The Personal Journey of Jack Welch JACK: STRAIGHT FROM …

1 Published by Soundview Executive Book Summaries, 10 LaCrue Avenue, Concordville, Pennsylvania 19331 USA 2002 Soundview Executive Book Summaries All rights reserved. Reproduction in whole or part is Personal Journey of jack WelchJACK: STRAIGHTFROM THE GUTTHE SUMMARY IN BRIEFThe career of former General Electric CEO jack Welch leaves us withmany lessons in management, business and leadership. From his beginningsas a stuttering, competitive kid from working-class Salem, Mass., to hisearly days as a GE engineer, to his ascension to CEO in 1980 and subse-quent 20-plus year reign at the top, Welch stressed the importance of peo-ple, originality and creativity, and common sense.

2 The result is a leadershipstyle that s often imitated, but never jack : STRAIGHT from the Gut, Welch is both storyteller and coach,using his exceptional career as the backdrop to share his thoughts on whatit takes to be a great leader. Part management text, part page-turner, Jackshows how the man widely regarded as the finest corporate executive of hisgeneration built his business and his Knowledge for the Busy Executive 24, No. 4 (2 parts) Part 1, April 2002 Order # 24-09 CONTENTSThe Vision ThingPages 2, 3 The Neutron YearsPage 3 The People FactoryPages 3, 4 Being BoundarylessPages 4, 5GE s Globalization DrivePage 5 Six Sigma and BeyondPage 6E-Business: GE GoesDigitalPages 6, 7 What This CEO Thing Is All AboutPage 8By jack Welchwith John A.

3 ByrneJacket Photograph byTimothy Greenfield SandersFILE: STRATEGIC MANAGEMENT What You ll Learn In This Summary It s best to be small, no matter how big you slashing unneed-ed bureaucracy and insisting that GE s businesses be in the top two positionsin their respective fields, Welch instilled an entrepreneurial spirit and a quick-thinking, quick-moving approach to competition and constant was a small-company approach to running an enormous, multi-billion-dol-lar organization, and it worked marvelously. It s all about Welch s passion was making people GE score competency, and he saw to it that the company found and developedgreat people. Companies must be boundaryless to unlock their results in stale ideas and, consequently, stale organizations.

4 By break-ing down the walls and borders that separated various departmental and func-tional areas at GE, Welch was able to unlock the full creativity of his people,propelling the company forward with fresh, creative approaches to problems. Quality is nothing without s Six Sigma initiatives replacedsloganeering quality strategies with ones that brought about measurableresults in increased efficiency, reduced defects and satisfied Vision ThingJack Welch s first time in front of Wall Street as CEO a talk before financial community representatives in1981 was, by his own admission, a bomb. In a 20-minute speech, he gave his audience a primer on whathe felt it would take for a company to be viable in thelong term.

5 Winning companies, he said, would be theones that search out and participate in real growthindustries and insist upon being Number One orNumber Two in every business they are in theNumber One or Number Two leanest, lowest-cost,worldwide producers of quality goods and services. Itwas a strategy to which he would commit his companywith the fullest effort imaginable a strategy thatwould change the face of GE Street yawned. They were looking for hard num-bers, things they could plug into their financial modelsand crank out estimates of earnings. They wanted aquantitative discussion; Welch had given them a qualita-tive talk, because he did not yet have a conceptual toolto communicate, much less implement, his on a Cocktail NapkinThen, one evening, while trying to explain the conceptto his wife, Welch sketched out the strategy on a cocktailnapkin.

6 The sketch showed three circles, labeled serv-ices, high technology and core. A number of GEbusiness units were listed inside and outside the the next few weeks, Welch would refine, expandand share his model with everyone who would inside the circles were core manufacturing,technology, or service entities the bedrock of businesses outside the circles would have to befixed, sold or closed they were marginal performers,or were in low-growth markets, or simply had a poorstrategic fit. These were business that were, in otherwords, going to have a hard time achieving the NumberOne or Number Two status in their the StrategyIn the first two years of the strategy, GE sold 71 busi-nesses and product lines, receiving a little over $500million for them a relatively small amount of action,but action that had purpose.

7 When GE sold a strugglingbusiness and realized an accounting gain as well ascash, it gave the company the flexibility to reinvest in orfix up another, potentially stronger, business. This gen-2 jack : STRAIGHT FROM THE GUTby jack Welch with John A. Byrne THECOMPLETESUMMARYS oundview Executive Book Summaries Published by Soundview Executive Book Summaries(ISSN 0747-2196), 10 LaCrue Avenue, Concordville, PA 19331 USA, a division of ConcentratedKnowledge Corporation. Publisher, George Y. Clement. V. P. Publications, Maureen L. Solon. Editor-in-Chief, Christopher G. Murray. Published : $195 per year in , Canada & Mexico, and $275 to all other countries. Periodicals postage paid at Concordville, PA and additional :Send address changes to Soundview, 10 LaCrue Avenue, Concordville, PA 19331.

8 Copyright 2002 by Soundview Executive Book formats:Summaries are available in print, audio and electronic formats. To subscribe, call us at 1-800-521-1227 (1-610-558-9495 outside &Canada), or order on the Internet at Multiple-subscription discounts and Corporate Site Licenses are also authors: jack Welch has been with the GeneralElectric Company since 1960. He was Chairman andCEO of the company from 1980 to 2001. John A. Byrneis a senior writer at Business 2002 by John F. Welch , Summarizedby permission of the publisher, Warner Books, Inc., NewYork, NY. All rights reserved. 479 pages. $ more information on the author, go to: A PHILOSOPHY(continued on page 3)Superficial CongenialityIn 1980, GE was, like much of American industry, aformal and massive bureaucracy, ruled by more than25,000 managers who each averaged seven directreports in a hierarchy with as many as a dozen levelsbetween the factory floor and the CEO s office.

9 Havingbeen in the field, Welch had a strong prejudiceagainst most of the bureaucratic culture and its superficial congeniality pleasant on the surface,with distrust and savagery roiling beneath also hated the sense of elitism exhibited byGE managers, as exemplified by the Elfun Society an internal management club that served as a network-ing group and a rite of passage into told members of the Elfun Society that the clubwas an institution pursuing an old agenda, one withoutany value to the newer, faster, forward-looking GE hewas trying to challenged to change, the members of Elfunrose to the occasion. Today, the once-exclusive man-agement club is an army of GE community volun-teers, with membership determined solely by the will-ingness of its 42,000 members (from factory workersto senior executives) to give the kind of consistent earnings growth that wasexpected of Welch when he was named CEO.

10 It wasalso the outgrowth of Welch s central vision of runningGE that he and GE leadership managed businesses,not earnings. Accounting doesn t generate cash; manag-ing businesses does. The Neutron YearsIn 1980, the economy was in a recession, withrampant inflation and soaring energy prices. In themidst of this downturn, GE looked as solid a companyas there could be, with over $ billion in net incomeand $25 billion in sales. Yet, jack Welch could see trou-ble on the horizon. The Japanese, benefiting from aweak yen and good technology, were increasing theirexports into many of the s mainstream businesses,from cars to consumer electronics. Welch recognizedthat GE would have to be faster and more entrepreneur-ial in strategy and in s Number One or Number Two vision helpedshave 118,000 people from GE s payroll in a five-yearperiod, earning him the name Neutron jack (the guywho removed the people but left the buildings standing)and the distinction of being named Fortunemagazine s Toughest Boss in America in 1984.