welchism

The Chairman’s Lounge

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The Chairman's Lounge Book Cover The Chairman's Lounge
Joe Aston
Simon & Schuster Australia
2024
359
★★★★★

This is the story of the downfall of an Australian business hero, the destruction of an iconic Australian brand, and hubris. In a mere four years Alan Joyce when from hero status in Australia, to literally hiding out with his mother in Dublin while being hounded by the press. Truly his downfall was impressive.

However, I think it’s also another example of Welshian management ultimately failing, as seen with General Electric in The Man Who Broke Capitalism and Lights Out. This includes: publishing accounting results that while inline with the definition of the accounting standards appear to have redefined expenses in a manner convenient to management with little rationale provided; misleading customers on their refund rights at a time when those same customers were trapped at home suffering and Qantas was sitting on massive cash stockpiles; illegal union busting; and shedding large numbers of highly skilled staff which simply couldn’t be replaced in a timely manner when travel ramped back up again. That is, optimizing for this quarter’s numbers by completely ignoring the longer term impact of the decisions being made.

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Lights Out

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This book continues the story of General Electric in the period after that covered by The Man Who Broke Capitalism, thus presenting an opportunity to validate if Jack Welch really was the bad guy while also learning more about where Welchism took General Electric in the longer term. This book is very readable, with nice short chapters -- for example it introduces Welch as a character, but does not dwell on his time at General Electric more than is necessary. Immelt's time as CEO got off to a rocky start, with the 911 attacks occurring on just his second day in the job. GE was financially exposed to these events, both as an insurer of some of the destroyed buildings, but also as a major manufacturer of aerospace equipment whose grounding reduced demand. My second day as chairman, a plane I lease, flying with engines I built, crashed into a building I insure, and it was covered with a network I own" Then of course came Enron. While the book asserts that GE's behaviour lacked Enron's criminality, GE was certainly creative and opaque with its accounting and would have to clean up its act under the new stricter post-Enron accounting…

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The Man Who Broke Capitalism

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With Cisco announcing that they no longer need 12% of their staff this calendar year (5% in February, and another 7% in September), I am left wondering what is so terribly wrong with American Capitalism. Interestingly at about the same time someone recommended I read this book, so here we are -- seeking to understand the behavior of our corporate masters once more. This book starts with this quote: To understand a civilization, consider its heroes. Which is telling because its so true. I think it also works for organizations -- if you want to see the values of an organization, don't look at what they say, look at who they promote and idolize. That's really the author's point though, so I shouldn't take too much credit. It's clear from the start that the author doesn't like Jack Welch or his leadership of General Electric and that he thinks Welch's legacy is toxic. Honestly though, he makes a pretty convincing argument that leaves me not being a huge fan either and certainly GE didn't survive the experience of Welch and those he chose to replace him upon retirement. It is asserted that Welch had three main maneuvers in business: downsizing;…

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