Jack Welch of General Electric
Jack Welch is one of the most popular CEOs in the world. His name is listed in every single list of top CEOs and associated with leadership, cost-cutting and decision making.
When we think of Multidexter Leadership, Jack Welch is the first name that comes to mind. He was bold, straightforward and as he used to say “obsessed with reality”
We put together this short case with an extract from the book and added a few more sections to include additional information about Jack Welch’s books, leadership quotes, selected videos, and his management institute.
This article summarizes some of the reasons that make Jack Welch one of the best CEOs of all time.
- Jack Welch Achievements as CEO of General Electric
- Jack Welch Leadership Quotes
- Jack Welch Books
Without further do, let’s now dive in.
Jack Welch as the CEO of General Electric
Jack Welch was a “Jack” of all trades. During his 20-year tenure as the CEO of General Electric (NYSE: GE), he grew profits from $1.5 billion to over $15 billion and increased GE’s market valuation by a factor of 30 from around $14 billion to over $400 billion. If you had invested a thousand dollars in GE stock when he took over as CEO in 1981, that money would have grown to $50,000 by the time he stepped down in 2001.
As soon as he took over, Jack insisted that GE had to be number one or number two in every business they were in, or else get out. By number one or number two, he meant GE to be the leanest, lowest cost,
With this mantra, he positioned GE as a leading company in most of its markets and took over new ones both at home and overseas, selling and closing poor-performing units by the dozen along the way. In his mind, underperforming units, that is, businesses where GE was not number one or number two in their respective markets, had to be “fixed, sold or closed”.
He reinvested the money from business sales and cost-saving programs into aggressive expansion plans to take the company into new business markets and successfully executed more than 600 acquisitions including very public ones like RCA and NBC.
Under his command, GE entered markets that were previously considered to be away from its industrial manufacturing core like real estate and financial services and launched hundreds of new products that took over entire markets both in the US and internationally.
He promoted cutting-edge initiatives that produced significant cost efficiencies, like the implementation of Motorola’s Six Sigma program and the digitalization of the procurement process which in GE moved several billion dollars a year.
Jack Welch was looking for rapid growth, whether part of GE’s core business or not.
During his period as CEO, Jack Welch managed GE with a firm hand and wasn’t afraid of making unpopular decisions. He implemented the infamous “rank and yank” program through which the company fired the bottom 10 percent performing managers every year, regardless of whether they performed well or not.
He also took GE through a major reorganization that dismantled the reigning corporate bureaucracy and laid off over 120,000 people, earning him the moniker “Neutron Jack” (as in a neutron bomb that eliminates people and leaves buildings intact).
Although widely criticized, his “yank and rank” program was fundamental in keeping GE’s thriving culture.
In short, the system seeks to sort out the A-, B- and C-players and compensate them in proportion to their contribution to the organization’s success. In the case of GE, A-players embodied what Welch called the “Four Es of GE Leadership”: high Energy levels, ability to Energize others, the Edge to make tough decisions, and the ability to consistently Execute and deliver.
Under this performance-based system, A-players could get up to three times the raises and bonuses that B-players get, while C-players would get nothing.
Even critics admit that Jack Welch was the extraordinary driving force behind GE’s explosive growth during these years. He was, without doubt, the Jeff Bezos of his era.
Jack would make unexpected visits to GE’s plants and offices and was always looking for opportunities to talk to people and provide his views on leadership and the direction he thought the company should be heading. He was well known for writing personal handwritten notes to employees to congratulate or correct them.
In 2001, Jack Welch sit down with Jeff Greenfield, host of PBS’ limited-run business series CEO EXCHANGE to talk about his leadership style and his years at GE. You should definitively watch the whole thing if you have the time:
Jack Welch’s results speak for themselves: he outperformed the S&P 500 Index by 3.3 times and was named “Manager of the Century”by Fortune Magazine in 1999.
He was probably one of the first CEOs who comfortably and “profitably” pursued aggressive growth beyond their “core business”.
He also the complexity of established frameworks, which according to him approach strategy as a “scientific subject”. in Jack’s mind strategy is done in three easy steps:
- Step 1: Come up with a smart, realistic way to gain
a sustainablecompetitive advantage.
- Step 2: Put the right people
in theright jobs to drive Step 1 forward.
- Step 3: Actively seek out the
best practicesto achieve the goal set in Step 1, whether inside or out of the organization, adapt them and continually improve them.
With a few exceptions, not many large companies have achieved the exponential growth that GE experienced under Jack Welch.
Both Jack Welch and Jeff Bezoshttps://strategyforexecs.com/jeff-bezos-amazon/ are members of a selected group we call “multidexter” leaders who see strategy as a multidimensional game where “brains” and “people” matter more than “seniority” and “years of experience”.
