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WHO CHANGED
ENGINEERS
THE WORLD CAREERS
WHO CHANGED THE WORLD tce
Claudia Flavell-
M
ANAGER of the century. been influenced by his teachings. What came
One of the most influential to be known as Jacks Rules are by now the
While charts the rise CEOs in business. Jacks business equivalent of holy writ, bedrock
of business giant Rules are by now the business equivalent of
holy writ. There are few superlatives that
wisdom that has been open to interpretation,
perhaps, but not dispute.
(and chemical have not been applied to Jack Welch, the A little detail thats not quite as well known:
engineer) Jack former CEO of General Electric (GE). His
management tenets were so widely admired
Jack Welch is a chemical engineer.
Welch and copied that they came to dominate the small beginnings
world of business for decades. Born in 1935 into a family of Irish immigrants
his father a railroad conductor and his
the corporate leader mother a straight-talking no-nonsense
Over the 20 years he headed GE, Welch housewife the young Welch soaked up his
transformed the company from a lumbering, mothers competitive spirit and bluntness,
over-bureaucratic giant into a leaner, meaner and his fathers diligence and hard-working
and far more flexible corporation. Revenue nature.
increased from US$26.8bn in 1980 the year Neither of his parents had been to
before Welch took the helm to US$130bn in university, and the closest to a role model
2000. Market value rose almost 30-fold from was an uncle who worked as an engineer
US$14bn to over US$410bn, making GE the at a power station. Welchs choice of degree
most valuable company in the world at the was more based on gut feeling than diligent
time. research, as he writes in his autobiography
Over the same period, the company shed Straight from the Gut: Being an engineer
over 100,000 employees, earning Welch the sounded good to me. I found out early that
nickname Neutron Jack (which he detested) I liked chemistry, so I took up chemical
because he would eliminate people but engineering.
leave the buildings intact. Along the way he While he didnt make it into the Ivy League
ushered in the age of shareholder value and colleges of Dartmouth or Columbia, he won a
introduced the relentless focus on market place at the (comparatively cheap) University
share, earnings growth, and share price that of Massachusetts at Amherst. It was a blessing
shaped the world of business throughout the in disguise: Getting into a less competitive
90s and beyond. school [] would in the end give me a
Around the world other businesses tried tremendous advantage. The calibre of the
to emulate him. Fortune magazine wrote in competition I faced at UMass in those days
2006: Just try to find an executive who hasnt made it easier to shine.
No engineers in
the boardroom?
Despite many nights spent drinking beer, Welch overcame some initial performance
playing poker and partying with his fraternity, problems with the polymer, oversaw the
Welch graduated in 1957 as one of the top construction of the production plant, and The essence of
two chemical engineers at UMass that year. successfully introduced it to the market under competitiveness is liberated
He turned down several job offers and the trade name Noryl. Jack Welchs rise as a when we make people
took a fellowship at University of Illinois at manager had begun.
believe that what they think
Champaign, where he first completed his
Masters and then prompted by a weak job the greasy pole and do is important and
market his PhD. Further promotions were fast to follow. The then get out of their way
appointment as general manager of the
While Welch only spent a very short time
US$32m plastics business in 1968 made
while they do it.
doing proper chemical engineering on a
process plant before he began his meteoric him GEs youngest-ever general manager,
rise into management, he never regretted his at the age of 32. He was named head of the
choice of degree. He wrote: I have always felt chemical and metallurgical division in 1971,
that chemical engineering was one of the best a vice president in 1972, sector executive
backgrounds for a business career, because for consumer products in 1977, and in 1979,
following a gruelling internal competition
both the classwork and the required thesis
against other GE high-flyers, he was
teach you one very important lesson: there
confirmed as vice chairman and heir apparent
are no finite answers to many questions. What
to Reg Jones as chairman and CEO.
really counted was your thought process.
control your
own destiny or someone
else will
400 businesses that fell by the wayside business processes, has been widely adopted
under his tenure. GE used the cash to across the corporate world over the past two
pay for restructuring the businesses decades. Much of that is Welchs doing.
on the fix list. Staff numbers took a When Welchs longstanding friend Larry
hit, falling from 411,000 at the end of Bossidy (at the time the CEO of chemicals
1980 to 299,000 in 1985. Those who producer Allied Signal) sang the praises of
stayed were expected to do more; Six Sigma to GEs top management in 1995 he
Welchs philosophy was to pay well, got an enthusiastic reception. The company
create great working conditions, and calculated that implementing the technique
attract the high flyers. and driving down defects to the lowest level
Nevertheless, morale plummeted. could save billions of dollars an opportunity
Welch not only acquired the it could not pass up.
