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Welch, Jack 1935–

Jack Welch
1935

Former chairman and chief executive officer, General Electric Company

Nationality: American.

Born: November 19, 1935, in Peabody, Massachusetts.

Education: University of MassachusettsAmherst, BS, 1957; University of IllinoisChampaign, MA, 1958; PhD, 1960.

Family: Son of John Welch (a railroad conductor) and Grace Andrews; married Carolyn Osburn, 1959 (divorced 1987); married Jane Beasley (an attorney), 1989 (divorced 2002); children (first marriage): four.

Career: General Electric Company, 19601968, engineer; 19681971, vice president and head of GE Plastics; 19711973, vice president of Chemical and Metallurical Division; 19731977, head of strategic planning; 19771979, senior vice president and head of Consumer Products and Services Division; 19791981, vice chairman; 19812001, corporate chairman and CEO and chairman of National Broadcasting Corporation.

Awards: Junior Achievement National Business Hall of Fame, 1997; Manager of the 20th Century, Fortune, 1999; 400 Richest Americans, Forbes, 20012004.

Publications: Jack: Straight from the Gut, 2001.

John F. Welch, Jr.who went by the name Jackwas among America's most recognized and controversial chief executives. During his 41 years at General Electric (GE) Welch rose from his position as an entry-level junior engineer to become the company's youngest vice president and later its youngest CEO and chairman. Throughout his 20 years leading GE Welch garnered a reputation for having a no-nonsense and dynamic style that was at times considered abrasive by employees and the public alike. While the merits of Welch's management tactics were the subject of debate, none could argue with the results produced by his leadership. Welch took GE into international markets at a scale never before attempted while leading the company away from manufacturing and into

services. GE's market value grew 40-fold, to $500 million, between 1981 and 2001. At the end of 2001, which was the beginning of Welch's retirement, GE was the most valuable company in the world.

EARLY LIFE, EARLY LESSONS

Jack Welch was born in Peabody, Massachusetts, to a blue-collar Irish-Catholic family and was raised in Salem. An only child, the young Welch was the exclusive beneficiary of his parents' attention, for better or for worse. He attributed many of the fundamental life lessons he learned to growing up in his Salem neighborhood; some he learned from his parents, others from the neighborhood boys through sports. At an early age Welch discovered the premium he placed on winning and the bad taste left in his mouth by losing.

The role of sports in Welch's early life was profound; he would rely on lessons taken on the field time and again throughout his career. In his autobiography, Jack: Straight from the Gut, Welch described one instance in particular when his hockey team lost a game, to which he responded by throwing his stick and pouting. Immediately afterward Welch's mother marched straight into the locker room and took him to task in front of the team: "If you don't know how to lose, you'll never know how to win. If you don't know this, you shouldn't be playing" (2001).

After earning a bachelor's degree in chemistry from the University of Massachusetts and graduate degrees from the University of Illinois, Welch headed back to Massachusetts for a position with GE developing new plastics. Welch recalled work as an engineer at the Pittsfield, Massachusetts, facility as being fast paced and exciting; he was able to explore the limits of materials technology with only limited interference from distant management. The labs were small and intimate, and a charged, excited atmosphere encouraged achievement. Welch would remember that atmosphere and try to keep the same level of enthusiasm throughout his career.

But Welch's first job with the company was almost his last. He felt underpaid and undervalued, due partly to what he saw as a bloated GE bureaucracy, partly to the standard bonus he received when he felt he deserved more. In fact, Welch accepted a job offer from another company; however, only days before he was to leave GE he was convinced to stay by Reuben Gutoff. Gutoff, who later served as the president of Standard Brands and started his own consulting firm, was at the time a burgeoning executive who saw potential in the young engineer and sympathized with his position. Although he stayed on, Welch had not changed his mind about GE's administration, which he saw as unresponsive at best and debilitating at worst. Welch would struggle for the next 40 years to balance the need for effective administration against the needs for efficient production and market agility.

By 1968 Welch was running General Electric's entire plastics business, then a $26 million operation. He oversaw the production and marketing of Lexan and Noryl, trademarked materials developed in GE labs. The plastics became common in consumer goods thanks in no small measure to Welch's relentless sales efforts. The position was ideal for an energetic engineer with a doctorate in chemical engineering as well as an understanding of the business of science. Through the early 1970s Welch held increasingly challenging positions and moved swiftly through the company's ranks: he led the chemical and metallurgical division from 1971 to 1973; served as head of strategic planning for a $2 billion portfolio of businesses from 1973 to 1977; and was sector executive in the consumer-products division, a $4.2 billion operation, from 1977 to 1981.

