How a boy with a stutter became the titan who transformed General Electric and defined American ingenuity – Jack Welch in Perspective

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Few businessmen posses the enterprise and acumen required to lead a company to success. Even fewer still have the gumption, drive and tenacity needed to take that company to the forefront of an industry. Jack Welch is one of these few. Though he was the youngest CEO General Electric had ever had, Welch was able to grow the company from a respectable $14 billion to eventually become the world’s most valuable company, at an unimaginable $410 billion.

Born in 1935, in Peabody Massachusetts, Jack was the only child of a middle class family. Welch’s father, a train conductor and union leader, often worked days in excess of 14 hours to support his family. Welch recalls learning some of his more poignant life lessons while waiting for his father at the train station with his mother, Grace, a woman of strong will whom he commonly accredits for moulding him into the person he became.

One would never know Welch’s childhood was plagued with a stutter. Such an affliction often has an adverse impact on one’s future and the person they become. Though he was unable to rid himself of the stutter until later in his life, he refused to allow his speech impairment to negatively impact his confidence. Welch recalls how his mother would bolster his self-esteem by attributing the stutter to his high intellect, often saying “no one’s tongue could keep up with a brain like yours”. Grace imbued Jack with the strength and confidence required to perceive his disadvantages in life as largely superficial, and to understand that one’s limitations are only dictated by their ambition and fear of failure.

Although he only stood 5’7” tall, Jack’s confidence and self-awareness propelled him to become a determined athlete in his later youth, competing in a variety of sports including hockey and basketball- always challenging his personal limits. Investing a large amount of time and energy in each sport, Jack did not take defeat easily. After losing one particular hockey game in over time, Jack became so enraged that he threw his hockey stick across the rink and stormed off. Still flustered and back in the locker room, Jack and his team were horrified to see his mother burst in. Grace was intent on teaching her son a much needed lesson. Grabbing the collar of Jack’s uniform before his team, Grace chastised Jack, roaring “you punk! If you don’t know how to lose, you’ll never know how to win!” It is this quality which may be most valued in a manager- to never falter in the face of failure, but to learn from ones deficiencies in order to improve and to become more resilient. Though there are many high achievers, few are able to learn the lessons needed to become truly strong and effective leaders. Welch would later be quoted as saying “To possess self-confidence and humility at the same time is called maturity”.

Along with his athleticism Jack also possessed a strong penchant for academia, earning a Bachelors Degree in Chemical Engineering and then a Ph.D at the early age of 25, upon which he was recruited by GE’s prestigious plastics division for a mere 10 000 dollars a year. Often completing his work with supplementary analysis and varied perspectives on how to apply his projects, Welch continued to move beyond what was expected of him at GE, in order to get himself “out of the pile” and get noticed by management. Sure enough it was not long before Jack’s proclivity for going the extra mile was noticed by rising GE executive Ruben Gutoff.

Though he was well liked, Welch gradually found the bureaucratic nature of GE too onerous to support the innovative medium he believed was required for success. Welch desired an environment that fostered innovation, one where he could shine through his achievements; he didn’t want to succumb to the hierarchy of having to “sell” his projects to senior Research and Development executives. Most aggravating was GE’s payroll structure, which allotted salary increases based on ones’ seniority, while taking little consideration of their performance and contribution to the company. Knowing that Welch was undervalued at GE, Gutoff managed to convince him to stay, promising to place him in line for a management position and offering a large wage increase, along with helping to alleviate some of the bureaucracy.

Although Welch stayed at GE, his consideration for management did not come about the way anybody would have expected. At the age of 27, Welch was working at a pilot plant developing a new plastic called PPO (Polyphenolene Oxide). While in his office at the factory, a terrible explosion erupted from the lab he was supervising, blowing the reactor through the roof of the building and shattering many of the windows. Fortunately no one was hurt, but Welch knew this would be detrimental to his career. The explosion proved too problematic to be solved on site, so Welch’s manager sent him to Bridgeport CT to speak with Charlie Reed, a former MIT professor, and GE executive. Fearing for his future, Welch recalls driving the hour to Bridgeport as the longest drive he had ever taken.

