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Phony CEOs?

Updated: Nov 8, 2020

Jack Welch, former chair and CEO of GE was, and remains, one of HR’s most controversial figures. He is probably the most well-known CEO ever to champion the value of HR. He famously said, in no uncertain terms, 'HR is the most important role in an organization'. Yet to this day most HR practitioners find it difficult to align themselves with Welch, he was, after all, the person who institutionalized ‘rank & yank’ globally. What most people, including Welch himself, seem to agree upon is that his style of leadership was fit for purpose: albeit fit for a specific global conglomerate at a specific time in its business history. Today we are living in different times. Or are we?

One can almost hear Welch’s New England pharynx reverberate when reading his core ‘competencies’ of HR as a three part combination of i) Parent ii) Pastor who has iii) business-operations experience. It is the parent’s role to tell it like it is; the pastor’s role to keep confidential matters confidential and; experience in operations will help the ‘parent-pastor’ understand the nuances of the business.

While Welch’s choice of words may not be to everyone’s liking, it is hard to disagree with his recommended behaviors. During his retirement years Welch would frequently return to question - why, why don’t more organizations perceive or value HR the way he did? In trying to answer his own question he seldom moved beyond a diagnosis of lack of candor or ‘palace intrigue’ (AKA too much office politics).

What Welch failed to fully incorporate was just how unique his tenure at GE was and how this impacted his ability to empower and value HR. Although Welch was an employee-CEO, he acquired the status and stature more akin to a founder/owner-CEO. Founder/owner-CEOs hold a unique position which allows them to take more long-term risks. To be fair, being a founder/owner-CEO is no guarantee of being an effective CEO; many founders prove inept as CEO. Nevertheless, founder/owner-CEOs have a deep caliper of skin-in-the-game that can never be matched by an employee-CEO. This is one of the reasons why the venture capital firm Andreessen-Horowitz makes investing in founder-CEOs at the top of the list of their considerations.

Welch effectively acquired the status and power of a founder/owner-CEO by being a 40 year ‘company-man’ who was CEO for the latter half of his tenure. That era of skin-in-the-game, company-man CEOs no longer exists. The vast majority of large company CEOs today want (or need) their HR to act more like a public relations arm for the CEO’s executive philosophy, AKA being a personal agent of the CEO. In theory this should be of no meaningful concern, assuming the CEO’s interests are closely aligned with the best interest of the organization. In practice, this latter assumption is tenuous. In contrast, founder/owner-CEOs are significantly less threatened by having their HR or their CHRO act more like an independent, internal, check and balance rather than a quasi-lawyer and covert political operative. History shows that Welch clearly possessed the self-decorum and support that allowed him to empower, enable and advocate for a more independent, constructive HR function and team.

This is not, however, the end of the Welch story. One of the lesser known sub-competencies of HR that Welch advocated for was that of ‘phony-finder’. That is, HR should have an uncanny ability to detect people who are NOT authentic. Maybe Welch thought this competency was self-evident in his ‘Parent-Pastor’ but in recent times, many CEOs have learned to create a layer of direct reports who exist more as a buffer of ‘plausible deniability’ rather than enhancing their bench strength and accountability as CEO, meaning the competency of phony-finder has never been more important for an HR leader. Welch was as authentic AND accountable as it gets, to a fault, which is why so many HR people struggle to close that circle. The same cannot be said for far too many CEOs today who consider themselves i) students of Welch but ii) more clever at capturing and holding onto their position of power. The latter are gently reminded that Welch was CEO for 20 years.

As the expression goes, justice delayed is justice denied. HR has a similar corollary:

HR after the fact is not HR (and all too often the phony that HR needs to red card is their CEO).

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