Jack Welch: Former GE CEO

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Table of Contents

Introduction
Jack Welch’s Accomplishments and Achievements
History of Jack Welch
Key Attributes of Jack Welch
Long-term Impact of Jack Welch
Lessons Learned About Leadership
Conclusion
References

Introduction

Jack Welch was the CEO of General Electric (GE) between 1981 and 2001. He was the youngest CEO to be appointed in the company. He joined the company in 1960 and later promoted to be the vice president in 1972. Welch ascended the organizational hierarchy, first serving as the vice chairman in 1979 and later became the CEO in 1981. This paper focuses on Jack Welch as the former CEO of GE.

Jack Welch’s Accomplishments and Achievements

At first, Welch worked as a subordinate chemical engineer with a salary of $10,500. GE increased his salary by $1,000 during his first year. However, he was not happy with the increase and the strict governance in the company. He had a plan to leave the company, but Reuben Guttoff convinced him to stay. According to Bill (2008), Welch first worked in chemical development section, which was charged with building chemical businesses.

One of his colleagues argues that Welch was not a typical guy since he had his own style of working. Instead of concentrating only on the products design, he came up with sales techniques and production methods for the product to have a competitive advantage in the market (Welch, 2003).

During his time as a CEO, the company’s value rose from $3 billion to many billions. He turned the slow-moving business into a fast moving and flexible business. Nevertheless, Welch found himself managing a large business, which concentrated not only on light bulbs but also on the nuclear weapons.

During his tenure, there was a huge revenue surge of about $130 billion. The revenue growth was much higher as compared to the previous figures before Welch’s inception as a leader. Although Welch had many accomplishments and achievements, he had to make difficult decisions like sacking over 100,000 employees. Nevertheless, people named him as “Neutron Jack” because he defended his actions as a move to improving GE’s productivity and flexibility in the dynamic market (Bill, 2003).

Welch (2003) argues that he came up with a work out program that contained five elements: off site meetings, spotlight on issues, main processes, participation, small groups and follow-up after implementation.

The program was meant to diminish bureaucracy, thus giving every employee a chance to influence and improve daily activities. The work out program enabled Welch to ‘clean up’; hence, the workers became more productive as the processes were made simpler. In this case, Welch eliminated the waste hours and energy lost in day-to-day operations.

This plan changed employee’s behavior in the company and so, the workers could also advice their bosses on what to do. Other achievements include bureaucracy busting, where he had to eliminate the existing unnecessary organization levels. He reduced the organizational hierarchy and removed wasteful practices that were of part of GE’s culture and norms. In particular, he closed some industrial units, hence dropping payrolls and unwanted procedures.

Moreover, Welch encouraged employees to contribute in decision making by coming up with suggestions for improvements. Welch instilled learning and development within the company by allowing managers to seek best approaches from other departments.

Likewise, Welch regarded the GE business as a game that has professional team with highly skilled and motivated individuals. He had close relations with his top team and their families. Besides, he built guesthouses, fitness and conference centers, even though many people regarded this as a waste of money on non-productive things (Judge et al., 2002).

Another area of Welch’s achievement was the strict evaluations on the executive managers. Managers were awarded grade A, B or C according to their performance. Grade C managers were at a higher risk of dismissal. Every year, Welch would discharge underperforming managers. Welch integrated performance analysis with the business process.

The assessment was based on several factors, including how supervisors treated and controlled the employees, and how they sustained the organization’s culture. Failing to meet the set standards meant that such managers were likely to be withdrawn from their positions. He instilled discipline to increase performance of top managers, and rewarded best performances with bonuses (Kotelnikov, n.d.).

Welch brought change, demanded continued learning, and gave examples to other managers on how he made mistakes that made him learn and change his guiding principle. In essence, he made sure that every division of the company defined their markets globally. For example, a division like Power System was able to redefine its market.

Each division was to become the first or second leanest low-cost global producers of high quality goods and services. His strategy was either to fix GE’s mess, sell it, or close it. Within the first two years, GE got acquisitions, joint ventures and other deals, including selling about 71 businesses in which GE used the income to improve its market competitiveness.

In addition, he discovered that the Internet improved productivity as the company eliminated paperwork and other unnecessary transactions as it embraced e-business as an income generating service. Welch also brainwashed the other managers into his thinking. During the meetings, he used simple things such as carrots to explain and dialogue or anything that could make others understand what he was thinking (Bill, 2008).

According to Welch (2003), success was gradual because by the year 1984, sales rate was only at $28 billion with a growth rate of 1.8 percent. However, more sales and growth rate added up to $58.4 billion with an annual growth of eight percent.