What happened next had a tremendous effect on Welch’s approach to management. Instead of reprimanding him, Reed asked Welch’s opinion on how to fix the problem, how such disasters could be avoided in the future, and what Welch had hoped to achieve had nothing gone wrong. Reed didn’t find Welch’s method leading to the explosion to be be negligent, and that for all intensive purposes Welch was an excellent employee. Reed simply wanted to work with Welch to remedy the situation, and to know that Welch would take the time to correct such problems before they result in catastrophe in the future. The experience made Welch realize that if someone makes an honest mistake there is no use in kicking them when they’re down. Instead, it is of greater benefit to work with people to establish a trusting relationship. As Welch climbed the hierarchy of the company, he tried to always maintain an aura of understanding, making a point of viewing his employees through their abilities, not their mistakes.

Not long after, Welch was promoted to a management spot that had opened in GE’s PPO division. Welch made a point of celebrating even the smallest of achievements; by doing so he was able to cultivate a workforce, which promoted initiative and innovation. As a result his division met with great success and proved him to be a skilled manager. Realizing that Welch was truly a diamond in the rough, GE promoted him to a General Manager position; a surprise to some, as at 32 years old he was the youngest general manager General Electric had ever seen.

Just as Welch entered his new position, GE was emerging from a long period of intense Research and Development. In an effort to gain some much-needed publicity for GE’s new products, Welch embarked on an aggressive ad campaign. Never one to get bogged down in conventionality, Welch went above and beyond, going so far as to include an advertising stunt that had a Major League Pitcher throwing baseballs at Welch, who deflected them using a PPO plastic shield.

Though his new General Manager position invited many new and exciting avenues for Welch to shine, such as the ad campaign, it was not without its difficulties. Welch knew that his division was overstaffed, and was consequently suffering from crippling bureaucracy, and layoffs were the only remedy. To create the lean workforce Welch needed, he adopted what many have referred to as a more callous persona, holding little tolerance for incompetence for those who underperformed. On the flip side he was quick to recognize those who exceeded his expectations, rewarding them with greater responsibility and an increased salary. Once Welch had streamlined the business he was able to achieve his personal goal of doubling his division’s business within three years, providing further proof of his effectiveness as a manager.

Welch was able to grow the GE Plastics division from a respectable 28 million dollars into a billion dollar business. With his outstanding performance as a manager, Welch was promoted to manage the entire Chemical Metallurgical Division in 1971, and then in 1977 he was again promoted to Vice Chairman. After a few years GE started the search for a new Chairman and CEO. Not wanting to simply hand the position over, current chairman Regional H. Jones thought it best to choose his successor through a competition. Each candidate was handed a division of the company and told to improve it as best they could; Welch was given GE Insurance. Welch didn’t find any glaring problems with the business plan as the insurance division already had the highest profits per employee; it would instead be, as he found, a simple game of improving the work atmosphere, and finding the right people for the job. After making a few alterations to the division, Welch won the competition, and was appointed Chairman and CEO in 1981.

Welch knew he needed to make some drastic changes if he was going to turn GE into the creative, flexible and lean workforce he envisioned. He started by selling business divisions and extremities that he found superfluous or unproductive, such as television and housewares manufacturing. Over the course of his career Welch applied what he learned while working with GE’s insurance division, and shifted GE from a manufacturing business to one largely based on investment banking, hi-tech manufacturing, and broadcasting. Selling off unneeded divisions and property not only improved GE’s profit margins, but also provided GE with capital that could be reinvested in more profitable divisions, or to buy other companies which Welch thought GE could add value to.

One of these such companies was RCA, the parent company of NBC, which Welch bought in 1985 for 6.3 billion dollars- the then largest acquisition in American history. Though NBC was a prominent network, and the deal widely praised, Welch soon discovered the network was hemorrhaging money, losing 130 million dollars in 1987. To remedy the situation Welch made some changes to NBC’s executive team, and sold off the majority of other RCA property. Though he essentially dissolved RCA, the changes proved necessary. By 1997 NBC was the undisputed king of network television;  not only did the network become one of the most profitable, at nearly 500 million dollars its profits dwarfed the competition.

