Winning - Jack Welch [53]
The “so what” was all in the timing. Caspar Weinberger had just been named secretary of defense, and he was spearheading President
Reagan’s campaign against government “fraud, waste, and abuse.” The newspapers were filled with stories about companies charging the government $400 for hammers and $1,000 for toilet seats. We were up next.
The facts, as we came to learn, were that 99.5 percent of the thousands of time cards filed in the Pennsylvania plant had been filled out correctly. It didn’t matter—0.5 percent of them were not and that was a violation. Instead of facing that, we got all caught up in our own logic. It went like this: most of the time cards were correct and the errors were accidental…overall we had actually undercharged the government…this is all just a political witch hunt.
With a seasoned mind-set, I would have said, “We were wrong. Let’s do what it takes to correct the situation and put it behind us.”
I’m not saying that the correct mind-set means you should always fold at the get-go. Sometimes you are absolutely clean and you need to fight. In 1992, a former employee turned whistle-blower from our diamond business claimed that we had colluded with De Beers to set prices in the industrial diamond market.
Knowing the people charged with collusion, I felt certain that this was just a case of a disgruntled guy who should have been let go with more sensitivity. Nevertheless, we dug into the investigation as if we were guilty, looking for every shred of evidence that could be used against us. We turned up nothing. That allowed us to take on the government with everything we had, and we won big when a federal judge threw out the government’s case in 1994.
The same “we own it” mind-set got us successfully through another crisis. In the late ’80s, the people running our appliances business in Louisville, Kentucky, began to hear rumblings from the field that an unusual number of refrigerator compressors were requiring repair a year or two out of the factory. The highest volume of breakdowns was coming from the warm-weather states. After a few months, the problem spread north, and I was brought into the loop.
We immediately assembled a SWAT team of experts from every part of the company—metallurgists and statisticians from corporate R & D, design engineers from Aircraft Engines who had experience with rotating parts, and marketing people who had studied the consumer impact of other national product recalls.
The team met weekly for a month and spoke on the phone every day to review new data and sort through options. Within three months, it was clear that the only course of action was a national recall. We had to take a $500 million write-off, and we received some unpleasant coverage about our technical capabilities in the Wall Street Journal. But grasping the scope of the problem early and taking ownership of its solution ultimately resulted in a lot of goodwill from consumers.
The point is, at the first glimmer of a crisis, don’t flinch. Get into a worst-case scenario mind-set and start digging.
Assume you have a major problem on your hands that’s yours to fix.
Assumption 2: There are no secrets in the world, and everyone will eventually find out everything. In the chapter on people management, discussing the corrosive effect of layers, I mentioned the children’s game of telephone. In it, the first person in a circle whispers a secret to the second, who passes to a third, and round it goes until the last person announces what message has reached him. Not surprisingly, the final version has no resemblance to the original.*
Telephone gets played during crises too.
Information you try to shut down will eventually get out, and as it travels, it will certainly morph, twist, and darken.
The only way to prevent that is to expose the problem yourself. If you don’t, you can be sure someone will do it for you, and you will look the worse for it.
Now, I know what you’re thinking; “Legal won’t let us.” And you’re right. During a crisis, your lawyers will tell you to say less, not more.