Jack Welch

   

John Francis "Jack" Welch Jr. (born November 19, 1935 in Salem, Massachusetts) was CEO of General Electric between 1981 and 2001.

Early Life and Career

Welch was born 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, graduating in 1957 with a Bachelor of Science degree in chemical engineering. He went on to receive his M.S. and [Doctor of Philosophy|[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 $1000 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 one level higher than Welch, decided that the man was too valuable a resource for the company to lose. He took Welch and Welch's former wife Carolyn out to dinner at the Yellow Aster in Pittfield, 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. [1] (http://www.businessweek.com/1998/23/b3581001.htm)

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.

Tenure as CEO of GE

Through the 1980s, Welch worked to streamline GE and make it a more competitive company. He shut down factories, reduced payrolls, cut lackluster old-line units. 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. 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 brining a sense of informality to the company.

In 1986, GE acquired NBC. During the 90s, Welch helped to modernize GE by emphasizing a shift from manufacturing to services. He also made hundreds of acquisitions and made a push to dominate markets abroad. Welch adopted the Six Sigma quality program in late 1995.

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 lead 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 and the No.1 position in prime time ratings. Also, Welch did not rescue GE from great losses; indeed, 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 the humiliating Kidder, Peabody & Co. bond-trading scheme of the early 1990s that generated bogus profits." [2] (http://www.businessweek.com/1998/23/b3581001.htm)

Nevertheless, Welch has lead 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.

He was once dubbed "Neutron Jack" (in reference to the Neutron bomb) for wiping out the employees while leaving the buildings intact, but was named "Manager of the Century" by Fortune. Also notable is his record salary of $94 million a year, followed by his record retirement-plan of $8 million a year.

There was a lengthy and well-publicized succession planning saga prior to his retirement.

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. They divorced in 2003. The second marrage is widely known as Jane cleverly included provision to netralize a marrage agreement that protected Welch's wealth in case of a divorce. [3] (http://news.bbc.co.uk/2/hi/business/3992381.stm)

Welch underwent triple bypass surgery in May 1995. He returned to work full time in September of the same year and also adopted a exercise schedule. Jack enjoys playing golf, a sport at which he has become quite good.

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