General Electric is a company with a history of  leadership continuity.  GE follows a stable tradition in which a long-serving CEO passes  company leadership to a successor who  carries on the traditions of this well established, prestigious company.   In 1981, General Electric was voted the best run company and Reg Jones, the outgoing CEO, had just been voted the best CEO by his peers in the Fortune 500 companies.  In that same year,  Jones overturned tradition by turning over the reins of GE to Jack Welch, a long time GE employee who was known as a ‘revolutionary’ for his ‘fix, sell or close’ strategies (Lowe, 2001).  Welch was not satisfied with being the CEO of a good company.  He immediately set his goal to be the leader of the best company in the world.  In his pursuit of perfection Jack Welch made drastic, quick changes, incorporating aspects of various decision making perspectives and management styles but aggressively shunning one  particular perspective. (1)

           John F. Welch Jr. was born in Salem, Massachusetts in  1936 to an Irish-American working class family.  His mother, Grace, was 40 when he was born.  Jack credits his mother for his self-confidence.  When he developed a stutter as a child, Grace explained that he should be proud of it.  The speech peculiarity meant that his brain worked very fast and his tongue couldn’t keep up.  She encouraged Jack, her only child,  to be either a priest or a physician but he chose to study his passion, chemistry.  Not qualifying for a scholarship to an Ivy League university, the family saved the $50 a semester it cost to send their son to the University of Massachusetts.  He was the first member of his family to go to college.

         Jack Welch came to GE in 1960.  It was his first job after completing his Ph.D. at the University of Illinois.  He remained with GE until he was faced with mandatory retirement at the age of 65.    His 40 year career at GE provided him with an outlet for his incredible energy and his high standards.  It also gave him the opportunity to hone his leadership skills.  By the time he retired in 2001, Fortune  had named him the Manager of the Century.

         Jack Welch made a strong distinction between management and leadership.  As early as  1981, in Welch’s first address as CEO,  he shared his concept of leadership.  As he addressed the shareholders for the first time, Welch did not go into his specific plans for how he would proceed as leader but rather gave his vision.  He challenged the listeners to think of GE a decade from that day:

          Welch felt the essence of leadership came from inside.  He has frequently taught at Crotonville, the GE executive training center, that leadership is not a fancy euphemism for management, because sometimes it is the exact opposite.   In his 1998 address to the GE shareholders Jack Welch expounded on this aspect of leadership versus management:

         In the same address, Welch elaborates that a manager is the one who  “controls things, keeps them in channels, builds and respects boundaries between functions and ranks, stays within internal and external company walls” (p.5).  He decries this as typical bureaucratic behavior.   On the other hand, a leader’s responsibility is to go after those boundaries with a hammer, drawing the best ideas from anywhere:  the factory floor, other businesses, other companies.

         From the beginning of his tenure as CEO, Welch challenged GE leaders to be “better than the best”.   He told them that  if the environment or economic climate says that a situation is not possible then they should  disengage from that limiting way of thinking and proceed in another way.  GE executives were taught to think ‘beyond the box’.  Rules are for managers and vision is for leaders.   Right to the end Welch challenged the rules.   He disregarded the mandatory retirement age of 65 by staying an extra year and retiring at 66.

         In 1982, when Jack Welch had been CEO of General Electric for one year,  Tom Peters and Robert Waterman published In Search of Excellence,  which detailed eight basic principles practiced by successful companies.  GE, under Jack Welch’s leadership had put most of the principles into action.  For example, the first ‘excellent’ principle is: a bias for action.  Welch embodied that principle.  As CEO, he bought and sold divisions to change the focus of GE from a company which received 85% of its revenues from selling products like appliances to a company which got 70% of its revenues from providing services.   Throughout his tenure as CEO, Welch urged his division leaders to be the best.  If the company which they led was not number one or two in their field then it would be sold.  That directive spurred his company presidents to action.  Tom Peters called Jack Welch’s management style  ‘management by fear’ when Peters was working as a consultant for GE.  But Welch defends his style by saying that no one is working there against his will.  Welch says that the work is so challenging and exciting that no one wants to leave.  (Lowe, p 115, 172)        (3)

         Peters and Waterman also stress that excellent companies stay close to the customer because the business is based on having a market and also because good ideas (feedback) comes from clients.  Welch comments that customers are the center of GE’s universe not only because they provide a market but that customers or clients set the standards for the quality which they will accept.  If the customer is not convinced that GE supplies the best quality then they will go elsewhere.  Service to the customer provided one of the stimuli for instigating the Six Sigma program for quality control.        (4)

         Peters and Waterman’s 4th principle, productivity through people,  stresses the importance of having individual workers take ownership and pride in their jobs.  This relates to the philosophy of ‘boundaryless’ behavior which Welch developed and promoted at GE.  He encouraged ideas for improvement from every sector and employee level.  The premise of a boundaryless organization is that with the traditional boundaries of positions removed, the best ideas and practices from anyone and anywhere would surface and be considered and encouraged.  This increased the information base and therefore the effectiveness of the organization.

