The Real Jack Welch?

I’m reading a really, really, really interesting book, Imagine It Forward, by Beth Comstock where the author narrates her career in PR and as a change maker. I’ve just started so I’m only at the early part of her career where she is at GE during Jack Welch’s tenure.

Now growing up, Jack Welch was the star CEO lionized by the business media. My first memory of him was as “Neutron Jack” where he laid off a lot of people, apparently in such a brutal way that it became newsworthy. The layoffs were concerning to me, but I was a kid so, what do I know? It’s hard to argue against cutting costs to bring back profits to save a company. It makes logical sense but…

The other thing I knew him for was “you had to be either number one or number two in the market, or just get out”. Again, that made sense and it was hard to argue against it, but consider this: if you had a classroom of kids and you taught only the number one or number two kid and forget the rest because they were losers, does that sound right? It makes sense if you needed to maintain sufficient profitability to keep the company running but maybe some of those business units might actually become great companies when economic conditions change. Or become great companies under a better manager.

Heck, don’t we try to put every piece of the cow to use so as to not waste it? Not every part of the cow is number one or number two but we try to put them to use. Maybe the inability to turn some business units into number one or two may be a sign of a not so great leader picking managers who could turn the units around? A lot of what Jack Welch said at the time made sense but I also wondered if he lacked some kind of true leadership ability so he had to keep only the units that were number one or two.

Throughout his tenure as CEO and after, Jack Welch was the poster boy for the shareholder value philosophy. He was the man. He was constantly cost cutting – CONSTANTLY. And thus, every other company in the US was also on a continuous cost cutting, all in the name of shareholders.

He always met his forecasts, quarter after quarter after quarter. The profits were always going up and to the right. Having done a lot of forecasts, I suspected he was managing the financials, maybe not illegally but maybe cutting it close. But there was never any news about that, so I just had my suspicions because nobody can meet the forecasts for years like that.

All of the media lionized him. He was the CEO of the century.

Now this book gives a slightly different view; there are some things I have never read before.

For starters, he seemed kind of childish in his tantrums. The author once tried to be efficient by giving him electronic clippings from the web of news about him but he actually wanted the real news page so he could see not only news about him but how the news was laid out on the page. The electronic version didn’t appeal to him

““What do you got? What do you got?”, he said, almost barking, and threw the papers at my face.”

Imagine It Forward, Beth Comstock, 2018, p. 40, hardcover.

Then there’s the “Where’s my Roger Cohn” moment when a positive profile about him did not get enough play in the news:

“Bearing down, his voice growing loud, he said, “I expect you to do for me what you did for Tim Russert and Tom Brokaw. You’re a star maker. Where’s my star?””

Imagine It Forward, Beth Comstock, 2018, p. 42, hardcover.

He kind of sounds like someone.

And finally, the insight on how he managed to meet his forecasts quarter after quarter:

“The principle source of GE’s financial success was that Jack bought lots of companies – especially in financial services – to make GE’s earning continue on their upward slope. He pushed the company headfirst into finance. GE had long had a financial services division – GE Capital – that helped consumers and industrial customers finance their GE purchases. Jack pushed it to expand into other sectors, like mortgages and car and boat loans, to the point that it had $371 billion in assets in 2001 and, at its peak, accounted for over half of GE’s profits. Jack then used the balance sheet of GE Capital to make financial acquisitions that could easily be sold to help fill earnings gap on the industrial side. With this tool, Jack was able to deliver the numbers he promised, quarter after quarter and year after year… But while constant acquisitions and financial services boosted GE’s bottom line and stock prices, they required deep cost-cutting in parts of the company. In order to meet Jack’s constant tightening, GE managers cut back on R&D and stayed out of risky new sectors. The company that was famous for bringing the lightbulb, X-ray machine, and unbreakable plastic to market had come up with fewer earth-shattering products in recent years.”

Imagine It Forward, Beth Comstock, 2018, p. 53, hardcover.

There it is: he wasn’t a really great businessman guiding his company to develop new businesses and soar to new heights; he was a financial engineer.