It’s instructive to look at crisis calls, not only because getting them right is so important, but also because they compress and highlight so many of the important elements of making judgment calls.

“The ultimate test of management is business performance. Achievement, rather than knowledge, remains, of necessity, both proof and aim.”

In the late 1990s, a group of midlevel students at GE’s Crotonville leadership institute challenged him, saying that the “#1, #2, fix, close, or sell” strategy was hurting the company because executives were gaming the system.

The optics were not good, nor was her popularity in HP. To make matters worse, HP missed more than half of its earnings targets during her tenure.

Soon after he became CEO of General Electric, Welch had a meeting with Drucker. As they discussed GE’s various businesses, Drucker, Welch recounts, asked him at one point: “If you weren’t already in this business today, would you go into it?” It was a question that crystallized Welch’s thinking and ultimately resulted in his famous “#1, #2, fix,

The role of the leader is to lead the organization to success, so when the current strategic road isn’t leading toward success, it is his or her job to find a new path. How well a leader makes strategic judgment calls is a function of both (a) his or her own ability to look over the horizon and frame the right question and (b) the people with whom

1. First of all, judgment is the core, the nucleus, of leadership. With good judgment, little else matters. Without it, nothing else matters.

And in the mid-1990s he redefined GE from a company that sold products to be a company that delivered services. It still manufactured many kinds of equipment and electrical machinery, but Welch’s new business model was, for example, to provide a hospital with an efficient radiology department, rather than just a good CAT scan or MRI.

People calls are often viewed as win-lose decisions for various players in the organization, and as such they unleash the most powerful of political forces in an organization.