« Archives in April, 2005

Jack Welch Gives Straight Talk About Winning

Former GE CEO Jack Welch spoke at the Marshall School today to pitch his new book, _Winning_, and, since I RSVPd for a ticket immediately, I actually got to get into the event and look at the back of someone’s head while listening to Welch talk for two hours (Jason, you have exactly five gray hairs). Actually, it was a really incredible speech and I was very impressed by Jack Welch’s clear, straightforward style and his blunt (although not-particularly-offensive) honesty. A good role model for us all and a lot of great food for thought. I’ll probably turn into a corporate tool and buy _Winning_ now to read what Jack Welch had to say in print.
Yeah, sorry, this is probably going to be one of those un-funny entries; I’m going to mostly report and include very little commentary. Hopefully it will, as we say in b-school, add value.
Welch certainly added value. I’ll admit I was a bit skeptical at first that he would just pitch his book; but the forum, which was designed as an interview of Welch by famous leadership scholar and Marshall Prof Warren Bennis, really got Welch to say some useful and topical things. Some of the subjects upon which Welch spoke included (in no particular order):
* Succession
* Outrageous CEO pay packages and severance bonuses
* His famous employee ranking system at GE
* How to make good hires
* The only three metrics you need to run a company
* Sarbanes-Oxley
* Expensing options
* Mentors
* How to prove yourself in your first job
* The difference between being an employee and a boss
* And much, much more that I should have rememebered but, darn it, I forgot already!
h3. Succession
When Welch retired from GE, there was a bit of a brouhaha over who his successor would be; there were three qualified individuals who had been groomed for the post. One was chosen, and the other two left within about ten days of the choice. A lot of people said “too bad you couldn’t keep those other two qualified people,” but Welch doesn’t feel that way, for four reasons:
* Keeping the “losers” would have created cliques of people who thought “they should have hired the other guy!”
* What kind of an example does it set to have a bunch of #2s around?
* Make room for the up-and-coming young execs! Don’t keep people around who won’t be promoted further.
* The two “losers” deserved CEO spots, and got them; they just had to go elsewhere.
The two passed-over execs have been very successful CEOs at other companies, and Welch’s successor has been successful at GE.
When Welch ultimately retired, he told his replacement to feel free to tear everything down, despite GE’s incredible success over the last 20 years. “Imagine you lived in a house for 20 years,” explained Welch, “you’d think everything was fine. You’d think the carpet was fine, that the arms on the chairs were fine. Then you sold the house, and the buyers came in and they said, ‘look at the holes in this carpet, look how threadbare the chairs’ arms are.’” Welch expected change when he left, and he felt he had the right man around to move things forward.
Welch is a big believer in building internal succession plans; not least, without such a plan, you run the very real risk of ending up paying:
h3. Outrageous CEO Pay and Severance Packages
Welch specifically called out the example of Carly Fiorina here, not because he felt she had a particularly inapproporiate package but because she was a good example. “You’re HP,” he said, “you’ve just fired your CEO for incompetence, and you want to hire someone new. What do you have to do to hire Carly Fiorina away from her good job as CEO of Lucent?”
Think about it from Fiorina’s point of view: you’re hired to take over a floundering company, bring it back from the brink, leave a solid job with a successful company in which you look good and from which you probably don’t need to worry about being fired. Oh, and if you fail in this new job you’ll probably do so spectacularly enough that you’ll never find another job. How much would you want to see your pay be? How much would you want your severance package to be?
Similarly, Tyco’s new CEO was hired away from a good VP position at Motorola to take over a company in bankruptcy that might be liquidated. He turned Tyco around. What do you think it takes to get someone to quit a good job and go to another that might not be around in a month? Money. If you groom internal successors, you don’t need to “bribe people to come to work for you”.
h3. Employee Ranking at GE
During Welch’s tenure, GE instituted a revolutionary ranking system: everyone was ranked by their boss as either in the top 20%, the middle 70%, or the bottom 10%. The bottom 10% were fired. Welch admitted that suddenly instituting this program, without building up to it over a period of time, was a major mistake. “A guy gets a bottom 10% rating and is shown the door. ‘Wait a minute,’ he says, ‘I’ve been here 23 years and nobody ever told me I was in the bottom 10%!’” Of course that’ll cause problems! Make big changes part of a whole plan and sell it first.
h3. How to Make Good Hires
This anecdote was based on a question Welch got at an earlier speech. Welch said the one question to ask anyone you are thinking about hiring was “why did you leave your last job?” From that you’ll learn about dreams, about initiative, about interaction patterns, about who’s a whiner and who’s a worker, and more.
h3. The Only Three Metrics You Need to Run Your Business
# Customer Satisfaction
# Employee Satisfaction
# Cash Flow
“If your customers are satisfied then you’re growing share. If your employees are satisfied then you’re making productivity gains. If you have strong cash flow then you’re making money.” Oversimplified, but philisophically very sound.
h3. Sarbanes-Oxley
Welch is no big fan of SarbOx; he thinks it is far too burdensome on small companies. He’s particularly against the requirement for independent directors: “what makes you think you want a poet on your board more than you want Warren Buffett?” he asked. Welch’s proposal: index the requirements to firm size, with lighter requirements for smaller firms.
h3. Expensing Options
Welch is famous for making GE one of the first companies to pervasively use options as part of compensation. “I’m proud that 90% of options at GE went to regular guys,” he said. Of course, at the time, options didn’t have to be expensed; now they increasingly are being expensed, and Welch doesn’t like it. “The fat cats will always get their options,” he explained, “it’s the little guy who’ll lose them.” Welch thinks that the old way of doing it was adequate, because the footnotes showed how dilutive the options were.
h3. Mentors
“The only thing a mentor is good for is to show you where the coffee is and where the lunchroom is,” said Welch. He’s not a fan of mentoring programs, because he thinks such programs cause people to put all their eggs in one basket. Welch encourages everyone to have as many mentors as possible and not risk getting attached to one “turkey” who will take you down when they fall.
h3. How to Prove Yourself in Your First Job
Overdeliver. “Never do what your boss says.” Always do more.
h3. The Difference Between being an Employee and being a Boss
When you’re a boss, it’s not about you anymore, it’s about your employees. Welch related an anecdote: “A manager I knew asked me once, ‘Jack, I have ten employees and two of them are just smarter than me. How do I evaluate these two people?’ I said ‘What the hell’s wrong with the other eight?’”
That’s my not-so-brief summary of what I learned from Jack Welch. Interesting and thought-provoking all! Also I learned to show up early for popular events so that I don’t get stuck in the back, which is probably a good lesson for some point in my life.
I would highly recommend trying to hear him speak if you get the chance. I think you’ll be impressed, like me, by what a straight shooter he is. Now if only I weren’t on a fixed income I’d go out there and buy _Winning_.
If you’re interested in the topic, I’ve got a bit more “information on leadership”:http://cleverbird.com/wiki/LeadershipTechniques/LeadershipTechniques from other perspectives over at “Cleverbird”:http://cleverbird.com.
_Update: Check out the “Daily Trojan’s article”:http://www.dailytrojan.com/news/2005/04/27/News/Welch.Imparts.Business.Knowledge-941139.shtml on the speech, it mentions a few details I forgot._















