How Jack Welch Brought Ge To Life

THE NEW GE: HOW JACK WELCH REVIVED AN AMERICAN INSTITUTION

By Robert Slater

Business One Irwin - 295pp - $24.95

Perhaps no other chief executive officer is more celebrated--some would add feared--than John Francis Welch Jr. The name of the General Electric Co. chairman routinely graces lists of the best, the toughest, the smartest bosses in Corporate America. In just over a decade, Jack Welch has transformed the GE bureaucracy, with its love for systems and planning, into a keenly competitive, even nimble, $60 billion-a-year growth machine. While the thousands of attendant layoffs haven't been easy to watch, sales and profits have handily doubled in those 10 years.

Who, then, is Jack Welch? And how did he do it? Those are questions that veteran Time writer Robert Slater answers in The New GE: How Jack Welch Revived an American Institution. More than just a lively rehash, The New GE benefits from four interviews with Welch on why he ignored the old wisdom that if it ain't broke, don't fix it.

Back in the 1970s, what Welch saw as Reginald Jones's would-be successor was a shiny, prosperous-looking facade hiding some rather rusty pipes. Under Jones, GE had become a sprawling, diversified company with annual profits surpassing $1 billion. But many of GE's businesses were either growing too slowly or not at all, and the company was saddled with a plodding culture that thwarted fresh thinking. Welch's proposed remedy was a streamlining of GE into a dozen or so high-growth units. Later, levels of management would be chopped, "speed bumps" between functions flattened.

For all Welch's vision, Slater notes, he was an improbable choice for CEO. At 45, not only would he be GE's youngest chairman ever, but he seemed too rough around the edges for the buttoned-down atmosphere at GE's Fairfield (Conn.) complex. Two factors helped: his technical background (a PhD in chemical engineering) and his appreciation for the rise of global competition.

Welch also knew how to make businesses grow. As a technician, young Welch and his team found that adding polystyrene to a hard-to-form polymer would make a plastic that was easily shaped and commercially viable. That product, Noryl, was a breakthrough in using plastic to replace metals in automotive and industrial applications. Plastics, a $40 million-a-year unit in 1968, is a $5 billion one today.

Such entrepreneurial fire stood Welch in good stead as he moved up the ladder, boosting the performance of the medical-technology unit and switching GE's finance arm from its dependence on equipment financing toward more sophisticated and profitable services.

Also, Welch was always tough, having grown up working-class in Peabody, Mass., where he roughhoused with friends in a rock formation they called The Pit. Welch recalls that fights were "a way of life." A former GE exec told Slater: "You can't say hello to Jack without it being confrontational. If you don't want to step up to Jack toe-to-toe, belly-to-belly, and argue your point, he doesn't have any use for you."

Welch expresses little regret at all the upheaval he created. In fact, he suggests to Slater that he may have moved too cautiously. For example, Welch wanted to get GE into food and pharmaceuticals but couldn't find good deals. Even so, Welch's GE stands apart from other corporate behemoths. GE's early-1980s life crisis--spurred by Welch--may have spared it the ignominies that have befallen IBM and General Motors.

But some of Welch's ideas have seemed less than 1,000-kilowatt. He stumbled badly with his purchase of the Kidder, Peabody & Co. investment firm (though the buy may yet prove astute). And blending NBC Inc. into the GE culture has been anything but smooth. From the start, in 1985, Welch treated the network like any other GE division. NBC might throw off lots of cash, but why, the bean-counters in Connecticut wondered, did an NBC finance drone get paid twice what the post might pay in Jet Engines, and why couldn't NBC News even come up with a budget plan?

No, Welch could never be accused of being sentimental. Asked by Slater about the 1984 sale of GE's venerable housewares unit--a move lamented by old GE hands--Welch replied bluntly: "In the 21st century, would you rather be in toasters or CT-scanners?"

He may well be around to see if he was right. At 56, Welch is still a decade shy of retirement. Much of his time these days is spent planning a cultural revolution to spur creativity among GE workers that could prove even longer-lasting than the one Slater documents.

This transformation probably won't be easy to watch, either. Already, one of Welch's favorite ways to prod workers is to engage them in one-on-one, no-holds-barred dialogue at the company's training center in Crotonville, N.Y. The name of the forum in which such professional combat takes place? The Pit.