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Welch, Jack - Overview, Personal Life, Career Details, Chronology: Jack Welch, Social and Economic Impact

business ge’s company welch’s

(1935-)
General Electric Company

Overview

A 1996 survey conducted by Financial Executive revealed that the CEO most admired by chief financial officers of major corporations was Jack Welch of General Electric (GE). That is a remarkable turnaround for a man who, during corporate cutbacks, earned the nickname “Neutron Jack” for eliminating 100,000 jobs at GE and radically reorganizing the blue-chip company. But his keen leadership has earned him admiration and respect among his peers as the man they would most want to work for. He has maintained consistent earnings, solid financial performance, and strong commitment to shareholder value. This is a testimony to his unique strengths in guiding GE, one of the world’s largest corporations, toward the twenty-first century.

Personal Life

John Francis Welch, Jr. was born November 19, 1935, in Peabody, Massachusetts. He grew up in the small city of Salem, Massachusetts, in a solidly working class Roman Catholic neighborhood. His father, John Sr., was a conductor for the Boston & Maine Railroad who was away from home a great deal. Welch has credited his mother, Grace, with playing the most important role in his life. As he has said in an interview in Fortune, “Don’t get me started on my mother; she’s my whole game.” She cheered her son on in sports and fostered his self-confidence, helping him to overcome a serious stammer that she insisted was not a speech impediment but the result of Welch’s hyperactive brain that was working faster than his mouth.

An only child, Welch’s extended family was his neighborhood: “Kids that didn’t have anything,” Welch remembered. “You were lucky if you had food on the table.” The center of Welch’s youth was a makeshift park created from an excavated gravel pit. In the “pit” Welch played basketball, baseball, and hockey in tough competitions. As Welch recalls, “We were jocks of sorts. I mean, we played ball countless hours, played street hockey all night. That was everything. Sports were everything.” It was there that Welch learned how to compete, to hate losing, and to negotiate for playing space among the bigger kids. A friend of Welch’s at the time explained that the lessons learned helped ensure later success: “‘Hey, we can do anything. Nothing can be as tough as going to the Pit.’” Welch attended Salem High School, excelling at sports. His class voted him the “most talkative and noisiest boy.” In his school’s literary magazine Welch recorded his “repressed desire: to make a million.”

Failing to win a Navy ROTC scholarship, which would have paid for a private college, Welch instead attended the University of Massachusetts. His mother wanted him to become a doctor or a priest. He wanted to be a great hockey player, but he was not fast enough, and instead took up engineering because, as he recalls, “we only had one person in our whole family that was at all educated beyond high school. He was called an engineer, and he worked at a power plant. So I went to engineering school.” Although he was able to graduate with honors, Welch remembers his college years as a time more devoted to parties and having a good time than for studying. He went on to get his Ph.D. in chemical engineering at the University of Illinois in 1960. Out of three job offers, Welch chose General Electric’s engineered materials plant at Pittsfield, Massachusetts. As Welch remembers, “it was like going home in a way. That may sound ridiculous, but in those days that was kind of important.” Welch steadily climbed the GE corporate ladder to become in 1981, at age 46, the youngest chairman and CEO in the company’s history.

Welch married Carolyn Osburn in 1959, whom he divorced in 1987. He married Jane Beasley in 1989. He has four children, Katherine, John, Anne, and Mark. An avid sportsman, Welch is a devoted golfer and the lessons he has learned in sports competition have transferred to his business approach, which thrives on challenges and a commitment “to fight like hell before I lose.” A demanding and relentless supervisor, Welch has succeeded in creating an extremely competitive structure at GE in pursuit of what he has described in an interview for Fortune as the “boundaryless” workplace in which the traditional lines separating workers and departments are blurred in order to expedite the delivery of services and products. Welch’s relentless pace was slowed in 1995 when he was diagnosed with heart disease and underwent successful triple bypass surgery. Yet Welch seems reluctant to step down as head of GE, a position he has held since 1981, but repeatedly stating intentions to remain until the year 2000.

Career Details

When Welch came to work for GE, he was about as far from the center of power in the giant company as he could be. He worked in the chemical development area of the organization, charged with developing new chemical businesses. Welch also contradicted the image of the corporate team player. As one of his colleagues recalled, Welch was “the least typical GE guy. Definitely a maverick in his style.” Yet Welch’s skills as a scientist were quickly complemented by a business insight that enabled him to understand not just a product’s design, but the sales techniques and production steps required for that product to find a market niche. The small-scale and independence of his early experience with GE suited his style, ability, and helped to determine his future idea of the giant GE empire. As he revealed in an Industry Week interview, “My only business experience came from being an entrepreneur in a small business outside the mainstream of GE: a family grocery store, if you will—the plastics business. My technician and I were partners [working] on the same thing. We had two people, then four people, then eight people, then 12 people, and now we’re a $5 billion business! But it started that way. So that’s my vision of how people should communicate. Everyone’s involved. Everyone knows. Everyone’s got a piece of the action. The organization’s flat. All these things are from when I was 26 years old.” Within three years of Welch’s appointment as general manager of GE’s worldwide plastics division in 1968, he had turned the fledgling division into a $400 million-a-year business.