Potty Mouth

While I have no particular memory of taking GSBA 547: Cursing for Managers this semester, I’ve either received some cutting-edge new subliminal training in how to drop f-bombs in class, or I’ve contracted “Tourette’s Syndrome”:http://tourettes.org/. Either way, I’m contributing to the moral turpitude of the Marshall School. (Note to entrepreneurs: turpitude.org is apparently not taken!)
It all started, appropriately enough, when we were discussing what to do with “underwater options”:http://www.answers.com/topic/underwater-1&method=6. I somehow managed to use the f-word seven times in about a minute and thirty seconds. About a third of the class snickered like fourth-graders; another third was relieved that someone had finally cursed in class so now they could; and the other third was probably quietly appalled.
At first I assumed that, well, there was a topic I felt strongly about so I spoke perhaps a bit out of turn. But it’s only gotten worse; it’s as if the curse words found a chink in my armor and have now entered all areas of my speech. I’ve caught myself cursing in everyday conversation several times in the last week, and, just this morning, I cursed at myself when talking to myself in the shower.
Of course, like everyone born back East, where men are men and women wear tons more perfume and thus can be located from across the room simply by smell (convenient when one has lost one’s girlfriend in a crowded bar), I used to curse a lot. When I came out West for college, I was tremendously amused to see all those Bay Area people who used “hecka” in lieu of the apparently too-vulgar “hella”. Of course, the f-word was, at the time, my favorite adjective, and all of the freshpeople from the East Coast enjoyed recognizing each other from a distance by our gratuitous use of the d-word, the s-word, the seven-letter g-word, and, of course, the “14-letter s-word”:http://www.everything2.org/index.pl?node=snugglebunnies.
But being known for my potty mouth wasn’t exactly what I’d come to college for (I’d come to college, of course, for the girls, and for “the newspaper”:http://www.tsl.pomona.edu/). So I cleaned up my act. Sure, I kept the f-bomb around for when I needed it, but it was part of my arsenal for massive retaliation, not for low-intensity warfare.
And so it was for the last 12 years, until, this semester, I found myself cursing to obviously-confused international students. I don’t know how it happened. I don’t want people to know me only for my potty mouth. I mean, we’ve all known my ideas were shit all along, this would just be too much.















