Soft Inuence Tactics

Rational persuasion
Welch was aware of the high cost of producing sub-standard products when GEs
dishwasher and washing machine product lines lost 18% and 16% of its market share
respectively. To quickly remedy the problem, Welch introduced the six sigma program and
illustrated the effectiveness of six sigma in other industries which allowed them to achieve
less than one failure per million units of production. Management was convinced by factual
data and implemented it to more than 5,000 projects over the next two years.
When GE and the US Congress were lambasted by the public over the 1981 Tax Act that
allowed companies like GE to enjoy substantial tax concessions, Welch explained that the
Act made American companies more competitive in the world market and had already
created over 200,000 jobs and billions of dollars in export revenue
1
for the American
people, earning the support of Americans within and without GE using facts and logic.
Inspiration appeal
GE underwent restructuring during Welchs reign, corporate morale was seriously damped
by insecurity as a result of the massive layoffs taking place. In 1986, GE acquired RCA
and Welch called it a quantum leap that revitalized the employees of GE. All 500
managers gave a standing ovation when the acquisition was announced, it raised the
morale of all staff and made them feel that they were wanted and that they company was
worth working for
2
.
Looking at Welchs meteoric rise up the ranks in GE and knowing that he grew up in a
family of working class citizens, employees were inspired that if Welch can do it, so can I
by exemplifying the values that Welch espoused. As written by Lowe, the values that he
so energetically espouses meritocracy, dignity, simplicity, speed, a hatred of
bureaucracy touch on universal longings ... [and] they translate anywhere
3
.
Welchs inspirational sphere of inuence was not limited to within GE. Business leaders
admired him for his ability to achieve impressive results and upload a high standard of
ethics. Welchs iconic status gave him referent power over GEs stakeholders, suppliers
and customers that he put to good use establishing and strengthening key relationships of
GE
4
.
Consultation
Before Welch, it was the corporate culture for the top brass to solve all problems and that
subordinate input was unnecessary. When Welch took the reigns, the felt otherwise and
welcomed everyones input. He was an advocate of constructive conict and utilized a
process of wallowing where he got a group of people from various ranks and
departments to wrestle with an issue so that he was able to consider the problem from
everyones perspective
5
.
1
Slater, R. (1999). Jack Welch and the GE way. New York, NY: McGraw-Hill, p. 110.
2
Krames, J.A. (2005). Jack Welch and the 4Es of leadership. New York, NY: McGraw-Hill, p. 66.
3
Lowe, J. (2001). Welch: an American icon. New York, NY: John Wiley & Sons, Inc. p. 22.
4
Lowe, J. (2001). Welch: an American icon. New York, NY: John Wiley & Sons, Inc. p. 39.
5
Welch, J., Bryne, J. (2001). Jack: straight from the gut. New York, NY: Warner Books, Inc, p. 141.
This made employees excited to give their own ideas and opinions and take charge in the
execution if their idea was chosen. Welchs tactic of involving employees in the process of
planning and executing energized everyone in the company and increased their self-
condence, resulting in increased commitment to the company.
Being a hockey enthusiast, Welch understood that teamwork wins games. He held on to
this principle and worked hard at removing perceived barriers between management and
employees to encourage everyone, even at the lowest level, to participate in improving
productivity and processes
6
. It is widely accepted that Welch Americanized GE, bringing
in the democratic process and the voice of the average employee into the boardroom.
Ingratiation
Welch establishes a close working relationship with his business leaders and mangers by
providing them with the necessary support that they need. Inline with that, Welch visits
GEs European facilities annually and spends many weeks touring facilities and reviewing
operations in Asia. In addition, he will personally call his business leaders to ensure they
are receiving the support needed. His employees aspire to achieve more for the company
as a result of having positive feelings towards Welch.
By the same token, when Lane joined GE, Welch personally told everyone that Lane
represented the candor that everyone should have and this boosted Lanes self-
condence and status, resulting in Lane working doubly hard for Welch
7
.
Hard Inuence Tactics
Exchange
Welch developed a performance based system of employee evaluation that rewarded
employees for attaining goals. He fostered a new attitude in employees by encouraging
them to work for themselves and motivated them to do their utmost in their work. The top
20% of the GE Vitality curve were well rewarded while the bottom 10% were red
8
. Welch
believed in using the carrot and stick approach to motivate employees. Additionally, GE
provides employees with support and prospects for individual development
9
in exchange
for their contributions to the company.
