Chapter 3: Create an Authentic Learning Organization

Overview

Our behavior is driven by a fundamental core belief: the desire, and the ability, of an organization to continuously learn from any source, anywhere; and to rapidly convert this learning into action is its ultimate competitive advantage.

—JACK WELCH, former CEO of General Electric

This boundaryless learning culture killed any view that assumed the "GE way" was the only way or even the best way. The operative assumption today is that someone, somewhere, has a better idea; and the operative compulsion is to find out who has that better idea, learn it, and put it into action—fast.

—JACK WELCH

In the seat of the CEO: You are the CEO of a $25 billion conglomerate founded more than a century ago. Although you spent 20 years working your way up through the hierarchy, you were still surprised at the extent of the bureaucracy you discovered once you reached the corner office. Even though your company is heralded the world over for its excellence in management, you see a company that is hamstrung by red tape—an organization that seems to require seven signatures for every major decision.

After reviewing the organizational charts, you focus on a possible cause of all of this red tape: layer upon layer of management. There are more than 25,000 managers in the firm, including more than 130 vice presidents. There are so many strategic planners mucking up the works that nothing seems to get done. There are vice presidents hiring strategic planners, and strategic planners hiring vice presidents. On top of that, many of the company's largest businesses, such as its large tool division, are growing at less than 4 percent a year. No wonder the company has been dubbed a "GNP company"—its profits are growing at approximately the same rate as the economy as a whole.

And—you notice with concern—nobody seems to mind. You call a meeting with your senior management team to get its take on the situation, and you learn that most of its members are content with the way the company is functioning. They see little reason to change things. There is even a whiff of arrogance around the edges of the discussion—as if your colleagues are convinced that your company has a monopoly on good ideas and smart management.

This attitude is all the more surprising given the lack of coordination and communication that you've discovered among the members of this same management team. Despite the fact that most of them have been with the company for many years, they seem to know little about one another's businesses. In addition, when you ask them about the morale of the workforce, few seem to know (or perhaps care) how the rank and file are faring.

As if this weren't enough for you to worry about, many of the company's flagship businesses are lackluster at best. Rather than leading their industries, many of them are laggards (often fourth or fifth in their industries). You see few realistic growth prospects for these stragglers. Not surprisingly, the managers of these slow-growth companies have few strong ideas for improving things.

To complicate matters further, the company has its hand in so many types of businesses that you see no clear way to reorganize things. You see an organization in desperate need of an overhaul, and yet you seem to be alone in that assessment.

What is going on? Is your concern misplaced? If not, what do you do, and where do you begin?

What would Jack Welch do?

It was the publishing event of the year. When word spread in July of 2000 that the leadership memoirs of GE's Jack Welch were about to go on the auction block, every publisher wanted in. However, the multimillion-dollar ante was too much for most publishing houses. After several days of bidding, the price tag reached a stratospheric $7 million, and only two publishers were left standing. For a business book, this was an unheard-of event.

According to one insider, the GE chairman was embarrassed about the mountain of money that was about to be shoveled his way (despite the fact that he was planning to donate the money to charity). As a result, Welch put an end to the auction by selecting Time Warner, who agreed to pay $7.1 million for the right to publish his story. Had Welch not stopped the bidding, the price tag would probably have increased by several additional millions.

At that time, no U.S. president—traditionally the highest-paid autobiographers—had ever received a book advance of more than $7 million. (President Ronald Reagan had received $8 million, but this was for a two-book deal—his memoirs and a book of speeches). Why were the reflections of this business leader now more highly valued than the reminiscences of any other business or political leader in history?

Like the stock market, the Welch payday had reached record—even euphoric—levels. That same year, the greatest bull market in U.S. history ended. The following year, Welch stepped down as GE's CEO. Still, neither event prevented Welch's book from becoming one of the best-selling business books in publishing history. What made Jack Welch's leadership methods the most emulated in history? Why are his strategies and tactics studied by students, managers, and other chief executives the world over?