Jack Welch died on March 1 at the age of 84. He was one of the most successful men of the twentieth century—a working class Irish kid, who through, enormous talent and hard work rose to be one of the most acclaimed businessmen of all time. An entire generation of managers and business leaders studied his every move, pushed his books up the bestseller lists, quoted and emulated him. He succeeded at everything he touched, except perhaps the one thing he cared most about—his legacy.
Very few have worked harder to shape what future generations would think of them than Jack Welch. He wrote books—three of them—with immodest titles like Winning! lest anyone forget that's what he did. He lent his name to a business school at Sacred Heart University and later founded the very successful Jack Welch Management Institute to teach his approach to leadership. He taught at MIT. He even married a journalist covering him, Suzy Wetlaufer. After carefully and very publicly selecting Jeff Immelt as his successor, he then undermined him. Welch used those from his inner circle to make sure that he himself got full credit for GE's success and Immelt full blame for what came later.
Welch was born into a working class Irish-Catholic family in Peabody, Massachusetts in 1935. After obtaining his undergraduate degree in chemical engineering from UMass, he went on to get his masters and doctorate from the University of Illinois. He graduated in 1960 and took a job with GE, the company he would stay with throughout his career. He rose meteorically through the ranks, becoming GE's youngest-ever CEO and Chairman in 1981. Over the next twenty years, according to GE, he took the company from the tenth most valuable in the world to the largest and most valuable. Market cap rose from $14 billion to $410 billion. The stock price rose from $1.27 per share to around $50, growing four times faster than the market overall. Welch was lauded as a hero. In 1999, Fortune named him "Manager of the Century." He retired in 2001. Had he had passed right then, he likely would've been sure that he'd be remembered as one of the great business innovators and leaders of all-time. Instead, he lived long enough to see much of what he'd done fall apart and many of his management theories discredited.
Welch was a tireless innovator, changing virtually everything he touched—quality control, leadership, strategic planning. He was an early proponent of dismantling bureaucracy and creating less hierarchical workplaces and a later adopter of Japanese-influenced quality processes. Perhaps the ideas he's most associated with, though, involve aggressive acquisition as a means to growth and what can best be described as the brutality school of management.
Before Welch, GE was a relatively staid manufacturing firm. Under Welch, it became a voracious corporate acquisitor, gobbling up 600 companies during his tenure. He built the world's largest conglomerate during a time when the stock market hated conglomerates. GE's performance was so strong that they made an exception. His modus operandi was to buy a company and gut it of employees, weak product lines, and underutilized assets, a process that earned him the nickname "Neutron Jack," because like a neutron bomb, he destroyed the people and left the buildings intact. His formula led to explosive growth in both revenues and profits even as the number of employees plummeted. He expanded particularly aggressively into financial services. When the Great Recession hit, GE's financial businesses tanked, and GE was forced to take a bail-out. It's market capitalization at the end of 2019 was $96 billion, less than a fourth of where it had been in 2001.
Welch blamed Immelt for the struggles of GE. But that just won't stick. Welch always said that he should be measured by how GE did after he left. And that is not very well. Immelt was his carefully chosen successor. If he wasn't up to the job, then Welch erred in choosing him. And Immelt's formula was Welch's—acquisitions and expanding into financial services. Welch may own GE's success, but he also owns at least some part of its failure.
But it was not just what Welch did. It was how he did it. He was brutal in slashing costs and firing people. He was brutal in the demands he made on his managers. This resulted in extraordinary performance but also in managers going to any lengths to avoid his displeasure. One of Welch's dictums was the importance of being "number 1 or number 2 in every market in which we compete." It's a sophisticated rule of thumb that despite its apparent simplicity, embodies both economics and game theory. Nonetheless, for those desperate GE managers with a business stuck at number 3, it led less to creative business strategies than to creatively defining markets in ways that kept their businesses from being sold off, what former University of Chicago professor Milind Lele scornfully dismissed as "being number 1 north of Broad Street and east of Main." It also led to questionable reporting and accounting practices. In 2009, the SEC accused GE of false statements and it paid a $50 million fine. Welch was equally brutal on a personal level, famous for honest-to-the-point-of-cruel feedback and for firing those managers rated in the bottom 10 percent in terms of performance. Welch's approach to people management epitomizes what the current generation of business leaders strives to avoid. It is less an example than a cautionary tale.
After leaving GE, Welch continued to pontificate on business and politics, staying in the public eye long after his moment had passed. He lived long enough to see his legacy. It's anyone's guess whether he liked what he saw.
Sam Hill is, among other things, a Newsweek contributor and best-selling author. His most recent Newsweek story is Black China: Africa's First Superpower is Coming Sooner Than You Think
The views expressed in this article are the author's own. This piece had been edited for publication online.
Correction: This article has been corrected to better reflect Suzy Wetlaufer's work prior to her marriage to Jack Welch.