         In the fifth principle,  hands-on, value-driven management, Peters stresses that   successful companies are lead by teams which operate on the same basic principles.   The successful company has to be bound by shared values and common goals.  Jack Welch practiced this principle also.  It is most dramatically demonstrated in the adaptation of the Six Sigma program developed at Motorola in 1985.    Six Sigma is a statistical control process which sets a standard for the number of defects per million which are acceptable.  A sigma represents a standard deviation on a bell curve, so the fewer the defects, the higher the sigma.   Welch’s goal for quality control was 2.4 defects per million which is Six Sigma.  This program has been successful at GE because it has complete support by Welch.  He insists that all leaders and managers be trained in it and the techniques be drilled  all the way down to the lower levels of the organization.    The GE homepage describes Six Sigma as having ‘changed the DNA of GE--it is now the way we work--in everything we do and in every produce we design’.  (GE homepage)  The emphasis on the Six Sigma design for quality gives all employees a shared goal.

         As a correlation to the fifth principle Peters and Waterman also include  the statement that leaders of successful companies demonstrate “the ability to create enthusiasm” and ‘unleash excitement’. (p. 291)  Almost the same wording  is included in the GE mission statement when it states  that GE leaders ‘demonstrate... always with infectious enthusiasm for the customer, ... the personal energy to welcome and deal with the speed of change...the ability to create an atmosphere that energizes others...”. (GE homepage)

         Welch was an expert at Peters and Waterman’s seventh principle:  Simple form, lean staff.  Trim the upper levels and have fewer administrative layers.  From 1981-1989, Jack Welch removed nine layers of GE hierarchy, reduced 29 pay levels to five pay bands and reduced the total workforce by 100,000.  Included in that reduction of force was a two-fifths cut in upper management in the first years of his tenure.  By the end of his tenure Welch had pared the executive force from 300 to 30. (Heller, p. 564)

         Not all the Peters and Waterman principles were practiced by Welch.  He did not ‘stick to the knitting’.  He sold off companies which were not either first or second in their field.  Whether it was close to the knitting or not didn’t matter.  Welch challenged GE employees to keep their eyes open for businesses which catered to the future.  In his first years as CEO, Welch asked each company president to define where his company would be in 50 years.  Those companies which seemed irrelevant in any way to a forward looking GE were sold.  Welch invested in high technology providers rather than appliances which had been the mainstay of GE since the beginning 125 years ago.  He moved GE away from providing ‘goods’ and entrenched the company as a provider of ‘services’.

          Peters and Waterman conclude that excellent companies are defined by two commitments:  to provide the best quality and to provide the best service to the customer.  GE under Jack Welch strove to deliver exactly that.  By introducing and making mandatory the Six Sigma program for quality control, he assured the customer that every product or service purchased from GE would be world class quality.  In effect, it would be the best.  If In Search of Excellence were updated and revised, GE would most likely be used as an example of most of the excellent principles.

         Because of Jack Welch’s outgoing personality and high energy, on the surface he seems like the embodiment of an overt leader.  He is.  However, he is much more.  To use Henry Mintzberg’s word, he is also a ‘covert’ leader. (Mintzberg, 1998) According to Mintzberg, a covert leader performs leadership from behind the scenes.  In an orchestra, all the players are professionals and have to be treated as such.  The conductor does not give orders as much as channel the energies of the individuals into beautiful music.  Similarly, Welch believes that in order to be successful at GE, the worker has to be 100% in tune with the shared vision.  All workers have to ‘know the score’ and fine tune their vision so that everyone is playing from the same page.  If someone is not willing or able to do things the GE way, they can be replaced.  If a company does not come out on the top of its field, it will be sold.  Mintzberg also mentions that in the case of a conductor and an orchestra, even though all concerned are professionals, the players must accept the conductor’s authority to lead them.  As with GE, Welch has given his company presidents autonomy but they must conform to GE’s mission and vision.  Just as an orchestra member can be fired for insubordination, a GE company can and will be sold if it does not match the high standards of GE.

         Another important role of the orchestra conductor which is more covert than overt is ‘linking’ or networking.   The conductor has to be out in the community seeking support and promoting positive public relations.  Welch also believes that an important part of a CEO’s job is to promote the company.  Welch does this not only by his public relations efforts but more so by training executives who are desired by other companies.  Lowe comments that no matter the reason someone leaves GE, their training at GE is an asset on their resume and ‘makes a manager part of a fraternity whose members keep in touch and network long after leaving GE.”  Lowe then presents a list of 25 top companies run by former GE executives who still network with their former leader, Jack Welch. (p. 65)

         In his final address as CEO in April, 2001, Welch turned over the reins stressing that one of the marks of leadership is change and that GE will change with the new leadership.  But he also stressed that two principles will not change.  GE will always stand for integrity and it will never give up its hatred of bureaucracy.  Welch minces no words when describing his feelings about bureaucracy.  In this same farewell address he expresses GE’s

