Jack Welch's Unretirement
On Oct. 11, Jack Welch took the stage before a standing-room-only crowd at the North Ridge Country Club in Raleigh, N.C., and doubled down. “In order for the employment numbers to be where they were said to be, the economy would have to be operating at breakneck speed,” Welch, the former chief executive officer of General Electric, said in defense of his widely derided Twitter message alluding to a partisan bias in a U.S. Bureau of Labor Statistics report. The previous week he’d written: “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers.” Welch looked out at the 400 executives attending the North Carolina CEO Forum. “Do you think the economy is operating at breakneck speed? All I’m trying to do is show this number is nonsense!”
“These people,” he went on, referring to the workers who conduct the employment survey, “they may have a soul Christ would be happy with, but do you really think they’re Romney supporters? Everyone has bias, and that influences what you do.”
Welch wore a dark suit and striped tie, and as he shared his conspiracy theory in exchange for his standard six-figure fee, he excitedly wiggled his 5-foot, 7-inch frame around in a red armchair on stage. But Welch, who just turned 77, wasn’t finished. “If I were president,” he declared, according to Lauren Ohnesorge of the Triangle Business Journal, who was present, “I would raise the retirement age!” And: “The trouble with government is, it has no competition—it is bloated beyond belief!”
In case it wasn’t clear, Welch “reviles” President Obama, as Welch’s interviewer, Ken Eudy, says. “Our event is actually nonpolitical,” says Rick Deckelbaum, one of the event’s organizers, chuckling a little. “Welch even joked that on the flight down to Raleigh his people told him not to talk about politics.”
Welch didn’t care. By all indications, he was soaking up the attention he’d generated using his social media bully pulpit. His suggestion that the Obama administration had fudged the employment report for political gain made headlines around the world—most of them negative. According to a person close to him, Welch was hurt by some of the mockery that rained down. The detractions ranged from calling Welch a “crazy-old-man-on-twitter” (Reuters’s Felix Salmon) to a has-been who has “lost his game” (Fortune’s Allan Sloan). It was not the kind of attention he was used to—but it was still better than no attention at all.
On the North Carolina stage, Welch turned to Eudy, the public-relations executive and local Democrat who was questioning him: “Your party likes to divide,” Welch scolded. “I know about division—my daughters are out right now with Obama signs. … So we’ve chosen not to discuss the subject.” It was clear he relished his status as a free agent. “If I were still a CEO, I wouldn’t be saying all these controversial things.”
In conversations with friends, Welch calls himself retired, but retirement Jack Welch-style is very different than retirement for most business moguls. At one end of the spectrum is Bill Gates, who quit running Microsoft to battle malaria and poverty in the developing world; at the other are entrepreneurs who found wellness centers, ex-chiefs who bankroll the search for extraterrestrial life, and John McAfee, the antivirus software pioneer on the lam in Belize. In between are dozens of less colorful lives lived by corporate elder statesmen, such as former IBM Chairman Lou Gerstner, who hold part-time consulting gigs or business school professorships. Since September 2001, when he left GE, Welch has forged his own, singular path, a sort of unretirement-as-reality-show cast by himself and his third wife, Suzy. Says Jimmy Lee, vice chairman of JPMorgan Chase and Welch’s close friend and longtime business associate: “His agenda is being Jack.”
Welch left the corporate sector with more than $400 million and enjoys a gilded standard of living, flitting between his Manhattan apartment with skyline views and oceanside spreads on Nantucket and in North Palm Beach, Fla. “He plays golf, he enjoys that,” says Larry Bossidy, one of Welch’s lieutenants at GE and a former CEO of Honeywell who socializes with Welch. “But what keeps him vital and alive is his engagement in various activities. He’s not a guy who sits around and worries about things. He enjoys life in many dimensions.” Says Home Depot founder Ken Langone: “Jack has a chance now to be more of a free spirit.”
Welch declined to be interviewed for this article but has no shortage of opportunities to speak. In the last few weeks, Welch held forth at the Shale Gas Insight conference in Philadelphia and the World Business Forum in New York. After North Carolina, he went to Peru and Ecuador for the 2012 Business Decision Makers Program. He most recently appeared in Toronto at the Art of Management gathering on Nov. 20, where a $799 “platinum pass” granted guests access to an “exclusive cocktail reception” with Welch. In between, he’s grilled executives during the biannual operating reviews he leads for private equity firm Clayton, Dubilier & Rice (CD&R), and he and Suzy have entertained friends including Langone in Florida, where Suzy is learning to play golf. “I think Jack doesn’t want to be pigeonholed as the guy who ran GE,” says Bob Nardelli, once a contender to replace Welch at GE who went on to run Home Depot and Chrysler. “He loves GE, but he wants his impact to be bigger, broader, and more global than that.”