Jack Welch Leadership Quotes
Jack Welch leadership style was very straightforward, and as he calls it “obsessed with reality”. If he was an avid student of anything, it was of GE’s inner workings and numbers. He was a very pragmatic, cut-to-the-chase executive who established a no-BS culture at GE that always looked at facts and numbers coldly.
To see Jack Welch leadership style at his best, watch this 2-minute video where he explains his measurements to run an organization. This is by far one of our favorite Jack’s moments:
Here a few of his most popular quotes:
About Strategy: Jack Welch’s view is that executives must be quick on their feet when making strategic decisions and should not stop to absorb overly complex information facing paralysis for over analysis.
In his Book Winning he says: “In real life,
Although Welch has always given credits to some management theories and their promoters, he disagrees with their scientific approach to strategy.
About this topic, he says “You just should not make strategy too complex. The more you think about it, and the more you grind down into the data and details, the more you tie yourself in knots about what to do… When it comes to strategy, ponder less and do more.”
About Management: For Jack Welch, Management is about tackling the hardest decisions first. About management, he says: “Management is all about managing in the short term while developing the plans for the long term“.
About his “core businesses”: As we point out in the book, Jack Welch was one of the first CEOs who truly saw his company as a group of “capabilities” which could be exploited to make money in any industry even if this was far from their “core”.
When buying NBC, Jack Welch was continually criticized by expert analysts and other CEOs, because the deal would put GE into foreign waters. He was constantly advised not to pursue the deal because he didn’t know anything about movies or TV shows. To his critics, Jack Welch had the multidexter answer:
“Well, I can’t build a jet engine, either. I can’t build a turbine. Our job at GE is to deal with human and financial resources. The idea of getting great talent, giving them all the support in the world, and letting them run is the whole management philosophy of GE, whether it’s in turbines, engines, or a TV network”.
Jack Welch Books:
Jack Welch is also an avid teacher and writer. Part of his success at GE was in big part due to his big effort with his Crotonville Management Development Institute in Ossining, New York.
The center, founded in 1965 and majorly upgraded by Jack Welch in the early 1980s, trains around 12,000 employees every year on areas from management skills to technical training and the discussion of trending topics like Blockchain and Artificial Intelligence.
Crotonville was fundamental to Jack Welch’s famous deployment of Six Sigma and other radical implementations at GE. It became a talent factory that still provides top performers for GE.
Reflecting on how fundamental Crotonville was for GE’s success during his tenure as CEO, Jack Welch says:
“Ultimately, Crotonville became a boiling pot for learning. Our most valuable teachers there became the students themselves. Through their classwork and field studies, they taught the company’s leaders and one another that there often was a better way. Crotonville became, in fact, our most important factory… Without Crotonville, I didn’t think we had a prayer“.
Teaching for Welch came naturally, which is reflected through his multiple books and his Jack Welch Management Institute at Strayer University, one of the top 25 online MBA programs in the US.
Our research included three of Jack’s most popular Books:
- “Straight from the Gut” about his years on GE
- “Winning” with his life partner Suzy Welch, and
- “The Real-life MBA” also with Suzie Welch
In these books, you can truly appreciate the real-life, no-BS style of Jack Welch. We recommend reading them all three in the order they are listed.
Clifford, Catherine. Jack Welch: This is the No. 1 key to success as a leader. CNBC. November 2017. URL: https://cnbc.com/2017/11/17/former-ge-ceo-jack-welch-how-to-be-a-great-leader.html
Jack Welch’s profile page at GE Website. URL: https://www.ge.com/about-us/leadership/profiles/john-f-welch-jr
Welch, Jack; Byrne, John A. Jack: Straight from the Gut. Business Plus. Kindle Edition.
Hartung, Adam. GE Needs A New Strategy And A New CEO. Forbes website. March 2017. URL: https://forbes.com/sites/adamhartung/2017/03/28/ge-needs-a-new-strategy-and-a-new-ceo/#43e16a707990
Jack Welch page at Encyclopedia.com. URL: https://encyclopedia.com/people/social-sciences-and-law/business-leaders/jack-welch
Hartung, Adam. GE: A Total Leadership Failure. Forbes website. April 2015. URL: https://forbes.com/sites/adamhartung/2015/04/15/ge-a-total-leadership-failure/
Jack Welch Wikipedia page. URL: https://en.wikipedia.org/wiki/Jack_Welch
Welch, Jack; Welch, Suzy. Winning: The Ultimate Business How-To Book. HarperCollins e-books. Kindle Edition.
Nicholls, Jane. Inside Crotonville: GE’s corporate vault unlocked. GE Reports. October 2017. URL: https://www.ge.com/reports/inside-crotonville-ges-corporate-vault-unlocked/
CEO Exchange archive. URL: http://www.pbs.org/wttw/ceoexchange/episodes/archives.html