The 5 rules of leadership by Jack Welch to manage your employees

Jack Welch turned the failing General Electric (GE) into an industry leader for two decades under his management. Under his leadership, GE’s market capitalization went from $12B to $410B (a 4000% rise).

He was so successful that competitors and other leaders studied his techniques to emulate them. Fortune Magazine even named him “the CEO of the century.”

What were Jack’s management secrets that resulted in maximum value creation?

Here are his five management rules:

1. Hire the right people

It might sound obvious, but many companies hire the wrong people or recruit the right ones but don’t provide the right resources to help them succeed. The result? Mediocre performance, lower team morale, and loss of capital (one bad hire can cost you $17000-$240,000).

As a result, you must always strive to get your people's decisions right. Start with writing down what person you’re looking for, and never settle until you get a similar person. Ensure you’re actively involved in the hiring process to ensure the candidate passes all the filters.

Then, set clear working expectations from day 1. Make them aware of their roles and responsibilities (should support their skill sets), what good work would look like, and your metrics to measure their success. Don’t forget to provide them with the resources/tools to help them succeed.

"People development," Welch says, "should be a daily event, integrated into every aspect of your regular goings-on."

2. Build trust with transparency and credit

Welch is a staunch supporter of not hoarding information and being honest with your team. If you withhold information (related to their performance or anything in general), people won’t trust you.

So, hold regular1-on-1s to evaluate their progress. Tell them what they are doing right (so they can double down on it). Provide constructive criticism whenever necessary, along with feedback on how to improve. Only when you let them know their shortcomings would they work on them, isn’t it?

Also, provide credit where it’s due—you’ll boost their confidence and incentivize them to continue performing stronger.

3. Challenge your team to get the best solutions from them

Each employee is intelligent and capable of solving problems differently (else, why would you hire them?). As a leader, Welch says, you should capitalize on this by asking questions and stirring a healthy debate.

In his book, Winning, he writes:

"When you're a leader, your job is to have all the questions. You should be incredibly comfortable looking like the dumbest person in the room. Every conversation you have about a decision, a proposal, or a piece of market information should involve you saying, 'What if?' and 'Why not?' and 'How come?'"

This way, you’ll find better solutions, engage your team, and get the best out of them.

4. Set a culture where no one’s afraid to experiment and make mistakes

"Winning companies," Welch says, "embrace risk-taking and learning." If you want to innovate and grow faster, your team must be willing to execute a hundred different ideas without thinking that if they fail, they’ll be shamed or fired.

As a manager/leader, set an example. Whenever someone fails, don’t ridicule them. Instead, ask them to review the mistakes and ensure they don’t repeat them.

This way, people will call out their and others’ mistakes before it balloons into something big.

5. Have the courage to make decisions

Similar to how some employees don’t call out their managers to appease them, a few managers run away from making tough and harsh decisions (but crucial to the organization’s success) to protect employees. Never do that—even if that means firing people or not participating in the new, shiny trends (fads).

“Obviously," Welch argues, "tough calls spawn complaints and resistance. Your job is to listen and explain yourself clearly, but move forward. Do not dwell or cajole."

Of course, you must discuss with your team before making a decision, but you should make the ultimate call. Sometimes you’ll be correct, and sometimes you’ll be wrong. But as a leader, you must own and make your decisions to determine the company’s trajectory.