Although he cut some of the company’s assets, he brought in new companies such as RCA, an investment bank in New York and Hungary’s lighting Company. He was also able to motivate his employees. Welch hired the best employees and could even write personal handwritten notes to congratulate them after good performance.

History of Jack Welch

Jack Welch was born in 1935 and brought up in Peabody, Massachusetts by his two parents who were Roman Catholic. His father worked as a railroad conductor and his mother was a housewife. Jack’s father worked for many hours in order to support his family.

Jack and his mother used to go to the train station to wait for his father and as they waited, they had talks with his mother, which served as his early education. “He studied at Salem High School, attended Massachusetts University, and attained a degree in chemical engineering in 1957” (Bill, 2008, p.15).

Welch was also involved in many activities such as basketball, baseball and playing hockey, which shaped him to become a good leader. Earlier on, he used to play these games at a makeshift park. Together with other youngsters, they played hockey all night, and it is here that he first learned to compete to try to get some playing space even in the presence of bigger kids and to hate being a loser.

In high school, he became a co-captain of golf and a treasurer in the senior class. As he played his role as a leader, he gained competitive shots and his teams and classmates knew him as a feisty competitor who saw no limits. In addition, Welch’s mother greatly contributed to his success as a leader because as they held discussions on games, she instilled in him a fierce will to achieve.

Welch became popular and clever and was a class jokester. His mother continued to support him, and he decided to take chemical engineering at Massachusetts University. In college, some professors became Welch’s mentors and convinced him to attend a graduate school. Therefore, he went to Illinois University and got a doctorate degree. When he got his degree, his mother was excessively excited as she called the Salem newspaper to report that Welch had his PhD (Bill, 2008).

Key Attributes of Jack Welch

Welch had several attributes that made him a great leader. Some of these attributes include energy, energizing, edge, and execution. As previously discussed, Welch had more energy to lead. This energy made him to lead others and he sustained it in all situations and challenges that faced the company.

He had to attend tedious job meetings and ensured that the work plan worked out. Welch’s energizing attribute entails ability to energize other managers to follow instructions and make them perform. He was able to devise a vision and persuade people to work on it. He was selfless when giving the managers credit as they performed well, but also quick to accept mistakes and take responsibilities when things went wrong.

According to Kotelnikov (n.d.), the edge attribute enabled Welch to make difficult decisions. For example, he was able to hire, promote, and fire non-performing managers and thus, he never allowed difficulty to stand in his way. Another attribute that Welch possessed is dedication. He spent his time and energy to complete all the tasks before him.

The dedication enabled him to achieve the company’s vision. Magnanimity as an attribute enabled him to give credit to the managers who deserved it. He also took responsibility for any failures and recognized that he was no better than other managers or employees since he tried to elevate everyone, especially when he called for meetings with different groups and interacted with them on ways of self-improvement.

Moreover, this displays the openness attribute because he listened to other peoples ideas. With this, he was able to get new ways of improvement in to further the company’s vision as well as building mutual respect and trust among managers and other employees.

Welch was also creative because of his ability to think out of the box, as he was able to see things that other leaders could not see. Fairness was another attribute depicted from Welch because he treated the managers and other employees justly.

He only fired those who did not perform as stipulated, but those who performed well were retained. Welch was assertive as he clearly stated what he expected from the managers to avoid misunderstandings (Zaccaro, Rittman, & Marks, 2001).

Self-confidence was one of the greatest attributes that Welch possessed because he transformed the whole company by reducing bureaucracy and eliminating unnecessary day-to-day organizational tasks. In essence, he defied the laid down order and the status quo.

He handled feasible tasks and avoided setting unrealistic goals. Nevertheless, he knew what his virtues and limits were and thus, he could not hide them. He was initiative and therefore became a role model to the managers because in most cases, teammates tend to classify themselves with the values of their leaders.

Long-term Impact of Jack Welch

Welch achieved GE’s vision by fundamentally rethinking and radically transforming the company, which continues with technological advancement that have created products that are used all over the globe (Bill, 2008).

For example, GE creates most of the plastic materials used to make computers. Welch has demonstrated how modern businesses can be reconstructed to a flexible structure, which allows productivity and change. GE is one of the largest corporations around the globe and plays a key role in the US and in the world’s economy.

Although at the beginning of his tenure, he had to cut more than 100,000 jobs, he knew that this was only short-term, as it would later lead to productivity and growth, which could create more job opportunities and better living standards. For 20 years, he made the employees’ jobs better with much returns because he got rid of bureaucracy. They loved working at GE because learning was a continuous process.

Lessons Learned About Leadership

The research and analysis on Jack Welch has enabled us to understand that it is good to act like a leader rather than a manager while embracing change. Zaccaro et al (2001) assert that change keeps the employees alert because they are not sure whether the change might affect their jobs. Change brings about company growth.