Feelin’ the 6am

I will never publicly admit that I like having 8am classes four days in a row. But I am now officially a convert to the whole morning person things. A flurry of e-mails at 6:05am? Makes me feel hardcore.
Like my mother, also a Cancer, I used to heart sleeping in. I think I made it in at 8:45am — official starting time — about 5% of the time at my last job. Earlier, when I owned my own business, I’d regularly keep going ’til 11 or midnight and then sleep ’til 8am (thank goodness I worked from home and a quick trip downstairs in my jammies had me answering e-mails by the time clients got into work). I vowed I would never, ever, work for someone who made me come in before 9:30am. Ahh, youth.
When I started school in August I saw all the first-term 8am classes I was, to put it lightly, I was ready to plotz. And the first couple of weeks were awful; I never drank a lot of coffee before, but suddenly I was up to a venti soy latte every morning. Then I started getting headaches when I skipped coffee, so I downshifted to tea (and baked goods!), and got my mornings going.
Today I woke up at 5:30 — even before the alarm went off — and sat down and did some research. Forty pages of analyst Spanish- and Portuguese-language analyst reports and business press articles later, I discovered I was done with my research for the day, even before my first class.
The downside of all of this is that I keep waking up at unreasonable hours like 5:15am. This is even worse thanks to “daylight savings time”:http://juniorbird.com/archives/001421.html, since the light by which I might have gotten my work done has been transferred, by government fiat, to midwestern industrial agriculture. Soon I may have to switch my alarm from 6am to 5:30am — and, if Dean Voigt lets me, I might actually try to get to sleep before one. Because, let’s face it, that hour between midnight and one is just all about the recently-TiVoed Family Guy and Futurama. I need less cartoon in my life and more hardcore 6am e-mailing.















What, Me Relax?

It’s day three of a three-day weekend. And have I chilled out any? Of course not. I spent a whole day on activities. I spent a whole day paying bills and taking care of un-attended-to tasks. I’m in the midst of spending a whole day trying to get a summer job. TiVo has about 30GB of stuff I’d love to watch but Dean Voigt has a lot more stuff I need to do. Yes, it’s clear, what I really need is an intern.
The problem is, I’m getting bogged down in all the little things: shopping for household products, paying taxes, reading cases, making my “girlfriend”:http://brenditabonita.blogspot.com feel valued, eating, etc. What I really need to be doing is getting a good night’s sleep, watching World’s Wildest Police Videos, and drinking vodka tonics.
An intern is the obvious solution to my problem. A nubile young USC undergrad could gain invaluable perspective on the whole business school process, plus great connections with deans and director-level staff that said intern could leverage into a greater chance of admission.
And, from my point of view, I could have someone who could help me out with tasks like mailing bills, figuring out that whole Brazil visa thing, tell me what I’m having for lunch, and keep track of the three projects, one presentation, and five tests that I have in the next 21 days. Because that’s way too much work for me to remember without having need of a padded room.















