TheFiresideCEO 225structures in business. At many businesses, managers set targets and
are evaluated on the basis of whether they meet them. The incentive
is to set modest targets. In a stretch setting managers are encouraged
to set extraordinarily ambitious goals and are then evaluated accord-
ing to how they did in one period compared to how they did in the
prior period. In short, “performance is measured against how the
world turned out to be—how well a business anticipated change and
dealt with it—rather than against some ‘plan’ or internal number
negotiated a year earlier.”
Speed and stretch are complemented by the final core operating
element of a boundaryless environment:simplification. Complexity,
whether in business organization charts, communications, or goal
setting, impairs speed and stretch and is foreign to a boundaryless
culture. Simplicity breeds self-confidence, which is conveyed
through direct plans and straightforward speech, setting “big, clear
targets.” The clarity arising from simplicity has another big virtue:
It enhances speed. As Welch says, “simple messages travel faster,
simpler designs reach the market faster, and the elimination of clut-
ter allows faster decision making.”
The Implementing Practices
GE implements its core operating elements of speed, stretch, and
simplification to realize the fruits of these elements. The key to pro-
ducing those fruits is the concept of integrated diversity. It is the
strength a company generates from being number one or number
two in all its businesses and drawing on the resources of each busi-
ness to sustain or enhance its position in others.
Two steps were necessary to achieve integrated diversity at GE.
The first was to keep only the businesses that were number one or
two in their particular markets. Each business needs to be strong in
its own right. Then the collection of businesses produces “a critical
mass of competitive advantage.” To exploit that competitive advan-
tage in turn requires delayering the management structure, which
Welch achieved by dismantling the multiple layers of management
that had clogged the company in the earlier era. Delayering en-
hanced productivity, making the aggregate of the parts far more pow-
erful than their mere sum.
Through a strategy called “Work-Out,” Welch sought and got
input from everyone in the company (and some people outside it).
Long before Perot and Clinton repopularized the town meeting con-