNOWN] had mentors? The were hanging on for dear life. Finally selling the furniture. Okay? They, that does no good for anyone. So a companies job is to provide
opportunity give you a fair meritocracy, and give you a
chance. Your job is to choose your lifestyle what
you want what you don’t want how much of this you want how much of
that you want. It is not the company the share owners job
to figure out your balance. That’s something you’ve gotta do. Now that may not be politically correct,
but that’s the way it is. And only winning companies count, and get
all this other stuff out of your mind if you got any of it into it, that, that anything other than winning counts in
companies. Because they get job security. They get poised to get back. They get self-satisfying lives. People can choose balance, or not balance
in those companies, but their job is to win and create valued products and services that allow the institution to go
forward. Remember, companies are the only thing
that drive the society. Successful companies. Government creates no revenues. They get it all from your taxes and companies taxes, and then they do good
things. They defend us in war, they have judicial
systems, they educate us, they do all those things, but they do it
from no income. They only do it from successful companies. So successful companies are the engine of
the society. Government is the support to that. And the sa, and that’s why a company’s job
is delivering winning products, happy successful people, but they’ve gotta
decide how much they’re wanna give here, there,
everywhere.>>Jack, thanks so much for sharing your
time and your wisdom and insights. The book is winning. There’ll be a book signing in upper
Arbuckle.>>And the money goes to charity.>>That’s right. Please join me in thanking Jack? [SOUND]

Jack Welch: Create Candor in the Workplace
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