Jack Welch
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John Francis "Jack" Welch Jr. (born November 19, 1935) was CEO of General Electric between 1981 and 2001.
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Early life and career
Welch was born in Peabody, Massachusetts to Irish-Catholic parents John, a Boston & Maine Railroad conductor and Grace, a housewife. He attended Salem High School and later the University of Massachusetts, graduating in 1957 with a Bachelor of Science degree in chemical engineering. He went on to receive his M.S. and Ph.D at the University of Illinois in 1960.
Welch joined General Electric in 1960. He worked as a junior engineer in Pittsfield, Massachusetts, at a salary of $10,500. Welch was displeased with the $1000 raise he was offered after his first year, as well as the strict bureaucracy within GE. He planned to leave the company to work with International Minerals & Chemicals in Skokie, Illinois.
However, Reuben Gutoff, a young executive one level higher than Welch, decided that the man was too valuable a resource for the company to lose. He took Welch and Welch's former wife Carolyn out to dinner at the Yellow Aster in Pittsfield, and spent four hours trying to convince Welch to stay. Gutoff vowed to work to change the bureaucracy to create a small-company environment.
"Trust me," Gutoff remembers pleading. "As long as I am here, you are going to get a shot to operate with the best of the big company and the worst part of it pushed aside." "Well, you are on trial," retorted Welch. "I'm glad to be on trial," Gutoff said. "To try to keep you here is important." At daybreak, Welch gave him his answer. "It was one of my better marketing jobs in life," recalls Gutoff. "But then he said to me--and this is vintage Jack--'I'm still going to have the party because I like parties, and besides, I think they have some little presents for me.'" Some 12 years later, Welch would audaciously write in his annual performance review that his long-term goal was to become CEO ([1] (http://www.businessweek.com/1998/23/b3581001.htm)).
Welch was named vice president of GE in 1972. He moved up the ranks to become senior vice president in 1977 and vice chairman in 1979. Welch became GE's youngest chairman and CEO in 1981, succeeding Reginald H. Jones. By 1982, Welch had managed to disassemble much of the earlier and successful management put together by Jones, most notably Douglas Moore, Vice-President of Marketing and Public Relations and previously general counsel of the lamp division in Cleveland, Ohio. Moore lived at 89th and 5th Avenue in Manhattan and had built his reputation on the price fixing scandal that G.E was embroiled in during the 1950's. To the shareholders chagrin, Moore was abruptly terminated at the height of his value to G.E along with other senior members of the G.E. "old guard" who had contributed so greatly to the success of the Company.
Tenure as CEO of GE
Through the 1980s, Welch worked to streamline GE and make it a more competitive company. He shut down factories, reduced payrolls, cut lackluster old-line units. He also pushed the managers of the businesses he kept to become ever more productive. Welch worked to eradicate inefficiency by trimming inventories and dismantling the bureaucracy that had almost led him to leave GE in the past. Although he was initially treated with contempt by those under him for his policies, they eventually grew to respect him. Welch's strategy was later adopted by other CEOs across corporate America.
Each year, Welch would fire the bottom 10% of his managers. He earned a reputation for brutal candor in his meetings with executives. He would push his managers to perform, but he would reward those in the top 20% with bonuses and stock options. He also expanded the broadness of the stock options program at GE from just top executives to nearly one third of all employees. Welch is also known for destroying the nine-layer management hierarchy and bringing a sense of informality to the company.
In the early 1980s he was dubbed "Neutron Jack" (in reference to the neutron bomb) for wiping out the employees while leaving the buildings intact. The chapter "the neutron years" in his book says that GE had 411,000 emplyees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 that left the payroll, 37,000 were in sold businesses, and 81,000 was reduced in continuing businesses.
In 1986, GE acquired NBC. During the 90s, Welch helped to modernize GE by emphasizing a shift from manufacturing to services. He also made hundreds of acquisitions and made a push to dominate markets abroad. Welch adopted the Six Sigma quality program in late 1995.
In 1999 he was named "Manager of the Century" by Fortune magazine ([2] (http://www.timewarner.com/corp/newsroom/pr/0,20812,667526,00.html)).
Notable is his record salary of $94 million a year, followed by his record retirement-plan of $8 million a year.
