Ask any business person the name of a superstar CEO, and Jack Welch’s name is likely to be one of the first mentioned. If you’re not aware of Jack, he became the chairman and CEO of General Electric in 1981 and held that position for two decades.
During his tenure, GE’s sales increased fourfold, and market capitalisation increased from $13 billion to several hundred billion. Those are two of the reasons why, in 1999, Fortune magazine named him “Manager of the Century”.
Getting his leaders to change by facing reality was one of the hallmarks of Welch’s early years as CEO. He did that by telling and retelling the story of his first successful reality check, described in his book Jack: “Straight from the Gut”.
In his first year as CEO, he was on a field visit to GE’s nuclear reactor business in San Jose, California. The leadership presented a rosy plan that assumed orders for three new reactors a year. Looking backward that was a reasonable assumption, since GE had been selling three or four reactors a year since the early 1970s. But the year was now 1981, just two years after the Three Mile Island nuclear disaster in Pennsylvania. What little support there was for nuclear energy had vanished and GE hadn’t received a single new order in the two years since.
Jack listened politely for a while then dropped a bombshell. “Guys, you’re not going to get three orders a year. In my opinion, you’ll never get another order for a nuclear reactor in the U.S.” He told them they should figure out how to make a business of selling nuclear fuel and services to the 72 active reactors they have already built.
They were shocked. They argued that if they took those orders out of the plan, it would kill moral, and they’d never be able to mobilise the business again when the orders come back. Jack didn’t buy it. GE re-staffed the business to focus on a service model and grew earnings from $14 million to $116 million in just two years. When Jack retired 20 years later, the company still hadn’t got a single new order for a nuclear reactor in the U.S.
This story, impressive in its outcome, highlights that the first obstacle to change is getting people to accept change. Jack did this through the telling of this one story many times over for it painted a picture that people could relate to. How do you implement change?