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EXTRACT FROM JACK WELCH'S AUTOBIOGRAPHY

 

Jack Welch
 When Jack Welch, the son of a
 train conductor, became CEO of
 General Electric (GE), Thomas
 Edison's old light bulb company
 was a sleeping giant. Today, 20
 years later, GE is a dominant
 player.
On April 1, 1981, I was like the dog who caught the bus. I finally had the job. Despite all the experiences that had gotten me this far, I wasn't nearly as sure of myself as I pretended to be. Outwardly, I had a pretty good dose of self-confidence, and those who knew me would have described me as self-assured, cocky, decisive, quick, and tough. Inwardly, I still had plenty of insecurities. Whenever I had to get up in front of people, I struggled with my speech impediment. I fussed with a comb-over to disguise my receding hairline. And when someone asked me how tall I was, I had myself believing I was at least an inch and a half taller than the five feet eight I really was.

I came to the job without many of the external CEO skills. I had rarely dealt with anyone in Washington, even though the Government was more into business than ever. I had little experience dealing with the media. Our 500,000-plus shareholders had no idea who Jack Welch was and whether he would be able to fill the shoes of (Reg Jones) the most admired businessman in America.

But I did know what I wanted the company to "feel" like. I wasn't calling it "culture" in those days, but that's what it was. I knew it had to change.

The company had many strengths. It was a $25 billion corporation, earning $1.5 billion a year, with 404,000 employees. It had a triple-A balance sheet, and its products and services permeated almost every part of the GNP, from toasters to power plants.

Some employees described the company as a "supertanker" – strong and steady in the water. I respected that but wanted the company to be more like a speedboat, fast and agile, able to turn on a dime.

I wanted GE to run more like the informal plastics business I came from – a company filled with self-confident entrepreneurs who would face reality every day. I knew the benefits of staying small even as GE was getting bigger. The good businesses had to be sorted out from the bad ones. I wanted GE to stay only in businesses that were number one or two in their markets. We had to act faster and get the bureaucracy out of the way.

The reality was that at the end of 1980, GE was, like much of American industry, a formal and massive bureaucracy, with too many layers of management. It was ruled by more than 25,000 managers who each averaged seven direct reports in a hierarchy with as many as a dozen levels between the factory floor and my office. More than 130 executives held the rank of vice-president or above, with all kinds of titles and support staffs behind each one.

GE's culture had been built for a different time, when a command-and-control structure made sense. Having been in the field, I had a strong prejudice against most of the headquarters staff. I felt they practised what could be called "superficial congeniality" – pleasant on the surface, with distrust and savagery roiling beneath it. The phrase seems to sum up how bureaucrats typically behave, smiling in front of you but always looking for a "gotcha" behind your back.

In the early 1980s, you didn't have to be in a GE business that was up for sale to wonder if Jack Welch knew what he was doing. The turmoil, angst, and confusion were everywhere. The causes were the goal to be number one or two, the three circles, the outright sale of businesses, and the cutbacks occurring in many parts of GE.

Within five years, one of every four people would leave the GE payroll, 118,000 people in all, including 37,000 employees in businesses that were sold. Throughout the company, people were struggling to come to grips with the uncertainty. I was adding fuel to the fire by investing millions of dollars in what some might call "non-productive" things. I was building a fitness centre, guesthouse, and conference centre at headquarters and laying plans for a major upgrade of Crotonville, our management development centre.

My take on this was that all these investments, at a cost of nearly $75 million, were consistent with the "soft" values of excellence. But people weren't buying it. For them, it was a total disconnect. It didn't matter that the money I was investing in treadmills, conference halls, and bedrooms was pocket change to a company that was spending $12 billion over the same period on new plants and equipment. The symbolism of the $75 million was too much for people to handle. I could understand why it was difficult for many GE employees to get it. But I was sure in my gut that it was the right thing to do.

I knew I had to try to win people over, one by one. I'd argue that the spending and the cutting were consistent with where we needed to go. I wanted to change the rules of engagement, asking for more – from fewer. I was insisting that we had to have only the best people.

I'd argue that our best couldn't be asked to spend four weeks away for training in cinder-block cells at a worn-out development centre. Guests shouldn't have to come to headquarters and stay at a third-class motel. If you wanted excellence, at a minimum, the ambience had to reflect excellence. I'd explain the fitness centre was as much about getting people together as it was about health. I thought a gym would provide an informal place to bring together all shapes, sizes, layers, and functions. If you will, it could be that back room of a store where people took their breaks. If investing a little over $1 million could make that happen, it was worth it. Despite my good intentions with the fitness centre, people had trouble seeing the benefits in the face of layoffs.

Some of the same logic went into the decision to put up a $25 million guesthouse and conference centre at headquarters, which was an island unto itself. It was in the country, some 60 miles north of New York City. There was no natural place to congregate after work. Fairfield and the surrounding area lacked a decent hotel to put up employees and guests who came from all over the world. I wanted to create a first-class place where people could stay, work, and interact. The facility featured fireplaces in the lounges and a stand-up bar in the pub where everyone could mingle.

