Jack Welch Leadership Style

John Francis “Jack” Welch, Jr. (born (1935-11-19)November 19, 1935) is an American chemical engineer, business executive, and author. He was Chairman and CEO of General Electric between 1981 and 2001. During his tenure at GE, the company’s value rose 4000%. In 2006 Welch’s net worth was estimated at $720 million. Early life and education Jack Welch was born in Peabody, Massachusetts to John, a Boston & Maine Railroad conductor, and Grace, a homemaker. Welch attended Salem High School and then University of Massachusetts Amherst, graduating in 1957 with a Bachelor of Science degree in chemical engineering.

He is a member of the Phi Sigma Kappa fraternity. He received a M. S. and PhD at the University of Illinois at Urbana-Champaign in 1960. Jack Welch, the man behind American conglomerate General Electric, has been named as the most admired businessman of all time in a Guardian poll of Britain’s leading bosses. Mr Welch, who took over as chairman of GE in 1981, was picked by nearly half of the FTSE 100 chief executives as the man whose achievements they regarded most highly. But Bill Gates, founder and chairman of Microsoft, was nominated as the most influential business person of the century by one in two executives.

Both men were selected from a list of contenders which stretched back to the last century and included giants of the business world whose achievements have transformed modern life such as Henry Ford, Walt Disney, Andrew Carnegie and John D Rockefeller. In 18 years as the head of GE Mr Welch has increased the value of the group from $14bn (? 8. 7bn) to more than $400bn. As its eighth chairman in the company’s 117 years, he has overseen the recent arrival of $100bn worth of annual sales while net profits are heading for the $10bn mark.

Under his tenure, the share price has risen thirtyfold. In his time at the top he has transformed the company from a collection of electrical businesses, ranging from turbines and aero-engines to white goods, and turned it into a vast enterprise, encompassing the NBC television network and a huge lease-finance business, GE Capital, which is now the world’s biggest and most successful non-bank financial operation with credit cards and insurance. The corporation also includes plastics, appliances, industrial systems and diagnostic equipment.

Mr Welch has sold about $10bn of businesses but has bought companies worth $19bn and has never sacrificed GE’s diversity. Welch adopted Motorola’s Six Sigma quality program in late 1995. In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26. 8 billion. In 2000, the year before he left, the revenues increased to nearly $130 billion. The company had gone from a market value of $14 billion to one of more than $410 billion at the end of 2004, making it the most valuable company in the world He is one of the few chief executives whose shareholders would not argue about his $57m a year pay packet.

However, even that pales into insignificance compared to the $100bn fortune amassed by William H Gates, who set up Microsoft 25 years ago General Electric Welch joined General Electric in 1960. He worked as a junior chemical engineer in Pittsfield, Massachusetts, at a salary of $10,500. While at GE, he blew off the roof of the factory, and was almost fired for doing so. In 1961, Welch planned to quit his job as junior engineer because he was dissatisfied with the raise offered to him and was unhappy with the bureaucracy he observed at GE.

Welch was persuaded to remain at GE by Reuben Gutoff, an executive at the company, who promised him that he would help create the small company atmosphere Welch desired. Welch was named a vice president of GE in 1972. He became senior vice president in 1977 and vice chairman in 1979. Welch became GE’s youngest chairman and CEO in 1981, succeeding Reginald H. Jones. By 1982, Welch had dismantled much of the earlier management put together by Jones After GE Following Welch’s retirement from GE, he became an adviser to private equity firm Clayton, Dubilier & Rice and to the chief executive of IAC, Barry Diller.

In addition to his consulting and advisory roles, Welch has been active on the public speaking circuit, and co-wrote a popular column for BusinessWeek with his wife, Suzy, for four years until November 2009. The column was syndicated by The New York Times. In 2005, he published Winning, a book about management co-written with Suzy Welch, which reached #1 on The Wall Street Journal bestseller list, and appeared on New York Times’ Best Seller list. Since January 2012, Welch and Suzy Welch have written a biweekly column for Reuters and Fortune.

