Tag Archives: Jack Welch

A Fourth Note on the First CEO: The Postwar Provenance

A reader of my posts about the acronym CEO suggests I have a look at the organizational chart for the Manhattan Project to gain a better appreciation for the “American and military” provenance of the term. “I believe during a period of intense collaboration between the military and private sector after WWII,” he writes, “it somehow permeated to corporate use.”

I have wondered about that “somehow,” and wondered, too, if I could be a little more specific about the course this permeation took. Is the acronym CEO — and the idea of the CEO — an outgrowth of the military industrial complex? Does the rise of the CEO to a position of cultural celebrity in the 1970s and 1980s tell us something (we don’t already know) about how the postwar environment shaped American ideas of command, power and leadership, in the private sector and in the public sector?

These are questions worth asking, I think, though I’m not sure the organizational chart for the Manhattan Project is the best place to start. Or at least that chart doesn’t include the term “CEO.” There is an “OCE” — an Office of the Chief of Engineers; the role of “Executive Officer” was assigned to J.B. Lampert. That title was also used in the appointment of Leslie R. Groves (of Now It Can Be Told fame), who in the org chart has the title of Commanding General.

The larger point here still merits consideration: just follow the careers of the engineers and military commanders identified in the Manhattan Project org chart, consider the military industrial development of the 1950s and the American business environment in which COs and XOs and members of the OCE worked closely with the private sector, and in many cases left the military to join the private sector: it’s easy to see how a new vocabulary of command might have emerged during that period, and eventually found its way into ordinary usage.

Still, I want specifics and cases I can point to. To that end, I’ve written to the company historian at General Electric, to ask whether the term CEO was in general use before the era of Jack Welch (who for a variety of reasons — not least for his cultural celebrity — probably deserves the title “The First CEO”). I’m looking for some examples of usage from the days of Ralph J. Cordiner (Chief Executive Officer from 1950-1963), Fred J. Borch (Chief Executive Officer 1963-1972) or Reginald H. Jones, who served from 1972-1981.

ReaganProgressGE seems like an obvious place to start looking. The company that brought us both Jack Welch and Ronald Reagan was, during the war and then in the postwar period, at the very center of military-industrial development; and big American companies like General Electric were never just manufacturing products — or even “progress,” which Reagan used to tout on TV as GE’s “most important product.” They were also designing models of power that persist to this day.

Has Management Become Significantly More Incompetent?

I don’t really have a dog in the Lepore-Christensen fight. Lepore’s strongest point, that Christensen’s theory of “disruption” is both a flawed theory of history and itself an artifact of history, seems to have gotten lost in the fray. Lepore overreached in her New Yorker piece, and now Christensen’s adherents and acolytes have come out in full force. There hasn’t been much room for careful discussion of Christensen’s theory as a discourse or artifact of post-industrial social collapse — which is, I suppose, what interests me most about it.

Still, I’m following the controversy, and yesterday, John Hagel offered a welcome, level-headed contribution to the discussion. Here, I simply want to paraphrase the comment I left on his post, because it touches on some themes I’ve written about in connection with the rise of the CEO (notably here, here and here.)

Hagel wants to move the discussion of Lepore-Christensen away from intramural antagonism and the clash of personalities and disciplines to look at “fundamental and systemic trends.” Clearly, he says, “something very profound is happening — and it’s largely escaped notice.” One measure of this bigger shift: “the topple rate at which US public companies in the top quartile of return on assets performance fall out of… leadership position.” That rate, he notes, increased 40 percent between 1965 and 2012.

There are lots of possible explanations for that wild increase. It seems safe to say there must be some great historical forces at work. Otherwise, Hagel writes, “one would have to believe that management is becoming significantly more incompetent over time”; and I guess nobody would seriously believe that. Here, at least, we’re meant to pass over the thought with a knowing smile: of course management has not become significantly more incompetent over time. Right?

I didn’t seriously entertain the thought of growing managerial incompetence again until I arrived at Hagel’s concluding paragraph. There, he offers a few suggestions on how incumbent players might “more effectively respond to these disruptive approaches (short of resorting to regulation and other public policy measures).” One suggestion is that management find ways to take the long view: incumbent players need “to find ways to expand the horizons of their leadership team beyond the next quarter or next year.” Myopia is always dangerous, and more dangerous now than ever before.

At the same time, short-sighted management has a history, and as I’ve suggested in my posts on the rise of the CEO, the most interesting chapter of that history starts right around the time the topple rate increases, in the 60s and 70s.

Around 1965, as profit rates in manufacturing fall and as the postwar boom yields to post-industrial reality, new ideas of management take hold. One of them is what Jack Welch once called “the dumbest idea in the world”: the doctrine of shareholder value. As this doctrine becomes boardroom religion, we see the rise of the “CEO” as corporate savior (in Rakesh Khurana’s phrase) and cultural celebrity.

Short-termism and, in some cases, risky financial manipulation become the name of the game. Compensation packages reinforce bad habits. Strategists and management consultants take their cues from the C-Suite, and tailor their offerings accordingly.

I’m not saying the rise of the CEO, the doctrine of shareholder value, or the promise of sustainable competitive advantage in the 70s and 80s explain the increase in the topple rate, but clearly they should be taken into account here; and we should give growing managerial incompetence its due. Bad ideas about what counts as business success — and misguided actions by business (and political) leaders — certainly make businesses more vulnerable to the kind of disruption that interests Hagel: the loss of leadership position.

Big scary historical forces may be overtaking us, but if competence in the face of those forces is what we’re after, then failed ideas of corporate purpose and failed models of corporate leadership ought to be called out, questioned, and radically altered or just dropped.