Criticism
Some people believe that Welch is given too much credit for GE's success. They contend that individual managers are responsible for the company's success. For example, Gary C. Wendt led GE Capital to contribute nearly 40% of the company's total earnings and Robert C. Wright worked to effect a turnaround at NBC, leading it to five years of double-digit earnings and the No.1 position in prime time ratings. Also, Welch did not rescue GE from great losses; indeed, the company had 16% annual earnings growth during the tenure of his predecessor, Reginald H. Jones. Critics also say that the pressure Welch imposes leads some employees to cut corners, possibly contributing to some of the defense-contracting scandals that have plagued GE, or to the humiliating Kidder, Peabody & Co. bond-trading scheme of the early 1990s that generated bogus profits" ([3] (http://www.businessweek.com/1998/23/b3581001.htm)).
Results
Nevertheless, Welch has lead the company to massive revenues. In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26.8 billion; in 2000, the year before he left, they were nearly $130 billion. Through its strong earnings and future growth estimates it was valued at $400 billion at the end of 2004, the world's largest corporation, up from America's tenth largest by market cap in 1981.
A careful analysis of what results were simply from the increased values due to the rise of the Dow Jones Industrial Average (DJIA) from 500 in 1980 to 12,500 in 2001 and today 10,500 ... would show that 95 % ++ of the results as GE were simply due to the market going up.
During this period 1980-2000 (of Jack Welch being GE Chairman) GE revenues increases similarly were almost all due to inflation increases (which increased prices 100-200 % during this 1980-2000 period).
So that a more clear analysis of the cause of GE market value and revenue increases would overwhelmingly credit the market going up and inflation.
Succession plan
There was a lengthy and well-publicized succession planning saga prior to his retirement. Template:Sect-stub
Personal life
Welch has had a slight stutter since childhood. He had four children with his first wife, Carolyn. They divorced amicably in April 1987 after 28 years of marriage. His second wife, Jane Beasley, was a former mergers-and-acquisitions lawyer. She married Jack in April 1989 and they divorced in 2003. The second marriage is widely known as Jane cleverly included a provision to neutralize a prenuptial agreement that would have protected Welch's wealth in case of a divorce. [4] (http://news.bbc.co.uk/2/hi/business/3992381.stm)
Welch underwent triple bypass surgery in May 1995. He returned to work full time in September of the same year and also adopted a exercise schedule. Jack enjoys playing golf, a sport at which he has become quite good although there is no resemblance in his game to Tiger Woods or other notable persons.
See also
Books
- Straight From The Gut, (ISBN 0446690686)
- The New GE: How Jack Welch Revived an American Institution, (ISBN 1556236700)
- Winning by Jack and Suzy Welch - Harpers Collins (April 2005), (ISBN 0060753943)
External links
Bios
- Jack - Straight from the Gut (http://www.straightfromthegut.com/)
- Clayton, Dubilier & Rice, Inc. (http://www.cdr-inc.com/index_bio.html)
- Jack Welch Biography and Business Quotes (http://www.woopidoo.com/biography/jack-welch.htm)
Articles
- IMNO Interviews Jack Welch Nov 2004 (http://www.imno.org/articles.asp?qid=163&sid=18)
- Askmen.com feature (http://www.askmen.com/men/business_politics/45c_jack_welch.html)
- Jack Welch's Encore - 1996 Business Week article (http://www.businessweek.com/1996/44/b34991.htm)
- How Jack Welch Runs GE - 1998 Business Week article (http://www.businessweek.com/1998/23/b3581001.htm)
- Jack Welch: My Personal History (http://www.nni.nikkei.co.jp/FR/TNKS/TNKSHM/welch/index.html)
- Why Jack Welch Isn't God (http://robwalker.net/html_docs/welch.html)
Awards
- FORTUNE - GE's Jack Welch Named Manager of the Century - November 01, 1999 (http://www.timewarner.com/corp/newsroom/pr/0,20812,667526,00.html)
Videos
- October 16, 2001 - Mr. Welch speaks at the Kellogg School of Management (http://www.kellogg.nwu.edu/news/whatsnew/welch.htm)
- 2000 (?) - Mr. Welch at the Fairfield University (http://www.straightfromthegut.com/meet/meet_video.html)de:Jack Welch