April 30, 2002 4:10 PM PDT

GE's Welch: Don't fret downturn; fix it

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PeopleSoft to beef up business software

April 25, 2002
LAS VEGAS--Jack Welch, speaking at a technology conference here Monday, urged companies not to sulk over the economic downturn, insisting now is the time for businesses to position themselves to pull ahead of the competitive pack.

"This will pass," he said. "Don't hunker down and freeze over it; just fix it."

The business icon and former chief executive of General Electric offered a range of advice--on topics such as investing in technology and rewarding employee performance--to the more than 2,500 people attending the PeopleSoft Leadership Summit 2002.

By increasing their investments in information technology this year, companies could get a leg up on the competition, Welch said. Many companies are cutting IT budgets after lavish spending on computer hardware and software over the past several years.

"This is the time to widen the gap," he said.

Nothing has been better for big companies than information technology for removing mundane, administrative work and improving communication with customers, according to Welch. However, he warned of the perils of taking on unwieldy, monumental IT projects.

"Unless you've got processes that align, you'll wind up with a bunch of 'world hunger' projects that take 18 months and cost $20 million," he said.

Companies should be working to keep up morale and motivation of its employees, particularly the top performers, Welch said. He denounced across-the-board pay freezes that some companies have instituted in the downturn.

"It's nuts to give everyone a pay freeze," Welch said. "Why give a great employee a pay freeze?"

Failing to give employees honest assessments of their work and treating them equally amounts to "false kindness," said Welch, who spent 75 percent of his time as the CEO of GE evaluating employees. He defended the practice he instituted at GE of regularly firing 10 percent of employees with the lowest performance evaluations.

"It's cruel to keep your worst and then cut them when the tough times hit, after they've aged, have families, and have fewer choices," Welch said. "It's a sin to lose your best."

As for employees, he said it's in their best interest to take control of situations they don't like.

"Never moan. Do not be a victim," Welch said. "Either raise hell and change the game or get out of there."

 

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