Why Jack Welch Is Not God

[Guest Nova Zemlya]

GUIDLINES FOR THE ARMCHAIR CEO

Why Jack Welch Is Not God

"But there's a difference between being a good CEO — which Welch has been — and being the undisputed all-time champion of corporate leadership. Or, to put it another way, think of Jack Welch as a stock.

If the most sensible way to gauge the current value of a stock is the famous price-to-earnings (P/E) ratio — that is, the ratio of a stock's market cost to the company's actual or expected profits — then consider Welch's reputation as "price" and his achievement as "earnings."

A stock can be overvalued, sometimes wildly so, even if its earnings look solid. In bottom-line terms, Welch's achievements are solid. But his reputation? As a multiple of what he has actually accomplished, it's gotten far too pricey to buy."

http://robwalker.net/html_docs/welch.html

(Note: When I first found this article, I thought to myself- "there is a god, after all" Somebody out there is looking for sanity in the business world and to cut away all of the hype. A lot of what is happening in the airline industry in Canada has to do with direct involvement with GE in some way or another.

I suppose if the company you are leasing from gives you advice on how to deal effectively with productivity and the cost of operations in airlines, then the obvious, as many people have pointed out is to reduce wages and benefits. You have to be a fool to demand that people accept to work for the lowest wages possilbe, when the challenge is to pay them the most, even when the advice you get from your peers shows is really that they practise not what they preach.

But since there is no other place than airlines that people attempt to style themselves after heroes, that suggestion will be taken hale and hearty, and never contribute to a pension plan ever again, and to layoff people and leverage productivity gains to the point where your airline caves in. You have to have the unions on-side to accomplish that, but those ill-gotten gains have a way of haunting you when the company collapses, eventually.

Of course, there are the inevitable problems, recessions and setbacks. If you compare Aeroflot with the mothercorp, heck Aeroflot looks much better these days- even with the robber barons running the show. You name it, they have faced it. The one thing that will be Aeroflot's undoing is the violent anti-labour stance of the Russians. Plus ca change.

While the general advice to any company wishing to avoid costs and show a clean balance sheet is to believe in the market and reduce input into pension plans GE itself has consistently paid into theirs. Unless of course, they are lying about it.

Throw a corrupt politician into the mix to buy too many new aircraft the airline can't afford, and possibly a gambling addiction in the finance department, measure your success by market share, fudge a few annual reports and bingo! You have the canadian airline industry.)

imo

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NZ