Small companies move faster. They know the penalties for hesitation in the marketplace. What we are trying relentlessly to do is get that small-company soul—and small company speed—inside our big-company body.
The goal of most big corporations is to get still bigger. Bigness is considered a virtue (or at least a necessary evil) in the corporate environment.
When Jack Welch took over at GE, the company was then one of the largest in America, with more than 400,000 employees. Through restructuring and downsizing, Welch pared the company down to 270,000 employees. But meanwhile, GE’s acquisitions were adding many more people to the payroll, as was Welch’s Six Sigma quality initiative. By the summer of 2000, GE had 340,000 employees.
But simple head counts can be misleading. Even as GE was getting bigger, Welch was making his company act as if it were much smaller. He achieved this goal by simplifying GE’s complex hierarchy and by creating programs that unleashed empowered workers.
BIG HAS ITS ADVANTAGES
Does “big” have its advantages? Of course, says Welch:
Big allows us, for example, to spend billions on development of the new GE90 jet engine, or the next-generation gas turbine, or positron emission tomography [PET] diagnostic imaging machines—products that sometimes take years of investment before they begin producing returns.
Size gives us staying power through market cycles in big, promising businesses . . . Size will allow continued heavy investment in new products . . . Size gives us the resources to invest over a half-billion dollars a year on education: cultivating, at every level in the organization, the human capital we must have to win.
Offshore, “big” permits us to form partnerships with the best of the large companies, and large countries, and to invest for the long term in nations such as India, Mexico, and the emerging industrial powers of South Asia.
SMALL COMPANIES CUT TO THE CHASE
Big, it seems, can be beautiful. So what is it about small companies that Welch loves? His answer:
For one, they communicate better.
Without the din and prattle of bureaucracy, people listen as well as talk; and since there are fewer of them, they generally know and understand each other.
Second, small companies move faster. They know the penalties for hesitation in the marketplace.
Third, in small companies, with fewer layers and less camouflage, the leaders show up very clearly on the screen. Their performance and its impact are clear to everyone.
And finally, small companies waste less. They spend less time in endless reviews and approvals and politics and paper drills. They have fewer people; therefore they only do the important things. Their people are free to direct their energy and attention toward the marketplace rather than fighting bureaucracy.
Welch loves the idea that small companies are uncluttered, simple, and informal.
They thrive on passion and ridicule bureaucracy. Small companies grow on good ideas—regardless of their source.
They need everyone, involve everyone, and reward or remove people based on their contribution to winning. Small companies dream big dreams and set the bar high; increments and fractions don’t interest them.
And he loves the way small companies communicate:
- with simple, straightforward, passionate argument rather than jargon-filled memos, “putting it in channels,” “running it up the flagpole,” and worst of all, the polite deference to the small ideas that too often come from big officers in big companies.
- Everyone in a small company knows the customers—their likes, dislikes, and needs—because the customers’ thumbs-up or [thumbs]-down means the difference between a small company becoming a bigger company tomorrow or no company at all.
So size alone, says Welch, is no longer enough in a brutally competitive world marketplace. Big companies must acquire the soul of a small company. While you are growing, Welch cautions, don’t lose your soul.
Don’t permit the attributes of bigness to overwhelm you.
Get bigger, but protect the soul of the more nimble organization that you once were.
WELCH RULES
- Assume that your big company can act small. Welch had to work at it, but he knew he could instill the passion and informality of a small company into the soul of GE.
- Structure for smallness. Welch removed layers and sector heads that did not add value. If your organization is too bloated, consider restructuring, removing layers, boundaries, approvals—in short, anything that bloats and slows the company.
- Check reality: Do you know your customers? This is a good yardstick. Welch likes to compare his company to the corner grocery store. Do you know your customers, and do they know you? If not, you have your work cut out for you.