Jack Welch

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Jack Welch as CEO of GE
Jack Welch as CEO of GE

John Francis "Jack" Welch, Jr. (born November 19, 1935) was Chairman and CEO of General Electric between 1981 and 2001. Welch gained a solid reputation for uncanny business acumen and unique leadership strategies at GE. During his tenure, GE increased its market capitalization by over $400 billion. He remains a highly-regarded figure in business circles due to his innovative management strategies and leadership style.

His net-worth is estimated at $720 million.[1][citation needed]

Contents

[edit] 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 Amherst, graduating in 1957 with a Bachelor of Science degree in chemical engineering. While at UMASS he was a member of the Alpha chapter of the Phi Sigma Kappa fraternity.

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 $1,000 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 two levels higher than Welch, decided that the man was too valuable resource for the company to lose. He took Welch and his first 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.[2]

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 disassembled much of the earlier management put together by Jones.

[edit] Tenure as CEO of GE

Through the 1980s, Welch worked to streamline GE and make it a more competitive company.

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. He shut down factories, reduced payrolls, cut lackluster old-line units. 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.

During the early 1980s he was dubbed "Neutron Jack" (in reference to the neutron bomb) for eliminating employees while leaving buildings intact. In Jack: Straight From The Gut (in a chapter titled "The Neutron Years"), Welch states that GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 who left the payroll, 37,000 were in sold businesses, and 81,000 were reduced in continuing businesses. In return, GE had increased its market capital tremendously.

In 1986, GE acquired NBC, which was located in Rockefeller Center; Welch subsequently took up an office in the GE Building at 30 Rockefeller Plaza. During the 1990s, Welch helped to modernize GE by emphasizing a shift from manufacturing to financial services.

He also made hundreds of acquisitions and made a push to dominate markets abroad. For instance, an advertisement by the "Arab Union For Advertising, Jeddah Saudi Arabi" appeared in the June 19, 1992 edition of the New York Times touting GE's alliance with the Saudi Bin Laden Group (SBG). The ad reported that "June 1991 marked Jack Welch's first visit to SBG when an understanding to work together was reached." It also reported that "On May 30, GE's John Welch Jr. and top executives were honored at a reception given in Jeddah by Bakr M. Binladin of the Saudi Binladin Group (SBG). Also present were more than 200 Binladin senior executives, public officials, diplomatic corps and business leaders."[citation needed]

Welch adopted the Six Sigma quality program in late 1995.

In 1999 he was named "Manager of the Century" by Fortune magazine.[3]

[edit] Results

Welch led 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. When Jack Welch left GE the company had gone from a market value of $14 billion to one of more than $410 billion at the end of 2004, making it the most valuable and largest company in the world, up from America's tenth largest by market cap in 1981.

Jack Welch had a record salary of $4 million a year, followed by his record retirement-plan of $8 million a year.

[edit] Succession plan

There was a lengthy and well-publicized succession planning saga prior to his retirement between James McNerney, Robert Nardelli, and Jeff Immelt, with Immelt eventually selected to succeed him as Chairman and CEO. Robert Nardelli became the CEO of Home Depot until his resignation in early 2007, while James McNerney became CEO of 3M until he left that post to serve in the same capacity at Boeing.

He announced the news of his succession to Jeff Immelt almost the same way as his earlier boss Reg Jones had announced it to him. Welch begins his bestselling book Jack: Straight from the Gut, with his experience of this.

[edit] 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 growth and the premier position in prime time ratings. It is also held that Welch did not rescue GE from great losses as 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".[4]

Welch has also received criticism over the years for his lack of compassion for the middle class and working class. Welch has publicly stated that he is not concerned with the discrepancy between the salaries of top-paid CEOs and those of average workers. When asked about the problem of excessive CEO pay, Welch has stated that such allegations are "outrageous" and has vehemently opposed proposed SEC reforms affecting executive compensation. Countering the public uproar over excessive executive pay (including backdating stock options, golden parachutes for nonperformance, extravagant retirement packages, etc.), Welch stated that CEO compensation should continue to be dictated by the "free market," without interference from government or other outside agencies.[5] In addition, Welch is a vocal opponent of the Sarbanes-Oxley Act of 2002, the wide-ranging legislation which established or enhanced new standards for corporate governance and accounting.[6]

[edit] 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. While Welch had crafted a prenuptial agreement, Beasley insisted on a ten-year time limit to its applicability, and thus she was able to leave the marriage with an amount believed in the range of $180m.[7]

The third wife of Jack Welch is Suzy Wetlaufer, a former editor of Harvard Business Review, who co-authored his latest book Winning as Suzy Welch. Wetlaufer served briefly as the editor-in-chief of the Harvard Business Review before being forced to resign in early 2002 after admitting to having been involved in an affair with Welch while preparing an interview with him for the magazine.

Welch underwent triple bypass surgery in May 1995. He returned to work full time in September of the same year and also adopted an exercise schedule that included golf. Welch is a member of Augusta National Golf Club. However, in Winning, Welch acknowledges that back problems forced him to give up playing golf, and that surprisingly, he doesn't miss it.

On January 25, 2006, Jack Welch gave his name to Sacred Heart University's College of Business, which will be known as the "John F. Welch College of Business".[8]

Welch is a strong believer in management education. In September 2006, Jack Welch began teaching a class at the MIT Sloan School of Management to a hand-picked group of 30 students with a demonstrated career interest in leadership.

Preceded by
Reginald Jones		 Chairman & CEO of General Electric
1981 – 2001		 Succeeded by
Jeffrey Immelt

[edit] See also

[edit] References

  1. ^ The Not So Retired Jack Welch
  2. ^ How Jack Welch Runs GE
  3. ^ GE's Jack Welch Named Manager of the Century
  4. ^ How Jack Welch Runs GE
  5. ^ 'Hardball with Chris Matthews' for July 12, 2006
  6. ^ Jack Welch Gives Straight Talk About Winning
  7. ^ Lovers seek lawyers as divorce booms
  8. ^ Sacred Heart University Names College of Business for Legendary GE Chairman Jack Welch

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