Jack Welch: Management genius or business destroyer?

 

People may have different opinions about Jack Welch, CEO of General Electric, as his name provokes mixed reactions. For some, he is the genius who revolutionized the world of management through innovative technologies, while others see him as a symbol of the destruction of the American business sector thanks to his policies that have made employees' lives hell. There are those who believe that he was running a "sect" so dipped in capitalist fever that even Iran would have been embarrassed. When Welch retired, he received a $417 million retirement package, the largest at the time, surprising even his most ardent believers.

Jack Welch always saw himself as a warrior for the "little man," advocating for efficient infrastructure for small businesses rather than the slow bureaucracy of large corporations. But he did not hesitate to defend the huge bonuses of CEOs, even as he fired dozens of working-class workers. This contradiction stems from from

His experience as a chemical engineer, where he understood how to synthesize opposing elements, create catalysts, and measure explosive outcomes. These understandings explain how divided people are about his methods of success. Arguably, his approach to business was like free radicalism in capitalism: interactive, active, but short-lived. Or am I playing the defender of Satan? Were his techniques always doomed to failure? Or have other companies improved its format? Did GE collapse because of him or against his will?

Elements of successElementsof success

When Jack Welch was born in 1935, GE was already a household household name thanks to radios, irons and more. What was started in 1892 by founders Thomas Edison and JPMorgan turned into a sophisticated company. But when Welch died at age 84 in 2020, he left behind a company that could not be recognized by its founders. A few years after his departure, GE ceased trading on the stock exchange.

Born in Peabody, Massachusetts, Welch was the only child of Grace and John, who had Catholic parents from Ireland. His father's salary as a railway worker provided them with a modest life, especially as GE's inventions raised the standard of living across the country, from refrigerators and televisions to medical equipment such as CT scanners.

 Compared to the Great Depression of his immigrant family, Jack Welch had good luck. Perhaps it was this relative well-being that drove Welch's direct and explicit adaptation to difficulties. Stuttering in his childhood was the first thing he overcame, and he thanked his mother for helping him, convincing him that his tongue could not keep up with his clever thoughts. During his junior and high school years, Welch spent his summers carrying golf clubs, distributing newspapers and selling shoes. These small jobs brought him closer to the types of people and worlds he would deal with later. But it is his academic side that has become the catalyst for change.

Welch studied chemical engineering at the University of

Massachusetts Amherst, and over the summer he interned at companies such as Sonoco and PPG Industries. The fact that he was getting training at some of the biggest chemical industry companies before receiving his degree shows that he was special. He made such a strong impression that job offers from major companies were coming to him immediately after graduating in 1957. While others accepted the first sign of sedentary work, this young chemical engineer appreciated the potential of strategic risk, so he invested in his talent by enrolling as a graduate student at the University of Illinois. When he left in 1960, the 25-year-old Welch had a master's degree, doctorate and wife. Children grew up faster at that time.

He entered the job market more and better than ever, and soon landed a job as a junior engineer at GE. But no one knew that signing his first real job contract would become a pivotal moment in American business history, for better or worse.

Momentum

Over the next twenty years, Welch quickly jumped the company ladder. His rise to the top was particularly impressive, especially as he was almost expelled when...

 Jack Welch's journey to the top was not without obstacles. He was nearly fired when a factory he ran exploded, sending its roof blown away. Such a laboratory incident would have been proud of Thomas Edison, however, none of this would have happened if Welch had resigned as early as he had planned.

Welch was dissatisfied with the corporate culture; he couldn't tolerate red tape that he saw as hindering productivity and increasing waste. So he threatened to resign, which was a bold move. This challenge was the first time his radical outlook clashed with the norms of corporate culture. In the sixties, an ideal and open office was still a distant dream. However, his protest was spectacularly successful; an executive promised him a small company atmosphere if he stayed, as well as a raise in his salary. His starting salary of $10,500 seems to have been insufficient, even though this is six figures at 2024 rates.

Jack Welch's business philosophy was a combination of small business and large salaries, and this philosophy became a hallmark of him and other companies over the next five decades. In his rise to the top, Welch took over as vice president in 1968 and managed the plastics division, which then generated $26 million in revenue for GE in one of its most competitive markets. He oversaw the production and marketing of popular products such as Lexan and Nurel, which were used to make Apple 2 computer containers.

In 1971, he became Vice President of Chemistry and Metallurgy at the company, then in 1973 joined the Group of Executives and took over the management of medical systems and electronic components divisions. In 1977, he became Senior Vice President, and by 1979, he was promoted to Executive Vice President. Finally, in 1981, Jack Welch was crowned the youngest chairman and CEO in GE's history.

For the next two decades, Welch was free to run the company as he saw fit. The first thing he did when he got the keys to the kingdom was to dismantle the old methods.

