Welch’s focus on the three main management tactics he used to grow the value of his company. First, dealmaking—acquiring other smaller organizations. Second, financialization—employing a wide variety of accounting techniques (generally legal, though sometimes questionable) to smooth earnings to ensure optimal quarterly performance. Third, at the heart of Welch’s approach, and of most interest for this article, was his relentless focus on downsizing or reducing staff expenses—aka humans.
“Before Welch came along,” writes Gelles, “employees were regarded as a company’s greatest asset. Without the rank and file, it was understood there would be no business at all. But to Welch, labor was a cost, not an asset. And as a cost, it was to be minimized.”
It’s not easy to increase profitability by developing new products—this takes time, ingenuity, and invention. But it’s very easy (at least in the short term) to increase profitability by reducing the number of employees.
The problem with all of this from a management standpoint (in addition, of course, to the massive human suffering) is that over the long term, you can’t cut your way to prosperity. Employees in layoff mode become nervous, disturbed, and unhappy. Morale suffers, and ultimately, so does an organization.
I have seen this personally many times during corporate reorganizations. Anxiety is the prevailing emotion du jour. Employees are understandably more preoccupied with personal survival than productivity.
Rule through FEAR.
Welchianism has moved throughout the US corporate world.
Job security is zip. And thus loyalty to the corporation is now zip.
Shareholder Value is ALL!
This was also the time that corporations moved from defined benefits pension to defined contributions.
And Congress has left it to the states to enact a living wage.
Federal minimum remains at $7.25/hour. NO increase since 2009. Over one-third of states still use the federal minimum wage today.
It seems to me that humans have little value to the corporate world and federal governing bodies.