My Three Sandboxes

During my horribly-oppressed youth at a Quaker School, I, like many other children in America (and, probably, worldwide), availed myself of the pleasures of playing in the sandbox. Now, most sandboxes are places for children to dig holes and build mounds and get sand in their shoes; at my Quaker school, sandboxes were a tool to enforce conformity. And to get sand in our shoes.
There were three sandboxes at my Quaker School. One was big and had monkey bars over it; if you wanted to play in the sandbox with all the other kids, then you’d play there. For those of us who valued our solitude and/or quiet time in which to contemplate the mysteries of the universe, you could choose from one of the other two:
* The sandbox right near the door, near which the recess teacher always stood, her watchful eyes always judging and watching for your misbehavior so that she could yell (she loved to yell).
* The sandbox far away, sheltered underneath tall trees, where the cats liked to poop.
Now, when I was seven I fully appreciated the structural strength of cat poop in the sand creations I made. However, I didn’t care for the stink. As I was a little pansy and feared loud sounds, I had to avoid the recess teacher and her hobby of raising her voice. That left the communal sandbox, and I think they planned it that way, so that I had to, you know, interact with other kids and awful stuff like that.
Although I don’t think they meant me to see all the underpants of all the girls who climbed the monkey bars overhead.















Going Once, Going Twice, Sold to the Trojan Who Bid 700 Points For That One Course

The way you get into electives here at Marshall is to bid on the courses you want. We get 1000 points, a list of the classes that will be offered in the fall, a prospective list of spring classes, and a list of the last 3-4 years of waitlists for classes, then we get to bid our points on the classes we want. The theory is, this procedure makes sure that people get into the classes they value the most; but that ignores all the things besides desire that go into a bid. Which made me ask: what, exactly, is it that bidding on classes measures?
Let me start by saying that I’m not particularly bitter about my outcome. I only got waitlisted for one class, and I think I stand a good chance of getting into that in the fall (that class is capped at the size of a small classroom, and there are enough students on the waitlist that we can fit into a large caseroom about exactly, so I bet they move us). Nor am I bitter about the fact that the online bidding system seems to go down all the time (last night it went down and lost all of the previous day’s data), or that it can take 20 minutes of trying over and over again to get onto the system. What makes me really think are all of the other inputs into the bidding process.
h3. What Inputs?
These inputs include, of course, things like the old professors vs. classes question: do you take the best professors regardless of what they’re teaching, or do you take the classes you really want regardless of the professor? As an NFL junkie, this makes me think of some teams’ preference to draft the best available player vs. other teams’ practice to draft for need (it always seems that winning teams do the former but the winningest teams make the two come into sync). Some courses also have prerequisites, so you have to keep that in mind and overbid on unwanted prereq classes to get into the wanted later classes in the series, or sadly watch your educational objectives slip out of your reach because you never figured out that “EKG” option on the intranet actually was the “Elective Kourse Guide”, an apparently-misspelled tome detailing all of the classes and, even, some of the prerequisites for those classes (say after me “prerequisite: GSBA 586… what’s GSBA 586? Why isn’t it in the EKG?”)
But there are other foils too. There’s time — one very popular professor is offering two consecutive instances of her very popular Valuations class, and the one at 10am is full but the one at 8:30am is, naturally, only half full (or half empty, for my pessimistic readers out there). And there are other scheduling aspects too. It’s good to have classes on just 3 days a week, and, if you’re forced to have classes Monday, Tuesday, Wednesday, and Thursday, then try to have just one class on MW or TTh and have the other four on the other pair of days. So that, you know, you can “have informationals” and “network” on those days. Especially with Ernie, the guy who sits down at the end stool at the “Lost and Found”:http://www.digitalcity.com/losangeles/bars/venue.adp?sbid=100103620 every day at 11:30pm and drinks Irish Coffees for about 9 hours, until he’s good and surly.
There’s also popularity — you can look at past wait lists and see how popular a class used to be, but you also need to ask your friends to see if lots of people are planning on taking a class this year (that’s what’s happened to me — a class that hasn’t been too popular in the past suddenly exploded). A corollary to this is bidding behavior — it’s just like in The Price Is Right, if that other guy thinks the bedroom set was worth $3000 but you said $3001 you get it and he’s out. If you can predict your classmates’ bidding behavior, and bid just a point or two over, you can get the class at a low, low, one-time cost, with no money down.
So, to recap, in order to get the classes you want, you need to:
# Choose profs vs. classes
# Make sure you take prerequisites
# Worry about the time your class is at
# And the day your class is on
# And how many people will be bidding on that class
# And how many points they will be bidding
Only steps 1 and 2 are really about planning your education; the other steps are either about sloth (not going into school at 8:30 am? slacker!) or about outsmarting your fellow Trojan. This system rewards lazy people who are prepared to be up front about their desire to sleep in, and put lots of points on the board for it, and people who are clever enough to ask their friends “what classes are you thinking about taking?” and then use that information against them! There’s probably some additional benefit that goes to people who can express their schedule as a linear equation and solve it optimally. Yes, MRS bidding is all about creating a lazy, intelligence-gathering, “Solver”:http://office.microsoft.com/en-us/assistance/HA011245951033.aspx -using superclass of prepared MBAs to lord over us open, trusting, morning-people MBAs. Well, ok, not “us”, I’m all about sleeping in.
h3. Obligatory Alternative
As an MBA Candidate, I’m no longer allowed to just complain; I have to offer solutions, too. Therefore, as an NFL junkie, I suggest the Marshall Draft.
It would go like this: we’d have 8 rounds. In these rounds, you’d get to pick:
* 5 classes
* 1 position on the priority list for ELCs (study rooms with projectors, whiteboards, and wireless internet that teams can book for meetings, which are always in high demand)
* 1 position on the priority list for computers in the lab
* An extra allotment of space on the e-mail system
The deal is, while everyone needs 5 classes, everyone wants at least one of the other three things as well, so you can trade around draft positions for those. For instance, I may not care about classes but I really want to be #1 on the ELC priority list; I might trade my first-round draft pick to someone who really wants a popular course, for a second- and eighth-rounder; then I’d use one of my seconds to get a class and the other to get #1 or #2 on the ELC priority list. People who are always running out of space on their e-mail might trade away a third-rounder for two fifths (that’s fifth-round picks, not fifths of bourbon), and spend each on an extra 20MB of e-mail space. And so on.
Your position in the draft could be determined randomly, or, better, it could be determined by how much value you add to the school. So, then, we could move people up in the draft for:
* VP & President positions held
* High grades
* High class participation points
* Tutoring, bringing in speakers, and other out-of-class activities
* Volunteering hours for C4C
* Getting ROI points
We could also have a compensatory system, moving people up in the next draft for:
* Getting stuck on a waitlist
* Having a class with a prof who is rated poorly
The Marshall Draft will reward:
* Providing value to the community
* Working hard
* Prioritizing
* Negotiations
Isn’t that a better alternative? Isn’t it?