Like RCA, Welch re-examined the entire GE employee body as a whole. He knew that large companies made a habit of allowing unproductive and uncommitted employees to hide in the bureaucracy created by the sheer mass of the company. To sleuth out such employees Welch adopted a management approach far different than his predecessor. Each year he divided GE’s workforce into a 20/70/10 split for evaluation. The top 20% were composed of exemplary employees who were rewarded for their work with stock options and bonuses; the middle 70% were those who were doing okay, but could do with some improvement; and the bottom 10% are those who underperformed, and for whom Welch had no reservation firing if they did not show improvement in the near future. However, the most important function of the 20/70/10 split was not to inform management of their employees’ performance, but to inform the employees themselves about where they stood. Welch found that if an employee was consistently in the bottom 10%, they would often leave on their own, realizing that they were in the wrong business and should probably apply their skill set to something they found more engaging.

Within his first seven years as CEO Welch had dispensed with over 100 000 workers, nearly a quarter of the entire GE workforce. Although the layoffs were necessary to get GE to where Welch wanted, it earned him the infamous moniker “Neutron Welch” for his ability to eliminate a vast number of employees while leaving the building they occupied intact. Though his methods may have seemed callous, Welch realized that some sacrifices were required to awaken the potential he had seen in the company for so long. Creating the small company feel Welch had been trying to achieve in a large conglomerate such as GE required an employee body who was excited and enthused about being where they were, one which could not be anchored down by employees who thought otherwise. In his book on management Welch explains, “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.”

Having scaled the GE corporate ladder from the very bottom, Welch knew that with each rung he climbed the distance between him and the final product expanded and became more complex, increasing the need to rely on experts who knew their areas intimately. To ensure that GE’s managers could rely on their workforce and each other, Welch put them through the GE Management Development Institute’s corporate training program in Crotonville NY. Costing 500 million dollars a year, the management program was an earnest one. Welch visited Crotonville or “The Pit” as it was affectionately known by its students, on more than 250 occasions and worked with 15 000 executives. Welch was dedicated to this program and put serious effort into exposing the many facets of his management methods and to share in his vision.

Welch took a very hands on approach to how he managed GE, dispensing with formality and possibly foreshadowing the age of the internet, he would often fax handwritten notes to hundreds of recipients throughout the company. To Welch formality was nothing more than a hindrance to fluid communication, a road block to the “small town atmosphere” he sought. Slipping into factories unannounced to gather information and make inquires, Welch went about his business with little prominence, and tried to meet others within the company at the same level and with humility. He personally knew the names and responsibilities of over 1000 of his colleagues and employees, and would interact with far more during the course of a year.

Welch believed that a company is essentially just a group of people – working together. In his book Straight from the Gut, Welch contends “Great people, not great strategies are what make it all work”. He strived to create a corporate culture with the “informality of a neighborhood corner grocery store in the soul of a big company”. Welch once said “The ideas that flow from the human spirit is absolutely unlimited . . . All you have to do it tap into that well. I don’t like to use the word efficiency; it’s creativity”. Perhaps then, it is Welch’s profound faith in humanity, which shone most brightly during his career at GE. It could be argued that the formality and bureaucracy ubiquitous with big business today stems from an inherent mistrust in an individual’s capability to do their job effectively. Welch thought exactly the opposite; it is making sure that the people you have within the business are effective in their position, thus eliminating the need for any barrier, which may hinder their progress within and for the company. Find the right people and believe in them.

Despite “Neutron Jack” and other derogatory nicknames such as or “Trader Jack”, which he garnered from the near 55 billion dollars worth of acquisitions he commissioned, no one could argue with what he had accomplished. By the 1990’s many regarded Welch as the best CEO in the world- Fortune 500 called him the CEO of the century. Though the company had been known for is management expertise, Welch literally redefined what successful management was.