Welch was capable in making deals with others outside of GE. When he recruited Michael
Carpenter into the GE team, he was offered the prestigious position of vice-president of
Business Development and Planning
10
in GE to pull him over from the renowned Boston
Consulting Group. Carpenter accepted Welchs offer and joined the team at GE.
Pressure
6
Welch, J., Bryne, J. (2001). Jack: straight from the gut. New York, NY: Warner Books, Inc, p. 170.
7
Lane, B. (2005). Jacked up. New York, NY: McGraw-Hill, p. 58.
8
Welch, J., Bryne, J. (2001). Jack: straight from the gut. New York, NY: Warner Books, Inc, p. 159.
9
Lowe, J. (2008). Jack Welch speaks. New Jersey, NJ: John Wiley & Sons, Inc, p. 65.
10
Slater, R. (1993). The new GE: how Jack Welch revived an American institution. New York, NY: McGraw-
Hill, p. 110.
While implementing the six sigma system in GE and to their supplies, Welch realized that
more than a few employees and suppliers were resistance to change. To apply pressure
for suppliers to move inline with GE, Welch imposed nes and other disincentives to
suppliers who produced low quality components. For employees, Welch sent a clear
instruction that employees who were not equipped for the new six sigma system faced
termination
11
.
Additionally, when Welch was choosing his successor, he made it very clear to potential
candidates that if they were not chosen, they will be forced out of GE because Welch
wanted to avoid conicts altogether when the unsuccessful candidates had to work with
the new CEO.
Mechanistic empowerment
Clarifying organizational mission, vision and values
One of the rst things that Welch did when he took the reins was to clarify GEs mission
and provide employees with a goal
to work towards becoming the
best. Welch made it explicitly clear
t hat t he company was onl y
interested in businesses that were
market leaders and would divest
those that are not
12
.
With the increasing competition from
Japan and Asia, Welch realized that
GE could not rely on its traditional
product lines and decided that they
would need to move into the service
sector. He laid out very specic
goals and the company was to focus
on delivering the best service to their
clients. To achieve those goals,
Welch outlined a set of company
values that all employees were
expected to heed. These values
wer e cr yst al l i zed on a smal l
l ami nated card (gure X) that
employees were expected to carry
on their being at all times
13
so that
they are empowered to innovate and
inspired towards excellence in
services rendered to their clients.
Specify tasks, roles and rewards
Wel ch l ai d out speci c key
11
Salter, R. (2000). The GE way eldbook. New York, NY: McGraw-Hill, p. 220.
12
Krames, J.A. (2005). Jack Welch and the 4Es of leadership. New York, NY: McGraw-Hill, p. 33.
13
Racette, C. (2009). Jack Welch and the GE way. New York, NY: McGraw-Hill, p. 179.
GE Corporate Values
Create a clear, simple, reality-based, customer-
focused vision and be able to communicate it
straightforwardly to all constituencies.
Understand accountability and commitment and be
decisive. Set and meet aggressive targets with
unyielding integrity.
Have a passion for excellence.
Have the self-condence to empower others and
behave in a boundary-less fashion. Believe in and be
committed to Work Out as a means of empowerment.
Be open to ideas from anywhere.
Have, or have the capacity to develop, global brains
and global sensitivity and be comfortable building
diverse global teams.
Stimulate and relish change. Do not be frightened or
paralysed by it. See change as opportunity, not just a
threat.
Have enormous energy and the ability to energise
and invigorate others. Understand speed as a
competitive advantage and see the total organisational
benets that can be derived from a focus on speed.
Figure X: GEs corporate values that employees carry around
at all times.
performance indicator (KPI) targets for his managers to meet and dened a direction for
each division utilizing a six sigma strategy. Each division will comply with a series of
actions to achieve those KPI targets set out. Welch achieved noteworthy nancial success
using the six sigma strategy.
Employees renumeration were tied to the six sigma and other specic goals that Welch
laid out and the employees were classied into their performance grades. Grade A
employees were the role models and were awarded raises and stock options that were at
least twice as large as grade B employees. Grade B employees were highly valued and
received substantial raises but only 60% of grade B employees also received stock
options. Grade C employees were promptly red
14
. By outlining the result/reward system
from the beginning, Welch provided the motivation for employees to work to achieve their
individual goals which, at the same time, were aligned with the companys goals.
Delegation of responsibilities
Welch delegated responsibilities to his subordinates and allowed them to learn from their
mistakes. He would set performance targets for his managers and check up on their
progress randomly. Welch also delayered the company by widening the span of control,
increasing the number of direct reporting subordinates. Essentially, this meant that Welch,
through the wider span of control, compelled managers to delegate tasks and
responsibilities. Prior to Welch taking over the helm and increasing the span to be between
ten and fteen, the company, like other corporations, favored the traditional number of
six
15
.
