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Published: November 29, 2005

 
 

Best Business Books 2005: Management

The Good, the Bad, and Jack Welch

The late historian and former Librarian of Congress Daniel Boorstin once observed that planning for the future without a sense of the past is like trying to plant cut flowers. Dr. Boorstin’s remark is especially applicable to the field of management, where the florists always seem to outnumber the gardeners. Many business academics regularly represent competencies (managerial abilities arrived at through on-the-ground experience and learning, which apply only to the particular context at hand) as strategies (context-free courses of action that can be implemented anywhere). Some consultants fall into the same trap, finding firms that are apparently doing well, identifying their “key success factors” and then promoting these to other firms so that they too can be like Dell, GE, Wal-Mart, or whoever else’s corporate garden is currently in bloom. And managers themselves frequently arrange their financial reporting to exhibit “flowers of success” that later turn out to be rootless and unsustainable. In the worst cases, such as Enron, the blossoms turn out to be entirely artificial.

Similar charges could be leveled at those most ardent of flower arrangers: writers of books on management. Too often, their books depict managers as lone actors in generic landscapes, whose methods and techniques can be freely transferred from one corporate situation to another. Yet if we are to learn from the experience of others, surely we have to understand their thoughts and actions in the particular situations in which they found themselves. When it comes to human action of any kind, context matters.

Each of the five books reviewed in this essay underscores the importance of context in business, though in different ways and from very different perspectives. The first two, Winning (HarperBusiness, 2005), by Jack Welch with Suzy Welch, and Will Your Next Mistake Be Fatal? Avoiding the Chain of Mistakes That Can Destroy Your Organization (Wharton School Publishing, 2005), by Robert E. Mittelstaedt Jr., are written specifically for managers. The other three are aimed at more general audiences, but provide important lessons for business leaders by reviewing both the recent and distant history of financial scandals: Conspiracy of Fools: A True Story (Broadway Books, 2005), by Kurt Eichenwald; Blood on the Street: The Sensational Inside Story of How Wall Street Analysts Duped a Generation of Investors (Free Press, 2005), by Charles Gasparino; and Ponzi’s Scheme: The True Story of a Financial Legend (Random House, 2005), by Mitchell Zuckoff.

You would expect that Winning, by Jack Welch, the retired celebrity chief executive officer of General Electric, and his wife, Suzy Welch, former editor (under the name Suzy Wetlaufer) of the Harvard Business Review, would surely illustrate the importance of context to management action. GE, after all, was one of the great laboratories of managerial thinking in the 20th century, and the authors set out to provide managers with guidelines to follow, rules to consider, assumptions to adopt, and mistakes to avoid.

Although Winning is well organized, clearly written, and worthwhile, it is disappointing in one major respect: its lack of concern for context. Mr. Welch freely acknowledges the importance of organizational culture (context writ large) by recounting, for example, the problems that GE faced when it acquired Kidder, Peabody (that firm’s top three values, he says, were “my bonus, my bonus, my bonus”), but he seems reluctant to accept the importance of a business environment or culture to the key policies and processes of organizations. This reluctance is best seen in the discussion of the “20/70/10” people differentiation formula (in which the top performers are promoted, the majority in the middle are nurtured, and the bottom 10 percent are fired) for which both Mr. Welch and GE became famous. One problem with the formula is the validity of the numbers themselves: Even Bob Nardelli, Mr. Welch’s former colleague and now CEO of Home Depot, has said, “There’s nothing magic about 10 percent.” (See “Winning Hearts and Minds at Home Depot,” by Victoria Griffith, s+b, Spring 2005.) Then there is the statistical nonsense of applying the formula to small departments. More importantly, the authors do not appear to consider that the measurement and reward of individual performance works in some contexts but does not work in others. The examples in the book, drawn from the playground and professional baseball, just don’t cut it as useful analogies to the business world. And surely the failure of the differentiation process in many organizations cannot be explained away by leadership teams “lacking in brains or integrity or both,” as the authors maintain. Isn’t it more likely that the 20/70/10 process works acceptably in GE largely because of the unusual context created by GE’s culture?

 
 
 
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