Jack Welch: The Lion Roars

JACK

Straight from the Gut

By Jack Welch with John A. Byrne

Warner Business Books -- 479pp -- $29.95

Being in a room with Jack Welch is like being cornered by an alluring yet dangerous lion. He does not tamely sit and await questions. He comes at a reporter the way he comes at his General Electric Co. employees: directly, impatiently, instinctually, alternately grinning or growling. Ask a question, and he is on you--challenging your assumptions, clawing for information, his voice rising to a shout or dropping to a purr, his little feet propelling him around the room as he circles you. He is one part charming, electric, shrewd, an engrossing teller of stories, a gossip--and one part beast.

Welch's memoir, Jack: Straight from the Gut, has the virtue of placing strangers in that room, offering them a sense of this man who may be the most influential CEO of the second half of the 20th century. "Write like you talk" is the best advice for any writer, particularly if you're a reasonably good talker. Welch is, and the voice that he and BusinessWeek Senior Writer John A. Byrne provide is the same one heard by visitors to his office. We hear here and elsewhere the familiar success stories--of how he downsized GE, excising "one of every four people" in his first five years at the helm; of profits that mushroomed from $1.5 billion in 1980, the year before he became CEO, to $12.7 billion in 2000; of a share price that rose an average of 21% in each of the past 20 years--50% faster than the Standard & Poor's 500-stock index; of how he gave an identity on Wall Street to his sprawling company by insisting on achieving ever-expanding quarterly-profit growth and shedding divisions that did not rank No. 1 or No. 2 in their businesses; of how his ideas about globalization and a boundaryless company and cost-cutting in good times and by-the-numbers managing spread to other companies like an infectious disease.

If Welch's book were just a roar, or just flashed his medals, he would have produced a self-reverential tome not unlike Sumner B. Redstone's or Michael D. Eisner's. But this is a much better book than those. Despite its good qualities, though, it has some problems, the biggest being a confusion over who the audience is, the reader or his GE compatriots. Welch regularly pauses to offer testimonials to this board member or that lawyer or vice-president. It becomes tedious. This confusion between honestly trying to tell his story with humor and humility and trying to thank or protect his teammates sometimes cheats the reader. For example, in his interesting account of the shrewd way he went about picking a successor, Welch does not tell us why he chose Jeffrey R. Immelt over two competitors, or what he perceived as the others' relative weaknesses. This spares their feelings but fails the reader.

Most of the time, however, Welch illuminates what he did as CEO. Because he saw the CEO's role as that of a teacher, not just a decider, and because he seeks to use this memoir to instruct, the reader also learns some lessons. The first, which is only implicit in the book, is to beware of the shibboleths of those who sell the latest how-to business fads. After the collapse of sprawling giants such as ITT, we were told that conglomerates don't work, that companies had to be focused on core businesses and "stick to their knitting." Welch successfully defied these injunctions. Ditto the notion that size is the enemy of speed. Ditto the idea that a CEO must not meddle or micromanage and instead must step back and delegate.

A larger lesson is explicit and personal and traces back to the lion--or maybe the lioness. The first chapter begins with an anecdote about Welch's mother. Grace Welch pushed her only child to excel in school and everywhere else. She came to his Salem (Mass.) High School hockey games, including one lost in overtime, when Jack got so mad he flung his stick across the rink. Back in the locker room, the door flung open and in barged tiny Grace Welch. She grabbed the top of Jack's uniform and in front of his teammates yelled: "You punk! If you don't know how to lose, you'll never know how to win." She was, he writes, "the most influential person in my life. Many "of my basic management beliefs--things like competing hard to win, facing reality, motivating people by alternately hugging and kicking them, setting stretch goals, and relentlessly following up on people to make sure things get done--can be traced to her as well. Perhaps the greatest single gift she gave me was self-confidence. It's what I've looked for and tried to build in every executive who has ever worked for me. Confidence gives you courage and extends your reach. It lets you take greater risks. My mother never managed people, but she knew all about building self-esteem."

No, Jack Welch is not a psychobabbler. The more than 100,000 employees he downsized can testify that he is not a touchy-feely kind of guy. But the core lesson of this book is that human qualities and the "soft stuff" of management--pride that stops short of hubris, the humility to listen, a team corporate culture, creating "the informality of a neighborhood corner grocery store in the soul of a big company," focusing on people development--matter more than astringent business plans. "Great people, not great strategies, are what made it all work," writes Welch. Near the end of the book, he tries to sum up what made him a successful CEO. By my count, 18 of the 30 qualities he cites--including "setting a tone" or making employees "feel my presence," "informality," "passion," "self-confidence," "integrity," "stretch," "culture counts," "mingling" with the troops, and creating a feeling of working for a nonhierarchical organization--cannot be reduced to a how-to formula.

