Standing and Fighting- a key success.

Many leaders have taken the easy way out. Rather than taking strong stand against adversaries they have been willing to give in to unreasonable and uneconomical demands rather than standing a fighting.

This is painfully obvious today when we witness the problems in the automobile and its supplier industries. General Motors and Ford have bleeding heavily and are not able to compete against its non-union foreign competitors. Not only are their wages high, but they are forced to pay for workers who don’t work, fund pensions, and contribute to ever increasing health benefits. In addition, these companies are forced to operate in old, non-competitive factories in locations that have high taxes and worker protection laws.

All of these problems were not caused by the current management but by those who preceded them, especially the leaders in the 1950’s and 1960s. Following World War II, the United States experienced its most prosperous times. There was enormous demand for consumer and industrial products. During the war, the entire US manufacturing effort was focused on winning the war and not on providing consumer and industrial products. Further the US companies stood alone in the ability to provide these products worldwide, since the European and Far East producers had been devastated during the war.

Unlike other major companies in autos, steel, aluminum and transportation, GE was unwilling to “pay off” the unions with overly generous, non-economic wages and benefits. Instead, GE leaders took a strong stand in the mid-1950s against the then strong labor unions dominance and uneconomic demand.

Led by Lemuel Boulware, GE’s refused to participate in industry bargaining and negotiated with the unions on a company basis. They carefully thought though what was in the balanced interest of employees, investors, stockholders and made a “fair offer” prior to the negotiations. Though they were willing to make some concessions, they were firm and were willing to take a strike rather than give away the shop. They christened this approach “Doing Right Voluntarily” and used these policies and practices to assure that the company didn’t mortgage its financial future. In addition, GE made it clear that it was ready willing and able to move its established plants to friendlier, non-union locations, rather than be blackmailed.

This practice became known as “Boulwarism” and though it received a great deal of negative press, it worked for a number of reasons:

1. 
   First, GE had a long positive track record from the company’s inception of caring about its employees and their well fare. They instituted a suggestion system in 1906, a pension program in 1912 and insurance in 1920.


2. Second, the major GE union, the United Electrical Workers (UE) was a communist led union that appeared to be more concerned with having a people’s revolution than about the conditions faced by the GE workers themselves. This union was highlighted in the McCarthy hearings and was ultimately ejected from the CIO.


3. Third, the CIO created a competing non-communist controlled union, under Jim Carey, who aggressively sought to convert the UE members to the IUE. Further other powerful unions were part of the GE bargaining units, including the Teamsters and the IBEW. So Boulware divided and conquered the unions and didn’t have to face one dominate union, as there were in the auto, coal and steel industries.


4. Fourth, as we said GE did its homework and was willing to give the workers, both union and non-union, attractive and even innovative benefits before they were required. In most cases, the workers recognized that the benefits and wage increases were fair and balanced and were will to accept them without a strike. This neutralized the unions bargaining power.


5. Fifth GE hired the “Great Communicator” and the popular host of GE Theater, Ronald Reagan to tour all of the GE plants and spread the message of evils of Big Unions and Big Government. Reagan claimed to have visited 135 GE research and manufacturing facilities and met with some 250,000 individuals. It ultimately led to his own conversion and gave him the underpinning of his successful election to President of United States.
   Sixth and probably most important, GE was willing to close plants in unattractive union locations and move them to non-union cities. This was very powerful, since it gave the company power that the auto, steel and coal companies didn’t have. GE was an early proponent of moving to the southern US and overseas.
   

Overall the GE Boulwarism approach enabled the company to maintain control over its own destiny and not allow Big Unions and Big Government to dictate to them. GE was unwilling to mortgage the future for short term gain and was willing to take a strike if it was needed. This was sharp contrast to the other industry leaders who accept peace at any price and didn’t appear to care about the long term implications of giving away the shop.

This is just one of the elements that has enable GE to prosper and grow over its 126 years of existence, while other United States giant companies have gone out of business or are one the verge of bankruptcy.

The complete story can be found in Bill Rothschild’s latest book “The Secret to GE’s Success”, published by McGraw Hill and is now available Simplified Chinese, Korean, Indonesian, Spanish, Japanese and CD.

Immelt is a RISKTAKER/ SURGEON...a unique combination!

Risktaker/ Surgeon... a unique leadership style!
Since the early 1990's I have enabled my clients to integrate strategies with leadership and human resources.

• In 1993, I wrote "Risktaker,Caretaker,Surgeon, Undertaker- the four faces of strategic leadership." The basic premise of my consulting practice and the book was that there was "no one type of leader for all times" or to challenge the premise of St. Thomas More's biographers, there is no one leader for all seasons.I used the simple life cycle to describe my theory. There are four stages of the life cycle:
  Embryonic stage, birth and childhood, and this requires "risk taking, missionary leaders".
  Teenage and early adulthood/ growth stage, that needs Caretakers..who will care for and grow the organization systematically;
  Then there is middle age and maturity and this requires the surgeon, a leader that will focus on the best and growth and prune the declining or dying.
  Finally there is the decline, fall and death stage and this requires an Undertaker.

Like all categorizations, they are simple but don't cover all situations. But this simple relationship to the right type of leader and the stage of a business enables organizations to spot the mismatches.

It is clear that you don't want a risk taker when the company needs major surgery or when it is time to divest or liquidate the assets.In a company like GE... which has businesses in all stages, the message is that the company needs a portfolio of leaders and the willingness to place the right type for the right situation. Historically, GE has had a "portfolio of leaders" and was able to match the type with the strategies. This was part of the strategic system when I was Corporate Planner in the early 1980's.

However, in my book and subsequent articles I concluded that GE's CEO's since the mid 1970's have been skilled surgeons. Borch started the pruning, Jones did some more and Welch was a great deal maker. I wrote an article several years ago called the "College of Surgeons" and described how most GE alumni were surgeon leaders when they left GE.

Now we have the Immelt era. Jeff started as a traditional surgeon and pruned many businesses, but as his years progressed he has become a very unique leader, which I have concluded is a RISK TAKER/SURGEON.

Risk taking Ventures...Immelt and his team have worked hard to focus on moving GE back to its traditional innovation, systems, solution role, which Welch had de-emphasized and even negated.This was achieved primarily by acquisitions and some internal innovations, but he has further increased the complexity and risks by making these global and increasingly moving into unstable, but potentially long term profitable areas like China, Middle East etc. He has bet billions on these ventures and even was willing to open research labs in countries that are not secure. In short, he has the missionary zeal and attributes of a "risk taker" leader.

Surgeon...but Immelt and his team have also continued the pruning. In fact, it has been greater and more pervasive than any of his predecessors. The latest surgery is demonstrated by his willingness to prune the "traditional GE" businesses, like appliances, lighting, motors etc. He clearly willing to to get out of businesses which he believes are not fast growing and global.Complexity, confusion and unpredictability are the results. Since most leaders fit one of the four categories, they are easier to understand and predict. The stakeholders, investors and the media understand what a risk taker or surgeon is and so they begin to feel comfortable with them, even if they don't agree.

However, when you have a compound/ split leadership personality it gets very complicated and difficult for the key stakeholders to understand and support. This is even worse when the leader says one thing one day and then does something different the next. This was the problem Immelt demonstrated when he promised a 13% growth and only delivered 5% in the first quarter of 2008.I am not sure the combination of "risk taker" and "surgeon" really works and can be successful in the long run.

Bill Rothschild...author of The Secret to GE's Success and Risktaker, Caretaker, Surgeon, Undertaker- the four faces of strategic leadership.