Viewpoint -- GE's Welch Leaves Legacy Of Aggressive Innovation

At a board of directors meeting on Friday, Sept. 7, Chairman and CEO John F. (Jack) Welch Jr. retired from General Electric Co. Business school professors and their students will debate for many more years the reasons why Welch was unable to cap his 20 years as GE's CEO with the strategically bold acquisition of Honeywell International Inc. And in the process, they -- and manufacturing company CEOs and COOs around the world -- will learn some lessons about strategy, tactics, and arrogance. In the meantime, Welch has left a legacy of aggressive innovation. For example, early in his tenure Welch declared that GE businesses were to be No. 1 or No. 2 in their global markets or fixed, sold, or closed. That dictum in part earned him a nickname, "Neutron Jack," that he hated. In the process of restructuring GE, it implied, Welch was making people disappear while buildings continued to stand. In fact, both people and buildings disappeared. Early on, Welch's tough discipline also led to grumblings among some veteran managers that GE wasn't a fun place to work anymore. GE's pridefully independent lighting division, for example, was reined in and told to improve its performance. Indeed, under Welch, GE's financial performance was extraordinary. GE remains one of the few conglomerate companies that actually works. Welch married manufacturing, services, and technology into a confederation of businesses that grew from $28 billion in revenue in 1981 to $130 billion in the year 2000, a 364% increase. A couple of years ago Welch described GE as a company "that is overwhelmingly a source of customer-focused, high-value, information-technology-based productivity solutions -- as well as a provider of high quality products." But growth didn't just happen. Credit Welch with making the principle of boundaryless behavior an operating practice. He encouraged, cajoled, and sometimes commanded employees to break down functional barriers that cramped people, inhibited creativity, wasted time, and slowed things down. Credit Welch with a problem-solving initiative called Work-Out that focused on finding and sharing new and better ways of running a plant, providing a service, or developing technology. Credit Welch with the notion of stretch goals, of a business venturing far beyond its immediate reach and being every bit as good as imagination said it could be. Credit Welch with recognizing the value of Six Sigma quality methodology and giving it momentum within GE, in part by tying every manager's bonus to quality results. Credit Welch with reserving to himself the role of CMDO -- Chief Management Development Officer -- and giving Jeffrey R. Immelt, his successor as chairman and CEO, and other GE business presidents and CEOs more management room to run their operations. GE continues to have the greatest management depth of any U.S.-based company, with more than a dozen senior executives able to be CEOs of major firms anywhere in the world. Credit Welch with passion. His intensity could be intimidating, even to the point of rudeness. But no one ever doubted where Welch stood on an issue that he cared about. Credit Welch with regularly venturing to GE's executive training center in Crotonville, N.Y., where he taught, challenged, and bantered with passion. Credit Welch with writing an informative and challenging letter to -- as he addressed it -- share owners, employees, and customers as part of GE's annual report to shareholders. These letters remain a valuable source of executive actions and operating philosophies, suitable for adoption, adaptation, and inspiration. To be sure, Welch had some strategic stumbles along the way. For example, despite great expectations, Kidder Peabody, the investment firm, proved not to be a good fit for GE. And one wonders if all of Welch's emphasis on having business-focused "A" players as its leaders cost GE a necessary measure of humanness. Nevertheless, Jack Welch will continue to influence managers and executives -- and not only in the U.S. For example, an eagerly awaited Welch management book debuted the week of Sept. 10. And there's the promise of Welch the consultant, with still-on-the-job CEOs calling him and asking for advice. But would Welch ever be content to be only a coach of CEOs? It's difficult to imagine Jack Welch being anything less than an intense, passionate player-coach. John S. McClenahen is an IW senior editor. He is based in Washington.