To better wield his influence, Welch has cultivated a large audience through Twitter (1.4 million followers); on television (CNBC, NBC, CNN, Fox); on the editorial page of his friend Rupert Murdoch’s newspaper (the Wall Street Journal); on the speaker’s circuit, where he commands at least $150,000 for a Q&A (he doesn’t do speeches); and through other channels. Much of his energy is devoted to weighing in on whatever subject interests him—from presidential politics to the Boston Red Sox. A verbatim sampling: “Daughters home so I am watching Bachelor. What a stupid awkward show. Maybe age is my problem” (March 14, 2011); “Congratulations to Piers Morgan on new baby !!!!!!!!!!!!!!” (Nov. 26, 2011); and “Solar plus wind.….energy independence..,,”BAD ARITHMATIC” (Sept. 6).
“Your yield curve crests the day you retire,” says Steve Miles, a leadership consultant and founder of the Miles Group. “The further you get from the CEO job, the more provocative you have to be to get attention.”
Welch’s ongoing argument for his own relevance draws upon his legendary business reputation. He was born in Peabody, Mass., the only child of Irish immigrants, with a father who worked as a train conductor and a famously tough mother. After earning a Ph.D. in chemical engineering at the University of Illinois Urbana-Champaign, Welch joined GE’s plastics division in 1960. By the time he left 41 years later, he was credited with transforming the conglomerate into a lean and much more profitable company. At the peak of his influence, in 1999, Fortune named him “Manager of the Century.” That Welch’s methods could be crude and controversial—eliminating more than 100,000 jobs at GE, dumping waste into the Hudson River, and often keeping the financial operations of GE opaque—was mostly obscured by his ability to keep shareholders happy. Riding the bull market of the 1990s, he grew accustomed to worshipful press coverage. “CEOs were idolized,” says Bill George, a former CEO of Medtronic who teaches at Harvard. “We were treated, frankly, as heroes, and Jack was right at the top of the list.”
The foundation for his next phase began before his departure from GE with a $10 million deal for his memoir, Jack: Straight from the Gut, one of the highest nonfiction advances ever. The book’s Sept. 11, 2001, publication had been planned as a sort of coronation to coincide with his retirement. After the terrorist attacks, sales didn’t meet expectations, although the book still became a bestseller. The month after its release, CD&R announced that Welch would be joining as a “special partner” to help analyze companies. Welch realizes that his role has changed. Donald Gogel, CEO of CD&R, recalls one company review Welch conducted that ended with the chief executive telling Welch that he’d go home and mull over his advice. Welch sat back in his chair and said: “ ‘What has become of me?’ ” according to Gogel. “ ‘I give all of my ideas, and people used to say, You’re right, Jack. And now they say, I’ll think about it?’ ”
Welch also obliged chief executives who wanted to bring him on as a consultant—a sort of CEO shrink. William Harrison, then the head of JPMorgan Chase, and Barry Diller, chairman of IAC/InterActive, signed up. “We call on him a lot,” Diller says. Bill Conaty, who served as GE’s head of human resources from 1993 until 2007 and is now an adviser with Welch at CD&R, says Welch never planned to retire in the conventional sense. “I know he hated the word ‘retirement.’ ”
Welch’s personal life underwent a complete transformation in October 2001, when Suzy Wetlaufer, the 42-year-old editor of the Harvard Business Review, came to his office to interview him. The encounter led to an affair, a scandal, a divorce, and a marriage. Welch’s split from Jane, his second wife, caused the public revelation of his lavish GE retirement contract. Chastened by the outcry, Welch offered to modify the contract to eliminate most of the continuing perks on the list, giving up free use of GE’s corporate jet and access to its Fenway Park skybox.
Welch’s new wife was photogenic and press savvy. It was Suzy, people close to the couple say, who pushed Welch to become more of a pop culture personality and embrace social media. The chairman emeritus of Corporate America was suddenly part of a celebrity partnership, Jack & Suzy. They moved into a townhouse in Boston’s Beacon Hill with Wetlaufer’s four children. “With his marriage to Suzy, he’s reinvented himself. Without her ignition, I don’t think he would be as productive,” says Warren Bennis, founding chairman of the Leadership Institute at the University of Southern California and a friend of Welch’s. “They’re co-leaders. She’s part of the energy behind that brand. Their relationship is a key to who he’s become.”
Their joint branding exercise included a book contract with HarperCollins to write Winning, a management guide, and a series of business advice columns, first for Businessweek from 2006 to 2009 and later for Reuters, which syndicated the series to Fortune. They were moves that seemed designed, in part, to bolster Suzy’s credentials, as she had to leave her Harvard Business Review job under a cloud after getting involved with her famous subject. The couple proved that not every brand spinoff is destined to succeed. In 2009 they tried their hand at reality TV. It’s Everybody’s Business with Jack & Suzy Welch was a takeoff on Donald Trump’s The Apprentice. Sponsored by Microsoft, the show featured the Welches doling out business advice to executives from a real company. An episode appeared on MSN.com and later on CNBC, but no more were produced.