Balancing books and equations

By the end of his presidency, Welch had made radical changes to GE, making huge profits, but also controversial because of its effects on workers and corporate culture. These decisions and achievements have been the focus of study and analysis to understand their impact on the future of business and the American economy.

 In 1982, Jack Welch had succeeded in removing all traces of the former administrative infrastructure. As an electronics engineer, he believed that part of the engineering process involved disassembling things to reassemble them more efficiently. However, some critics considered his strategies to have been aggressive simplification and harsh integration. Simply put, Welch discovered that the fastest way to save money and increase profits is to lay off employees. That may not seem like a great idea at present, but that's just because the

Welch became the norm thanks to his "vitality curve".

Welch called his version of the Bartow distribution the "Vitality Curve," also known as the 20/80 split, where 80% of the results come from 20% of the effort. But he went a step further with the concept of 20/70/10. Welch explained the details in his book "Jack: Straight Out of the Intestines." The 20% refers to the best employees, category A, whose business improves the company significantly. These receive bonuses such as stock options and salary increases.

The 70% is for employees who perform acceptable work, category B, who are competent and reliable. They may in the future be promoted to category "A" but will remain in place as long as they are not lowered to category "C". Category C is the most productive employees who drain the energy around them like an office "grunch" that absorbs the motivation from hardworking workers. Regardless of your position or length of service in the company, being in the bottom 10% was a highway to separation.

Jack earned the nickname "Jack neutron" for the neutron bomb, for his ability to wipe people out while leaving buildings standing. He enjoyed surprise visits to factories and headquarters to make sure employees were doing their best to stay within the "vitality curve." Welch was not alone in using the system; he ordered all its directors and executives to evaluate their departments and employees according to a set of criteria. These evaluations were made through a series of questions and values, such as the first paid arithmetic system for the operation, but there was no solid empirical data, and Welch was the first to admit that judgments would not be perfect.

Despite the rigor of this method, it helped the company get through difficult times. During his first year as CEO, the company recorded revenues estimated at $26.8 billion. At the height of Welch's tenure, GE was generating $460 billion in revenue. Despite controversy over its management style, Welch's approach was so popular that it still exists today, even if companies apply it secretly under different names. It is estimated that between 12% and 30% of Fortune 500 companies still use his evaluation and layoff system.

In turn, this artificially raised the value of shares; the fewer shares, the higher their value and the greater the earnings per share, even if other CEOs weren't registering at Welch's summer camps, the fact that they copied every step of his evidence proves that he was more than a role model; he was an example. His reputation was immune to criticism; it didn't matter whether he denied climate change or wrestled with New York state over dumping chemicals into the Hudson River. Even when GE was accused of defrauding the Defense Department with millions of dollars during some aircraft engine contracts, Jack Welch remained CEO for an additional 10 years.

When Welch began retirement, he successfully negotiated a $10 million cash down payment in exchange for the rights to write his memories, though he said he would donate the profits.

For charity. Unfortunately for Jack, the beginning of the end of his reputation at the company was about to happen.

Breaking links

Jack Welch said the success of his 20-year leadership can be measured by looking at his impact on a cumulative period. But he later considered that these words brought him regret, as after leaving GE, the company went down continuously and suddenly collapsed.

It started with scandals in 2014, with General Capital agreeing to pay the largest credit card discrimination settlement in history. They refused to grant consumer benefits and debt relief to Spanish speakers, and exploited vulnerable groups such as the elderly by not detailing costs and fees consistently.

But an admirer of Welch might argue that this did not happen during his tenure, so Jack cannot be blamed for this deficiency, even if he founded the system and culture.

At first. Even his chosen successor acknowledged that the company's structure was worse than she expected.

So what were Jack's defenses? He said the effects of the disruptions caused by the Sept. 11 attacks affected production and revenues across all industries. But that's like saying if the wheel of your used car breaks off the moment someone else starts driving it, the problem is the potholes in the road and not your poor maintenance.

Even if you consider that I am not fair, you cannot hold Ben Ben responsible for the Great Recession. Suddenly, the stocks and bonds underpinning GE's financing operations were not impressive after that. All category A employees discovered that their rewards were significantly undervalued, and that their classification would not guarantee stability at work, when GE began selling subsidiaries and assets to survive.

In short, Jack Welch's leadership history was mixed with achievements and criticism, as he transformed a general Electric to a global empire The value of the company increased tremendously, but it also left behind a period of decline and collapse. Welch's bold management techniques, such as the classification and disposal system, brought temporary success but ultimately caused negative repercussions for the company. Whether Welch's ideas are spiritual merit appreciation or blameworthiness remains the subject of constant debate, but the bigger lesson is that the details of success and failure in the business world are often more complex than they seem at first.

 

*******

Jack, Welch, General, Electric, Techniques, Management, System, Classification, Disposal, Success, Criticism, Transformation, Industrial, Evolution, Corporate, Major, Management, Strategy, Business, Productivity, Appreciation, and Blame.