LEADING GE

In 1981 Jack Welch was not considered a leading contender for GE's top job. However, his performance and earnings record ultimately won him the position over six other candidates. Even though he had no formal master plan for GE's reorganization, he did have a vision of what he wanted the company to be.

The first step in realizing that vision was a dismantling of the bureaucracy. At the start of Welch's tenure GE administration was built around three hundred separate businesses, a recipe for inefficiency. Welch tore into the ossified corporate structure with a vengeance and by the mid-1980s had overseen nearly 120,000 layoffs and earned the nickname "Neutron Jack." The name was derived from the neutron bomb, a weapon designed to minimize heat and blast effect but maximize dispersal of lethal neutron radiationin effect, eliminating people but leaving buildings and equipment intact. Welch was never fond of the moniker.

Entire lines of business were dismantled or sold off under Welch's doctrine of exclusively maintaining operations that were ranked first or second in their given field. By 1985 billions of dollars had been made or saved through sales and layoffs. Welch sought opportunities for growth by reinvesting those billions and considered possible takeover targets. He eventually settled on RCA, originally a GE startup but at the time of the merger a top competitor in the high-tech and defense industries. The merger made sense as an effort to consolidate American manufacturing in those fields against Japanese competition. The deal was the largest merger of its kind in the history of American business, with RCA selling for nearly $6.3 billion. Within three years half of RCA's premerger workforce was gone, as well as most of its businesses, including the radio network, which had been in operation virtually since radio was born. By the late 1980s only the National Broadcasting Corporation (NBC) television network and RCA's defense businesses remained.

As the 1990s progressed Welch instituted the Six Sigma program at GE. Initially implemented at Motorola and Allied-Signal, the program was developed to maximize the efficiency of manufacturing processes through the minimization of production of defective units. When applied at General Electric it became the largest quality-control measure ever adopted in corporate America. The program required a huge investment in training and tracking but ultimately led to great gains in profit and productivity.

By the end of the century GE had developed an electronic-business program; another of Welch's initiatives, the system electronically tied the company directly to suppliers and customers. The e-business was just one aspect of what Welch dubbed the "boundaryless company," a company without administrative walls between separate business units and where knowledge applied to one area could be applied companywide. At the time of his retirement Welch had only begun to see his vision of a boundaryless company come to fruition.

MANAGEMENT STYLE

Jack Welch firmly believed that top performers deserved to be handsomely rewarded, an attitude he had retained since his first job at GE. He established a performance-review program to identify the top 20 percent of employees, who were accorded bonuses, as well as the bottom 10 percent, the "lemons," who were typically fired and replaced. Welch supported the distribution of wealth as far as possible throughout the company and understood when considering bonuses that life-changing fortunes were sometimes at stake.

Besides the raw numbers measuring efficiency and profits, more personal aspects also characterized Welch's leadership. He brought an air of informality to the company that stemmed from his belief that General Electric was little different in practice from a small local market. Customer satisfaction and positive relationships with both customers and employees were what ultimately made a business successful. Whether the product for sale was turbines or apples, the customer would determine the success of the enterprise. Thus, Welch made efforts to cultivate relationships with suppliers, customers, and employees alike. Knowing his employees had a direct impact on productivity, Welch communicated with workers often enough for them to feel that at any moment they could receive a note or a visit from the boss. His efforts at communication engendered senses of value and pride in employees, in that if a task was important enough for Welch to care about, it was important enough to perform with the utmost effort. As a result of his personability, everyone knew Welch simply as "Jack."

Informality was also standard in company correspondence. Welch faxed handwritten notes to anyone in the company who he felt deserved personal communication, whether to motivate, correct, or congratulate, from top management to laborers. Welch also personally reviewed everyone who worked directly for him, handwriting extensive performance evaluations that sometimes ran several pages. This exercise not only gave specific and ongoing feedback to employees but was a chance for Welch to reflect on the businesses that each employee was leading. The atmosphere of informality was perhaps most critical among GE's top leadership, where the confidence that came from being in familiar company encouraged executives to openly praise or criticize each otheror even Welch himself.

