Jack Welch: The Autocratic Leader

When General Electric chairman and CEO Jack Welch retired in 2001, he left behind
one of the worlds most valuable and complex companies. Over his 20 years at the
helm, GEs value increased 4000% and his autocratic style formed the basis of the
companys core leadership values. [1] But despite his success, Welchs critics insist
that his approach stifled innovation and created a climate of fear. This article will
outline the key elements of his leadership style.

About Jack Welch

Born 1935 in Salem, Massachusetts.
Received PhD in chemical engineering from the University of Illinois in 1960.
Joined General Electric as a chemical engineer in 1960.
Became Chairman and CEO in 1981.
Retired in 2001. [2]

The people person

Jack Welchs leadership was defined by his desire to connect with people. Up to a
fifth of his time was spent with GEs customers and much of the rest was spent with
the companys employees. For Welch, the only way to guarantee GEs long-term
competitiveness was to maintain the quality of its people. He was personally
responsible for all top-level hiring decisions and is estimated to have known GEs top
1,000 employees by name. [3]
'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.' [4]

- Jack Welch
Such was Welchs enthusiasm for the personal touch that he would frequently send
handwritten notes or bottles of champagne to employees who had done a good job.
He also put huge emphasis on regular appraisals for those who reported directly to
him. By maintaining human contact with his employees, Welch was able to make
them feel important despite the size and scale of GEs operations.

Few would argue that Welch was a soft-touch, however. At times he was criticised
for being too gruff, but his no-nonsense approach helped GE foster a culture of
friendly competitiveness. Employees have said that they always knew exactly
what Welch expected of them and regularly received stringent performance targets,
often delivered during personal visits from the CEO.
In his autobiography, Welch urges leaders to get out of their headquarters and visit
field offices. He points out that, for large organisations, headquarters dont make or
sell anything. [5]

The coach
'Theres a simplicity and a power to his management imperatives that resonate with
people.' [6]

- Beth Comstock, Chief Marketing Officer, GE

To signal that people and training were important, Welch invested early on in the
revitalisation of the executive training facility at Crotonville in New York. This was at a
time of great change, when many in the company were facing redundancy, but
Welch felt that this was a strong signal to the rest of the business about the value of
leadership.
To underline this point, he personally conducted leadership seminars with GEs most
promising managers to espouse the core GE values: customer service; trust;
informality; creativity and energy. During his tenure as CEO, he met over 15,000
managers and executives in this setting and insisted that they be honest with their
criticism of the company. [7] Years later he would return to this point, saying: You've
got to look in the mirror every morning and be totally self-effacing. Give yourself a
critical review. [8]
Former Business Week editor John Byrne reports that, at one session, employees
bemoaned GEs rhetoric about managing for the long-term while adding pressure to
produce short-term results. Welch responded: Anybody can manage short.
Anybody can manage long. Balancing those two things is what management is. [9]
This emphasis on training has continued even after Welchs retirement. In 2009 he
set up the Jack Welch Management Institute, an online MBA course from Strayer
University which continues to teach the so-called Welch Way. [10]

The communicator
'He made it personal for all 300,000 of us, and thats tough. He lived it all the time.'
[11]
- Jim McNerney, former GE Executive
Jack Welch never shied away from telling people what he wanted. In the mid-1970s,
Welch wrote in his annual performance review that his long-term goal was to
become CEO. [12] When he secured the top job within a decade, he set himself an

even more audacious target: to turn GE into the worlds most valuable company.
Some of his methods for doing this didnt sit well with everyone at GE, but Welch
worked hard to communicate his wishes and reinforce key messages. His
thinking was that people would be more likely to buy-in to his ideas if he explained
his rationale, even if they disagreed with him. [13]
To this end, Welch hosted an annual get-together of GEs top 500 Executives, where
he would outline his broad ideas for the business. Among them, that crucial
message about the importance of coming first: Are you proud of everyone who
reports to you? he said in 1998. If you aren't, you can't win. You can't win the
game.
Select managers from throughout the company were also invited to present, so that
lessons learnt in one part of the business could be shared with everyone. Attendees
were then encouraged to host similar events for the people who reported to them,
and so on, until Jack Welchs message had reached GE employees around the
world. [14]

The autocrat
'He could love you like a son but, if you didnt perform, he was willing to fire you.'
[15]

