AT ANY COST
Jack Welch, General Electric, and the Pursuit of Profit
Thomas F. O'Boyle
Knopf 449pp $29.95
John F. Welch Jr. is hardly infallible. The man who has led General Electric Co. as chairman and chief executive for the past 17 years has made some big mistakes, including his acquisition of securities firm Kidder, Peabody & Co. A tough and uncompromising leader, Welch has also made some widely unpopular moves--from laying off tens of thousands of employees to ditching businesses that had long been part of GE's legacy.
But Welch, who--according to survey results--runs the most admired corporation in the world and who has delivered more wealth to shareholders than anyone other than Microsoft Corp.'s Bill Gates, doesn't deserve the unflattering portrait found in Thomas F. O'Boyle's At Any Cost. The author charges that it is financial gamesmanship, not superior leadership or technological innovation, that is at the root of Welch's success. He maintains that the CEO's driving nature has caused many of the company's employees to take illegal actions to deliver results at any cost. Welch, he claims, has taken humanity and compassion out of business, turning his back on employees and communities in the interest of profit.
Books about Welch and his revolution at GE are not rare. At Any Cost is the third Welch account this year, following Jack Welch Speaks by Janet C. Lowe and Jack Welch and the GE Way by Robert Slater, that author's third adulatory book on Welch's management approach. But O'Boyle, a former reporter at The Wall Street Journal who is now assistant managing editor at the Pittsburgh Post-Gazette, is the first to take an extremely critical look at Welch.
O'Boyle is an able writer who has done a remarkable amount of research. In the past six years, he has interviewed some 320 people, pored over thousands of pages of court documents and newspaper clippings, and traveled through many GE towns, from Pittsfield, Mass., and Schenectady, N.Y., to Mexico's maquiladora region. In the process, he has unearthed every shred of negative news on GE from the past century.
Unfortunately for O'Boyle, there isn't much muck to rake. The author relies heavily on the views of disgruntled former executives who have filed lawsuits against the company. More than once, this results in accounts that are unfair, misleading, and often just plain wrong. At one point, for example, he writes that "the connection between the severity of Welch's demands and the occurrence of repeated scandal was a clear cause and effect, as transparent as glass." The author's first bit of evidence: a 1985 grand jury indictment of GE over a defense contract. GE pleaded guilty to defrauding the government, admitting that some managers had doctored 108 time cards out of some 5,000 submitted by hourly workers. Trouble is, the practice occurred in 1980, before Welch was even chief executive.
Or consider this travesty. The author devotes a full 54 pages to the 1991 axing of Edward J. Russell, head of GE's industrial diamond business and to his allegations that he was dismissed because he alerted the Justice Dept. to an alleged price-fixing scheme with the De Beers diamond cartel. But a judge threw out two of three wrongful-discharge counts in Russell's own civil lawsuit against GE. As part of a settlement of the third, the executive recanted. "I am now aware that GE removed me based on its view of my performance and not because I was a whistleblower," he wrote--something the author never mentions. O'Boyle does acknowledge Russell's admission that he had "no personal knowledge of any antitrust wrongdoing or any other illegal conduct by GE personnel." Not surprisingly, a federal judge threw out Justice's case even before GE began to put on its defense. Yet, the author tells the story as if Russell's accusations were fact.
O'Boyle not only tries to lay the blame for nearly every controversy at Welch's feet but also takes aim at several of Welch's major strategic decisions. He says, for instance, that Welch was "misguided" in trading GE's consumer-electronics business in 1987 to Thomson for the European company's medical-equipment business and cash. This conclusion is nonsense: The former Thomson unit is now a successful and profitable part of GE's global medical equipment operation, helping to make that division No. 1 in its field in revenues worldwide. Meantime, earlier this year, Thomson closed the last major TV-assembly plant in the U.S. because of losses.
Had Welch managed GE in the way O'Boyle suggests, the CEO would have been another Roger Smith or John Akers, unwilling or unable to effect the dramatic change necessary to prevent a debilitating decline at an industrial icon. Among other things, he would have kept GE in mature, low-margin industries such as consumer electronics. He would have funneled unlimited research and development money into these efforts, rather than aggressively expanding in financial services, which has been a bonanza for GE. He would have guaranteed the employment of tens of thousands of employees the company no longer needed.
Much of O'Boyle's material makes for some entertaining, but not very enlightening, reading. However, the entertainment value comes at the expense of the author--for in the end, O'Boyle hacks not at Welch's credibility but his own.