GE's Welch an Ambivalent Kingmaker

Dec. 21, 2004
His protgs must leave to reach their full potential.

For nearly 17 years, Chairman and CEO John F. (Jack) Welch Jr. has redefined--arguably revolutionized--the way General Electric Co. does business. He's infused GE--and the modern management lexicon--with such terms as "stretch goals" and "boundaryless behavior." He's insisted that businesses not No. 1 or No. 2 in global markets be fixed, sold, or closed. But equally significant is the fact that six U.S. executives who once worked for Welch are now putting their considerable talents to work at their own multibillion-dollar companies. Norman P. Blake Jr. is CEO of USF&G, a Baltimore-based insurance holding company. Glen H. Hiner is chairman and CEO of Owens Corning in Toledo, Ohio. Michael D. Lockhart is chairman and CEO of General Signal Corp., Stamford, Conn. John Trani is chairman and CEO of The Stanley Works, a New Britain, Conn. tool and hardware company. Harry Stonecipher is president and CEO of McDonnell Douglas Corp., St. Louis. And Lawrence A. Bossidy is chairman and CEO of AlliedSignal Corp., Morristown, N.J. Call them Jack's men; but don't call them that to their faces. As much as they admire, respect, and even have affection for their former boss, they do not belong to him. They are their own people. Blake confesses: "I wanted to know, for myself, how good I was. And I felt, in a way, I would never fully answer that question when I was a part of GE." Hiner, about the same age as Welch, also knew that to be a CEO he would have to go outside GE. No other major U.S. company can claim GE's level of chief-executive development; indeed probably no other major company anywhere in the world can. Credit Welch--for aggressively identifying and developing leaders. And credit GE for fostering a culture of management excellence that predates Welch. But ask yourself if GE is less dynamic today because such powerful, determined, decisive executives as Blake, Hiner, Lockhart, Trani, Stonecipher, and Bossidy aren't there. Look at your own company. Ask yourself whether the truly talented (and ambitious) leaders are in effect forced to go elsewhere to realize their full potential (and ambitions). Is this a cost your company--or any company that's really good at what it does--must be prepared to pay? Is this, indeed, a cost that every company must pay? It may not be. In such impressive European companies as Swiss-based Nestl SA and ABB Asea Brown Boveri Ltd. many talented senior executives stay, notes Peter Lorange, president of the International Institute for Management Development, Lausanne, Switzerland. And the reason is there's room for the talented and the ambitious on strong, multi-person management boards. These executives are not bumping their heads on a professional ceiling. Lorange acknowledges that management boards--like almost any committee--can breed bureaucracy. And it's difficult to imagine that prospect appealing to Welch, the person who delayered GE with a vengeance and has put a premium on speed and simplicity--faster decision-making, more effective communication, and designs that get to market sooner. But must boards be bureaucratic--particularly if they were composed of people like Blake, Hiner, Lockhart, Trani, Stonecipher, and Bossidy? Lorange just may be right when he asserts that executive-management committees not only provide their companies with a deep pool of talent but also a lot of energy. And by creating multi-person offices of the chief executive and senior management councils, such companies as GE and AlliedSignal seem to be tapping talent and generating energy. But in these firms--and others--there's still a chief executive officer, a person to whom some set of powers is uniquely reserved. And it seems unlikely--at least in the U.S.--that people of determination and possessed with decidedly healthy egos will be content to be one among a powerful few when there's an opportunity to be a CEO who's more "equal" than the company's other senior executives.

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