[15][16] On January 25, 2006, Welch gave his name to Sacred Heart University’s College of Business, which will be known as the “John F. Welch College of Business”. Since September 2006, Welch has been teaching a class at the MIT Sloan School of Management to a hand-picked group of 30 MBA students with a demonstrated career interest in leadership. In 2009, Welch founded the Jack Welch Management Institute, a program at Chancellor University that offered an online executive MBA degree. The institute was acquired by Strayer University in 2011.

Welch has been actively involved with the curriculum, faculty and students at the online business school since its launch. Jack Welch and His Wife, Jane | Personal life 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 Welch in April 1989, and they divorced in 2003. While Welch had crafted a prenuptial agreement, Beasley insisted on a ten-year time limit to its applicability, and thus she was able to leave the marriage with an amount believed to be around $180 million.

Welch’s third wife, Suzy Wetlaufer, co-authored his 2005 book Winning as Suzy Welch. Wetlaufer served briefly as the editor-in-chief of the Harvard Business Review. Welch’s wife at the time, Jane Beasley, found out about an affair between Wetlaufer and Welch. Beasley informed the review and Wetlaufer was forced to resign in early 2002 after admitting to having been involved in an affair with Welch while preparing an interview with him for the magazine. On March 11, 2010, Welch appeared as himself in the fourteenth episode of the fourth season of the hit NBC sitcom 30 Rock.

In the episode, he governed the sale of NBC Universal to a fictional Philadelphia-based cable company, Kabletown, a parody of the actual acquisition of NBC Universal from General Electric by Comcast in November 2009. SEC inquiry as Jack Welch gives up freebies Source: The Guardian, Tuesday 17 September 2002 02. 40 BST Mr Welch has been forced to give up a retirement package worth up to $2. 5m a year after details were revealed last week in papers filed by his wife in divorce proceedings. The securities and exchange commission (SEC) launched its investigation late last week after details emerged in divorce papers filed by Mr Welch’s wife, aggrieved at his affair with a former Harvard Business Review editor.

Mrs Welch, who claims she gets only $34,000 a month from her husband, said GE paid about $80,000 a month for staff and upkeep, including food and wine, at his New York apartment. He used a Boeing 737 worth almost $300,000 a month while enjoying limou sine services and free seats at the Metropolitan Opera, and New York Yankees and Boston Red Sox baseball games How Welch Manages GE Rank-based employment evaluation Jack Welch’s vitality model has been described as a “20-70-10” system. The “top 20” percent of the workforce is most productive, and 70% (the “vital 70”) work adequately.

The other 10% (“bottom 10”) are nonproducers and should be fired. Rank-and-yank advocates credit Welch’s rank-and-yank system with a 28-fold increase in earnings (and a 5-fold increase in revenue) at GE between 1981 and 2001. DATA: BUSINESS WEEK Straight from the Gut In Straight from the Gut, Welch says that he asked “each of the GE’s businesses to rank all of their top executives”. Specifically (in accordance with the 20-70-10 model) the top executives were divided into “A”, “B”, and “C” players. Welch admitted that the judgments were “not always precise”.

“A” players “A” players, Welch claimed, are * filled with passion * committed to “making things happen” * open to ideas from anywhere * and blessed with lots of “runway” ahead of them, * have charisma, the ability to energize themselves and others, * can make business productive and enjoyable at the same time. * and exhibit the “four E’s” of leadership: * very high Energy levels * can Energize others around common goals * the “Edge” to make difficult decisions, * the ability to consistently Execute, or deliver on their promises “B” players

The vital “B” players may not be visionary or the most driven, but are “vital” because they make up the majority of the group. “C” players “C” players are nonproducers. They are likely to “enervate” rather than “energize”, according to Serge Hovnanian’s model. Procrastination is a common trait of “C” players, as well as failure to deliver on promises. These designations apply not only to workers at the bottom levels, but also managers. Consequences Welch advises firing “C” players, while encouraging “A” players with rewards such as promotions, bonuses, and stock options. Criticisms of rank-and-yank.

The model assumes that the players do not change their rating. In practice even the fear of being selected as a “C” player may result in an employee working harder, reducing the number of “C” players. The style may make it more difficult for employees to cross rate from one division to another. For example, a “C” employee in a company’s Customer Service division would be at a disadvantage applying for a job in Marketing, even though he or she may have talents consistent with an “A” rating in the other division. Rank-and-yank contrasts with the management philosophies of W.

