(Corrects Ben Heineman’s description of an executive firing.)
Since he retired as chief executive of General Electric (GE) in 2001, after two decades in the job, Jack Welch’s legacy has been the subject of heated debate. Under Welch, the company’s market value grew from $14 billion to $410 billion, and revenue multiplied fivefold to $130 billion. Yet his brutal management style was legendary. Each year he famously ranked employees and fired the bottom 10 percent. As retirement neared, he pitted three top executives against each other in a bake-off to determine who would be his successor. “You got to be rigorous in your appraisal system,” Welch told Diane Brady in an interview for this story. “The biggest cowards are managers who don’t let people know where they stand.” Brady talks with GE veterans—including Jim McNerney and Bob Nardelli, who lost out to Jeff Immelt in the race to succeed Welch—about what it was like to work for “Neutron Jack.”
CEO, Boeing (BA)
Can you talk about one experience with Welch that stands out?
In the early ’90s, we were all very frustrated about how we were doing in Asia—particularly Jack. There were 10 of us who were leading the businesses at GE at the time. One of my vivid memories was Jack at one of our staff meetings. He was, shall we say, encouraging us to do better: “And if you guys don’t, I’m going to do something you all won’t like, ’cause I’ve got to have progress in Asia.” So I just salted that away. I thought it was another Jack mandate. I knew it would have implications, but none of us thought too much about it. Anyway, the next morning, I get a call from Jack saying, “Jim, come see me.” I show up in his office, and he says, “OK, I want you to go to Asia. We’re going to create a position. Somebody has got to get this company into Asia.” I said, “Well, what do you want me to do?” And he says, “You figure it out. That’s why I’m sending you there.” I found that incredibly motivational.
Had you raised your hand, saying, “If the opportunity comes up, I’d love to be in Asia”?
No. Not at all. I was just one of the guys he was yelling at, two days before, who wasn’t performing in Asia, to whom something I wasn’t going to like was going to be done to me. Obviously, what he was saying was, “I’m going to send somebody over there to show all you guys how to get into Asia and mess with you.”
Let’s go back to where he’s yelling at all of you.
OK, where he’s being tough on you.
Yeah, he’s being tough. He’s saying, “Listen, you guys. You guys are not making the progress in Asia. You think you’re making progress, but you’re not.”
Isn’t that intimidating?
It took a certain amount of self-confidence. But the culture was only about performance. That’s the culture he wanted to lead, and he did a hell of a good job of leading it. There’s no one I’ve seen who can make everything personal—both personal in terms of the way he motivates you and personal in the way he holds you accountable—like Jack. He made it personal for all 300,000 of us, and that’s tough. He lived it all the time. There were lots of handwritten notes. There were bottles of Champagne at nice times, when you least expected it. GE was 300,000 individuals to him, not 10 businesses. And the leaders of those businesses all had a personal relationship with him. That takes time and effort.
Chief Marketing Officer, GE
Did he ever criticize you?
I’d come over from NBC (CMCSA). In TV news, if you don’t meet your deadline, you’ve got black space. So my personality was at that time a bit abrupt. He called me one day and said, “You have to wallow in it.” I thought, This makes no sense. This is Mr. Speed, Mr. Simplicity, and he’s telling me to wallow? He thought it was important for me to take time to make connections. He just felt I was a bit abrupt—on to the next thing. We’d had the conversation, and then, one day on the phone, he just hung up on me. I thought, Gosh, what did I do? So I called his assistant to get him back on the phone. I said, “Jack just hung up on me. Was that a mistake?” She said, “No. He’s trying to make a point to you. That’s what you sound like.” He was willing to take the time to teach and inject humor to make a point. He had a great saying: You’ve gone from pig to prince, or prince to pig. He’d say, “Today you’re a pig,” or, “Today, you’re a prince,” meaning you did really well or boy, you stunk at that. He had this ability to teach or mentor at seemingly unlikely moments.
How did Jack deal with all the publicity?
He put himself out there when it was appropriate because it was a way to tell this company’s story. He was a company guy foremost. Jack is a good story. He speaks clearly. There’s a simplicity and a power to his management imperatives that resonate with people, and the company was performing well. It was good for the brand. You also have to look at the time. The celebrity CEO came to be in that time. You had these very big companies like Coke (KO) and IBM (IBM) where the CEO really spoke for the entire company. That being said, if you were to go forward 10 years, probably building the company’s brand around one person for the long term is something you’d want to think about. It was smart for the time, clearly not sustainable after he left. It’s more about the team now.
CEO, Discovery Communications (DISCA)
Has Jack mellowed a bit over the years?
Jack hasn’t changed at all. He’s so competitive. I met him three weeks ago to play golf. We decided that at the 18th hole, you’d have to whip out the cash and pay up. He takes you two ways. One, he’s exceedingly good as a golfer. And two, he gets you completely off your game. When we got to the 16th hole, he’d basically won the match. It was just a question of how much I’d owe him at that point. I hit a shot toward the green and it starts to tail off a bit. To the left side of the green, there’s a sand trap. He’s won the match, and he starts yelling, “Sand trap! Sand trap!” It lands in the sand trap, and he looks at me and says, “What a shame.” I get to the 18th hole and pay him $130. We shake hands. I get an e-mail a week later where he says, “I’m heading to Nantucket today with Suzy. Can’t wait to go shopping and spend my $130.”