When Welch turned 65 in 2000, he hit the mandatory retirement age for GE employees, and was forced to abdicate the position that he had proved to be most successful in. When Welch retired, revenue was at an unprecedented 130 billion for the year, and GE’s market cap was nearly 200 billion dollars, over 100 times what it was worth when he began. A 100-dollar investment in GE the day he took over as CEO, would have yielded more than 2000 dollars the day he left. In an interview with Fortune Magazine, Welch said that he had the greatest job in the world; only at GE can “we go from broadcasting, engines, plastic, (to) power systems- anything you want, we’ve got a game going. So from an intellectual standpoint, you’re learning every day.”

For most, retirement would mean a retreat into a more private life to enjoy and discover all the finer things that one would have missed in the hustle and bustle or years past. Though for Welch, the finer things can only be found in the assiduous pursuit of self-advancement. Enthralled with the constant development of technology, Welch has been quick to jump on every new opportunity it opens. An avid tweeter, it’s easy to follow Welch’s latest exploits on Twitter and other social mediums.

Leading a more public life than ever, Welch has forged a retirement path unique unto its own. Delving into as many avenues as GE has divisions, Welch’s “retirement” has taken him from changes in his family life to television shows.

A man with an admired business career, Welch was not without his familial interludes. He had four children with his wife Carolyn, whom he divorced amicably in 1987, after 28 years of marriage. In 1989 Welch married mergers and acquisitions lawyer Jane Beasley. Later in life Welch would comment that furthering one’s career while trying to maintain a decent familial presence is difficult at best.

While giving an interview in 2002, Welch met Suzy Wetlaufer, a reporter for the Harvard Business Review. Though Welch was married at the time, he took a liking to Suzie’s outgoing and personable character, and began an affair. In 2003 Beasely became privy to Welch and Suzie’s ongoing relationship and demanded a divorce. Unfortunately for Welch, their prenuptial agreement had expired 4 years earlier, a formality which ended up costing him an estimated 180 million dollars. In 2003 Welch and Suzy married. Under the scandal of their affair Suzy was forced to leave the Review, and so she embarked into a relationship with Welch that was both personal and professional.

Co-authoring two books and writing a biweekly column for Reuters and Fortune magazine added Suzy to the Welch brand. Welch and Suzy even created their own TV show which featured the two giving business advice to executives of real companies. Though the show ended in failure, it served as an affirmation of their involvement in each other’s lives. Warren Bennis, a friend of Welch has said, “With his marriage to Suzy, he’s reinvented himself. Without her ignition, I don’t think he would be as productive”.

Along with giving lectures and other speaking engagements, the Welchs are attempting to improve university education. Appealing to Welch’s keen interest in technology, Michael Clifford, an online education entrepreneur had the idea of creating an Internet based business school, and approached Welch to help in the development. Convinced that online education is the modern approach to post secondary education, the Welchs donated 2 million dollars to what became the Welch Management Institute. Both Suzy and Jack created the curriculum for the executive MBA program, along with a series of video recorded lectures given by Jack.

As a retiree Welch has finally had license to speak his mind, something that was not afforded to him while leading GE. A dedicated republican, Welch has become an outspoken critic of the Democrat party and left wing monetary and fiscal policy, often appearing in the media to give his opinion on political matters. A true character, Welch has also played himself on the popular NBC television show 30 Rock, as he is idolized by one of the main characters, Jack Donaghy, for his prowess as a businessman and personal success.

From humble and meager beginnings Welch Welch learned to overcome the obstacles of his youth and realized his strengths were in recognizing the human potential. Having faith in the abilities of others and allowing them to grow is a management ethic that was born from Welch’s self confidence balanced with his humility. He believed in it and banked on it. His ability to always see the big picture coupled with his forward thinking allowed him to surpass the management paradigms of the time, and build GE into one of the most successful companies in history.

When looking over old photos of himself posing with fellow teammates, Welch is surprised at how much shorter he actually was than the others around him; a poster child for how far you can go if you believe in yourself.

https://www.youtube.com/watch?v=dlPjxz4LGak