Edwards Deming, whose broad influence in Japan has been credited with Japan’s world leadership in many industries, particularly the automotive industry. “Evaluation by performance, merit rating, or annual review of performance” is listed among Deming’s Seven Deadly Diseases. It may be said that rank-and-yank puts success or failure of the organization on the shoulders of the individual worker. Deming stresses the need to understand organizational performance as fundamentally a function of the corporate systems and processes created by management in which workers find themselves embedded.

He sees so-called merit-based evaluation as misguided and destructive. GE is by far the most famous company to utilize this form of corporate management. However, since Jack Welch’s departure from the company, less emphasis has been placed on eliminating the bottom 10% and more emphasis placed on team-building. Microsoft Starting in 2006 Microsoft has used a Vitality Curve despite intense internal criticism. Mini-Microsoft, an anonymous blogger internal to the company, made “the curve” a frequent topic on his blog.

In a memo to all Microsoft employees dated April 21, 2011, chief executive Steve Ballmer announced the company would make explicit the Vitality Curve model of performance evaluation: “We are making this change so all employees see a clear, simple, and predictable link between their performance, their rating, and their compensation. ” The new model has 5 buckets of pre-defined size (20%, 20%, 40%, 13%, and 7%), and management simply ranks.

All compensation is pre-defined based on the bucket, and employees in the bottom bucket are ineligible to move positions with the understanding they will soon be yanked Like the seasons in the year, there are rhythms and rituals to how Jack Welch manages the colossus that is General Electric.

Besides his monthly teaching sessions at the Croton-on-Hudson training center, his date book is penciled in for: EARLY JANUARY Sets agenda for the year with top 500 executives at a session in Boca Raton, Fla. MARCH Tracks progress and swaps ideas with top 30 executives at quarterly Corporate Executive Council in Croton-on-Hudson. APRIL/MAY Goes into the field to each of GE’s 12 businesses for full-day Session C meetings to personally review the performance and developmental plans for GE’s top 3,000 managers.

Also sends out a survey to thousands of employees to find out what they’re thinking. JUNE Quarterly CEC meeting at Croton-on-Hudson. JUNE/JULY Spends full day with leadership of each of GE’s businesses to review their three-year strategic plans at headquarters in Fairfield. SEPTEMBER Quarterly CEC meeting at Croton-on-Hudson. OCTOBER Convenes top 140 executives in Croton-on-Hudson at corporate officers’ meeting to set the stage for the upcoming Boca meeting. OCTOBER/NOVEMBER Invests full day with leadership of each of GE’s businesses to review budgets and follow up on human-resource reviews earlier in year.

DECEMBER Quarterly CEC meeting at Croton-on-Hudson. Welch’s Note to Bill Woodburn, June, 1996 | NO TURKEYS While analysts on Wall Street or GE’s own investors view Welch’s likely legacy as creating the world’s most valuable company in stock market terms, Welch himself sees things quite differently. The man who spends more than 50% of his time on people issues considers his greatest achievement the care and feeding of talent. ”This place runs by its great people,” says Welch. ”The biggest accomplishment I’ve had is to find great people. An army of them.

They are all better than most CEOs. They are big hitters, and they seem to thrive here. ” The leadership style of Jack Welch Jack Welch’s leadership style is imaged in “FORCE”. F-Flexible: Jack Welch often uses the flexible mode to lead his staff. For example: When the employees create many achievements, he will give them many awards. When they bring few achievements, he will give them a little encouragement or few awards. Or, when they bring many losses, he will give them many serious punishments. When they make few mistakes, he will give them few light punishments.

O-Organizational: Jack Welch usually makes everything became very organizational. For example: He divides the things into important things and unimportant things, and at first, he will deal with the important things, and then to deal with the unimportant things. R-Result-oriented: He thinks the result can show the whole process and care about the result can make the leader’s responsibility became more specific. For example: If the result is showed in the front of him, he will know what the process is and where the problems are and how to solve the problems. C-Communication:

He thinks the communication between the leaders and the staff is very important. Communicating with the staff usually can help the leaders to know their problems and needs. For example: In the process of communicating with the staff, the leaders will know how to motivate them and make many leading ways to lead them. E-Education: He often uses the educational ways to lead his staff. It is important to educate the staff. For example: Education will influence the development of science and innovation inside GE. So, the staff must be giving more specialist education and training.