- Ben Heineman, former Senior Vice President at GE

In 1961, Welchs first year at GE, he was given a $1,000 raise and almost quit the
company. The young Jack Welch felt that GE was too bureaucratic and the raise
didnt match his input. Years later, he was sure that when he rewarded his
employees he did so according to what he thought they deserved. GE salaries
during Welchs time at the top could increase by up to 25% without promotion. Stock
options, meanwhile, were given to tens of thousands of staff not just senior level
executives. [16]
Welch claimed in 2012 that every good leader he had known had been generous
and wanted to see their employees succeed. That meant offering staff
development opportunities, even if it meant losing them to a different team, while
encouraging them to stretch beyond what they thought was possible. [17]
But for all of Welchs enthusiasm for encouraging top talent, those who werent up to
scratch were quickly shown the door. For Welch, the most effective way to improve
the companys level of performance was to differentiate between the top 20% of
performers, the vital middle 70% and the bottom 10%. For Welch to lose a top level
performer was a sin and a post-mortem was carried out on everyone they lost. The
bottom 10% were routinely fired if they showed no sign of improvement.
As Welch acknowledges in his autobiography, this was easy in years one and two
when there were poor performers to identify and move on, but by year three the
obvious candidates had been dealt with. Yet Welch insisted that managers continue
to differentiate because it was unfair to bottom level employees not to deal with them

in a candid way. As far as Welch was concerned, firing poor performers early in their
career was a form of kindness because it gave them time to start afresh. A letter to
share owners, co-signed by Welch in 2001, states: Removing marginal performers
early in their careers is doing the right thing for them; leaving them in place to settle
into a career that will inevitably be terminated is not. [18]
In March 2012, over ten years after Welch left GE, Welch maintained that this was
still the best way to run a business. Speaking on CNBCs Squawk Box, Welch said:
Public hanging is an awful expression, but it is what leadership is all about. It
teaches others what you will tolerate and what you wont tolerate. Theres no other
way around that. [19]

Criticism of the Welch Way

Despite Jack Welchs incredible success on a spreadsheet, his leadership style has
come under fire in recent years for its take-no-prisoners approach. In his Squawk Box
interview in 2012, Jack explained that if someone had bad numbers, but had bought
into the GE culture, they deserved another chance. But according to business writer
Steve Denning this didnt filter down through the ranks, with those on the bottom
convinced that bad numbers meant a death sentence.
Instead, Denning writes that Welchs practice of routinely firing the bottom 10%
created a culture where employees were under intense pressure to perform well,
while sucking up to the boss and keeping their heads down. [20]
Others have written similar criticisms, suggesting that the pressure exerted by the
top brass lead to a culture where some employees cut corners, while union leader
Stephen Tormey has claimed that General Electrics workers were considered
lemons to be squeezed dry. [21]

Still 'winning'
Despite these criticisms, Jack Welch remains one of the 20th centurys most
influential leaders, who oversaw the greatest period of prosperity in GEs history.
With his personal touch, Welch communicated that every GE employee had a
crucial part to play in the companys success while earning their trust and respect.
Thanks to his direct approach, employees always knew where they stood and were
aware that they had to direct their focus on delivering for the customer. Above all,
Welch had the ability to excite and inspire his staff because of his enthusiasm as a
leader.
[1] Kaihan Krippendorff, 'The Jack Welch Leadership Crash Course' at http://www.fastcompany.com/3002406/jackwelch-leadership-crash-course (25 October 2012).
[2] Past Leaders at http://www.ge.com/company/leadership/past-leaders (accessed 12 March 2013).
[3] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[4] Ibid.

[5] Jack Welch, Jack (Headline, 2001).

[6] Diane Brady, 'Jack Welch: An Oral History' at http://www.businessweek.com/articles/2012-08-09/jack-welch-anoral-history (28 August 2012).
[7] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[8] Nadia Goodman, 'Jack Welch on How to Manage Employees' at http://www.entrepreneur.com/blog/224604 (5
October 2012).
[9] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[10] Jack Welch Management Institute at http://jackwelch.strayer.edu/ (accessed 12 March 2013).
[11] Diane Brady, 'Jack Welch: An Oral History' at http://www.businessweek.com/articles/2012-08-09/jack-welchan-oral-history (28 August 2012).
[12] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[13] Nadia Goodman, 'Jack Welch on How to Manage Employees' at http://www.entrepreneur.com/blog/224604 (5
October 2012).
[14] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[15] Diane Brady, 'Jack Welch: An Oral History' at http://www.businessweek.com/articles/2012-08-09/jack-welchan-oral-history (28 August 2012).
[16] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).
[17] Nadia Goodman, 'Jack Welch on How to Manage Employees' at http://www.entrepreneur.com/blog/224604 (5
October 2012).
[18] Letter to Share Owners at http://www.ge.com/annual00/letter/page4.html (9 February 2001).
[19] Steve Denning, 'Jack Welch, GE, and the Corporate Practice of Public Hangings'
at http://www.forbes.com/sites/stevedenning/2012/04/26/jack-welch-ge-the-corporate-practice-of-public-hangings/
(26 April 2012)
[20] Ibid.
[21] John A Byrne, 'How Jack Welch Runs GE' at http://www.businessweek.com/1998/23/b3581001.htm (8 June
1998).