Jack Welch and Jack Ma: icons of their time.
Several years ago, I attended a three-day business conference that featured some remarkable management ‘gurus’ and business leaders. Jack Welch was one of them, and the 3,000 participants in the room were mesmerized by his presence, including myself — which is particularly amazing given that he was connected via web conference, instead of being physically present. Looking back at that day, I can’t help but wonder what sort of response he would get today from a similar crowd.
Welch was crowned “Manager of the Century” by Fortune magazine in 1999, two years before he retired from General Electric. He was also dubbed “Neutron Jack” (in reference to the neutron bomb) because he was known for firing so many people that only the buildings were left standing. Each year, he would divide all top executives into “A”, “B”, and “C” players, and eliminate those in the “C” group. His so-called rank-and-yank policy (a.k.a. “vitality curve”) was praised by many as being a central pillar for growing GE’s market value 40-fold during his 20-year tenure as the company’s chief executive. In the end, the word on the street (meaning Wall Street) was that, regardless of method, no one could argue with the results that he produced.
One of his main contributions was to lead GE away from manufacturing and into services, primarily financial ones. Thanks to him, the company created by Thomas Edison came to rely on GE Capital as its main business. During the crisis of 2008, its assets collapsed along with the rest of the whole system, and the subsidiary had to be bailed out by the government to the tune of $139 billion dollars.
According to a recent story by Bloomberg BusinessWeek, it took current CEO Jeff Immelt more than a decade to “exorcise the ghost of Jack Welch”. Now the company is focused on power and energy, and it’s made a significant bet on developing software to connect generators and engines to the internet. In other words, it has turned its attention back to innovation, and is fostering a start-up culture in order to attract younger and entrepreneurial talent. As for the “vitality curve”, the company decided to implement a gentler system where employees are “coached” to excel.
People were very surprised, if not confused, when Welch declared in 2009 that “shareholder value is the dumbest idea in the world”, given that he is widely credited with making shareholder value a corporate obsession.
Could the man who leads straight form the gut have had a change of heart?
There is a number of active CEO’s who have been very vocal about shifting the corporate conversation from shareholder value to stakeholder value, which takes into account not just investors but also employees, customers, suppliers and society at large. However, turning words into action seems to be challenging when the system is still designed to encourage short-term returns, reward financial engineering and ignore pervasive workforce disengagement. Even self-proclaimed “conscious capitalists” are finding it hard to ensure that their companies live up to their highest ideals. Whole Foods has gotten into deep trouble because of exploitative pricing tactics, significantly hurting consumer trust in its brand. Apple has been borrowing money in order to repurchase stock and fatten dividends, while avoiding to touch its international bank accounts and pay hefty taxes in the process.
Not long ago, leadership professor Bill George posed a question to third-year students at Harvard Law School: “Is the corporation an institution to be developed to serve society, or a collection of assets organized to maximize return to investors?” All 30 students said it was the latter. This anecdote shows how deeply entangled the profit-driven culture is with the educational, legal and fiscal structures that have been in the making for a long time.
These days, the counter-culture to the “shareholder is king” movement is emerging from some of the least expected places. One of them is Hangzhou, in China’s Zhejiang Province, home to the world’s largest retailer.
In 1999, Jack Ma was sitting in a coffee shop, thinking of how Ali Baba had learned the secret password of the 40 thieves — “open sesame” — and accessed the treasure that was hidden in a cave. The story resonated with his vision of unlocking the potential of China’s small and mid-size merchants, and that’s how his company was named.
Back then, Ma saw the internet as an enabling tool for connecting businesses across the country’s huge population, when few other Chinese did. He had no background in technology, and his ideas earned him the nickname “Crazy Jack Ma”. So he and his wife brought 17 friends together and pooled $60,000 to start the company. That provided the foundation for Alibaba’s dynamic partnership structure and unique culture designed to drive collaboration and promote accountability for long-term growth.
He has said that “our challenge is to help more people to make healthy money, ‘sustainable money,’ money that is not only good for themselves but also good for society; that’s the transformation we are aiming to make”.
Ma is mostly known for being the richest man in China and the first mainland Chinese entrepreneur to appear on the cover of Forbes. The Washington Post described the tiny, slim framed business magnate as “a larger-than-life figure who has been likened to the godfather of Chinese entrepreneurship and attracted the loyalty of employees and customers alike with a showmanship that sometimes borders on the bizarre”.
But how does Ma see himself?
Like many brilliant innovative minds, Ma struggled academically. But unlike many idolized college drop-out successful entrepreneurs such as Mark Zuckerberg, Bill Gates or Steve Jobs, Ma earned his MBA from Cheung Kong University while already building Alibaba in the early 2000’s.
As he revealed in an interview with Charlie Rose in Davos:
“I failed a key primary school test two times, I failed the middle school test three times, I failed the college entrance exam two times … I applied for Harvard ten times, got rejected ten times. And then I told myself, someday I should go teach there.”
With or without Harvard, the former English teacher and translator is now directing a huge chunk of his energy towards teaching a new generation of entrepreneurs and leaders around the world. He’s teaching us that failure and rejection are more important than wins; that a healthy body is not just important for health itself but also for overall life balance; that free trade doesn’t just enable commerce and profit but also enhances global peace and prosperity; that leadership is not just about a title or position but also about the willingness to collaborate and a disposition to serve.
Jack Welch and Jack Ma are both icons of their time. We can’t fully understand either one unless we study the context in which they were brought up. And they also represent two approaches to leadership that still co-exist today.
The question is: Which Jack do you believe is more likely to thrive in the modern era? Which one could you learn the most from? Which one would you rather emulate?