3. He also put forward three tenets when he was leading GE. First, Improve the IQ of organization. Second, Reduce many repeated labours. Third, Avoid the organization make mistakes. These three tents play an important part to the development of organization. Opinions Jack Welch identifies as a Republican. He is also a global warming skeptic. Yet he has said that every business must embrace green products and green ways of doing business, “whether you believe in global warming or not… because the world wants these products.

” In an interview with the Financial Times on the Global financial crisis of 2008–2009, Welch said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. ”[ In an interview published by International Mentoring Network Organization How do people know if they have what it takes to become a CEO? They won’t. They will have a series of experiences that will build their self-confidence, and as they build their self-confidence their whole presence or persona will either grow or not grow.

For example, you write stories now, when you wrote your first story, it was a lot harder than when you write one now. That’s what happens to a CEO. They go through a series of experiences and they either build enormous self-confidence or not. How can a newly graduated MBA student excel and move up the company? Like anybody without an MBA, they never do what they are asked, they always do more. If somebody asks them a question about this magazine, they give a competitive view on all the magazines. If your boss asks you a question, he or she often knows the answer; they usually just want you to confirm it.

When he or she asks you a question, give them “A” plus everything else. If you receive a PR question, you give a comparison of the size of PR outputs in other firms; some cases they went through; who ran a good one and who didn’t; how long the PR person should be the head of PR, etc. To excel, you have got to give more than just simply saying, “Our PR department has five people with this much overhead, etc…” Blow them away with thorough, actionable information! Every time you make your boss look good, you get chips in the bag.

You need to let your boss know he or she can count on you to be there when needed and you will manage your public life in such a way that you will always be there. On the other hand, he will give you flexibility if you’re always delivering. But no company policy is ever going to give you flextime. The only thing that is going to give you flextime is chips in the bag with management Tearing up the Jack Welch playbook Source: By Betsy Morris, Fortune senior writer July 11 2006 In executive suites across the country, a dramatic rethinking is underway about fundamental assumptions that defined Welch and his era.

Is an emphasis on market share really the prime directive? Is a company’s near-term stock price – and the quarterly earnings per share that drive it – really the best measure of a CEO’s success? In what ways is managing a company to please Wall Street bad for competitiveness in the long run? Jack Welch, needless to say, is having none of it. When FORTUNE caught up with him recently, he was as confident and outspoken as ever. “I’m perfectly prepared to change,” says Welch (who co-writes a column in Business Week with his wife, Suzy). “Change is great.

” But, he asserts, he sees no reason to back away from the principles by which he and other star CEOs like Roberto Goizueta of Coca-Cola managed. If applied correctly, Welch contends, his rules can work forever. Sorry, Jack, but we don’t buy it. The practices that brought Welch, Goizueta, and others such success were developed to battle problems specific to a time and place in history. And they worked. No one questions today that bloated bureaucracy can kill a business. No one forgets the shareholder – far from it. Yet those threats have receded. And they have been replaced by new ones.

The risk we now face is applying old solutions to new problems. Early on, Welch argued that lagging businesses – those not No. 1 or No. 2 in their markets – should be fixed, sold, or closed. In a 1981 speech titled “Growing Fast in a Slow-Growth Economy,” he announced that GE would no longer tolerate low margin and low-growth units. GE, he told analysts at the Pierre Hotel in New York, “will be the locomotive pulling the GNP, not the caboose following it. ” As much as any other single event, Welch’s words marked the dawn of the shareholder-value movement. And GE eventually became its star.

No question who was Welch’s boss. His report card: the stock price. His goal: consistent earnings growth. As his ruthlessly efficient strategy wrenched GE into high performance, the company’s stock took off. Soon virtually everything Welch said became gospel – often to the extreme. When Welch embraced Six Sigma, the program began to proliferate all over corporate America. He talked about being the leanest and meanest and lowest-cost, and corporate America got out its ax. Welch advocated ranking your players and weeding out your weakest, and HR departments turned Darwinian.

