by Jack Welch
—VITÓRIA, BRAZIL
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Unlikely. Your problem is too big and time is too short. Instead, you need to accept that you have reached a moment of truth in the evolution of many start-up and family-run ventures. A unique technology or product, plus passion and momentum, can take you only so far. Now you need help—from the outside.
Don’t panic. Get out there and find a star CEO. Yes, that step can be anathema for owners and entrepreneurs in your situation, but it usually hurts only at the beginning, as you hammer out new roles and relationships. After that, it can be all upside, as outsiders, with their experience and hunger for change, find the route to the growth that has eluded you.
And you, incidentally, are in a particularly fortunate position. The star you need could come from your own industry. Big Pharma is having its own growth problems. And because of that, there are lots of talented executives who would likely jump at the chance to transform a floundering family-operated biotech company.
Of course, to attract such a change agent, you will need to give something up. You and your father, for instance, may have to let go of daily operations, hiring, and strategic planning. You will also have to let go of some equity. You simply cannot reel in a great outside CEO without giving him or her a piece of the action. The good news is, if your new star does the job well, you all win, financially and otherwise, as the company grows and thrives.
Yes, letting go can be scary. But there’s really nothing to fear, since you and your father will retain majority control of the company. Just be sure to use that control judiciously.
Remember, you hired the star not to obey you—but to save you!
WINNING AND LOSING
On Why Business Is Good
Winning could not have been published at a more fraught moment in the life cycle of world business. The technology bubble had burst, sapping enormous confidence from the system; the emergence of terrorism had introduced a new and seemingly intractable shakiness to the markets; and corporate scandals were in high gear. After more than a decade of exuberant go-go-go for business, suddenly there was a widespread sense of no-no-no. No growth, no certainty, no pride.
The last of these—the contention that business is inherently bad—has always struck us the most off base and, indeed, even the most dangerous to the future of a healthy society.
In this final set of answers, we explain why.
THE WAGES OF SOX
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Has the new regulatory environment in the United States—brought on by its spate of corporate scandals—crippled the country’s entrepreneurial spirit and dulled its competitive edge?
—NEW YORK, NEW YORK
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No—but we have to be careful going forward.
Look, there can be no denying that in 2001, two major events significantly impacted the U.S. business environment. First, the well-publicized spate of corporate scandals that began to unfold that year led to the eventual passage of the Sarbanes-Oxley Act, with its new legion of constrictive financial reporting requirements and correspondingly severe penalties. SOX, as the act is commonly called, cast a real chill on risk taking. And while its requirements affected every company, small entrepreneurial ventures, with their limited staffs and tight cash flow, certainly felt its additional costs the most.
Second, there was 9/11, which sparked tough new immigration rules. While completely understandable, those rules happened to affect a visa provision called H-1B, which makes it harder for skilled foreign workers, i.e., future entrepreneurs, to stay in the United States after they complete their education.
Both SOX and H-1B had unintended consequences that could have really weakened American entrepreneurship. But they haven’t. Here’s why.
Take SOX to start. Without doubt, SOX was necessary. Investors desperately needed to see that the U.S. government was committed to keeping American business clean and fair. SOX did that, and that was great. But any law that passes the U.S. Senate by a vote of 99–0 has to be excessive—and SOX was.
Already, however, we have begun to see the most constrictive black-and-white strictures of SOX give way to good judgment by regulators. The SEC has very thoughtfully reevaluated and revised sections of SOX. Normalcy and equilibrium are creeping back into the system.
As for the new immigration laws, the picture isn’t yet so positive. In 2004, in fact, the U.S. government cut the number of H-1B aliens permitted into the country by two-thirds—from 195,000 to 65,000—although the cost of sponsoring such aliens was reduced for employers. During our recent visits to dozens of American business schools, we heard about the difficulties wrought by this rule again and again, and not just from the young people themselves, but from the professors who want to help them achieve their dreams of building businesses in America.
That said, SOX is a good example of how a much-needed but overreaching law in the U.S. system can be modified to reflect marketplace realities, and it’s likely the same will happen in regard to immigration. America was built in large part on the brains, heart, and sweat of newcomers, and it must continue to benefit from the future’s best and brightest flowing through its doors from every corner of the world.
But even if the return to more open immigration rules is slow, America still has three huge competitive advantages in the global marketplace.
First, its government and its people are ardently pro-business. They believe in capitalism, and every aspect of the political system bolsters that belief. Taxes, while significant, are not onerous. Calls for protectionist measures are beaten down in favor of free-trade initiatives.
Second, the U.S. culture celebrates entrepreneurs.
Some of its biggest heroes include great inventors from Thomas Edison and Henry Ford to Bill Gates and Michael Dell. And there is absolutely no shame in telling people—including your parents—“I’m starting a business in the garage.” In fact, it is more likely to cause envy or awe than dismay.