THE CULTURE OF COMPETITION

But informality could not have been mistaken for laxity, or kindness for weakness. Previous GE leadership had delineated management concepts designed to guide the company through the subsequent year in formal annual presentations. As part of his sustained war against entrenched bureaucracy Welch dispensed with this system entirely in favor of more continual general guidance. Under Welch's leadership formal meetings and deliberative committees were no longer needed in order to implement change. More authority was entrusted to lower-echelon leaders, who were more familiar with immediate problems and possible solutions than were distant senior executives. The new system allowed greater latitude for managers and the opportunity for swifter responses in order to meet rapidly changing conditions.

Within this system of fast-moving goals and changing tactics, Welch sometimes felt as though he were back in the vacant lot of his youth. In the "Pit," where he and his neighbor-hood friends often played their games, the future GE chief executive first learned both to lead and to follow. Later he frequently applied sports metaphors to his thinking and in his relations with managers. At times he considered himself a team captain, picking the best players for the GE team and drawing the most out of them once the game had begun. Welch consistently forced executives to argue in meetings, often heatedly, the idea being to force management to know their businesses, processes, and issues thoroughly before engaging in discussion with the boss. Under such conditions Welch could determine a manager's level of commitment or enthusiasm for a project or policy by noting the extent to which he was willing to argue. Welch was typically curt and had little patience for half measures and was similarly combative in performance-review meetings, in which company leaders would discuss the employees within their respective divisions. Welch could be quick to make judgments with seemingly limited knowledge, but he sought to provoke advocacy from his management and ultimately trusted them to tell him when he was wrong.

Despite media perceptions of him as an ogre, Welch himself disputed the notion that he was a particularly brash boss. He insisted that there was a difference between being "tough minded" and "bullying" and deplored the notion that GE inculcated an atmosphere of bellicosity or machismo for its own sake.

EDUCATION

Ivy League educations and MBAs were no guarantees of success at GE under Jack Welch, which would come as no surprise considering that his training was in science and his degrees were from state schools. He took education seriously but was more concerned with cultivating talented managers who could run successful businesses.

As evidence of the seriousness with which Welch viewed corporate education, he developed an executive-training facility at Croton-on-Hudson, dubbed "Crotonville," in upstate New York. Welch turned the 52-acre facility that was originally designed and built by earlier company leadership into a prep school for current or potential leaders. The move was a bold one, as Crotonville training had not traditionally been a valuable commodity and had not necessarily attracted the company's best and brightest. Furthermore, in the midst of GE's downsizing the site required millions in order to be refurbished, upgraded, and expanded. Welch persuaded the board to fund the project, to which upwards of $40 million was eventually committed. To Welch the cost was negligible; he gambled that the return on the investmenttalentwould be more valuable than money.

Welch originally spent several hours every month leading discussion in what became called the new "Pit," the large, sunken lecture hall at Crotonville. In time, advisors from Harvard and the University of Michigan were brought in to restructure the Crotonville experience, starting with the general curriculum and later with specific coursework. They dispensed with case studies of other companies in favor of the study of specific problems within GE. There were several three-week programs developed for leaders at various stages in their careers, with others built around the study of a particular country or industry. Over time GE enlisted a cadre of experts who were already on the payroll to make themselves available to advise on the issues and questions studied at Crotonville. Within 10 years of Welch's Crotonville redevelopment only the top performers landed the increasingly competitive slots to attend the training programs; by 2001, 85 percent of the Crotonville faculty were GE executives.

THE "BOUNDARYLESS" COMPANY

While thousands of students attended training at Crotonville in order to devise solutions to business problems, implementation of the lessons taken there remained unenthusiastic. Characteristically, Welch blamed bureaucracy for thwarting his visionin this case managerial holdouts from the previous era who did not share Welch's broader vision for the company. Those managers were not nearly as impressed by Crotonville alumni as Welch was. Frustrated, Welch applied the "Pit" experience across the entire company. Welch wanted not large, formal classrooms and management training but forums for the same types of exchanges of ideas that he deemed so valuable at Crotonville. Welch named the gatherings "Work-Outs" and modeled them on the traditional New Englandstyle town meeting. The twist was that management would be excused from the discussion. Facilitators hired from academia to lead discussion helped workers develop solutions to ongoing problems within the business. At the ends of the meetings managers were brought back and presented with the results of the discussion. On the spot they had to decide to either implement the arrived-at solutions or not; they had to be prepared to either argue against the proposals or, if unable to execute them immediately, construct a timetable for doing so.

