Jack Welch

The most praised and perhaps the most feared and certainly one of the most confounding and
controversial bosses in America, Jack Welch was the chairman of General Electric for 21 years.
John Francis “Jack” Welch is a global legend, the man who drew the blueprints for the
reconstruction of U.S. industry. Welch was voted “most respected CEO” in Industry Week’s
survey of chief executives several times. Business Week proclaimed Welch “the gold standard
against which other CEOs are measured.” This hadn’t always been the case. Industry Week also
noted that Welch, “the most acclaimed SOB of the last decade [1980s] is the most acclaimed
CEO of this one [1990s].”
When Welch slid behind the wheel at GE in 1981, he peeled right out onto the road to change—
high-speed, gut-wrenching change. Most experts, and certainly many GE employees, couldn’t
understand why he was ripping up and rebuilding a company that seemed to be in fine shape.
During the early 1980s he was dubbed "Neutron Jack" for eliminating employees while leaving
buildings intact. In Jack: Straight From the Gut, Welch states that GE had 411,000 employees at
the end of 1980, and 299,000 at the end of 1985.
Jack Welch is not an easy man to like or understand. Once called the toughest boss in
America, Welch added some of the most feared words to the business lexicon: restructuring,
downsizing, rightsizing.
Welch is known as a “tough-love capitalist,” and soon other companies were forced to follow his
lead. “Welch’s GE,” said Victor H. Vroom, professor at the Yale School of Organization and
Management, “is a model for the promise—and the problems—of creating the modern industrial
company.”
He was in favour of an informal organization: Everyone, from secretaries to factory workers,
calls him Jack. Everyone can expect--at one time or another--to see him scurry down an aisle to
pick through the merchandise on a bottom shelf or to reach into his pocket and surprise with an
unexpected bonus. ''The story about GE that hasn't been told is the value of an informal place,''
says Welch. ''I think it's a big thought. I don't think people have ever figured out that being
informal is a big deal.''
General Electric’s management structure was once described as an elaborate, many-layered
wedding cake, becoming smaller as it went up. In 1985, Welch began what economist Joseph
Schumpeter called “creative destruction.” The hierarchical levels were trimmed from 29 to 6. He
converted GE into a wagon wheel with top management at the center and all the company around
radiated around like the spokes of a wheel.
His philosophy is change before it’s too late: Welch adopted Motorola's Six Sigma quality
program in late 1995. Welch had grown convinced that GE’s quality standards simply weren’t
high enough, even though GE had always been, in his words, a “quality company.” We want to
be more than that. We want to change the competitive landscape by being not just better than our
competitors, but by taking quality to a whole new level. We want to make our quality so special,
so valuable to our customers, so important to their success, that our products become their only
real value choice.
He led the company to massive revenues. In 1980, the year before Welch became CEO, GE
recorded revenues of roughly $26.8 billion. In 2000, the year before he left, the revenues
increased to nearly $130 billion. When Jack Welch left GE, the company had gone from a
market value of $14 billion to one of more than $410 billion at the end of 2004, making it the
most valuable and largest company in the world.
Managing less is managing better: He also pushed the managers of the businesses he kept to
become more productive. Welch worked to eradicate inefficiency by trimming inventories and
dismantling the bureaucracy that had almost led him to leave GE in the past. He shut down
factories, reduced payrolls and cut lackluster old-line units. Welch's philosophy was that a
company should be either #1 or #2 in a particular industry, or else leave it completely. Welch's
strategy was later adopted by other CEOs across corporate America.
After two decades of Welch-inspired challenges and changes, GE still is leader of the pack
among the best-managed and most financially successful enterprises anywhere. Only a handful
of U.S. corporations of GE’s age remain at the forefront of their industries and are formidable
competitors in the global arena.
We are betting everything on our people—empowering them, giving them resources, and getting
out of their way.
Jack Welch conducted the Workout in which he assembled people of all ranks and functions in
one room and listened to their problems. He made sure that there is no hurdle in the ways of the
employees in achieving the goals.

Welch was a busy man at GE. Along with powering up training and evaluation and driving
home quality and efficiency, he was involved in more than a thousand acquisitions. This
averages out to more than two per month. When he retired, GE employed nearly 300,000 people
in about 15 major businesses ranging from jet engines to credit cards.
Even ill health hasn’t slowed him down. In May 1995, he underwent quintuple-bypass heart
surgery. He returned to work on Labor Day, 1995. Welch often explains that the business world
is riddled with paradoxes and that successful business leaders in the future will accept paradox as
normal. Well, Jack Welch is a paradox himself; and said Dr. Steve Kerr, GE’s former chief
learning officer, that is the most interesting thing about him. His complexity makes him unique,
sometimes exasperating, but always intriguing. Welch could be blunt and harsh.
Nurture employees who share the company’s values: His philosophy is to keep the A’s in the
company and get rid of C’s. He always said, “Give employees more responsibility, and they will
make better decisions. By making your employees more accountable, you make your
organization more productive.”

If leadership is an art, then surely Welch has proved himself a master painter. Few have
personified corporate leadership more dramatically. Fewer still have so consistently delivered on
the results of that leadership. For 21 years, while big companies and their chieftains tumbled like
dominoes in an unforgiving global economy, Welch has led GE to one revenue and earnings
record after another.

Learning Culture: He was in favour of emphasizing idea sharing inside the company and
finding and implementing the best idea. He believed that the best ideas come from within and
unless the idea is acted on, it will have little impact. So he made sure that great ideas are
implemented.
Act like a small company: Jack believed that small companies move faster. They know the
penalties for hesitation in the marketplace. What we are trying relentlessly to do is get that small-
company soul—and small company speed—inside our big-company body.

Three Ss: Welch focused on three concepts that gave GE enormous energy:

“Speed, simplicity, and self-confidence: We’ve been characterized over the years as the ‘best-
managed’ company, the ‘financial wizards,’ or other labels. If we are to be the clear winners we
must be in the ’90s, we will need to become the fastest, simplest, and most self-confident
company on Earth.”

Unleash the energy of your workers: The way to get faster, more productive, and more
competitive is to unleash the energy and intelligence and raw, ornery self confidence of the
American worker, who is still by far the most productive and innovative in the world. The way to
harness the power of these people is to protect them, not to sit on them, but to turn them loose,
let them go—get the management layers off their backs, the bureaucratic shackles off their feet,
and the function barriers out of their way. He was in favour of turning the employees into the
owners.

He used acquisition to make the quantum leap: GE acquired RCA.

And in 2000, he wanted to acquire Honeywell. When he was asked why Honeywell? He would
say, “What the hell do you think Honeywell is? . . . We’re merging two real high-tech
companies, with real earnings, doing real things, and using e-business tools. So get that straight.”
Honeywell seemed like a great fit with GE. Both companies made power-generation systems,
plastics, and chemicals. GE aircraft engines were a major force in the commercial aircraft field;
Honeywell was strong in avionics and business jet engines.”
He was about to retire from GE but before he retires he wanted to make sure he gets the deal for
GE and acquires Honeywell. The $45 billion deal would have been the largest industrial merger
in world history. It would increase GE’s size by one-third and give GE a near monopoly in
several areas, including building engines for large regional jets. But later due to conflicts with
European Commission, he had to write a letter to the CEO of Honeywell that the deal was dead.
And In July 2001, Welch called the merger off. With nothing left to do, he retired in September
after 21 years at GE.