Welch’s unretirement took another surprising turn when he was approached by Michael Clifford, an online education entrepreneur, with the idea of launching an Internet-based business school. Clifford was interested in taking the traditional business school model and creating something “more current,” as he put it, and “less controlled by academics who had never run a company.” The Welches invested $2 million alongside Clifford and others in the Jack Welch Management Institute, established as part of Chancellor University, a struggling for-profit college in Cleveland. Clifford describes Jack and Suzy as “totally focused and totally passionate” about the startup. “Suzy was the ball bearing that made it happen,” he says.
“Great day working on Jack Welch MBA curriculum + finalizing staffing,” Welch wrote on Twitter on June 30, 2009, as the school was preparing to launch. And then: “Blew out back today.” On July 5, 2009, Welch was admitted to New York-Presbyterian Hospital with discitis, a serious spinal infection that he attributed to the cortisone shot he’d taken for his back. He spent 92 days in the hospital, an ordeal that both he and his wife documented in real time. Once he was past the worst of it, Suzy tweeted: “That sound you hear is me exhaling for the first time in 22 days.”
Welch returned home diminished and frail. Despite the setback, the Jack Welch Management Institute opened in January 2010, one semester later than planned. In April that year, Bloomberg News reported that Chancellor and other for-profit colleges had been recruiting students from homeless shelters and registering them so they could obtain federal student loans, which formed the bulk of the schools’ revenue. Congressional hearings on the merits of for-profit higher education followed. Welch moved his institute to a larger, publicly traded for-profit college with a better reputation called Strayer University, in Herndon, Va. Strayer agreed to pay $7 million to Chancellor to buy the Jack Welch Management Institute, with 40 percent of the funds contributed by Welch. Strayer also entered a licensing agreement with Welch and agreed to pay him a royalty for use of the curriculum he and Suzy had designed. Welch’s name is a major selling point for the school, which targets midlevel executives willing to pony up $30,960 for 12 courses leading to an executive MBA. The institute has yet to turn a profit, but Welch has said he hopes it will one day produce more graduates than Harvard Business School. (Strayer declines to give specific numbers, but says several hundred are currently enrolled.) “Jack’s videos bring the curriculum to life,” reads the school’s promotional copy. “Additionally, all executive MBA and certificate students now have the opportunity to speak with Jack directly through a live video conference at the end of each term.”
In his video addresses, Welch riffs on topics of the day and applies them to the business world. In one featured spot, he discusses WikiLeaks: “As you go to business … err on the side of transparency internally,” he declares, “but make it clear to everybody who works in your unit that trade secrets are trade secrets!”
At the same time, the company where the Welch legend began has been suffering. The soaring GE stock price that turned Welch into a star has since fallen to $20, one-third its high in August 2000. GE Capital, the finance unit that Welch made an earnings powerhouse, had a near-death experience during the financial crisis and was forced to turn to Warren Buffett for a $3 billion bailout. GE’s uncanny ability to deliver steady earnings growth became less a sign of Welch’s genius than his knack for moving money around and drawing on a richly funded pension plan. Some of the most famous Welch management edicts—from cutting the bottom 10 percent of the workforce to being No. 1 or No. 2 in every business—turned out to be as elusive a practice within GE as in the rest of the world. To some, the so-called Welch Way didn’t just seem silly but wrong.
The analysis of Welch’s accomplishments splintered into two camps: his fans who still regard him as the business world’s General Patton—“His wisdom and his experience are second to none,” says former Campbell Soup CEO Doug Conant—and those more critical of the imprint he left. “You can’t evaluate a CEO’s legacy in the time he was CEO. You have to look at what was laid at the successor’s feet,” says Thomas O’Boyle, author of At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit. “And on that criteria, the market cap is less than half of what it was when he left. Doesn’t that somehow count toward the consideration of what he did while he was CEO?”
There’s no shortage of old CEOs with expertise, nor, for that matter, of old CEOs with books to flog and speaking agents. None, though, has managed to turn the revelation of his expertise into an event quite like Jack Welch has. When he plays his greatest management hits for audiences around the world—“Sense early, move fast, and energize your people!”—he’s doing more than cashing a check. He’s advancing the syllogism at the heart of his post-GE success: Jack Welch was a great manager; I want to be a great manager; if I listen to Jack Welch, I, too, will be a great manager.
True or not, it’s hard to argue with the crowds. Ten thousand Chinese manufacturing representatives came to see a man who doesn’t speak a word of Mandarin in September 2011. In 2013 he’s already booked in Atlanta, Finland, and China again. The Twitter incident doesn’t appear to have harmed his appeal; on the contrary, it’s gained him followers. “When he tweeted, that was almost more of a Donald Trump move,” says Gary Koops, a managing director of Burson-Marsteller, the global PR firm. “An entire generation of MBA students and aspiring leaders still want to hear from Jack Welch. What strikes me is that he’s still viewed as a significant figure that people pay attention to.”
That’s because he’s as much a professional personality now as he ever was a CEO—a profile he and Suzy are managing as deliberately as he ever did a GE earnings presentation. The irony is that the Chinese manufacturing students could study his every tweet, audit every Jack Welch Management Institute class, and trail Welch on the speaker’s circuit for all his remaining days without mastering the secret of his retirement act. That’s because it’s not replicable.