As "Work-Outs" spread throughout GE and Welch saw more good ideas being implemented, he started to ponder his notion of the "boundaryless" company. Welch envisioned a system where not only the inventor of a good idea but all the others who recognized and developed that idea would be rewarded. In practical terms this meant that knowledge needed to be shared across all lines of business, which in turn necessitated more sharing of the employees themselves across different businesses. "Knowledge" in this context referred not only to factual information but to methods of improving profitability, the insight to recognize problems, and experience in correcting past problems. With maximum communication, lessons and ideal practices learned in one division could be applied to any other division.

In essence three methods encouraged this continuous redistribution of knowledge. Firstly, Welch broadened the granting of stock options beyond GE's top leadership. Options were far more valuable than cash bonuses in a strong market and thus were a strong incentive to employees. These options also tied the success of GE to the promotion of the best ideas produced within the company. Secondly, meeting and planning sessions held throughout the year at all levels of management allowed new ideas to be presented, refined, and applied. Finally, Welch brought in human resources, adding consideration of boundaryless behavior to performance reviews. Whoever was insufficiently imaginative or reluctant to embrace Welch's vision was dismissed.

Welch believed that if he wanted his messages to have the desired impact he needed to disseminate them himself. He recognized, however, that it was impossible to develop personal relationships with every employee in the company. What Welch chiefly achieved through his corporate-education initiatives and his pursuit of the boundaryless company was the institution of a means of communication. Welch's messages and visions were learned and reinforced first at Crotonville, then through the sharing of employees across businesses and in ongoing meetings; ultimately these concepts were tied to employee promotion and retention. Welch trusted managers to relay leadership messages throughout the company, but he did not rely solely on them to do so.

See also entry on General Electric Company in International Directory of Company Histories.

sources for further information

Byrne, John, "How Jack Welch Runs GE," BusinessWeek, June 8, 1998.

Lowe, Janet, Jack Welch Speaks: Wisdom from the World's Greatest Business Leader, New York, N.Y.: Wiley & Sons, 1998.

Slater, Robert, Jack Welch and the GE Way: Management Insights and Leadership Secrets of the Legendary CEO, New York, N.Y.: McGraw Hill, 1998.

Slater, Robert, The New GE: How Jack Welch Revived an American Institution, Homewood, IL: Business One Irwin, 1993.

Welch, Jack, Jack: Straight from the Gut, New York, N.Y.: Warner Books, 2001.

Thomas R. Borjas

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Borjas, Thomas. "Welch, Jack 1935–." International Directory of Business Biographies. 2005. Encyclopedia.com. 28 May. 2016 <http://www.encyclopedia.com>.

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Borjas, Thomas. "Welch, Jack 1935–." International Directory of Business Biographies. 2005. Retrieved May 28, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-3448500603.html

Jack Welch

Jack Welch

John F. "Jack" Welch Jr. (born 1935) rose from the ranks of General Electric (GE) to be named the company's youngest ever chief executive officer in 1981. After making difficult personnel decisions early in his tenure, which included shedding more than 100,000 employees, Welch began a period of growth and success that is unparalleled in business history. As the new millennium dawns, GE, under Welch's leadership, is the largest company in the world and a symbol of American ingenuity and power.

Bold, competitive, and controversial are all traits that describe Jack Welch, one of the world's most powerful business leaders. Although he is now worth countless millions, Welch was born on November 19, 1935 into a middle class family in Peabody, Massachusetts, the only child of a train conductor/union leader and a strong-willed mother, Grace. Welch's father worked grueling hours to support his family, often leaving the house at 5:30 a.m. and not getting home until 7:30 p.m. Grace and the boy used to wait for the elder Welch at the train station. Welch recalls that the talks he had with his mother at the station served as his early education.

