Apostle of change institutes a last one, by retiring
WASHINGTON — As the novice manager of a plastics operation at General Electric Co., John Welch Jr. instituted something he called "the one-hundred-pound club."
Whenever his unit booked a 100-pound order, someone would ring a bell and stop the assembly line. Workers would clap and - in Mr. Welch's words - "go bonkers" in an impromptu, morale-boosting celebration.
Cheesy? Perhaps. But effective - and a hint of what became a signature style. Jack Welch, who retires today after nearly 20 years at GE's helm, has become a titan of US business through aggressive, charismatic, celebrity-showman leadership.
Along the way, he has become a symbol for an age where, increasingly, the show business of America is business. In an in which half the country owns stock, CEOs are stars in their own right. Management may no longer be enough. Today, top CEOs need to be good on CNBC - and spout epigrams, too.
In this new world, Jack Welch is a brand name. Last year, he got $7.1 million for his memoirs - not far behind the Pope. As measured by market capitalization, GE is now the most valuable corporation in the world.
"He's been a great manager for GE and his legacy will last for a long time," says Michael Buckley of the Michael F. Price College of Business at the University of Oklahoma.
This doesn't mean Welch hasn't made billion-dollar blunders. Most recently, his bid to merge with Honeywell was blocked by European Union antitrust regulators. The Bush administration has ordered GE to dredge decades of PCB pollution out of the Hudson River.
Nor was he the first rock-star CEO. That title might fairly go to former Chrysler Chairman Lee Iacocca, who remains the only business leader whose memoirs have sold more than 1 million copies.
But Welch was arguably the first modern manager to come to believe that his primary role was to serve as an apostle of change. He was a pioneer of the fast-moving flexible, style of business that globalization and the pressures of modern capital markets demand.
When he took over GE in 1981, the firm was doing fine. But fine wasn't good enough. "I want a revolution," he said. And he got one - by ripping out layers of middle management, chopping off old businesses, and dropping off more than 100,000 jobs.
It was a shock to the company and earned him the nickname "Neutron Jack." But it flattened GE's hierarchy, broke down the walls between its many businesses, and fostered a kind of entrepreneurial spirit rare in a large corporation, according to analysts.
"He created a boundaryless corporation," says Vijay Govindarajan, director of the global leadership center at Dartmouth University's Tuck School of Business in Hanover, N.H.
Nor was he tolerant of timeservers. Welch almost left GE early in his career because everyone in his unit received the same $1,000 bonus, and he expected others to emulate that hungry, meritocratic attitude. Some saw his methods as harsh. GE grades its managers on the curve, with the top 20 percent marked as stars and the bottom as weeds, to be shortly uprooted.
It's a management method that lets everyone know honestly where they stand, but it does "create tension and pressure," says Mr. Govindarajan.
Among Welch's other favorite maxims was that every division in the sprawling GE conglomerate had to be first or second in its market, or face the ax. Thus the firm whose ancestry stretched back to Thomas Edison and the invention of the light bulb has shed many of its consumer-electronics businesses, for instance, while acquiring NBC (via its purchase of parent firm RCA), and today generating nearly half its profit from its financial-services division.
Even its remaining big-metal manufacturing arms, such as locomotive divisions and its aerospace engine business, derive a large chunk of their income from service contracts.
Some see this as a betrayal of the firm's legacy. The company that was the No. 1 patentee of inventions every year of the 20th century until 1986 is no longer even in the Top 20 of that list. GE is now "mostly a bank," says firm critic and author Thomas O'Boyle.
His brass-knuckle methods made it easier for US corporations to lay off hundreds of workers at the slightest hint of hard times, according to other critics. "He really did create the opposite of the kinder, gentler corporation," says a former GE Capital employee.
But for better or worse, his influence is now everywhere. Former Welch protéges now head a dozen US firms - as well as the Italian auto giant Fiat.
The former hockey player still occasionally takes younger people from GE out to the rink, undoubtedly to check them into the boards.
"The model is that you can never rest on your laurels. You have to keep moving and keep changing," says Chris Bartlett of the Harvard Business School.
Staff writers Mark Trumbull and Dante Chinni contributed to this report.