Six ways Jack Welch is wrong about what makes a great company

So Jack Welch is becoming semi-enlightened in his later years. The man who previously promoted firing 10% of your employees every year is getting all soft and cuddly and wants companies to be good workplaces.

He even published an article called 6 ways to tell if you work for a great workplace. And he really is starting to get it. Unfortunately, he’s not quite there yet. Let’s look at where he gets it right and wrong.

His first point is that “1: Great companies demonstrate a real commitment to continuous learning.” Spot on. Well done, Jack.

But then he says that “2: Great companies are meritocracies. Pay and promotions are tightly linked to performance, and rigorous appraisal systems consistently make people aware of where they stand.

No. Just, no. Many great workplaces don’t have rigorous appraisal systems. In fact, some great workplaces have been ruined when they start measuring everything. Just look at why Microsoft abandoned stack ranking:

Microsoft has been known as the ur-example of pitting employees against one another in an attempt to reward the excellent and weed out the weak, which gained widespread popularity in the 1980s after then-Chief Executive Jack Welch brought the ranking system to General Electric.

The problem is workers generally aren’t thrilled about having to play Game of Thrones at the office. David Auerbach, a former Microsoft employee, recently told Bloomberg Businessweek that the practice had employees feeling helpless and “encouraged people to backstab their co-workers.”

Yes, Jack Welch inspired it. No, it doesn’t work.

Under point 2 he also writes that “People with brains, self-confidence, and competitive spirit are always attracted to such environments.

There are a few fundamental mistakes here. First of all, hiring for brains and self-confidence may land you with a lot of jerks. New York based company Next Jump tried it and found that:

…we followed a common practice used by the biggest tech companies in the world: to hire brilliant and driven people. But, after two years of heavily investing in this hiring process, concentrating our efforts at the top engineering schools on the east coast, we found ourselves with a small army of brilliant jerks.

The culture was toxic. Racial tension, blaming others, total disregard for other people’s opinions and total protection of one’s own ideas and work products. We did a rapid evaluation of all the people we would want to work with vs those we didn’t, and, in one day, we fired half our engineers.

[after that] humility became an important trait to screen for in our hiring process. We now interview for 45 minutes on humility. No matter how brilliant and driven a candidate is, if they get a humbs down on humility, we do not hire them. No exceptions.

And as for hiring competitive people, there is actually evidence that competing lowers performance.

Jack says that “3: Great companies not only allow people to take risks but also celebrate those who do.

Excellent, Jack. I agree.

The next one is “4: Great companies understand that what is good for society is also good for business.

Which is awesome, but then he has to add that “They offer flexibility in work schedules to those who earn it with performance.

No. Great workplaces offer flexibility to everyone.

He also writes that “5: Great companies keep their hiring standards tight. They make candidates work hard to join the ranks by meeting strict criteria that center around intelligence and previous experience.

But actually, some of the greatest workplaces I know hire based less on skill and much more on personality and attitude. Look at Southwest Airlines who famously “Hire for attitude, train for skill.” Or Pret a Manger in the UK, who hire happy people and the teach them what they need to know in the job.

And finally he writes that “6: Great companies are profitable and growing.

Nope. They can be growing, but they absolutely don’t have to be. Ricardo Semler, the CEO of Semco in Brazil put it like this:

There is no correlation between growth and ultimate success. For a while growth seems very glamorous, but the sustainability of growth is so delicate that many of the mid-sized companies which just stayed where they were doing the same thing are much better off today than the ones that went crazy and came back to nothing. There are too many automobile plants, too many airplanes. Who is viable in the airline business?

If someone asks me, ‘where will you be in 10 years’ time?’, I haven’t got the slightest idea. I don’t find it perturbing either if we said, ‘look, in 10 years’ time Semco could have 500 people instead of 3,000 people’; that sounds just as interesting as 21,000 people. I’d hate to see Semco not exist in 10, 20, 50 years’ time, but what form it exists in, what business it’s in and what size it is are not particularly relevant.

A company certainly has to be profitable in the long run or it won’t be around but I would bet that there is no correlation between the growth rate of a company and how good a workplace it is.

Your take

What do you think? Is Jack Welch right or wrong? What makes a great workplace in your opinion?




2 thoughts on “Six ways Jack Welch is wrong about what makes a great company”

  1. Sorry but I don´t know who Jack Welch is, but I think like every body he has been working a lot on his way and I hope he has been learning something about happiness.

    In my opinion a great workplace is that in which the balance between the company environment and family environment, company needs and ourselves needs, success and failure, knowledge, vocation, attitude, friendship, commitment and all are working together in the happiness way.

    Of course in my opinion only 20% people are working in their dream workplace (if the Paretto law work here). The other 80 have been run all with an other element (frustration) with an extra hard work on this field every day.

    Thank you very much, and try to be happy.

  2. I disagreed with you on Milton Friedman, but I must agree with you here. Great workplaces have high levels of trust between team members; that’s the only way to get the whole-is-greater-than-the-sum-of-the-parts effect.

    I’m betting you like (or would like) Stephen Covey.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.