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Jack Welch: Straight from the Gut

When you’re edging toward 80 and you’ve already revolutionized the business world, it’s clearly time to relax. But instead of kicking back, Jack Welch, the revered CEO at the helm of General Electric for 20 years, has reinvented himself again.

While his contemporaries—and, let’s face it, even people half his age—are often bewildered and bedeviled by breakneck technological intrusions, the 78-year-old Welch embraces them all. He has 1.42 million Twitter followers and more than 2 million devotees to the wisdom he imparts on his LinkedIn web page. He often prefers a teleconference to traveling to New York to meet face to face with private equity portfolio companies.

And education? It’s moved online. The reason? “One word: reach. You get to more people,” says Welch, who formerly taught an elite group of MBA students at the Massachusetts Institute of Technology and now oversees the Jack Welch Management Institute at the comparatively unknown online Strayer University.

The Internet and social media have transformed education as well as the business world, Welch says. One of the most profound changes is that bosses can no longer pretend they know more than their workers. “Knowledge is no longer power because everyone has it,” he says.

That means bosses have to be true leaders. They have to show workers where the company is headed, why it’s headed there and why they should follow. “It’s not some stuffed shirt in an office barking out orders anymore. Everybody has the knowledge,” he says.

For the straight-talking Welch, it’s never been about style over substance. And age hasn’t changed him. While many business tycoons settle in Palm Beach, Welch and his third wife, Suzy, looked roughly 10 miles north of the island mecca of the rich and famous when they began hunting for a Florida home seven years ago. They purchased a $7.6 million home in Lost Tree Village, a gated community that stretches from the Atlantic Ocean to the Intracoastal Waterway in North Palm Beach. An undeniably wealthy enclave with a golf course designed by fellow resident Jack Nicklaus, it has none of the glitz, glamour or celebrity of Palm Beach. That, Welch says, is why it was attractive.

“I don’t ever want to wear a tuxedo again,” he says, his raspy voice dripping with the distinctive New England accent he earned growing up in Salem, Mass.

A Meaningful Purpose

It’s vintage Welch. Throughout his career, as he increased the value of GE by an eye-popping 4,000 percent, he was known as a blunt-to-a-fault, unconventional leader. While he stands only 5-foot-8, everything about him seems large: his ideas, his commitment to them and his ability to make others embrace them.

Sitting in the kitchen of the 8,400- square-foot home on the Intracoastal that is filled with comfortable furniture and huge modern paintings by Jim Dine, one of his wife’s favorite artists, Welch displays all the wit, wisdom and verve that kept him in the headlines and at the helm of one of the world’s largest corporations for two decades.

His blue eyes glinting, he occasionally balls his fists as he blasts the ever-popular notion of business mentors, decries managers who blithely embrace across-the-board raises or across-the-board anything, and insists that running a business isn’t solely about making money.

“If work is just going in every day and getting a check, it’s an ugly life,” he says with a shake of his head. “When you can make work a meaningful purpose, you’ve hit the jackpot for people. When you can make them love coming to work, proud of their work, think it has a purpose, that’s what it’s all about.”

Further, he says, people should pursue their passions. “There’s an area of destiny for everyone. You like doing it and you’re good at it,” he says. To emphasize the point, he crosses his forearms in front of him to form an X. That is the perfect intersection everyone should be seeking. “We all want to end up there,” he says, tapping his arms together.

Such touchy-feely talk may surprise those who remember Welch in 1981 shortly after he became the youngest person ever tapped to run the company that traces its roots to Thomas Edison. Selling off unprofitable businesses and shedding bureaucracy, which resulted in the loss of about 100,000 jobs, Welch was dubbed “Neutron Jack.”

Welch says he was stunned by the criticism. “I hated it. Hated it. Hurts,” he says. “It’s the last thing I thought I was doing.”