Third and finally, the United States has vast capital markets and the ingenuity to use them to build great enterprises. Europe, Japan, and Latin America lag far behind the United States in the capital or desire, or both, to pour resources into the venture funds that galvanize start-ups in every industry. Likewise, they lack the proliferation of private equity firms you find in the United States, with their penchant for turning business laggards into fiercely competitive organizations.
In the United States, good ideas and the entrepreneurs who spawn them don’t go begging. Instead, they get pursued to the point that there is often more money than good ideas to invest it in.
Very simply, it’s an entrepreneur’s playground in America, and even excessive knee-jerk regulation cannot take the fun, energy, power—or spirit—out of it.
THE COCKTAIL PARTY CONSPIRACY THEORY
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Do you believe that large corporations are riddled with office politics—the “who you know, not what you know” syndrome—such that many people are stifled in favor of those who posture in the right way?
—BILLERICAY, ESSEX, ENGLAND
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There will always be office politics, but it goes too far to think that big business is “riddled” with it. Plenty of companies all over the world—winning companies—do everything in their power to get rid of it every day. In fact, they’re desperate to. Why? Because every manager with a brain in his or her head knows that you win when the best performers—not the people who “posture in the right way”—get heard and get ahead. You don’t think Microsoft grew into the most successful computer company in the world with a bunch of sycophantic dopes on the senior management team, do you? Or that Procter & Gamble reinvigorated its approach to innovation because it promoted a bunch of empty-headed rear-end kissers? No way. These companies, and thousands upon thousands like them, deliver results because they are meritocracies, where brains and sweat matter more than who had cocktails with the boss last week.
Office politics, in our experience, is mainly the province
of just three types of employees. The first is boss haters. These are the perpetually disaffected individuals in most every organization who have a congenital disdain for authority. It’s just part of their constitution. They go to work every day looking for palace intrigue, and part of that campaign is muttering away that some unworthy dunderhead got ahead because of “connections.” The second type is underperformers, who use office politics to explain away their own shortcomings. They deserved the promotion, but Mary got it because she went to school with the boss’s brother, and that kind of thing. And the third type is people who are underutilized—the bored. As the old saying goes, “Idle hands are the devil’s workshop.” Idle brains too.
Given the people behind office politics, it is easy to see why it mainly affects lousy companies. Good companies work ardently to root these types of people out, or to get them back on course. That doesn’t mean they succeed completely, but they never stop trying.
WHAT TO TELL THE GRANDCHILDREN
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After a successful and satisfying career as an engineer and manager, I am getting to the point where my grandchildren are turning to me for advice about educational and career paths for themselves. If you were in my shoes, what would you tell them?
—MILWAUKEE, WISCONSIN
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Whenever we get this question, a strong image comes to mind. It’s of a friend of ours who was encouraged (she would say, “shoved”) by her parents—back in the 1970s—to become a doctor. At the time, getting a medical degree was like winning the lottery, but with a lot more respect attached. So, our friend went along with the plan. Her parents cheered; she soldiered on.
Fast-forward to the present. Our friend is taking photographs for a living—joyfully, we might add. She ditched her twenty-year career as a neurologist at age forty-five with the words “Life is too short to spend every day doing something you don’t love.”
That’s what we would advise you to tell your grandchildren.
Now, we realize that every era has its next big thing. In the 1970s, college kids were pressed to study geology, to capitalize on the growing number of opportunities in oil and gas exploration. In the ’80s, investment banking and consulting were the gold mines of the future, and in the ’90s, the collective mantra was, “Go Internet, young man.” All in all, not bad stuff. The oil and gas industries continue to flourish. Investment banking and consulting continue to expand, making a lot of people fortunes. And the Internet, after enduring a period of bust, is strong and getting stronger.
Today, all arrows point toward the biotech, nanotech, and information technology industries, and the convergence among them. That’s where the growth and greatest excitement will likely be over the next decades.
But that data matters only if your grandchildren happen to like science or technology so much that they just can’t learn enough about either or both.
If they don’t, they should follow our friend’s well-earned counsel: the only career worth pursuing is the one that turns your crank.
So, by all means, mention the next big thing to your grandkids, but tell them with more gusto that they should do what they love. Tell them to grab on to the career that engages their brain and heart and soul and gives them meaning. Tell them that eventually, the money will come, and if it doesn’t, in time, they will find themselves rich with something money can’t buy.
And that, obviously, would be happiness.
GOOD-BYE, GENGHIS KHAN
* * *
“It is not sufficient that I succeed. Everyone else must fail” is a line attributed to Genghis Khan and sometimes quoted by the moguls of our own era. In the cutthroat, hypercompetitive business world today, what is your take on this attitude?