Neutron Jack moniker, he also Welch, who until then had been sceptical
topped the list of the toughest about quality programmes, put his weight
bosses in America. Welchs almost behind the initiative and ensured it was
brutal candour and impatience implemented across the organisation. If
were not always a virtue, with some you didnt have at least a green belt in Six
former employees likening working at GE to Sigma, you would not be considered for a GE
working in a warzone, with those who didnt management job. Bonuses were determined
get shot up in the first battle being left to limp to 60% on financial and 40% on Six Sigma
on to the next one. results. Within three years, Six Sigma saved
GE an estimated US$750m.
people management Today, Six Sigma and associated variations
Another one of Welchs maxims was that have gained enthusiastic support and have
every business had to make a positive been applied at countless companies around
contribution to the bottom line. If it didnt, the world; GEs early and successful adoption
or couldnt, it had to go. Welch would stretch was a key factor in this.
his managers and give them the freedom to
choose their path as long as they got results, shareholder value?
that is. Every year, the top 20% would be The other aspect in which GE led the
rewarded with stock options and bonuses. way the focus on shareholder value is
The bottom 10% would get the sack. a little more controversial. From the mid-
He demolished GEs rigorous formality and 80s onwards, practically every blue-chip
layers of bureaucracy. Known to all as Jack company chanted the mantra of maximising
(his response to being called Dr Welch was shareholder value. This doesnt just mean
I dont do house calls, so call me Jack), he maximising income and operating margins,
would take a keen interest in the smallest its also about maintaining a competitive
details of the business. He habitually violated advantage and various other drivers. The
the chain of command, arranging surprise ultimate goal is consistent earnings growth to
meetings with managers from all parts and maximise the shareprice, and thus the return
levels of the business at which hed quiz them to investors.
on all aspects of their work and challenge and The philosophy is that companies that are
test their strategies. GE staff from the shop the most efficient, have the best margins,
floor to the boardroom would sometimes and the best product would not just provide
receive handwritten notes, sometimes shareholders with the best returns, they
congratulating, at other times cajoling them. would also be best placed to survive long
Were pebbles in the ocean, but he knows term.
My main job was about us, one manager told Businessweek for However, particularly since the financial
a 1998 interview. crash of 2007/8, many have identified the
developing talent. I was a obsession with shareholder value as one of
gardener providing water six sigma the contributors to the problem, particularly
and other nourishment Another feather in Welchs cap is the when companies have neglected long-term
popularisation of Six Sigma. The quality development while concentrating on the
to our top 750 people. Of
management strategy, developed by Motorola financials for the next quarter.
course, I had to pull out in 1986 to identify and remove the cause of In a series of interviews in 2009, Welch
some weeds, too. defects and variability in manufacturing and lambasted those companies for putting
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Hazards XXIII
HAZARDSXXIIIHAZARDSXXIII 1215 November, 2012, Southport, UK
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HAZARDSXXIIIHAZARDSXXIII Technical programme coming soon
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The 23rd Hazards symposium will offer delegates over 100 presentations covering the following
HAZARDSXXIII broad themes:
HAZARDSXXIII Process safety research and development from regulators, operators, academia and other
interested parties
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HAZARDSXXIIIHAZARDSXXIII Lessons learned from new and revisited case studies
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Human factors/communications/safety management systems
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HAZARDSXXIIIHAZARDSXXIII Effective safety management in SMEs
HAZARDSXXIIIHAZARDSXXIII Safety culture and the challenge of global operations
HAZARDSXXIII Education and training to build and maintain safety knowledge, skill and competence
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