Faced with growing competition and falling profits, he says he had to act. “We were making television sets in Syracuse, N.Y., and the Japanese were selling them in the malls in Syracuse, N.Y., for 15 percent below what we were making them for there,” he says, grimacing at the memory. “So something was wrong, and we weren’t going to survive.”

Fielding the Best Team

And he says his tactics worked. When he took over, GE had 420,000 workers and did $25 billion in business. Twenty years later, it did more than $130 billion in business with 325,000 employees. “Now were we fat?” he asks with a nod, challenging listeners to disagree. “How do you do five or six times the volume with 100,000 fewer people if you weren’t fat?”

But contrary to popular belief, he says he never advocated whacking workers indiscriminately. Unfortunately, he says, that’s how many businesses interpreted the 20-70-10 approach he outlined in his first book, Jack: Straight from the Gut.

His theory was that the top 20 percent of a company’s workforce are the most productive, 70 percent are worth saving, and 10 percent aren’t performing.

“I talked about getting rid of the bottom 10 percent. So some companies fired the bottom 10 percent,” he says, waving his hands dismissively. “The problem was it was the first time anybody knew they were in the bottom 10 percent. That’s just stupid.”

He says he never intended his advice to be interpreted so literally or inhumanely. “You’ve got to have an appraisal system that is rigorous. People have to know where they stand,” he says. “You don’t get rid of them that year. You give them a year to improve. You work on it with them, and you do it hopefully when they’re 30, not 50.”

Firing people without warning, particularly after they’ve spent years toiling at their jobs, is just wrong, Welch says, his voice rising. “That’s the cruelest form of management. It’s cowardice. I hate it.”

He uses the same word to describe blanket management policies, such as 10 percent across-the-board cuts, 7 percent raises or buyouts for anyone over the age of 55. “They’re all cowardly management stunts,” he says. “You treat people as individuals, not with these blanket weak-kneed management formulas.”

Such policies seem to fly in the face of his mantra: “The team that fields the best players wins.” Not so, he insists.

“You believe that you’re fighting every day to get the best team. So how do you have a buyout when you have the best team and you lose three of your best players who happen to be 57 years old?” he asks. “All of a sudden you’ve weakened your team. It makes no sense.”

Create a Learning Culture

A former high school and college athlete, Welch has said success in any endeavor is a team effort, both for a company and an individual. That’s one reason he says he has rejected the popular notion of business mentors.

“I’ve had many mentors. I’d bump into someone who would give me a break, give me a chance,” he says. “But I’m always telling people don’t get yourself hooked on a mentor. Get something from everyone.”

There are unexpected pitfalls of being paired with someone not of your own choosing, he says. “Let’s say I’m your mentor,” he explains, clearly enjoying this story. “I’m a middle manager; you join the company; you’re fresh out of college. I’m assigned as your mentor because I’ve been there five years. But everybody thinks I’m a horse’s ass. What are they going to think of you? You’re hanging around with me. You get everything I’ve got—all of my baggage.”

Instead, he says, absorb lessons from everyone and everything—a newspaper article, a speech, a colleague, a boss, a book, even a competitor. And, as a leader, foster a learning culture. “It totally is in a learning culture that you create an atmosphere where everyone is looking all the time to do things better,” he says.

Welch worked to foster such an atmosphere at GE, and he preaches about the importance of a learning culture to his ever-growing number of students at Strayer University. He wants to spread the gospel of good management—a gospel that he says has peppered the business landscape with dozens of former GE executives who are now running companies that, like GE, are household names. He ticks off their names like a proud parent: David Cote, the CEO of Honeywell International; Frank Blake at Home Depot; David Calhoun at Nielsen; and James McNerny at Boeing. “I  can go through 50 of them,” he says. And that’s what he hopes for his students. To give them the practical skills they need to move to the top.

Expanding His Reach

Welch readily admits he was initially skeptical about online education. But ever the businessman, he likes the volume. “I now have 650, not 40,” he says of the number of MBA students he teaches at Strayer compared to MIT. “I want to have 5,000. We hope to get to 1,000 in the next 18 months.”