Welch's competitive fires can be traced back to his teenage years playing hockey, basketball, and baseball. In high school, Welch was co-captain of the golf team, lettered in hockey, and served as treasurer of the senior class. The five foot eight inch Welch was known as a feisty competitor whose will to win was limitless. Welch's mother also instilled in him a fierce will to achieve through long discussions and games of blackjack and gin rummy. "I had a pal in my mom," Welch told John A. Byrne of Business Week. "We had a great relationship. It was a powerful, unique, wonderful, reinforcing experience."

Welch combined popularity and intelligence with a quick wit. He was the class jokester. With his mother encouraging him, Welch studied chemical engineering at the University of Massachusetts, becoming the first person in his family to go to college. Several professors acted as Welch's mentors and persuaded him to attend graduate school. He then went on to earn a doctorate from the University of Illinois in 1960. When he got the degree, his mother was so proud that she called the Salem newspaper to report that "Dr. Welch" received his Ph.D.

Joined General Electric

After graduate school, Welch joined General Electric as a junior engineer in Pittsfield, Massachusetts. Frustrated by the company's bureaucracy, Welch quit a year later. He saw little room for advancement at GE. His boss, Reuben Gutoff, recognized Welch's talent, and talked him into staying. Gutoff even promised Welch that he would provide him a more entrepreneurial work environment, although supported with all the resources of a corporate giant.

As Welch climbed the corporate ladder, he was convinced that even a huge corporation like GE could remain nimble. By 1967, Welch was among the rising young stars in the GE plastics division. He kept the small company mentality close to heart and would later lead the charge to erase the big company malaise that could stifle ideas and action. In his early years, he helped GE Plastics explode from a $28 million after-thought into a billion dollar business.

The "Neutron Jack" Years

Welch moved through several different divisions as he progressed. Eventually, at age 42, he moved to the corporate headquarters in Fairfield, Connecticut, when he was named one of three vice-chairmen. After a fierce competition for the top spot, Welch was named chairman in 1981, the youngest CEO ever appointed at GE. "I think I'm the most happy man in America today," Welch told Thomas C. Hayes of The New York Times, "and I'm certainly the most fortunate."

Welch attracted controversy almost immediately. He was much different than his predecessor, the British gentleman Reginald H. Jones. Welch was brash and told managers that if they did not move quickly enough, he would "kick ass." The new leader was obsessed with turning GE into a flexible, lean business that ranked first or second in every industry in which it did business.

An early spotlight was thrust on Welch when GE purchased RCA, the parent company of NBC, in late 1985 for $6.3 billion in cash. At the time, it was the largest corporate acquisition in history and brought RCA back into the family. GE had founded RCA in 1919, but had to sell the subsidiary in 1933 because of antitrust threats. After the initial euphoria surrounding the deal wore off, Welch realized that NBC was losing $150 million a year, despite dominating prime time television and news rating. Welch set high financial goals for NBC and turned the business around by cutting costs and replacing unhappy network executives. By 1997, after more than a decade of Welch's cajoling, NBC became the undisputed leader of network television. GE transformed NBC into a profitable company that still provided high quality.

Welch and GE were successful economically across the board. However, during his first seven years as CEO, Welch cast off more than 100,000 workers, nearly 25 percent of GE's workforce. The mass layoffs earned Welch the derogatory nickname "Neutron Jack." Critics equated his name with corporate greed, arrogance, and contempt for workers. GE sold off many of its traditional businesses, such as housewares and televisions, and moved into high-tech manufacturing, broadcasting, and investment banking. Welch was willing to take risks and change the company's ingrained corporate culture to fit his strategic vision.

Welch's supporters countered by noting GE's amazing return on equity. In Welch's first six years, GE's total return to shareholders reached 273 percent. Welch told Russell Mitchell of Business Week that he wanted GE "to become the most competitive business enterprise in the world."

World's Greatest CEO

Despite picking up other monikers, such as "Trader Jack," based on his love of acquisitions, Welch transformed his image as GE's fortunes improved. Soon, he was becoming widely regarded as the best CEO in the world. The company had always been heavily watched by business analysts for the latest management trends, but under Welch's tenure, GE came to define successful business management.

Part of Welch's improving image was his emphasis on GE's Management Development Institute corporate training program. The center at Croton-on-Hudson (Crotonville), known within GE as "The Pit," was a showcase for Welch. The company spent $500 million a year on education and training at Crotonville. He appeared at the center more than 250 times over 17 years and worked with 15,000 GE managers and executives. "The students see all of Jack here," wrote Byrne of Business Week. "The management theorist, strategic thinker, business teacher, and corporate icon who made it to the top despite his working class background."

