Jack Welch

• Born: November 19, 1935
• Birthplace: Peabody, Massachusetts
• Died: March 1, 2020
• Deathplace: Manhattan, New York, NY

Early Life

Throughout the 1980s and 1990s, Jack Welch served as chief executive officer (CEO) of General Electric (GE), transforming the company from a largely national $14 billion business into an international $490 billion corporation. Blunt, ruthless, charismatic, and innovative, Welch earned the reputation as the most successful CEO of his generation and became an international celebrity in the process.

The man that would be described by Fortune magazine as the “most admired, studied, and imitated CEO of his time” was born into humble beginnings in Peabody, Massachusetts, on November 19, 1935. John Frances Welch Jr. was the only child of Irish-Catholic, working-class parents. His father worked as a conductor for the Boston and Maine Rail Road, and his mother was a homemaker.

Welch credits his mother with his competitive spirit and high self-esteem. She insisted that he strive for success in both the classroom and on the playing field. Although Welch stuttered as a child, his mother helped him to view his challenge in a positive light, focusing on what she regarded to be his superior intellect.

Although Welch was smaller in stature than most of the other boys his age, his mother encouraged him to compete in sports. As a child growing up in the Salem public schools, he was recognized as a highly intelligent student and talented athlete.

After graduating from Salem High School, Welch went on to the University of Massachusetts, where he graduated in 1957 with a degree in chemical engineering. He entered a graduate program at the University of Illinois. In 1960 Welch earned his PhD in chemical engineering and took a job as a junior engineer at General Electric’s Pittsfield, Massachusetts, plant. He would remain at GE throughout his professional career.

General Electric traces its roots to Thomas Edison, who founded the Edison General Electric Company in 1890. The company is best known in the United States for producing light bulbs and household appliances. When Welch arrived, GE was deeply rooted in traditional, top-down business methodologies. It was also a cumbersome organization, heavy with middle management and bureaucratic policies.

Welch wanted to secure a larger salary and distinguish himself from GE’s bureaucratic management pool. In 1971, the head of GE’s human resources division recommended Welch for promotion to vice president. Five years later he was promoted to senior vice president. In April 1981 Welch was tapped to replace CEO Reginald Jones. At the age of forty-five, he became the youngest CEO in GE’s history.

"Neutron Jack"

When Jack Welch took the helm at GE the company was valued at $14 billion. But it also lacked a global perspective and lagged behind other corporations in the use of new technologies. Welch was determined to transform the company’s corporate culture and distinguish GE internationally. Welch examined the many divisions held by GE and recognized that some were operating at a loss. His philosophy was simple: "If you don’t have the competitive edge, don’t compete." Each division had to be either number one or number two in its sector or it had to close.

GE’s 4,000 managers were instructed to review their staff each year. The top 20 percent would be nurtured for leadership roles. The next 70 percent were regarded as strong workers, “the heart and soul” of the company, according to Welch. However, the bottom 10 percent had to be improved or removed. With divisions closing and the bar for performance rising, many employees were let go each year. During Welch’s first five years as CEO, one of every four GE employees, some 118,000 people, lost their jobs. It wasn’t long before Welch was dubbed “Neutron Jack” after the nuclear bomb that vaporizes people but leaves buildings standing.

At the same time, Welch was transforming GE into an open, more relaxed company that did away with traditional boundaries in support of innovation and excellence. He built a fitness center, guesthouse, and conference center and significantly upgraded Crotonville, GE’s management development center. Each year GE managers at all levels spent four weeks at the center participating in seminars and training programs to further develop their leadership skills. Welch attended as well, to demonstrate the importance of the programs.

In 1982, 60 Minutes accused Welch of “putting profits ahead of people.” In 1984 Fortune magazine put him at the top of the list of "The Ten Toughest Bosses in America." Welch recognized early on that the nature of employment was undergoing a major transformation by the 1980s.

With the internet in its infancy, a more global and open marketplace was evolving. Welch understood that businesses would need to become flexible and lean to remain competitive. Welch did not guarantee his employees a job for life; rather, he promised they would develop skills at GE that would make them employable for life. Although Welch was downsizing GE in some areas, he was also acquiring promising companies.