         To examine Welch’s antipathy towards bureaucracy, we need to understand what it is and what it stands for.  Webster defines bureaucracy as ‘the body of officials and administrators, especially of a government or government department’, and  bureaucrat as ‘an official who works by fixed routine without exercising intelligent judgment.’  In Essence of Decision by Graham Allison and Philip Zelikow, a model for governmental or bureaucratic decision making is described.  Its key points conflict with Jack Welch’s philosophy.  In Allison’s description of governmental processes (Model II) , he emphasizes how routines and standard operating procedures (SOP) dominate in order to keep everyone on the same page.  Welch would vehemently object to this point because he believes that a common goal should provide the vision which keeps employees focused.  In Model II, change is brought about as a response to a crisis or an error.  According to Welch, change should be an underlying current in all that a business does.  Change occurs so that errors are avoided. The possibility for change keeps energy high in a company as it constantly seeks ways to improve on its performance.        (5)

         Allison notes that organizations working within Model II often lack farsightedness and flexibility. Welch firmly believes that in order for a business to be successful it constantly has to look 20 to 50 years ahead of itself to see if it is on the right track in what it provides to the public.  If it is not, then an organization needs to have built into it the flexibility to change direction and focus the way that GE changed when Welch came in as CEO.

         Welch would agree with the point of Model II decision making where organizational perspectives or culture influence decisions.  Welch would say that the GE mission and vision influence his and other GE managers’ way of thinking when making decisions for the organization.  But, he would not let it be used as an excuse for inaction.  Lack of action as well as a lack of vision are Welch’s  often repeated criticisms of bureaucratic organizations as we see in his farewell address quoted above.

         Another conflict with Model II is  GE’s ‘meritocracy’.  Under Welch, GE is structured into  3 levels:  the top 20% where the leadership comes from; the middle 70% who are energized to move up or to move out to spread the GE way as leaders of other top companies which can then network with GE; and  the bottom 10% who are encouraged either to change or to move out.( Report to shareholders 2001, p.6)  Welch promotes the person he considers best for the job.  He does not regard seniority or rank as important.   This contrasts directly with Model II’s hierarchical way in which the SOPs dictate who can be promoted and when.

         What lies ahead for Jack Welch now that he has retired as CEO of General Electric?  Now that Welch no longer runs the company which he changed from a traditional, industrial business to a sleek, financial conglomerate, what will he do with his time and his boundless energy?  Welch’s contract calls for him to be on call as a consultant for GE 30 days out of every year for the rest of his life.  Also, Welch is a major shareholder in GE and so will be able to overtly influence company decisions if he chooses to do so.  His covert leadership will continue through the programs he instituted, especially Six Sigma, which focus the workers and management towards a common goal, superior quality.

          Lowe suggests that Welch could continue his public contributions through politics.  He has international name recognition and is a friend of the present US president.  He could become a politically appointed ambassador. (p. 230)  With his wealth, status and reputation of being a savvy business leader, Welch could  be considered for the position of Secretary of the Treasury.  The precedent has been set since the present secretary, Paul O’Neil,  is the former CEO of an international company.

         Knowing the adamant dislike Welch has towards Allison’s Model II organizations, I seriously doubt that public service will be the future for Jack Welch.  Without the latitude to instigate change and to challenge standard operating procedures, Welch would not be able to lead and would be relegated to becoming a manager.  If he were to accept an ambassadorial appointment Welch would also find his hands tied since he would be the president’s representative and would have to promote the president’s plans and ideas, not Jack Welch’s way.

         According to Welch, he will play golf and promote his new book, Jack, Straight from the Gut, published this year.  But, on a 60 Minutes interview, Welch admitted that he wouldn’t mind running another company ‘as long as it was large enough for him to continue to paint in big, broad strokes’ (Lowe, p. 232)  Whatever Jack Welch decides to do, I am sure that it will fall close to the Peters and Waterman models of excellence and will stay far away from bureaucracy.

References:

Allison, G. & Zelikow, P. (1999)  Essence of decision, Explaining the Cuban Missile Crisis (2nd ed.)   New York:  Longman

General Electric Homepage, Addresses to shareholders, 1981-2001.  Retrieved December 8, 2001, from http://www.ge.com/news/welch/speeches/share.htm

Heller, R. (2001)  Roads to success.  New York:  Dorling Kindersley Press

Lowe, J. (2001)  Welch, An American icon.  New York:  John Wiley & Sons, Inc.

Mintzberg, H.  (2000)  Covert leadership:  Notes.  Harvard Business Review, 11/12, 1998.

Peters, T.J. & Waterman, R.H. (1982).  In search of excellence:  Lessons from America's best-run companies.  New York:  Harper and Row.

___.  Webster's encyclopedic unabridged dictionary of the English language (1989).  New York:  Portland House Press.