In recent years, Welch has turned his attention to "people" issues and has worked to create informality at the company. This push has allowed communications to open across layers and fostered a sense of entrepreneurship at the world's largest corporation. Throughout the year, Welch met with managers across several levels of leadership. As Byrne wrote, the meetings also allowed Welch "to make his formidable presence and opinions known to all."

When Welch needed information, he often slipped into factories and plants unexpectedly. A Welch trademark has been the handwritten notes he dashes off to employees. Welch wrote them out and then faxed them all over the company. Welch saw this extra effort as another way of breaking through the bureaucracy that initially hindered his progress at GE. "The idea flow from the human spirit is absolutely unlimited," Welch told Byrne, "All you have to do is tap into that well. I don't like to use the word efficiency. It's creativity. It's a belief that every person counts."

Since taking over in 1981, Welch has used the company's economic diversity as a tool to move into other industries with fast-growing profits. He has reshaped GE with more than 500 acquisitions worth $53.2 billion. Welch was also instrumental in the mid-to late 1980s movement among American companies to get leaner, tougher, and globally competitive. GE's non-U.S. sales grew to 45 percent in 1994, up from 22 percent in 1986. Forbes writer James R. Norman wrote, "Nearly every one of its (GE's) major products has become a growth business with the stepped-up development overseas."

The Future of GE

Welch's newest strategy was called "Six Sigma," which was a quality program that generated fewer than 3.4 defects per million operations in a manufacturing or service process. Despite the program's huge investment in training thousands of employees, Welch believed Six Sigma will save GE billions. In 1995, Welch launched the program with 200 projects, but the next year it grew to 3,000 and then 6,000 in 1997. The productivity gains and profit of $320 million exceeded Welch's expectations.

Welch was both revered and feared within GE. While not a cult personality, Welch realized what his leadership symbolized. To many, Welch was as synonymous with GE as Thomas Edison. In 1997, Welch was named to the National Business Hall of Fame in Cincinnati.

The GE that Welch has led since 1981 is a company that employs between 240,000 and 260,000 people in more than 100 countries. Shareholders have been rewarded throughout Welch's tenure. A $100 dollar investment in GE the day Welch took over would have been worth over $2,000 in 1998. He also achieved his goal of making GE the company with the highest market value in the world. In 1997, GE's stock value eclipsed $200 billion.

It is impossible to pin down exactly how Welch has achieved all the lofty goals set year in and year out at GE. Perhaps, it is simply the fact that Welch may be the hardest working CEO ever. While leading a company worth more than $200 billion, he also found the time to know by sight the names and responsibilities of the top one thousand people at GE. In fact, the CEO met and interacted with several thousand employees each year.

Characteristically, Welch summed up his thoughts in a few short sentences in an interview with Fortune magazine, "I have the greatest job in the world. We go from broadcasting, engines, plastics, the power system-anything you want, we've got a game going. So from an intellectual standpoint, you're learning every day."

Welch will retire in 2000 when he hits GE's mandatory retirement age of 65. Do not, however, think Welch will fade into the sunset or even slow down. He may play much more golf (one of his lifelong passions), but Welch will also remain an important figure in corporate America. Nearly akin to an ex-president, like Jimmy Carter, Welch's retirement will allow him to redefine the way an ex-CEO operates.

Further Reading

Lowe, Janet, Jack Welch Speaks: Wisdom from the World's Greatest Business Leader, John Wiley & Sons, 1998.

O'Boyle, Thomas F., At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit, Knopf, 1998.

Slater, Robert, Jack Welch and the GE Way: Management Insights and Leadership Secrets of the Legendary CEO, McGraw-Hill, 1999.

Tichy, Noel M. and Stratford Sherman, Control Your Destiny or Someone Else Will: How Jack Welch is Making General Electric the World's Most Competitive Company, Doubleday, 1993.

Business Week, December 14, 1987; June 8, 1998.

FW, September 8, 1987.

Forbes, October 10.

Fortune, January 11, 1999.

Industry Week, December 2, 1991.

Time, October 3, 1994.

Wall Street Journal, August 4, 1988.