—STILLWATER, OKLAHOMA
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It’s nonsense, of course, because it’s just not the way business usually works, nor should it be.
Now, obviously you’re not going to sit around wishing your competitors well. All tough-minded businesspeople want to win—they want the most sales, the biggest market share, the highest profit margins, and so on.
But tough-minded businesspeople also realize that competitors, for all their aggravation, serve a purpose. They sharpen your focus. They keep you fierce and hungry. And the best of them raise the bar on every aspect of performance, from innovation to delivery.
Without competition, companies usually get fat and lazy. Case in point: all the bureaucratic monopolies out there that have foundered, largely due to the self-satisfaction and arrogance that came with achieving the very success they were after.
So, look, you may not want your competitors to win, but unlike Genghis, you want them around. It’s good for customers, it’s good for you (albeit sometimes painful), and it’s good for business overall.
Now, taking the quote to the individual level—again, wrong, even for the most ambitious among us. We’re not going to deny that schadenfreude exists; it’s human nature to feel a small twinge of relief (or worse, happiness) when a colleague screws up. But the most successful people fight that instinct with everything in them. They know that someone else’s candle going out, as the old saying goes, doesn’t make their candle burn any brighter. It just makes the whole room darker.
The best thing that can happen at work—and in life—is to be surrounded by people who are smart and good. As with tough competitors, you learn from them and improve because of them. When they do well, so do you, either by their example or by being part of their team.
So maybe Mr. Khan was onto something eight hundred years ago, fighting other warlords on the Mongolian plain, but in today’s world, mogul or not, his advice seems ready to retire.
AND THE LOSERS ARE…
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All this talk about winning makes me wonder, is there any place for losers in this world? Only a small percentage of people succeed; what should all the nonwinners do, just kill themselves?
—BANGALORE, INDIA
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What a question! It has to mean you see winning in purely economic terms. That’s just not how it has to be.
We think about winning another way—as setting personal goals and achieving them, and (as important) enjoying the experience on the way. Winning has nothing—or everything—to do with your job. Yes, you can win as a corporate executive, but you can win just as meaningfully as a carpenter, math teacher, or singer in a wedding band. You can win raising a family, caring for your parents, or being a good friend—as long as those are the dreams you picked for yourself. Indeed, the biggest winners in the world are those who answer yes to the question, “Am I living the life I choose?”
One of the biggest winners we know is a person who by your economic definition would probably not qualify at all. Jim O’Connell graduated from Harvard Medical School. But instead of pursuing a prestigious and lucrative career, he has spent the past twenty-two years driving a van around Boston practically every night, delivering medical care to the homeless. He lives simply; money doesn’t matter to him. And yet Jim’s life is full of joy, and he is beloved by everyone lucky enough to know him, from street people to senators.
Look, winning and losing can’t be quantified. They are states of mind, and losing happens only when you give up. Seen that way, then, the world can be filled with winners, and there is room for them all.
WHAT’S RIGHT ABOUT WAL-MART
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Is Wal-Mart a force for good or evil in the world?
—EXETER, NEW HAMPSHIRE
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We have heard this question increasingly in recent months, but perhaps with the most fervor by the high school student who posed it the way you see it here, with the added remark, “You claim business is good for society—but Wal-Mart destroys it.”
Destroys it? No way.
Look, Wal-Mart is a great company. Maybe that’s politically incorrect to say today, but it’s absolutely true. Wal-Mart helps individuals, communities, and whole economies prosper.
Yes, Wal-M
art is huge and getting more so. Yes, its business model is threatening to competitors, and its purchasing power frightening to suppliers. But all that doesn’t make Wal-Mart bad. It just makes Wal-Mart a big fat target for critics who, for reasons of their own, won’t acknowledge the many ways Wal-Mart improves lives.
Take individuals. First and most obviously, Wal-Mart’s prices have a massive positive impact on the quality of life of millions of consumers. No other retailer offers so many good products for so little, from groceries, to school supplies, to medicine, to home furnishings. And in doing so, Wal-Mart helps keep household expenses low in a way that no social or government program could even attempt.
In addition, Wal-Mart helps individuals in a more long-term and exciting way. It provides its employees with tremendous access to upward mobility, even those with modest educational credentials. The organization is filled with stories of employees who started on the floor or as cashiers and worked their way up to management positions. And with Wal-Mart’s international growth, you are now seeing career paths that can start in merchandising in Texas, move to logistics in Arkansas, and end up in divisional leadership positions in Europe and Asia. Only the military comes close to Wal-Mart when it comes to providing training and opportunity for individuals who have no other way to break out of a paycheck-to-paycheck lifestyle and into a whole new world of possibility.