Most notably, in 1985 Welch acquired Radio Corporation of America (RCA), which owned the National Broadcasting Corporation (NBC). Not all acquisitions were successful, however. In fact, Welch’s self-described biggest failure came after his acquisition of Kidder Peabody in 1986. One of Wall Street’s oldest investment firms, Kidder Peabody appeared to be a good investment. But within months of closing the deal, one of the firm’s star investment brokers admitted to insider trading, and the company's value plummeted.

During the 1990s, Welch focused on the global market. In particular, he closed the first big business deal in Hungary, part of the new Eastern Europe after the fall of the Berlin Wall. Welch also embraced new internet technologies, albeit a little later than some of his competitors. As it did for other companies, the internet allowed GE to expand its markets, find new customers, and make its supplier base more global. GE’s revenues soared and the world looked to Jack Welch as a model CEO for a new era.

The Cult of Personality

Throughout the 1990s the stock market soared upward, “dot.com” businesses seemed to appear overnight, and a new kind of CEO emerged—the superstar personality. Bill Gates (Microsoft), Lee Iacocca (Chrysler), and Steve Jobs (Apple) were all part of this new trend. For many, Jack Welch was the leader of this pack. He had an outgoing, straightforward style, which captured the public’s attention. His management style and success at GE caught the attention of the business community, which flocked to Welch, treating him like a Fortune 500 prophet.

The press that had previously criticized Welch for ruthlessly cutting jobs began celebrating his success. Welch seemed to bask in his celebrity, actively promoting his image as a bigger-than-life executive. In addition to the media attention ,Welch and other superstar CEOs were handsomely compensated with unprecedented salaries and perks.

During the final year of his tenure at GE, Welch earned $16.7 million in salary and bonuses. More importantly, over the course of his tenure, Welch received more than 20 million shares of GE stock. Since GE’s financial success was linked almost exclusively to Welch’s leadership, GE’s board of directors was willing to compensate him in a manner never witnessed before in corporate America.

After Welch’s retirement in April 2001, his critics questioned how much of GE’s success was due to Welch alone. The downturn of the economy and subsequent scandals exposing corporate mismanagement and greed, forced a reexamination of the corporate strategies and accounting practices of the 1990s. Welch’s critics also pointed to the timing of his career—Welch took the reins at GE just as a major recession was winding down and retired at the end of an era marked by tremendous economic growth and expansion. While his critics sought to diminish his impact at GE, no one disputed that Welch was a solid, if not great, CEO.

Following his retirement, Warner Books paid an unprecedented $7.1 million for Welch's autobiography, Straight from the Gut. The book became an instant bestseller. However, shortly after the book's publication, Welch received press attention not for his professional accomplishments, but for his personal relationships.

Welch and his first wife, whom he had four children with, divorced at the height of his career at GE. In 1989, Welch married Jane Beasley, an attorney seventeen years his junior. Shortly after his 2001 retirement, Suzy Wetlaufer, editor of the prestigious Harvard Business Review, requested an interview with Welch. The two became friendly and their relationship personal. Wetlaufer’s story on Welch was withdrawn since her objectivity was called into question, and she resigned shortly thereafter. Welch’s wife filed for divorce, and Welch’s extravagant lifestyle became the subject of public scrutiny. Consistent with his confident style, Welch took it in stride.

Welch and Wetlaufer married in 2004. They cowrote two books about business, Winning (2005) and The Real-Life MBA (2015). Welch died of renal failure at his home in Manhattan on March 1, 2020. He was eighty-four years old.

Bibliography

Fernández-Aráoz, Claudio. "Jack Welch's Approach to Leadership." Harvard Business Review, 3 Mar. 2020. hbr.org/2020/03/jack-welchs-approach-to-leadership. Accessed 2 Nov. 2020.

Kudlow, Larry. "An Interview with Jack Welch." National Review, 17 Mar. 2009. www.nationalreview.com/kudlows-money-politics/interview-jack-welch-larry-kudlow/. Accessed 2 Nov. 2020.

Lohr, Steve. "Jack Welch, G.E. Chief Who Became a Business Superstar, Dies at 84." The New York Times, 2 Mar. 2020, www.nytimes.com/2020/03/02/business/jack-welch-died.html. Accessed 2 Nov. 2020.