"History of GE," http://www.ge.com (March 1, 1999). □

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Welch, Jack

Jack Welch

Born: November 19, 1935
Peabody, Massachusetts
Former CEO, General Electric, Inc.

During Jack Welch's twenty years as the leader of General Electric, he became one of the best-known business leaders in the world. He made GE more profitable and more valuable by making its management structure less complicated and by focusing on the businesses where the company was most efficient. Some of his methods attracted a lot of criticism. But there are few corporate leaders who have received as much publicity or as much admiration as Jack Welch.

"Dealing with the best team wins. This whole ideawhether it's a hockey team, a baseball team or a businessis the same: if you have the best team, you win."

Climbing the GE Ladder

John Francis Welch Jr., known as Jack, was born in 1935 in Peabody, Massachusetts. His father John worked for the Boston & Maine Railroad as a conductor and was often away from home because of his job. Jack's mother Grace was a strong force in the early life of her only child. She encouraged Jack to do many things on his own, such as go to baseball games in the city alone, in order to make him independent. She also made him realize he could succeed in life, in spite of the fact that he spoke with a stutter and was one of the smallest kids in his neighborhood. She always stressed the importance of education.

After graduating from high school, where he played four sports, Welch went to the University of Massachusetts at Amherst to study chemical engineering. He graduated in 1957 and went on to the University of Illinois for his masters and doctorate degrees. Immediately after he completed his studies in 1960, he took a job with General Electric, at a plant in Massachusetts. Managers there noticed he had an unusual combination of scientific knowledge and business sense. He also gained a reputation for rubbing people the wrong way at times, but his success at his job earned him the respect of his bosses.

Welch moved up quickly through GE, becoming general manager of the company's plastics division and turning it into one of the leading players in that industry. He became a vice president of General Electric in 1972 and moved to GE's consumer goods and services division in 1977. He became a vice chairman in 1979 and was assigned to the GE Credit Corporation. This was where he really made his mark. He got the division to grow by entering into new businesses; his results were soon noticed by top GE executives.

Neutron Jack

In 1981, Welch was named CEO and chairman of GE, becoming the youngest person ever to achieve this position at the company. He realized from the start that he needed to make some changes in order to stay competitive. He decided to reorganize the company by focusing only on those businesses that were strongest. During the course of this streamlining process, he laid off 135,000 GE employees25 percent of the company's workers. By letting go of more than one hundred thousand workers after taking over the leadership of GE, Welch earned the nickname "Neutron Jack." The name comes from the neutron bomb, which wipes out all life but leaves buildings standing.

Jeffrey R. Immelt, the man who eventually replaced Jack Welch as CEO of General Electric in 2001, told People magazine that working for Welch could be "fun" or it could be "terrifying."

Businesses that were not ranked number one or number two in their industries were given an ultimatum to improve or be shut down. In the next five years, GE closed 73 plants and offices and sold 232 businesses. Meanwhile, all of GE's various companies were organized into three umbrella groups: manufacturing, services, and technology.

While Welch's early moves as CEO were controversial, people soon saw that his tactics made the company grow and become more efficient. Opinions of him began to improve. His reputation was also helped because he believed in placing some of the decision-making power with the workers on the factory floors, rather than leaving it all to management. This helped the company act on good ideas that managers might not have considered, and also improved the workers' morale.

At the same time that Welch was letting go of less profitable businesses, such as television sets and mining, he was buying companies in industries where he saw potential. Some of his purchases included the investment bank Kidder Peabody, the chemical company Borg-Warner, and RCA, the parent corporation of the television network NBC. The last deal, which cost $6.4 billion, was the largest merger outside the oil industry up to that time.

A Few Stumbles

Some of Welch's deals ending up causing headaches for Welch and for General Electric. When it was purchased NBC was the leader in television, but it started to lose ratings because of increased competition, especially from cable television networks. One of Kidder Peabody's top executives was put in jail for making deals based on information that was not public, known as "insider trading." Other scandals also occurred within the company during this period.

Many members of the press and competing corporate executives questioned Welch's decisions. For example, GE suffered a $120 million loss because Welch decided to move into the business of making automation equipment for factories, but then could not find enough customers to purchase the company's products. He also stayed out of some lucrative businesses that could have boosted company revenues. For example, he turned away from developing magnetic levitation (maglev), a new transportation technology, preferring to remain involved in traditional railroad equipment, which was not a growing industry.

