Remembering Jack Welch
By Joe Rizzo (Executive Director, New England Lean Consortium)
Jack Welch, former CEO of General Electric, passed away on March 1, 2020, at the age of 84. He was a remarkable man in many ways. He served as CEO of General Electric for twenty years, from 1981 through 2001.
For those twenty years, GE recorded record Sales and record profits for eighty consecutive quarters. This is a remarkable achievement that very few, if any, other CEOs have achieved. As a result, GE stock rose every year, split two for one, and rose again the following year. Jack Welch made many millionaires of those people who invested in GE stock. Jack was known as the “the toughest boss in America”. He demanded a lot from the employees of GE. He believed in stretching people to the full extent of their talents and capabilities. It has been said that Jack spent 25% of his time doing people evaluations, which included identifying “Hipots” (high potentials) and developing a career path for each individual. Jack was also known as “Neutron Jack” as he fired over 200,000 people throughout the acquisitions of new businesses and the sale of old businesses. Whenever he went into a GE department for a business review, he assumed that 20% of the people there were excess and were not needed. He usually left the business review with a directive to reduce the headcount of the department by 20%.
One of Jack’s more memorable quotes referred to this process of personnel evaluations. “Whenever you become a leader, success is all about growing others.”
I was fortunate to start my career at General Electric as a Process Engineer in the Insulating Materials Department of General Electric in Schenectady, NY, in 1966. My first assignment was as the Process Engineer for Insulating Powders. I was assigned to a Senior Engineer for training and direction. After three months, the Senior Engineer left GE to start his own company, and I was suddenly in charge of a product line. For the next three months, the product line made money, something it did not do for the previous five years. However, during those three months, the Department evaluated the business line and made a decision to get out of the Insulating Powders business. I was offered the opportunity to become the Process Engineer for the mica mat paper operation in Coshocton, Ohio. I accepted the challenge but did not realize that I would have to travel to Coshocton every other week. In my fourth year at General Electric, I was offered the position of Production Engineer for Building 29, the mica fabrication operation, which I gladly accepted, as I no longer had to travel to Coshocton, Ohio. It was that year, 1971, that Jack Welch was promoted to the position of Vice President of the Chemical and Metallurgical Division. The Insulating Materials Department was in that Division and the General Manager reported directly to Jack. As is the norm when someone assumes a multi-department Division, the Vice President visits each Department for a business review. When Jack visited the Insulating Materials Department, the General Manager was pleased to announce that IMD had achieved a 5.4% net to Sales for the year 1970. The GM went on to explain that this was a good thing as the company average was 5.0%, and IMD was above the company average. Jack stopped the GM right there and informed the GM that if he wanted to stay in the Chemical and Metallurgical Division, he had to achieve double digit per cent net to Sales. As was the case with Jack, he was always raising the bar. No matter what you accomplished in the previous year, he expected and demanded more in the following year. The following year, Jack returned to the Insulating Materials Department for a business review of 1971. The General Manager enthusiastically reported to Jack that IMD had a great year as the net percentage to Sales increased by fifty per cent to 8.2%. Jack reminded the General Manager that a year ago he was informed that he had to achieve double digit net percent to Sales, which the GM did not do. Jack immediately fired the General Manager and half of the Senior Management Staff, plus several middle managers at the Insulating Materials Department. He also left instructions to reduce the workforce by 20%. In his book, “Straight from the Gut”, Jack discussed the early decisions that he had to make when he assumed the position of Vice President of the Chemical and Metallurgical Division. “I eventually had to deliver the bad news to three of the executives who reported to me in the new job in 1971.” One of those executives was the General Manager of the Insulating Materials Department.
The next morning, my boss called me into his office, and told me, “Joe, we need to have you take over RV-14, (the mica processing plant at the Riverview site in Rotterdam), Building 29, (the mica fabrication plant, at the Main Plant), and the Mica Mat Operation, (the mica paper making operation in Coshocton, Ohio), as there is no one left”. All of a sudden, I was the Operations Manager for three, geographically separate plants, manager of 200 people, having to deal with five unions on a daily basis. I had responsibility for the solids side of the business, and another manager had responsibility for the liquids side of the business. At GE, it was the norm to put people in positions that had nothing to do with their education, background or experience in a “sink or swim” situation. Fortunately for me, I was able to swim. The solids business was responsible for one third of the sales of the department, but generated two thirds of the profits. The one thing that I learned from this event was to “make the numbers” or you’re out. During my first year at IMD, my boss came out to the production floor to talk with me. He informed me that I was required to generate enough cost improvements in a year to cover my salary. This was pretty easy for an engineer to accomplish, and for the next four years, I accomplished this goal. When I took over the solids part of the business, I had to work with my staff of eleven supervisors and engineers to generate individual cost improvements objectives and total organizational cost improvement objectives. To a person, each individual met their individual cost improvement goals. Each year we led the department in achieving cost improvement goals. We got so good at it that we had our numbers met by the end of June, and we were working on next year’s numbers in July through December. It was all about making the numbers, and we did. I was a quiet, shy, introverted, geek when I arrived at GE in June of 1966. It wasn’t long after my arrival that I was pulled out of my shell and put into leadership positions. I gained a lot of experience and learned a lot during my twenty year career with General Electric. I was fortunate to have worked at GE while Jack Welch was the Vice President of the Chemical and Metallurgical Division and CEO of the company. I was fortunate to work for tough, demanding bosses at General Electric who stretched me to my full capabilities and talents. My definition of a good leader is “someone who takes you to a performance level that you would never have achieved on your own”.
Jack Welch was one of those good managers and a good leader. Thank you, Jack, for a great fifteen years under your leadership. Thank you, General Electric for twenty great years.