Fortune says Jack Welch is Wrong

Ken Lay once wrote a book for Enron employees about business ethics. Times may change, but character still trumps charisma at the end of the day.

FORTUNE magazine says there are "new" rules for running a business. "In Search of Excellence" (ISE) by Peters and Waterman, a book which looked at the practices of management in fast-growing, successful companies, came out in 1982, almost 25 years ago!

Here are the main principles in ISE (according to Wikipedia):

1. A bias for action, active decision making - 'getting on with it'.
2. Close to the customer - learning from the people served by the business.
3. Autonomy and entrepreneurship - fostering innovation and nurturing 'champions'.
4. Productivity through people - treating rank and file employees as a source of quality.
5. Hands-on, value-driven - management philosophy that guides everyday practice - management showing its commitment.
6. Stick to the knitting - stay with the business that you know.
7. Simple form, lean staff - some of the best companies have minimal HQ staff.
8. Simultaneous loose-tight properties - autonomy in shop-floor activities plus centralised values.

The "new" rules and the main points in "Excellence" are surprisingly similar. Just for fun, let's compare:

"The new rules"

1: Old rule: Big dogs own the street.
New rule: Agile is best; being big can bite you.
ISE: Simple form, lean staff - some of the best companies have minimal HQ staff.

2: Old rule: Be No. 1 or No. 2 in your market.
New rule: Find a niche, create something new.
ISE: Autonomy and entrepreneurship - fostering innovation and nurturing 'champions'

3: Old rule: Shareholders rule.
New rule: The customer is king.
ISE: Close to the customer - learning from the people served by the business.

4: Old rule: Be lean and mean.
New rule: Look out, not in.
ISE: Simultaneous loose-tight properties - autonomy in shop-floor activities plus centralised values
(This one doesn't quite match up, but it and #6 above were leftover)

5: Old rule: Rank your players; go with the A's.
New rule: Hire passionate people.
ISE: Productivity through people - treating rank and file employees as a source of quality

6: Old rule: Hire a charismatic CEO
New rule: Hire a courageous CEO.
ISE: A bias for action, active decision making - 'getting on with it'.

7: Old rule: Admire my might.
New rule: Admire my soul.
ISE: Hands-on, value-driven - management philosophy that guides everyday practice - management showing its commitment.

These do not match up exactly, but there is a lot of overlap as well. I think that ISE did a good job of recognizing where growth was coming in the economy and what created it.

Maximizing shareholder value does not necessarily lead to growth, for the company or the econmy. In the film "Other People's Money", Danny DeVito plays a Wall Street shark whose specialty was taking over companies by buying a minor interest, enough to get on the Board of Directors, then winning a proxy fight for control on the platform of liquidating the company, selling off its assets, all in the name of "maximizing shareholder value".

The film had a happy ending, for the targeted company. It moved into newer technology, fighting off DeVito and implementing or continuing many of the ideas in ISE. When did the movie come out? 1991, but it was an off-Broadway play before that.

Unfortunately for our economy, more of the CEO's (even in smaller businesses who should have known better) listened to Jack Welch, instead of Tom Peters. Unfortunately for me, I worked for many of the companies helmed by CEO's who believed in Welch's ideas, while giving lip-service to Peters, resulting in "downsizing" and layoffs, hitting me personally several times during that era.