Transformational Leadership

Transformational Leadership

One of the greatest business leaders in the world is Jack Welch, also known as CEO of the century, His leadership has seen him become an almost mythological figure in the international business community.

For Welch the core competency is people, and he invests a great amount in training facilities. According to Jack Welch, there are four characteristics of a high-potential manager and these can be easily summed up with 4Es, as befits any good theory of management:

• Energy – the ability to address every problem and situation with passion and proactivity.
• Energized – the ability to motivate and energize those around us.
• Edge – the ability to make decisions without doubts and questions.
• Execution – the ability to implement strategies and bring results.

 Those who possess these characteristics are usually the top 20 percent (Pareto Rule) of managers and those on who the company should always focus their efforts. This goal is achieved by differentiated pay in line with the performance of the best performers. Welch put into practice this concept by creating a pay system that offered bonuses and stock options of up to 70 percent of the basic salary of managers.

If we all did the things we are capable of doing, we would literally astound ourselves (Thomas Al. Edison). Image: © Megan Jorgensen (Elena)

Jack Welch installed a business philosophy and strategy that states the his company should be #1 and #2 in all the businesses it owns, and close or sell those in which it isn’t. This strategy has become accepted practice at diversified multinational companies, but it was originally developed and brought to success by Jack Welch’s great capacity for strategic vision.

When the majority of business schools taught the virtues of concentration on a limited number of business to leverage the core competences, or all the knowledge and synergies resulting from specialists in the field, Welch preached and practiced the advantages of differentiation, making over 600 acquisitions in various sectors. He considered the main factor for deciding on the acquisition/disposal to be based on whether the company was the leader (or co-leader) in its market. Il all cases where this was not the case, there were three alternatives: to bring the company to Welch’s standards, sell it or close it.

His transformational leadership was so successful that during his twenty-year tenure, Welch created as much value as any other manager in history.