Jack Welch's lessons from the top

Twelve years after his departure from the top job at GE, the ruthless management guru's mission to usher in a new era of business leadership blazes strong as ever.

A 20-year veteran chief executive is a rare tag for anyone to wear, especially in a public company. So when former General Electric chief executive Jack Welch speaks on leadership, the corporate world pays close attention.

It is no surprise that his lessons on management captured the most attention at this week’s World Business Forum in New York.

In a wide ranging Q&A session that covered the global economy, education and politics, Welch outlined what he felt was needed to be successful at the top.

“There is one characteristic that great leaders continue to have and that’s what I call … the generosity gene,” he told the audience of business executives. “They get excited by their employees’ success.”

The generosity gene, according to Welch, is what defines leaders all the way down the workforce hierarchy.

“It’s the person who loves to see people promoted,” he explained with fervour. “It’s the person who can’t wait to give a raise to people. It’s the person who is excited to take an idea from someone and give it to their boss and credit the person, not take it as their own.”

Linking the leadership discussion to the current Washington impasse – which he downplayed as “not the biggest deal in the world” – the former GE boss expressed his confidence in the theory translating as well to politics as it does to corporate environments. 

“It takes personal skills,” he confided. “I would say, without criticising the president, this isn’t one of his strengths.”

Welch was famous for not only presiding over a company that added 400 per cent in value during his tenure, but also for ruthless new age management techniques.

One such approach was his commitment to cutting any division which was not number one or two in its category – a tactic since imitated by many executives worldwide. Another was his culling of the bottom 10 per cent of managers every year, irrespective of the overall company performance.

This was done through measuring values, not just performance. If you put the two on equal footing when measuring the worth of an employee, Welch asserted, then the culture of the business will be defined as you please.

He contended the retention of staff with high performance but lousy behaviour was what “wrecks every company”, and referred tongue-in-cheek to this group of people as the “horse’s ass that kicks down and kisses up”.

Harsh though it may sound, the avoidance of problem staff members requires gradings, and Welch is ready to deflect criticism about the potential impact this could have on morale.

“So it’s okay to grade a 17-year-old but it’s cruel to grade a 35-year-old?” he mused. “People say it hurts teamwork, but not if you value teamwork.”

Since stepping away from the New York-based conglomerate back in 2001, Welch has turned lessons on leadership into a business in its own right, while also turning his hand to private equity.

Through this, his passion for business endures and he remains unafraid to challenge the status quo. A query of appropriate incentives from the learned audience was met with criticism of the most common approach to employee wage changes.

“Nothing’s worse than the annual raise,” he reasoned. “Everyone gets ‘X’ per cent – give me a break!”

Welch made the point that despite all the changes to the day-to-day running of a business, the timing of reviews and budgets has hardly changed for decades.

“The rhythm of the business hasn’t changed for 40 years,” he said, highlighting the similar timetables run by the managers of all the companies his private equity group has acquired. “You’ve got to be thinking contemporary,” he added. “You’ve got to challenge your organisation: what is the best practice today on every single thing?”

In a world facing a level of disruption and change not seen since the industrial revolution, answering that question is more important than ever.

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