As time went on, the mantra of shareholder value took on a life of its own. Cheered on by academics, consulting firms and investors, more and more companies tried to defy history (and their own reality) to sustain growth and dazzle Wall Street as Welch was doing. Accounting tricks, acquisition mania, outright thievery – executives went overboard. “It became all about ‘real men make their numbers,’ ” says one CEO. “What were we thinking? ” This, says Harvard Business School’s Rakesh Khurana, is the legacy of the Old Rules.

Managing to create shareholder value became managed earnings became managing quarter to quarter to please the Street. “That meant a disinvestment in the future,” says Khurana, author of “Searching for a Corporate Savior. ” “It was a dramatic reversal of everything that made capitalism strong and the envy of the rest of the world: the willingness of a CEO to forgo dividends and make an investment that wouldn’t be realized until one or two CEOs down the road. ” Now, he believes, “we’re at a hinge point of American capitalism. ” There is another model.

In breathtakingly short order, the rock star of business is no longer the guy atop the FORTUNE 500 (today Rex Tillerson at ExxonMobil, but the very guy those FORTUNE 500 types used to love to ridicule: Steve Jobs at Apple. The biggest feat of the decade is not making the elephant dance, as Lou Gerstner famously did at IBM, but inventing the iPod and transforming an industry. Dell spectacularly upended Compaq and Hewlett-Packard, yet few big companies paid close enough attention to see that new technologies and business models were negating the power of economies of scale in myriad ways.

Nobody has proved that more than Google. Yet in the corridors of corporate power, the old rules continue to cast an outsized shadow. Many CEOs are following a playbook that has, at best, been distorted by time. “How do you think about building shareholder value when a lot of people are really just going to hold the share for the moment? ” says Jim Collins, a former Stanford Business School professor and the author of “Good to Great” and “Built to Last. ” “The idea of maximizing shareholder value is a strange idea when [many shareholders] are really share flippers. That’s a real change.

That does make the notion of building a great company more difficult. ” That doesn’t mean everything about Welch’s era is wrong. Indeed, we named him “manager of the century” in 1999. Were he at GE today, he might well be in the forefront of the current wave of rethink ing, as his successor, Jeffrey Immelt, surely is. Still, in the way of all good analogies, we must begin by tearing down the old so that we can really open ourselves to something different. In that spirit, then, here are seven old rules whose shortcomings have become apparent and seven replacements that point toward a new model for success.

Some of the old rules are inspired directly by Welch’s teachings; others are not. New | Rules vs. | Old Rules| 1| Agile is best; being big can bite you. | | Big dogs own the street. | 2| Find a niche, create something new. | | Be No. 1 or No. 2 in your market. | 3| The customer is king. | | Shareholders rule. | 4| Look out, not in. | | Be lean and mean. | 5| Hire passionate people. | | Rank your players; go with the A’s. | 6| Hire a courageous CEO. | | Hire a charismatic CEO. | 7| Admire my soul. | | Admire my might| Issues Raised What are the issues associated with the use of stack ranking?

The stack rank system creates an environment that is not conducive to high employee morale and team performance. By ranking employees there becomes a sub-optimization in terms of team unity because it singles-out the performance of some at the expense of those who provide the daily support that is necessary for the team effort. It destroys intrinsic motivation because employees respond to rewards tied to short-term goals instead of working toward the overall success of the company. One employee wrote [Ibid]: It creates the perception of impossibility because the curve only allows for a few to be singled-out as exceptional performers.

One employee wrote [Ibid]: It promotes competition, not cooperation, because it pits employees against each other. One employee wrote [Ibid]: Proactive Career Management (or how to Subvert the System) Employees are smart, and they quickly figure-out how to manipulate the system to their least disadvantage. Microsoft employees who understand how the stack ranking system works heed to the following advice to ensure that they receive a high rating: [Mini-Microsoft, 2004, http://minimsft. blogspot. com/2004/07/microsoft-stack-rank-as-popularity.

html] Do what is necessary to get increase visibility in the group. This means ensuring that everyone in the group understands what projects you are working on, your role, and your accomplishments. Get a mentor – someone who is well-versed at playing the stack-rank game. It is always a good idea to find someone, preferably a manager well-versed in the process, to advise and coach you on how to manage your career and get a good stack rating. Always know when the stack ranks are because they occur at different times for different groups.