Despite these setbacks, Welch's reputation as an admired business leader grew. His methods of managing, which allowed employees to have a say in management decisions, were embraced by many other companies. Welch put company-wide quality initiatives in place and pushed GE to the Internet as a means to make the company more efficient. Probably the most significant factor in Welch's good reputation came from the fact that GE's value grew strongly throughout his twenty years as CEO.

At the end of Welch's career, he suffered a big business disappointment. He wanted to purchase Honeywell International, which made electronic equipment for airplanes. Its business fit well with GE's airplane-engine manufacturing operations. The two companies worked out the details for what would be history's largest industrial merger. The snag came when the newly formed European Union, the government that oversees matters affecting most of the countries in Europe, refused to grant permission for the merger. The EU required too many changes for GE and Honeywell to accept, so the deal fell apart.

The End of a Long Career

Welch retired from General Electric in 2001. His memoir, Jack: Straight from the Gut, which was one of many books Welch wrote over his career, became a best-seller as executives looked to his words of advice. Welch's personal reputation suffered in 2002, however, when an editor at the Harvard Business Review, Suzy Wetlaufer, announced she was having an affair with the former CEO. Welch and his second wife, Jane, divorced shortly after the affair came out in the news. Welch had married Jane in 1989 after divorcing his wife of thirty years, Carolyn, in 1987.

At the time of jack Welch's retirement in 2001, GE was the most valuable company in the world. Financial analysts estimated it was worth $490 billion. When Welch took over the company two decades earlier, the value was $14 billion.

Despite this scandal, Welch's reputation as one of the most admired and well-known business leaders in U.S. historyand probably in the worldis likely to stay intact. Newsweek magazine, while questioning what the Wetlaufer affair would do to his reputation, noted that Welch was considered the best manager in the last 50 yearshigh praise for a business leader.

For More Information

Books

Campbell, Robert. The Golden Years of Broadcasting: A Celebration of the First 50 Years of Radio and TV on NBC. New York: Rutledge/Charles Scribner's Sons, 1976.

Slater, Robert. The New GE: How lack Welch Revised an American Institution. Homewood, IL: Business One Irwin, 1993.

Sobel, Robert. RCA. Briarcliff Manor, NY: Stein and Day, 1986.

Weaver, Pat, with Thomas M. Coffey. The Best Seat in the House: The Golden Years of Radio and Television. New York: Alfred A. Knopf, 1994.

Welch, Jack, with John A. Byrne. Jack: Straight from the Gut. New York: Warner Books, 2001.

Periodicals

Gibney, Frank, Eric Roston, James Graff, and Joseph Kirwin. "How Jack Fell Down." Time (July 16, 2001): p. 40.

Jerome, Jim. "Electric General: The Corporate World's Boldest Boss, Jack Welch, Gears Up to Chill Out." People Weekly (November 5, 2001): p. 56.

Web Sites

General Electric, Inc. [On-line] http://www.ge.com (accessed on August 15, 2002).

National Broadcasting Corporation (NBC). [On-line] http://www.nbc.com (accessed on August 15, 2002).

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Welch, Jack

Jack Welch (John Francis Welch, Jr.), 1935–, American business executive, b. Salem, Mass., grad. Univ. of Massachusetts (1957); Univ. of Illinois (M.S., 1958; Ph.D., chemical engineering, 1960). He joined General Electric (GE) in 1960 and became vice president (1972) and then vice chairman (1979). In 1981 he became chairman and CEO of GE; at 45, he was the youngest person ever to have held that position. Under Welch, GE made a series of aquisitions, including RCA with its NBC television network in 1986, that resulted in its becoming the world's largest manufacturing, technology, and service company, with 1999 revenues of over $110 billion. Welch is credited with "reinventing" GE by encouraging decentralization in the organization, plus speed, simplicity, and self-confidence among management, but he was also known as "Neutron Jack" because of the number of employees that were fired or laid off during his tenure. He introduced the "Work Out" concept, a results-focused approach to problem solving. He retired in 2001.

See his Jack: Straight from the Gut (with J. A. Byrne, 2001); studies by T. F. O'Boyle (1998) and R. Slater (1998).

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