He also likes the practical aspects of the program. Most of the students are already working, either as middle managers or as entrepreneurs. They can immediately put into practice the lessons they learn. They don’t have to leave well-paying jobs to spend hundreds of thousands of dollars to get a degree, he says.

“This allows people to keep their jobs, grow in their existing companies and learn in a parallel universe,” he says. “It’s fabulous.”

While for-profit universities have come under fire from Congress for their high cost, low graduation rates and misuse of federal grant money, Strayer fared better than most in a 2012 report by the U.S. Senate Committee on Health, Education, Labor and Pensions. The report noted that many top companies, including Verizon Wireless, Lowe’s, CarQuest, ADP and Nestlé USA, provide tuition reimbursement for employees attending Strayer. That, the committee report said, spoke well of the rapidly growing publicly traded university.

Welch says he is heavily involved with the faculty and in developing the curriculum of his program. Every six weeks he holds a webcast where he takes questions from students. “The discussions are wide open. All I do is sit there and say, ‘Let’s have at it,’ ” he says. “We might have 300 to 600 online at any given time.”

Not everyone needs an MBA, says Welch, who earned a bachelor’s degree in chemical engineering from the University of Massachusetts at Amherst and master’s and doctoral degrees in chemical engineering from the University of Illinois at Urbana-Champaign. But that’s not to say a higher degree is useless. “It’s another notch on the belt,” he says. “It says you did something; you finished it; you learned how to do certain things. It allows people to deliver the results.”

Welch says he didn’t need an MBA because he had been schooled in the Socratic Method. While pursuing his doctorate, he learned to gather information, analyze problems and find innovative solutions. He grew to understand that the first answer wasn’t always the right one and that it sometimes took several trips down blind alleys to find a solution. Most important, he says, such truth-seeking builds self-confidence. “And this whole thing is about self-confidence: Do you have the ability and self-confidence to take chances, to reach, to probe, and the self-awareness to know what you don’t know?”

“I Never Realized I Was Short”

Welch readily admits he never lacked the self-confidence he credits with his success. He thanks his mother for that. “I was the only child of an Irish mother, and she had me late in life. She was 40. So I was the apple of her eye,” he says. “I have a speech impediment. My mother told me, when people would make fun of me, ‘Just tell them your mind works so much faster than your brain that your tongue can’t keep up with it.’

“And I believed her,” he continues. “A stammer? I could care less.

“I never realized I was short,” he adds with a shrug and a short laugh. His mother convinced him he would reach great heights no matter what he chose to do.

Today Welch’s work is in many ways an extension of what he did at GE, although the businesses he deals with are decidedly different. As senior adviser for the private equity firm Clayton Dubilier & Rice, he reviews businesses in the portfolio every couple of months the same way he reviewed businesses at GE. Quarterly, he does the same with Internet dating sites, search engine companies, a video company and other high-tech businesses as a consultant for IAC/InterActiveCorp, where his longtime friend, former Paramount Pictures CEO Barry Diller, is chairman of the board.

On a daily basis, he’s involved as chairman of the Jack Welch Management Institute, which is similar in many ways to the teaching he did at the GE Training Center, where he led lively exchanges with groups of employees every month for 20 years.

“Now I’m translating what I did at GE into today’s world,” he says. “It’s great fun.”

Welch says he never regretted leaving GE. “The whole idea of people coming to these companies is someday it’s going to be theirs,” he says. “I was running it for 20 years. I  was there for 40. It was time to move on.”

Besides, he says with obvious pleasure, he and his wife, a Harvard Business School graduate who was editor in chief of the Harvard Business Review, are too busy with their sundry pursuits. “We travel around the world speaking. I go to New York for private equity company meetings. I go to Washington for our school. I  hang out and play golf and go to the gym every morning when I’m here. There are no typical days. I love it.”


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