"Don't focus on the numbers"...Jack Welch

My goal in writing this blog is to present a perspective on root drivers for organization change and support these strategies with effective transformation processes.   Theory is interesting and talk is cheap.  To best understand this phenomenon my experience is to use real examples and case studies of change drivers.  Some will be my examples and some will be from the public domain.

Jack Welch, the infamous CEO and Chairman of GE for more than 20 years led a series of revolutions at GE, seeking to recast a highly bureaucratic, labor-intensive corporate giant into a highly productive machine that would function with the speed and simplicity of a series of small entrepreneurial companies.   Welch was all about measurement, yet one of his more famous quotes...

"Don't focus on the numbers, numbers aren't the vision, numbers are the product."

To me this statement perfectly articulates the what and why of measurement and some of the current problems with organizational measures.

You will hear me say over and over again, there has been a drive in organizations to create better and more copious measurements, which is obviously a very good thing.  Unfortunately, too often this has translated into... 'surely if we measure everything, we will find an abundance of important data that will help to drive productivity and profitability.'   Nope!

I was working in a large rolling mill that had poor productivity which we were trying to improve.  I sat down with the plant manager for a briefing and he produced what seemed like a hundred different analytical spread sheets that seemed to analyze the process down to the minutia, but all it did was confuse me.   His presentation was designed to convince the consultant that they had analyzed this problem to death and I could not possibly add anything to the equation.   He was partly right.  The data showed an organization working very hard at process improvement with little to show for it.  

Everyone has heard the statement...

"There are three kinds of lies: lies, damned lies, and statistics."  This phrase describing the persuasive power of numbers is attributed to the 19th Century British Prime Minister Benjamin Disraeli (1804–1881).

To return back to the rolling mill example, the problem was that they were so focused on measuring the sub-systems in the mill that they were not measuring true system outputs, which brings me back to Jack Welch.    If we look at Welch's career at GE,  he made at least 5 major interventions.  For each of those interventions measures were both the product and the steering mechanism for the change process.

The following are his major change strategy interventions...

1. Being Number One or Two in the Market Place...search out and participate in the real growth industries and insist on being number one or number two in every business that they were in - to become the  leanest, lowest-cost, world wide producers of quality goods and services;
2. People Differentiation, Creating the Vitality Curve... this was a process to differentiate management into 3 groups, A - the top 20% performers, B - the vital 70%, C - the problem 10%;
3. Work Out...taking unnecessary work out of the system and measuring the impact;
4. Boundary-less...the concept of removing boundaries both inside the organization, between manufacturing, marketing, finance, engineering, etc (measure the impact) and outside the organization to create a single process from supplier to customer (measure the impact);
5. Six Sigma Quality...driving productivity, reducing variance span and measure the impact.

I spoke to a friend of mine today who was CFO of a large international chemical company.  He said that his perspective was that since the recession hit large companies have 'hunkered down' and focuced entirely on cost reduction.  Now they and are waiting.

Too many managers are afraid to change.  They believe that standing still is the safest business strategy.  The problem with that approach is that the world is changing.  In fact it seems to be changing at an ever increasing rate.  Therefore to stand still is to meet yesterday's demands, with yesterdays products and yesterday's organization. 

The U.S. Marine Corp teaches what they call the 70-percent solution—It's better to decide quickly on an imperfect plan than to spend time considering every angle and roll out a perfect plan when it's too late.  Learn to move fast, change on the fly, and inspire employees—or die.

 Hard nosed, effective measurement is really about creating organizational learning that allows the management team to steer a course through the rapids of a world in the process of continually reshaping itself. 

The Art of the Bull's Eye
 

The Art of the Bull's Eye is a 7 step structured process that helps manufacturing organization's create an effective measurement system that evaluates customer profitability and customer value.  




We chose the metaphor of a Bull's Eye since the process of becoming a marksman requires...

• both the perspectives of art and science;
• finesse and strength;
• the capability to both adapt to various conditions and yet be extremely decisive;
• the practical applications of mathematics through the understanding of wind, barometric pressure and heat;
• the discipline to keep refining the process and a feedback mechanism to drive the refinements.

But, what is even more cool about the concept of the Art of The Bull's Eye is that it is also a metaphor for striving for perfection.

Jack Welch for me is an example of a manager with a continuous compulsive drive for perfection.  Did it work? First quarter profits in 1996 reached $1.67 Billion  more than the company earned during all of 1981, the year Jack took over. 




More next week.