In 1981, during a review, the leadership team of GE’s nuclear power business presented a business plan to Jack Welch: A forecast of 3 new orders for nuclear reactors a year.
Jack listened for a while and then said:
“Guys, you’re not going to get 3 orders a year. In my opinion, you’ll never get another order for a nuclear reactor in the U.S.”
The team was shocked. They argued, with the not-so-subtle implication being: “Jack, you really don’t understand this business.”
Jack writes in his book:
That was probably true…
But I had the benefit of a pair of fresh eyes. I hadn’t invested my life in this business.
I loved their passion, even though I felt it was misdirected.
Their arguments contained a lot of emotion but few facts.
Now, the 2 crucial facts in Jack Welch’s mind were:
- In 1979, a nuclear reactor accident in Pennsylvania put an end to what little public support remained for nuclear energy
- GE’s nuclear business had received no new orders in the last 2 years and had suffered a $ 13 million loss in 1980
Therefore, Jack asked the team to redo the plan on the assumption they’d never get another U.S. order for a reactor. He asked them instead to figure out how to make a business out of selling just fuel and nuclear services (maintenance, safety, etc.) to the already installed base. At the time, GE had 72 active reactors in service.
Welch goes on to write in his book:
Some 20 years after that first meeting, the business has gotten orders for only 4 of their technologically advanced reactors. Not one of them has come from the United States. And, the team built a profitable fuel and services business that has made money every year.
Now, let us take a pause and reflect on this question: What really made Jack Welch a great businessman?
- His intelligence?
- His knowledge of facts?
- His decisiveness?
- His competitiveness (commonly believed)?
Well, as is commonly believed, Jack Welch was highly competitive for sure. And, he may indeed be ranking very high on other qualities too. But, in my view, the locus of his excellence is to be found not in any of the above qualities, but instead in a habit that his mother instilled in him since his childhood: The habit of always facing facts.
It was this habit that led him to develop some of the qualities mentioned above. It was this habit that differentiated him form other CEOs.
Jack writes this about his mother in his book:
She always insisted on facing the facts of a situation. One of her favorite expressions was “Don’t kid yourself. That’s the way it is.” “If you don’t study,” she often warned, “you’ll be nothing. Absolutely nothing. There are no shortcuts. Don’t kid yourself!” Those are blunt, unyielding admonitions that ring in my head every day. Whenever I try to delude myself that a deal or business problem will miraculously improve, her words set me straight.
Facing reality became one of Welch’s basic management beliefs. He once remarked:
The art of managing and leading comes down to a simple thing. Determining and facing reality about people, situations, products, and then acting decisively and quickly on that reality.
The short example mentioned at the beginning exactly demonstrates this behavior. Please reflect make up your own mind!0