Welch sped up the decision making process at GE through the empowering the managers
to make capital allocation decisions. Traditionally, the companys policy was that only
sector-level executives and above could approve huge capital investments without
requiring the CEOs approval. Welch further empowered his managers and business
leaders through the removal of the strategic planning division and placing planning
decisions back in the hands of the managers and business leaders. In doing so, Welch
compels his managers to delegate more responsibilities, empowering even more
employees. This move gave GE business divisions the agility it needed to increase their
competitiveness
16
.
Accountability of results
All managers at GE had to rank their direct subordinates according to their performance.
This is known as the vitality curve within the company and the bottom ten percent of the
curve were dismissed outright. This created a competitive environment within GE where
only the best talents are retained and the least talented replaced. Having said that,
creating such a competitive environment can work against Welch where his employees,
instead of motivating them to do better, may foster a culture of sabotage and recklessness
to avoid being in the bottom ten percent, which would be counterproductive in the long run.
14
Murray, A. (2011). Should I rank my employees? The Wall Street Journal how-to-guide. Retrieved October
14, 2012 from http://guides.wsj.com/management/recruiting-hiring-and-ring/should-i-rank-my-employees.
15
Shaw, D.G. (1993). Making organization change happen: the keys to successful delayering. All Business.
Retrieved October 14, 2012 from http://www.allbusiness.com/human-resource-planning/
19930201/3005967-1.html.
16
Sherman, S., Tichy, N. M. (2001). Control your destiny or someone else will. New York, NY: HarperCollins
Publishers, Inc. p. 150.
Organic empowerment
Trusting his employees
Welch abhorrence for bureaucracy is well documented and he believed that his employees
would make the right decisions when necessary. Welch did not believe in micromanaging
his employees and trusted the intuition and decisions of his subordinates to respond to the
changing market demands. Welch instilled in employees that change is ever present and
encouraged them to make decisions themselves. He felt that if employees believed what
they did is right and are condent about it, they would not hesitate to improve the current
process
17
.
When Welch headed the plastics business of GE, he would give his employee an
assignment and a free reign. He instructed his subordinates to exercise their own initiative
and gave them carte blanche.
Building teams to encourage cooperative behavior
Welch believed that to encourage innovation and radical solutions, cross functional teams
were key. Cross functional teams created synergy and provided an interactive platform
that nurtured innovation. Employees were divided into groups to solve problems and given
the opportunity to develop as a team and view challenges from different facets, enabling
them to resolve problems more effectively as an empowered team.
When Welch had to turn around GEs medical business, he empowered his good friend
Robert Walt to form a winning team to save the division. Walt assembled his champion
team without any interference from Welch and turned the medical business into a crown
jewel of GE with an operating prot of US$1.7 billion
18
.
Boundaryless was a concept initiated by Welch to remove barriers between supplies,
customers and functions in GE. Although Welch focused on recognizing and rewarding the
ideas progenitor, boundaryless would also reward individuals who recognized and
developed the good idea. It placed focus on the team instead of the individual, and leaders
were encouraged to take credit as a team, not as an individual.
Providing a sense of security and support
As a huge corporation, GE has the advantage of being capable to take on projects with
high risks. However, corporations tended to be risk adverse and makes a scapegoat of
those who fail. Welch felt that this culture of scapegoat nullies GEs advantage and
decided to change it.
The Harlarc project was a $50 million light bulb development project that fell through. The
light bulb itself lasted ten times longer than the ordinary light bulb at a fraction of the
energy consumption, but consumers did not buy. Instead of ring the team involved, GE
rewarded them and promoted several of them
19
. This act showed the rest of the company
that taking risks and making mistakes is not to be afraid from and gives the employees a
sense of security that they will not be penalized for failing.
17
Slater, R. (1999). Jack Welch and the GE way. New York, NY: McGraw-Hill, p. 186-187.
18
Welch, J., Bryne, J. (2001). Jack: straight from the gut. New York, NY: Warner Books, Inc, p. 56.
19
Welch, J., Bryne, J. (2001). Jack: straight from the gut. New York, NY: Warner Books, Inc, p. 31-32.
Lastly, Welch encouraged his managers to take calculated risks without worrying about
negative consequences for undesirable results and empowering them to take ownership
and solve problems.