Promotions followed rapidly. He was named vice president in 1972 and in 1977 was appointed to head GE’s consumers goods and services division. He became a vice chairman in 1979 and was appointed to replace Reginald Jones as GE’s chairman in 1981, becoming the youngest CEO in GE’s history. Welch found himself managing, instead of a “family grocery store,” an industrial giant of diverse businesses that made everything from light bulbs to nuclear weapons. In the 1970s, GE had led American business in hiring huge staffs of strategic planners and, although GE enjoyed sales of $25 billion and profits which Welch helped triple in eight years, he feared that the company’s size and bureaucracy would cost GE flexibility in the modern marketplace. Welch embarked on a radical restructuring, dividing GE into winning divisions that were number one or two in their markets and losing divisions, mostly the company’s older, slower-growing manufacturing concerns, and began to sell them off. Welch closed 73 plants and facilities, sold 232 businesses and product lines, and laid off more than 132,000 workers, more than a quarter of GE’s labor force. Although GE pioneered generous severance packages and retraining for fired workers, Welch was nicknamed “Neutron Jack,” an allusion to the nuclear weapon that killed people rather than buildings. Welch has continued to defend the move as essential in establishing GE’s productivity and flexibility in the rapid-changing future marketplace. By cutting bureaucratic layers and achieving a flatter organization, Welch has shown how even a corporate giant like GE could imitate the aggressive innovation of Welch’s early experience of turning the company into what has been labeled in a Industry Week article a “$60 billion family grocery business.”

To reach that goal, Welch cut the work force and reorganized GE’s divisions in such a way that management was encouraging rather than inhibiting product development. Success took some time. By 1984 sales were still only about $28 billion and annual growth rate in labor productivity a meager 1.9 percent. However, by the end of Welch’s first decade at the helm GE recorded sales of $58.4 billion and an annual growth rate of over 8 percent, a third better than inflation. Welch did not just cut GE’s assets but bought $25 billion worth of new companies, including RCA, the New York investment bank Kidder Peabody, and Hungary’s Tungsram lighting company. The 1986 $6.4 billion acquisition of RCA, which included its National Broadcasting Company (NBC), at that time was considered the largest merger in business history outside of the oil industry. The acquisition also broadened GE’s base within the services and technology industries, the two growth areas that Welch anticipated would dominate the future business landscape. Welch had proven that he could not only trim his company down but boost its sales dramatically as well.

Welch’s success has allowed him to be routinely listed among America’s preeminent business gurus. It has been estimated that during his tenure as the head of GE Welch has added $52 billion in market value to his company. In the late 1990s, GE was the world’s most valuable company in terms of stock market capitalization. As a research analyst reported to Kiplinger’s Personal Finance Magazine, “The companies that have the technological skills and the manufacturing expertise are the ones that are going to come out ahead. That is probably the most impressive are of GE—its ability to constantly drive down the cost structure and improve productivity. And for that, Welch is the key.”

Chronology: Jack Welch

1935: Born.

1957: Received engineering degree from the University of Massachusetts.

1960: Received his Ph.D. from the University of Illinois.

1960: Began career with General Electric.

1968: Promoted as general manager of GE’s worldwide plastics division.

1973: Assigned vice president and chief executive of GE’s components and materials group.

1977: Made senior vice president, consumer goods and services division.

1979: Promoted GE vice chairman and executive officer.

1981: Named GE’s youngest chairman and chief executive officer.

1986: GE acquired RCA and the National Broadcasting Company.

Social and Economic Impact

Welch has succeeded in radically transforming his giant and venerable corporation, founded by Thomas A. Edison, allowing it to continue its technological innovations that have invented and manufactured products that we use in almost every aspect of modern life. For example, almost all of the plastic in personal computers is manufactured by GE’s plastics division. Like IBM, GE has been synonymous with affecting the course of modern electrical and electronic innovations. As a self-styled corporate outsider and maverick, Welch has shown how modern business can be recreated in a leaner, more flexible structure to encourage productivity and change. As one of the world’s largest corporations, GE plays a major role in the U.S. and the world’s economy. As GE showed through the 1980s, modern corporate retooling can be painful. In GE’s case more than 130,000 jobs were cut. But Welch had the courage to go through with painful, short-term cuts for long-term productivity and growth that could add even more jobs and a higher standard of living. GE was recast in Welch’s image of a leaner and more flexible giant that could respond quickly to changes in the marketplace. The lessons learned at GE have proven to be key for all other modern businesses.

As Welch explained in an Industry Week interview, “The hero is the one with the ideas. So my job is to find great ideas, exaggerate them, and spread them like hell around the business with the speed of light.” Welch has made sure that the heroes with those new ideas, whether for new products or increased productivity, can emerge and his company can act on their inspiration. Welch has shown how a modern corporate giant like GE can still achieve an informality and sense that everyone is involved in the common goal, an atmosphere that more and more will be needed as large multinational corporations enter the twenty-first century. As Welch has taught American business, “A successful leader can shock an organization and lead its recovery. An unsuccessful leader will shock an organization and paralyze it. So organizations constantly need to be regenerated. There’s a constant flow of ideas, excitement, and energy that has to be put into an organization. And it has to keep getting better. The bar has to keep going up.”

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over 4 years ago

GE does not, has not, and never will sell nuclear weapons.

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over 4 years ago

GE does not, has not, and never will sell nuclear weapons.