At first, when Welch decided to bring in change, some managers did not understand why, but Welch faced it. It is with this change that GE became more flexible and competitive. According to Welch, the purpose of change was not meant to worsen things, but to accommodate new opportunities, ideas and businesses. In leadership, one has to face the reality and act decisively.

According to Welch, it is better to face the reality rather than burying the head on the sand. At the time he joined GE, he found out that the managers assumed that the organization was in good shape. Nevertheless, Welch saw a sinking business since GE was slowly loosing its market value. Instead of assuming that the company would improve, he came up with strategies that improved things.

Similarly, the study on Welch urges managers to stop managing, but begin with leading to cultivate good managers. Welch did not like the notion of management because according to him, the managers over managed and hence participated in building a bureaucratic environment that could likely harm the company.

That is the reason why he changed the management style. He termed managing as controlling and keeping people in the dark instead of leading and making people passionate about their work. He further suggested that leadership is a trait that can be found in anybody with ideas that inspire, energize and enliven others rather than control and depress.

In addition, Welch stood out as a leader to defy the traditions that were earlier practiced at GE. He defied the long-standing reputation and decided that what worked before may not necessarily work in the future. We also learn that leaders should strive to become either first or second leanest in the market.

Nevertheless, Welch insisted on fixing the problems faced by the company, closing or selling it. For example, when GE acquired NBC Telecommunication Company, it was faced with difficulties while trying to compete with other similar US Companies. However, Welch came up with clever ideas to fix the problem, which involved replacing the managers with entrepreneur leaders who were focused on business.

In light of Welch’s leadership style, managers should not focus only on profits, but also customer and employee satisfaction. Although Welch cared about the profits, he focused more on customer and employee satisfaction and the cash flow. He also established a boundary-less organization where managers were able to share ideas across the businesses and thus becoming a learning organization. This enabled them to get ideas from any source, share it among themselves in order to get what they know.

Frey et al. (2009) argue that Welch enlightens leaders on the need to use the brain of each employee no matter the employee’s status in the company. He as well insists on tearing down the boundaries. Since he introduced no boundaries idea, the company became informal where workers were able to connect with the outside world quickly. Welch usually held informal meetings where he allowed other employees to lighten up and give their views. Sometimes he held informal get together.

Welch also teaches leaders to be lean and alert like a small company in order to survive in a highly competitive environment. Leaders should stop the behavior of thinking and acting like huge companies. Welch believes in simplicity, consistency, and reviewing everything. Consistency is an attribute that has helped him to revive GE. Welch also insists on discovering other businesses with great ideas and putting them into practice. Welch put GE in the level of big companies such as Motorola, Zerox and HP.

Furthermore, Welch inspires leaders not to tolerate bureaucracy, but instead blow it up. This is because bureaucracy contributes to slow decision making. He stresses on simplicity and less formality for a company to become more responsive. Eliminating bureaucracy reduces unnecessary work, enables leaders to work with colleagues, and streamlines decision-making.

Conclusion

Jack Welch has become one of American’s icons. He is referred to as an expert in leadership and management. Welch had the enthusiasm of a winning team coach. As depicted in this paper, during his time in GE, he revolutionized GE and used less time in carrying out his plans.

In addition, the GE became leaner, greater and competitive with few employees, few divisions and management. Growing up in a low class society, Jack Welch inspires many to try to strive to succeed. Although the workers who were laid off were not happy because they did not have any means to sustain their families, they later recognized the long-term impact that Welch had created in the US and the world’s economy as he transformed GE.

In essence, Welch concentrated on three main aspects: setting goals and devising strategic plans; listening and empowering the workers; and enhancing communication of new strategies and goals across the organization. Therefore, he made management possible by reducing the levels of management while enhancing free communication, thus acquiring knowledge from employees to facilitate decision making.

References

Bill, L. (2008). Jacked up: The inside story of how Jack Welch talked GE into becoming the world’s greatest company. New York, NY: McGraw Hill.

Frey, M., Kern, R., Snow, J., & Curlette, W. (2009). Lifestyle and transformational leadership style. Journal of Individual Psychology, 65(3), 212-240.

Judge, T. A., Bono, J. E., Ilies, R., & Gerhardt, M. W. (2002). Personality and leadership: A qualitative and quantitative review. Journal of Applied Psychology, 87(4), 765-780.

Kotelnikov, V. (n.d.). 25 Lessons from Jack Welch. Web.

Welch, J. (2003). Straight from the gut. New Jersey, NJ: Warner Book.

Zaccaro, S. J., Rittman, A. L., & Marks, M. A. (2001). Team leadership. Journal of Leadership Quarterly, 12(4), 451-483.

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