The traditionalists were shocked. I persevered because I wanted to create a first-rate informal family atmosphere and needed this ambience to get it. Everywhere I went, I was preaching the need for excellence in everything we did. My actions had to demonstrate it.

The internal upheaval was so great, it began spilling outside the company. By mid-1982, Newsweek magazine was the first publication to pick up the moniker "Neutron Jack", the guy who removed the people but left the buildings standing. I hated it, and it hurt. But I hated bureaucracy and waste even more.

Soon, Neutron began cropping up almost everywhere in the media. It was as if reporters couldn't write a GE story without using the tag. It was a painful new image twist for me. For years, people thought I was too wild, that I was too growth-focused, hired too many people, and built too many facilities – in plastics, medical, and GE Credit. Now I was Neutron. I guess that was a paradox, too. I didn't like it, but I came to understand it.

(Earlier in my career), my son John was sitting on the school bus when it stopped to make its next pick-up. A classmate climbed aboard and went straight at John, taking an unexpected swing at him. The fight broke up quickly, but poor John, then not much more than eight or nine years old, had no idea why it happened. It wasn't until he told the story at the dinner table that night that I explained that I had asked the boy's dad to leave GE. We all felt awful for John – especially me, who still remembers that story as if it occurred yesterday.

I had been in the CEO job less than a year when, in late February 1982, 60 Minutes accused us of "putting profits ahead of people". Some critics used us as a counterpoint to such companies as IBM, which at that time still promoted the concept of lifetime employment. In fact, IBM itself launched an advertising campaign touting its non-layoff policies in 1985. IBM's tagline: "Jobs may come and go. But people shouldn't."

At a time when I was being routinely assaulted with the Neutron tag, those ads really pissed me off. Sadly for the IBM people, their day would come as the company lost competitiveness. Any organisation that thinks it can guarantee job security is going down a dead end.

Only satisfied customers can give people job security. Not companies. That reality put an end to the implicit contracts that corporations once had with their employees. Those "contracts" were based on perceived lifetime employment and produced a paternal, feudal, fuzzy kind of loyalty. If you put in your time and worked hard, the perception was that the company took care of you for life.

As the game changed, people had to be focused on the competitive world, where no business was a safe haven for employment unless it was winning in the marketplace. The psychological contract had to change. I wanted to create a new contract, making GE jobs the best in the world for people willing to compete. If they signed up, we'd give them the best training and development and an environment that provided plenty of opportunities for personal and professional growth. We'd do everything to give them the skills to have "lifetime employability", even if we couldn't guarantee them "lifetime employment". The speech I had to give 1,000 times was, "We didn't fire the people. We fired the positions, and the people had to go."

Unfortunately, in the 1980s most of GE's employment levels were headed downward. We went from 411,000 employees at the end of 1980 to 299,000 by the end of 1985. Of the 112,000 people who left the GE payroll, about 81,000 people lost their jobs for productivity reasons.

From the numbers, you could make the case that there was either a Neutron Jack or a company with too many positions. I naturally took comfort in the latter, but the Neutron tag still got me down.

I took another solid hit in early August of 1984 when Fortune magazine put me at the top of its list of "The Ten Toughest Bosses in America". This was a case where being number one or two wasn't something you were looking for. Fortunately, the article had some good things to say as well. One former employee told the magazine that he had never met someone "with so many creative business ideas. I've never felt that anybody was tapping my brain so well". Another actually credited me "with bringing to GE the passion and dedication that characterise the best Silicon Valley start-ups".

I liked all that, but the positive reactions were overshadowed by comments from "anonymous" former employees who said I was very abrasive and didn't tolerate "I think" answers. "Working for him is like a war," claimed another unidentified person. "A lot of people get shot up; the survivors go on to the next battle." The article claimed that I attacked people almost physically with questions, in the words of the writer, "criticising, demeaning, ridiculing, humiliating". In truth, the meetings were different from what people were used to. They were candid, challenging, and demanding. If former managers wanted a reason why they didn't cut it, there were plenty of ways to spin the story. The net effect of all this publicity was that the Neutron Jack and Toughest Boss in America labels would stick for some time. The ironic thing was that I didn't go far enough or move fast enough.

The facts were that I was just too hesitant to break the glass. I waited too long to close uncompetitive facilities. I took too long to take apart the corporate staff, keeping on economists, marketing consultants, strategic planners, and outright bureaucrats much longer than I needed to. I didn't blow up our sector structure until 1986. It was just another insulating layer of management and should have been cut the moment the succession race was decided.

I shouldn't have agonised as long as I did on so many people who weren't going to cut it. The consistent lesson I've learnt over the years is that I have been in many cases too cautious. I should have torn down the structures sooner, sold off weak businesses faster than I did. This so-called Toughest Boss in America wasn't tough-minded enough.

 

Jack Welch Jack, Straight From The Gut by Jack Welch is published on September 11, 2001 in hardback at $20 by Headline. Copies can be ordered from The Times Books Direct at $17.99 plus 99p postage and packing, to order, telephone 0870-160 8080; or online seller Amazon at $19.77 hardcover, $11.30 paperback http://www.amazon.com


 

 


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