Jack Welch, the Chief of General Electric, who led the company to glory and became a business icon, died recently at the age of 84. He was the most influential business manager of his generation. During the two decades that he ran GE, the company’s revenue jumped five-fold. GE’s share value on the stock market grew almost thirty times during the same period. He was named the “Manager of the Century” by the Fortune magazine at the time of his retirement in 2001. GE was also named the “World’s Most Respected Company” in 2000, for the third year in a row. Mr. Welch also received a record severance payment when he retired.
Mr. Welch had a leadership style which was unique at that time – combative and blunt. He was an insider, having spent 20 years in the company when he became its Chairman and CEO, but behaved like an outsider. He hated bureaucracy and focused on shareholder value. He shed businesses that he felt were not performing and moved into new ones. He led the globalization of GE and made the company highly dependent on finance, as banking and investment grew in the American economy. His penchant for mercilessly slashing the workforce earned him the nickname “Neutron Jack”.
In the recent years however, there have been second thoughts about Mr. Welch’s management style and severe criticism about the legacy that he left behind. He is no longer considered a management role model, nor is the diversified business model that he followed considered revolutionary. So what changed since the time he left the company? GE Capital, the largest nonbanking financial institution in the US, which accounted for more than 40% of GE’s profits, was badly hit during the financial crisis. GE reported a loss of over $5 billion last year and its stock trades at a value which is 80% lower than the high it hit in 2000.
Today’s VUCA (volatile, uncertain, complex & ambiguous) world has taken a toll on many organisations who have not been able to strategize and adapt. In his twilight years, Mr. Welch talked about his biggest mistakes. He admitted that numbers are not everything and that people and cultures matter. He also admitted that the single minded focus on shareholder value was a bad idea. It was not a strategy, but a result of his actions. One of his biggest mistakes was focusing on numbers and meeting short term results. While the stock markets loved him, nobody realized how his practices weakened the foundations of GE’s business. Collaboration and innovation suffered. His successor Jeffrey Immelt had a difficult transition, but managed to correct a few of the mistakes during his tenure, until he was unceremoniously made to retire in 2017. The once biggest company in America is today a shadow of its former self.
GE is a perfect case study of a company which failed to adapt to change, where the practices of an iconic leader blinded them from reality. Companies today are required to adapt their business model and adjust to change – political, cultural, new technology, new processes, fluctuations in the industry and customer demands. There is a need for flexible leadership at all levels, right from the Board / CEO to the front-line employees. Flexible leaders are those who change plans as the situations change. This empowers them to remain productive during times of uncertainty and transition. They are open to new ideas, work with a wide spectrum of people and readily embrace change.
According to Rick Lepsinger, the author of “Flexible Leadership: Learning to Lead and Manage”, to be flexible in this uncertain world, we need to wear two hats – that of a leader and that of a manager. Both roles produce vital results for any organization and are needed for success. Leadership produces organizational change, while managing streamlines operations and produces order and predictability. Management becomes important when organizations grow bigger and more complex. The need for leadership increases when the environment is uncertain and volatile. While one person should be performing both the roles, there are very few executives who are effective at both leading and managing. The challenge obviously is in balancing both the roles.
A few guidelines, based on Peter Senge’s model of learning organizations, are recommended for integrating the leader and manager roles and help with the balancing act.
Develop Mental Models: A mental model is a representation of how something works. Models help to simplify the complex into organizable and understandable chunks, improve the quality of thinking and the ability to make decisions. As a leader, obtain timely and accurate data on the organization, employees and the environment. As a manager, measure these key variables and analyze how they change over a period of time.
Embrace Systems Thinking: Each organization has various systems and processes, many of them interlocked or connected. As a leader, one must understand how making changes in one area will affect others and thereby compensate for any impacts. This is an important skill set not only for top leaders, but also for managers at all levels in an organization.
Have a Shared Vision Across Levels and Subunits: Every leader across levels must co-ordinate efforts to manage change. The top management should ensure that the organization has a core ideology, while managers and leaders across levels must identify themselves with the vision, support, further develop and use it to guide daily actions.
Encourage Team Learning: As a leader and manager, one must encourage teams across the organization to learn. Effective team work leads to results which individuals are not able to achieve on their own. Further, individuals learn more and faster within a team. This may require team members to shift their mental models and be open to learn from their colleagues.
Personal Mastery: This is the journey of a leader and manager towards continuous improvement and seeing everything from a different perspective. It involves principles such as purpose, vision, belief, commitment and knowing oneself. Personal mastery is about defining what is important and being able to see the current reality as it is. For any leader and manager, it is about leading by example, maintaining focus and commitment to meet the objectives, as new challenges and situations arise.
Becoming a flexible leader takes time and patience. For a flexible leader, every situation is an opportunity to learn. As a leader becomes more flexible and open to experiences, s/he will become more effective.
Want to become a flexible leader? Reach out to Girish Karnad at karnadgr@gmail.com and he will be ready to help you navigate this VUCA world.