Two Tales Of A City

Apologies to Charles Dickens.?In a week to unwind, it’s time to flip open the Kindle.?So – an executive summary on our two all-time favorite business reads.?Not about licensing.?

Each book is about the same company.?Overlapping characters, org charts, deal-making anecdotes.?Different authors, though.?Very different.?

Read both.?As spin-offs go, the second book is up there with Better Call Saul.?Each one as enriching and fast-paced as any modern fiction/beach read that fills up needed PTO.

JACK:?STRAIGHT FROM THE GUT

Jack Welch spent forty years at GE, the latter twenty as its storied CEO.?He has timeless thoughts for leaders and managers – in business, education, hospitality – any context ?driven by self-reliance and strong performance.?

When he began as CEO, annual revenue was the GE market cap was $14 billion, and offered shares to the public valued at just under five dollars.?Upon his retirement??A market cap of $400 Billion, and with 120,000 fewer employees, grew annual profit from $1.5 billion to over $14 billion.?

If you invested $2,500.00 in GE stock in 1980, you would have had $125,000.00 by 2001.?

The People Around You Are Everything

Welch earns your trust.?This isn’t a numbers book.?He measures through the coaching and collaboration of success-oriented people.?Nothing else differentiates companies.?

His foundation was sandlot ball.?The best teams are out to win.?So they pick and work with superstars.?Or people best-suited for the positions.?Do what you’re great at, recognize shortcomings, improve your performance, and the playoffs are within reach. ?

If that doesn’t happen, you’re managed out.?It’s not personal.?Why should businesses operate against a different yardstick than pro sports?

Fuel Their Desire to Win Together

And so, Welch’s straightforward philosophies – personnel differentiation; unabashed candor; no mystery about where one stands; win, fix or sell; relentless training and feedback – become obvious.?He inherited an organization of people that worked hard, but reframed GE instead - towards teams that align, keep score, make heroes out of winners, and act fairly with people not reaching the goal line.

All intertwined with such a passionate writing style – recounting the competition, politics, real-life factory explosions, acquisitions - you may know of most. He evokes such energy, reminding us of how he made careers so fulfilling for so many people.

It’s a cover to cover, anti-Dilbert joy ride.?

LIGHTS OUT:?PRIDE, DELUSION AND THE FALL OF GENERAL ELECTRIC

In the last twenty years, GE was delisted from the Dow Jones, addressed criminal probes as recently as last week, and defended itself against multiple, massive accounting irregularities. At several junctures GE quite literally ran out of cash.?A behemoth that represented 20th century progress became an emblem in high stakes negligence.?

John Grisham can’t make this up.

Jack Welch left a house of cards in his wake??The protégé wasn’t up to the challenge? Investors left GE for shiny new Amazons? ?I don’t know. I’m not sure anyone can thread a cogent “what went wrong” account. But the authors spin one hell of a yarn.

The Best Of Times, The Worst Of Times

GE was (past tense) a sprawling conglomerate.?Tying together healthcare, aircraft, entertainment, finance, appliances, locomotives, wind turbines…if one division falls, others have their backs.?The book won’t force you to understand it.?No one does.

But Wall Street found this kinda outdated. ?Diversifying risk was not GE’s job. That’s what investors do.?But GE stuck to the old model, hearkening tradition.?Lots of buybacks and dividends to romance shareholders. ?Still - the stock price didn’t move.

Throw Money At A Problem Until There’s None Left (Money, That Is)

GE faced global competition with capital heavy manufacturing, newly commoditized.?Divisions were on borrowed time.?Didn’t matter for years.?Why??GE Capital was printing money the entire corporation could enjoy.?The financiers borrowed millions at low interest rates and loaned out at high ones.?Easy money to save troubled makers of appliances and machinery.

Until borrowers defaulted.?Low rates became harder to find.?Nobody was too big to fail. The stock price fell.

Jack was long gone.?Vito handed the reins to Michael and the transition politicized at the expense of sound business decisions. ?The board meeting dialogue reads like a legal thriller.

Team-Building Is Applauded.?Hitting Your Forecast Is Everything.

Veteran managers held over from the Welch era learned how to be team players and head coaches, yes.?They also knew hitting numbers was number one.?No excuses.?No questions.?To show perception of achievement, business units booked revenue before the goods were shipped. ?Then before the goods were made.?Then before the orders even came in.?Soon, ?financial statements had no relation to cash coming in the door.?And GE Capital wasn’t there anymore with a life raft. ?The stock price fell again.

All The King’s Horses...

Remaining shareholders got seriously angry. ?They asked questions.?About current state of affairs.?About why the Chairman and CEO were the same person: the boss of a public company answering only to himself. And about why GE spent so many decades trying to conquer a world that no longer existed. ?The privileged white collar one percent is no match for investors scorned.?On a somber note, many questions remain unanswered.

That said, watching the smartest people in the room humbled and diminutive when their mistakes hit page six, is a page-turning genre.

Two great books about business.?Each succeeded in helping our minds escape from our own business.?For awhile anyway.?Jack Welch has such marvelous lessons of impart.?And the history following his departure offers equally critical lessons that deserve the same respect.