Even before the Web, Jack Welch was interactive. A natural gossip, he knew thousands of employees by their first names and was hungry to learn as much as he could about his executives. He reshaped GE's 52-acre Crotonville (N.Y.) training center into a reeducation camp and pulpit to disseminate his views. But that campus was also a place he used to size up executives, to see if they pushed back, had passion, would stretch. He prowled in front of a lectern, never giving a formal speech, always trying to undress people with probing questions. As he tried to do with reporters, he was always fishing for information. Every executive who performed at an A or B level had to spend time at what he calls "the Crotonville pit," where each, in writing and in person, had to identify and discuss his or her (at GE they were mostly his) potential successors. Each also had to travel to Fairfield, Conn., or Boca Raton, Fla., or elsewhere to attend a stupefying number of corporate executive councils, session C reviews, session I reviews, session II reviews, and workout sessions.

True, Welch was lucky. He had the good fortune of a strong economy at his back for most of his 20 years. And he did make his share of mistakes. In retrospect, his impatience earlier this year to close a purchase of Honeywell International Inc. blinded him to the opposition that would build among European regulators. Similarly, his worries about drugs, payola, and other perils of the music industry prompted him to sell RCA Records too quickly and cheaply. He acquired NBC, and under Robert C. Wright, it has thrived. But because Welch refused to dilute GE stock with expensive purchases, NBC is the lone network without a studio to supply it with product. And NBC now competes against such vertically integrated behemoths as AOL Time Warner, Viacom, and Vivendi. He handles with humor his own hubris in believing that GE could find synergies by buying Kidder, Peabody. "The talent goes up and down the elevators every day and can go in a heartbeat. All you're buying is the furniture," warned company director Walter Wriston.

Welch has been justly celebrated as a business lion--and the book reveals a certain beastliness. In the name of synergy and a boundaryless company, he has been a pioneer in pushing NBC to shill for its various products. He boasts in this book of placing calls to NBC News to get Today to invite the anchors of its sister, Business Center on CNBC, to help boost its ratings against CNN's Moneyline. He describes goading CNBC to cover business news as "a game" or "sport," seeming not to realize that he bears some responsibility for the hyperventilated reporting that contributed to the dot-com bubble. His MSNBC also often reports the news as a sport of sorts--mud wrestling. He describes the New York Post--not The Wall Street Journal or The New York Times--as "my favorite paper."

He dismisses government and environmental complaints that GE has polluted the Hudson River with PCBs. He writes: "Good science and common sense have become drowned out by loud voices and extreme views" held by those who seek "to challenge the basic role of the corporation." This ignores some inconvenient facts: Republican Governor George E. Pataki and most of the state's congressional delegation have attacked GE. Those well-known "extremists" in the Bush Administration have sustained the Clinton Administration's order for GE to spend $500 million to dredge a 40-mile stretch of the Hudson. Welch justifiably observes that this dredging is a massive and expensive undertaking that will perhaps wreak more environmental damage than leaving the river at rest. But then he offers: "We'll spend whatever it takes to do the job right." If PCBs are not a problem, why make such an offer?

At one point, Welch boasts of a conversation with a manager of a Fifth Avenue clothing store. Appearing the previous evening on The Charlie Rose Show, Welch had said it was "important for organizations to continually remove the bottom 10% of their employees." The store manager, who had seen the program, explained to the GE chief that he had a staff of only 20. "Mr. Welch, do I really have to let two go?"

"You probably do if you want the best sales staff on Fifth Avenue," answered Welch.

As a consumer, I, too, want the benefit of dealing with the best sales staff. But if my salesperson is graded a C, not a B--Welch forced executives to get rid of employees graded C performers--maybe that salesperson just needs some good management coaxing to improve. Or maybe other factors, including good community relations or building long-term loyalty, should come into consideration.

What if every company said it wouldn't hire C performers? Welch describes the willingness to behead the Cs as "a willingness to take the heat when you make the tough calls." It could also be described as callous or ruthless, or as a preoccupation with achieving a profit margin of, say, 19%, rather than taking into account other values, such as decency.

Corporations, as Welch says several times, are composed of human beings who do not wake up each morning thinking: How can I pollute more rivers or harm more consumers? But the pressure in corporations to achieve the financial goals set at the top by CEOs such as Welch sometimes compel their minions to go after TV ratings by broadcasting reality shows that feature contestants willing to let rats crawl over them, or lead the NBC-owned local TV stations to dumb down their news coverage, or spur executives to show their boss how tough they are by firing more people.

Whatever its philosophical or other flaws, this is a valuable, pungently written business book by a man who lights up every room he enters. This memoir served as a necessary bridge for Welch, allowing him to get free of his beloved GE. "It kept me out of Jeff's hair during most of the transition," writes Welch. He succeeds in making readers "feel my presence," as he said he wanted his employees to. In the end, you remember the alluring lion.

By Ken Auletta

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