It’s best to be prepared and that means having completed a checklist that ensures you the greatest visibility and support, as well as being sure that any looming deadlines are completed, before your boss attends the stack rank meeting. If your successes are fresh in the mind of your boss, then he/she is probably more likely to support a high rating for you. Set-up a skip level one-on-one meetings. This means to meet with other managers, leads, and even your bosses’ boss to expose your value to the company by discussing your projects and accomplishments.

During the stack rank meeting your boss may need the support of other managers, and it doesn’t hurt if your bosses’ manager knows of you and your contributions to the group. Become a resource for other team members and especially team leads. Lend a hand to those who can support your cause and help you be a success. Constantly seek feedback and modify your efforts based on this feedback. You want to make sure that your efforts are in total alignment with the group, the boss and company objectives. Never assume that you are doing a good job; verify it early and often. Make sure your boss knows why you are so great.

Use every opportunity to promote yourself to your boss. Of course, this advice can apply to any employee in any company, but when employees start spending increasing amounts of time promoting and politicizing their work and themselves, less actual work get done. Welch’s most admired contribution to corporate wisdom? His competitiveness dictum. If you’re not competitive in a particular market, Welch famously advised, don’t compete. Welch practiced what he preached. Early in his tenure as G. E. chief executive, he directed his managers to “sell off any division whose product was not among the top three in its U. S. market. ” They did.

G. E. would unload or shut down operations that impacted tens of thousands of workers. Such moves kept G. E. focused, Welch explained, on the only bottom line that ought to matter, maximizing shareholder value. If General Electric could maximize that value by ditching plants, or shifting production offshore, so be it. Welch played few favourites. He could be as ruthless with his white-collar help as his blue-collar factory workers. In fact, corporate human resources professionals consider Welch the “brains” behind what may be corporate America’s most brutal office personnel practice, the annual firing squad known as “forced rankings.

” At General Electric, under Welch, this approach to supervision forced managers to rank their professional employees, every year, by category. Each one had to be placed in the top 20 percent, the middle 70, or the bottom 10. The top got accolades. The bottom got fired. “Not removing that bottom 10 percent,” Welch would tell G. E. shareholders, “is not only a management failure but false kindness as well. ” Jack Welch’s General Electric would have no room for “false kindness. ” You were either competitively successful, as an employee or a division, or out. You had to deliver. Except at the top. Jack Welch delivered nothing.

He built nothing. He became the twentieth century’s most celebrated executive by identifying challenges — and running the other way. A G. E. division struggling to make a market impact? Dump it. An employee who isn’t putting up the numbers? Fire away. Jack Welch did not turn marginal General Electric business operations into market leaders. He did not endeavor to transform weak staff into standouts. He, instead, surrounded himself with the already successful — already successful divisions, already successful employees — and rode their successes to his own personal glory. We need to be fair here.

Jack Welch did sometimes try to develop something new. In the late 1990s, for instance, at the height of corporate America’s Internet frenzy, Welch decided that G. E. needed to stake out a claim in cyberspace. General Electric, he told USA Today, has “got to have more ‘dot. coms. ” Welch set himself out to get those dot. coms. He poured cash into iVillage, Promotions. com, and a host of other cyber sites that promptly, within a matter of months, lost 90 percent of their value. G. E. ’s television network, NBC, also tried to launch an Internet portal. “NBCi” proved to be an even feebler entry into the portal sweepstakes than Go.

com, an Internet turkey brought forth by another “legendary” CEO, Disney’s Michael Eisner. The NBCi shares, worth $88. 50 when they first started trading, ended at $2. 19. Former General Electric CEO Jack Welch: Global Warming Skeptic By Peter Sasso | July 03, 2008 | 11:40 While guest hosting Wednesday’s “Morning Joe”, former General Electric CEO Jack Welch condemned global warming, the very theory MSNBC has been peddling for years. GE, of course, owns MSNBC; the rebuke of MSNBC’s favorite alarmist hypothesis came in a segment where hosts share noteworthy editorials.

Welch decided to share an opinion piece from Tuesday’s Wall Street Journal aptly titled “Global Warming As Mass Neurosis. ” Welch informed the audience that the article has “a lot of technical number