New rule: Hire passionate people.

Old rule: Rank your players: go with A’s.

At GE under Welch, employees were ranked as A,B, or C players, and the bottom group was relentlessly culled.

Pretty soon places as diverse as Charles Schwab and Ford began ranking employees. But as with Six Sigma, the practice became overdone. Welch’s “vitality curve,” in the hands of less deft managers, became the “dead man’s curve,” or “rank and yank.” Everybody, it seemed was expendable. There was a price to pay. “All of a sudden, when big companies had to change and respond to the marketplace and move quickly, they found out they couldn’t, because they didn’t have people engaged and aligned around the corporate mission,” says Xerox CEO Ann Mulcahy.” Then being big is a disadvantage. You are not nimble, there is no advantage to size. It’s like a rock.”

People don’t come to work to be No.1 or No. 2 or to get a 20 percent net return on assets. They want a sense of purpose. They come to work to get meaning from their lives.

Steve Jobs has emphasized that Apple hires only people who are passionate about what they do (something that, to be fair, Welch also talked about). At Gennetech, CEO Art Levinson says he actually screens out job applicants who ask too many questions about titles and options, because he wants only people who are driven to make drugs to help people.

GE still ranks employees, but Immelt has also added a new system of rating – red, yellow, or green – on five leadership traits (including creativity and external focus). Employees are rated against themselves, not one another. Immelt doesn’t talk about jettisoning the bottom 10 percent. He talks about building a team.

New rule: Hire a courageous CEO.

Old rule: Hire a charismatic CEO.

As big shareholders began to throw their weight around in the 1980s, boards sacked their CEOs and named dazzling replacements. And the celebrity CEO was born.

The stars of that era were a varied crew: Jack Nasser, Lou Gerstner, Michael Armstrong, Jack Welch, Carly Fiorina. Some got more credit than they deserved, others more blame. A voracious business press helped burnish (or break) reputations.

The bull market fueled the myth that a truly superior CEO could hit earnings targets quarter after quarter and propel the stock price higher. But the tactic’s used by this generation of leaders – squeezing costs, deftly managing financial and accounting decisions, using acquisitions to grow – did not always provide long-term solutions. Today many of those methods have fallen out of favor.

Real growth requires placing big bets that probably won’t pay off until far into the future – and today’s impatient culture offers little incentive. Never before has a CEO more needed to take risks, but rarely has Wall Street been less receptive. A recent Booz Allen study found that a CEO is vulnerable to ouster if his stock price has lagged behind the S&P 500 by an average of 2 percent since he took the top job.

“But standing tall is precisely what all those corner-office pros get paid the big bucks for, isn’t it? You have to have the courage of your convictions,” says Chambers of Cisco Systems. Immelt agrees that you must be willing to spend time “ in the wilderness with no love.”

Leadership is not about following the rules of the past. It is about standing up

for what you believe is best, regardless of

the consequences.

Fortune

Notes

 

The biggest feat of the decade is not making the elephant dance - an allusion to the book entitled “Who Says Elephants Can’t Dance?” of the fortunes of IBM from near collapse back to market leadership. The author, Louis Gerstner, was the CEO of IBM from 1993 to 2002, when he steadied a tottering IT giant and created a remarkable success story.

Vocabulary

1. bloated bureaucracy раздутый бюрократический

аппарат

1. lagging business (laggard) отстающая компания
2. shareholder value биржевая стоимость акции
3. successor (ant. predecessor) преемник (ант. предшественник)
4. fixed costs (ant. variable costs) постоянные издержки

(ант. переменные издержки)

1. market cap рыночная капитализация

(small-cap, medium-cap, large- cap companies) (компании с малой, средней,

высокой рыночной

капитализацией)

1. undertaking предприятие, дело, начинание

(ambitious, serious, worthwhile, risky undertaking)

1. operating margin маржа операционной прибыли
2. to rank employees ранжировать сотрудников
3. to put one’s own self-interests ahead of… ставить на первое место свои

собственные интересы

1. to screen out employees отбирать (отсеивать) сотрудников
2. job applicant (to apply for a job; претендент на рабочее место

to make, to send in, to submit an application;

to refuse, to turn down an application)

1. corner-office кабинет одного из руководителей

компании

1. to take over as CEO принять на себя обязанности

главного исполнительного

директора, вступать в должность

1. deft manager искусный, опытный руководитель
2. leadership traits черты, присущие лидерам
3. to burnish (ant. break) reputation повышать свою репутацию

(ант. «подмочить», испортить

репутацию)

 

Assignments

 

I. Suggest the Russian for the following:

1. to command the spotlight
2. can-do executives
3. in breathtakingly short order
4. far-flung units
5. archrivalry
6. to gain traction
7. to trail the S&P 500
8. to come up with new ideas
9. everybody seemed expendable

 

II. Find the English for the following:

1. концепция акционерной стоимости обрела самостоятельность
2. отрицать огромное значение экономии на масштабах
3. Он был одним из первых, кто, вполне возможно, переосмыслил бы (новые реалии)
4. в ущерб (перспективе развития)
5. почти не оставлять места новым идеям и абсолютно новым подходам
6. они с гордостью заявляют, что их прибыль…

 

III. Explain in English the following phrases:

1. Market value usually tracked its revenue
2. The big dogs seemed to hit a wall
3. Market domination is no safety net
4. Disney stranglehold on animated films
5. Coke’s monomaniacal focus backfired
6. the jaw dropper
7. …which espouses a competing quality-improvement process
8. to put smth on a timeline
9. No business can afford to focus its energies on its own naval
10. rank and yank
11. to be willing to spend time in the wilderness with no love

 

IV. Summarize the second part of the text; comment on the new rules of management

Chapter IV

Some Macroeconomic Issues

(Monetary Policy and Inflation)

 

Unit 12

Hawk Alert