End Government Regulation!

A favorite conservative cause is the evil of government regulation. They rail against the economic loss caused by taxes — a loss known in economics as “deadweight loss”:http://en.wikipedia.org/wiki/Deadweight_loss. But who ever thinks of the non-economic deadweight loss caused by government regulation? What about the most serious loss of all — daylight savings time! Yes, just yesterday, the Federal Government’s inefficient regulations caused a deadweight loss of one hour’s sleep to us all!
The basic concept behind deadweight loss is this: whenever there’s an inefficiency in the market, some economic value simply disappears. This is actually pretty easy to prove mathematically, although I can’t do it without graphs and I’m too lazy to draw one of those. Inefficiency can be caused by many things, including:
* Tarriffs
* Poor estimations of available future labor
* Incomplete information exchange
* Wireless broadband
* Michael Jackson trial
Conservatives always focus on the cash losses from taxes and other forms of government regulations. Yet they forget about the most important asset of all, the thing of which neither you, nor I, nor, most especially, soccer moms, ever have enough. They’re taking away time.
(And don’t give me that crap about us getting back an hour in the Fall. We all know an hour now is “worth more than an hour later”:http://en.wikipedia.org/wiki/Time_value_of_money — after all, with that hour now you can Just Get Stuff Done, but, with that hour in the future, well, you’ll just waste your time trying to Clean Up After Your Own Procrastination.)
Daylight savings time is a redistributive tax levied on all of us for the benefit of a few farmers. Perhaps, once, long, long ago, when the wildebeest roamed the veldt and the buffalo the plains, Daylight Savings Time represented a redistribution of precious time from lazy townsfolk to the hard-working farmers who formed the backbone of our society; but not today. Today, Big Government steals an hour of sleep from all of us to subsidize Big Corn and Big Beet Sugar. Does Big Soybeans really need our help?
I say no. I say stand up to the Sleep & Spend Congressmen in Washington. Show you don’t appreciate having your sleep taken away. Stick it to the man. Sleep in.