He has this special touch. We all really relied on him, probably too much. Most of the success of GE had to do with his vision. I was hired very early on, when NBC wanted to get into the cable business. Cable programming wasn’t making money, but Jack believed we needed to diversify from broadcasting. So we launched CNBC, and after two years, we were losing a ton of money. We were competing at the time with FNN, which went into bankruptcy. We pitched the idea of bidding for it. We prepared about two weeks for the meeting. We got about 20 minutes into the pitch, and Jack put his hand up almost like a timeout. He said, “You guys need to answer two questions: Is a cable channel that delivers business news a good business? And can we own it? What if we spend a year putting these two together, then wake up and find out that Headline News has become a business news channel?” We were in the leaves. He looked at the only two issues that mattered.
As GE’s senior vice president for human resources, you helped manage the race to succeed Jack in 2000. What was that like?
We’d narrowed it down to three. Jack went to McNerney, Immelt, and Nardelli, and said, “One of you will get the job, and the other two won’t, and whoever doesn’t is going to have to leave.” Then he put their replacements in position six months before we made the call, so they could train them. What he was doing was protecting the company.
Aren’t most leaders celebrated for holding on to top talent?
My theory was we could keep two out of three. His point was that they’d be so much in demand that it would be hard for them to pop back into a No. 2 position. He wanted whoever got the job to have clear sailing, to not have anyone looking over their shoulder. We lost some real institutional thinking with that move. In the end, he made the right call. He wanted there to be three winners. 3M (MMM) kept their CEO job open for a year. Home Depot (HD) picked up Nardelli within a week. … I can’t think of any other CEOs who would have made that call.
Is there a vignette that captures Jack for you?
I was in Zurich, closing a deal with ABB (ABB) in the locomotive business. We were right at Lake Lucerne, getting ready to do the signing ceremony, and he calls me from the hospital. He’d just had bypass surgery. He said, “I want you to get home immediately and pack a bag and come up to Fairfield.” I said something about it being a holiday. I think it was Memorial Day. He said, “I know, but on Tuesday, I want you to go up to Schenectady (N.Y.) and take over Power Systems.” About two weeks later, Jack sends me a case of Dom Pérignon with a note that said, “Look, I really apologize. I was thinking more about myself than you and Sue. Have a toast on me.”
But you missed your holiday. Did you have to be a workaholic to win at GE?
Jack would work tirelessly. He didn’t make you do it. But obviously if your performance wasn’t good enough, he’d take you off the job. He didn’t care how you did it. He lived it. He’d be the first to acknowledge that he probably didn’t do some things he should have done with the family, but he knew what tradeoffs he was making. It’s hard to run a global business 9-to-5. Saudis didn’t take Sunday off—if you’re building power plants in Saudi Arabia, you end up getting calls on Sunday.
Welch’s Executive Assistant since 1988
Why did you stick with him after he left GE?
Initially, I thought it might end. He sort of enticed me to come along and promised me things that didn’t come true. He said, “I’m going to retire. We’re going to have it easy.” At GE we worked around the clock. I remember saying, “You know, after 14 years, I don’t want to kill myself anymore.” And he said, “Oh no, it’s not going to be like that. We’re going to work 10 to 2, and we’re going to take it easy.” I still work seven days a week. Maybe for 10 minutes he thought he was going to work 10 to 2. I just keep up with him.
What are the qualities of the ideal executive assistant for Jack Welch?
All along it was important to be honest. You own your mistakes. If I don’t like something, I’ll tell him. If he doesn’t, he tells me. Right now, my biggest asset is the history. I know his relationships with hundreds of people. He doesn’t have to spend a lot of time explaining things to me. What’s remarkable is the consistency. I was cleaning out some files and came across these handwritten notes from the late ’60s. Thirty years later, it was almost verbatim what he was still saying. When I first saw them, I said, “Jack, you’ve got to get some new material.” For him, there was no new material. He had a vision for how he wanted to lead. I don’t know where he got that, but it was just so consistent.
Senior Fellow, Belfer Center for Science and International Affairs
As general counsel, what’s one of the toughest calls you saw him make?
We had a scandal involving the Israeli Air Force: One of our employees had been part of a scheme to steal millions in U.S. aid. The question was, should we fire the head of the military engines business? He was beloved, a 30-year veteran who had nothing to do with the crime. We had an argument. Some defended the guy, but Jack said, “He’s gone. He put the company at peril. If the generals don’t get hit harder than the troops, what are we telling people about our culture?” He made a decision most people in the company didn’t like. There was a lot of resentment.
Do you think he’d made up his mind before you even weighed in?
Generally speaking, he would listen up to a point and then decide. Sometimes he would pull the trigger pretty fast. He had incredible instincts. He could literally walk in the room and see a flaw others missed. “How’d you get that revenue number? Your whole stinking plan depends on that number. Where’d you get it?” He was totally fearless. Although he truly believed in debate and wanted people to speak candidly, his style was so volatile and tough, it would sometimes scare people from telling him the truth. But he never fell in love with any of the things he had done. He could love you like a son but, if you didn’t perform, he was willing to fire you.