John Francis Welch, Jr. , also known as “Jack”, became the CEO of General Electric in 1981 and maintained this title for the next 20 years until his retirement in 2001. He was widely known as a “national business hero” because he had a different approach on management that provided increasing results. For this very reason, many also despised his tactics. He was very aggressive in cutting out the weak, because he believed that it was holding back the company. One of the main principles that General Electric emphasized was loyalty. After Welch took over, loyalty meant next to nothing.
He led General Electric to become a highly profitable and successful firm, but a major question is how successful he was as a manager. Another concern would be about the way he treated his workers. Chapter 5 of the textbook states that corporate social responsibility is “the corporate duty to create wealth by using means that avoid harm to, protect, or enhance societal assets. ” According to this definition, General Electric may not have fulfilled this duty. Considering how large the organization is, employees of General Electric make up a large part of society.
Welch’s plan of “closing 73 plants, selling 232 businesses, and eliminating 132,000 workers from GE payrolls” made a huge impact on these employees that lost their jobs. Welch did not consider the consequences of his actions, and how they affected the lives of those who dedicated many years of loyalty to General Electric. He made it mandatory to list the lowest performing 10% of each General Electric business, regardless of how successful their business was. This was a horrible way to evaluate the productiveness of each business.
Time after time, the lowest 10% of managers were rid of. Instead of using this “differentiation” technique, which discouraged workers and made the work environment extremely competitive, Welch should have approached this situation differently. There are many ways that a manager can motivate their employees to work harder and more productively. One way is by using positive reinforcements and incentives. Using Welch’s plan would be miserable and every employee would fear losing their job. No one wants to go into work every day, having to question the safety of their position.
Using positive incentives, which are not materialistic, will allow employees to be more excited to go to work. They would want to work harder, not to receive a raise, but because they feel fulfilled and accomplished for doing well. Friedman’s view of corporate social responsibility is that “the only social responsibility is to increase profits obeying the law. ” I do not agree with this statement because it is much more than increasing profits while following laws. His ideas are similar to Welch’s actions, in that profits are what matters most.
During Welch’s era, he increased General Electric’s profits significantly, but also gained countless amounts of hatred. Both Friedman and Welch have a narrow view of what corporate social responsibility really is. Many demands that Welch carried out as CEO has caused harm to many of his own employees. For example, if one worker has been living paycheck to paycheck, and was suddenly let go because he or she happened to be in the lower 10% in the General Electric business, the worker will not have enough money to pay for rent, food, or even take care of a child.
Because of these harsh and sudden decisions made by Welch, many people began to suffer. Not only were jobs being outsourced, but General Electric was also causing harm to the environment. This constitutes to the unsafely measures of General Electric during the Welch era. During Welch’s time, he decided to rank shareholders over employees and other stakeholders. At one point in the text, he compares his employees to plants. Welch stated that “if they grow, you have a beautiful garden. If they don’t you cut them out. ” Many found this method cruel.
As Welch ruled General Electric, the profits were continually raking in. For those who shared stock in the company, they especially became wealthy. But this happened at the cost of their employees. In the text, Helen Quirini, a retiree who worked for General Electric for 39 years, is discussed regarding pension. She has only been receiving $737 a month, or $8,844 a year compared to Welch, who was receiving $357,128 a month and had more privileges such as an apartment with a chef, housekeeper and wait staff, as well as use of General Electric jets.
While many of the company’s directors and managers flourished, employees took a huge hit when Welch was in charge. He saw them as a cost of production, and treated them as such. Though reports show that he was making profits, it requires more than money to be a successful leader, and Welch did not exemplify this. General Electric should have had their priorities checked at this time. The company was said to be built on loyalty, but there was none. Welch should have given more thought to his employees and may have even been more successful with his profits. .