Jack Welch, a railroad conductor’s son who became chairman and CEO of General Electric and led it for two decades, growing its market value from $12 billion to $410 billion, has died. He was 84.
With a determination to win by busting up bureaucratic complacency, Welch earned two titles — “manager of the century,” and “Neutron Jack” for slashing tens of thousands of jobs. Under his leadership, GE became the world’s most valuable company, after Microsoft. Its fortunes later turned south.
While at the helm, Welch bought and sold scores of businesses, expanding the industrial giant into financial services and consulting. GE Capital Bank was founded seven years into his tenure. His acquisitions included RCA — then-owner of NBC — and Kidder Peabody, the brokerage that became entangled in an insider trading scandal.
He also streamlined the conglomerate’s bloated bureaucracy by giving managers free rein to make changes they deemed beneficial to the bottom line.
He invented the “vitality curve,” in which managers were ranked into three groups. The top 20% “A” group was “filled with passion, committed to making things happen.” The “vital” 70% “B” group was essential to the company and encouraged to join the A’s. Then there was the bottom 10% “C” group. “The underperformers generally had to go,” Welch said in his 2001 book, “Jack: Straight From the Gut.”
According to the book, “the workforce went from 411,000 to 299,000 during his first five years as chief. With such cuts, he acquired the derisive moniker named after the neutron bomb, which was designed to kill multitudes without destroying cities.
John Francis Welch Jr. was born Nov. 19, 1935, in Peabody, Massachusetts, to Irish American parents. His father was a conductor for the Boston & Maine Railroad and his mother was a homemaker. The younger Welch studied chemical engineering at the University of Massachusetts Amherst and received his Ph.D. from the University of Illinois in 1960.
Welch joined GE in 1960 as a chemical engineer in its plastics division in Pittsfield, Massachusetts. He became a vice president in 1972 and vice chairman seven years later. In April 1981, at age 45, he succeeded Reginald H. Jones as chairman and chief executive officer.
Welch insisted that all of GE’s divisions be market leaders. ″Fix it, close it or sell it,” he was fond of saying.
Fortune magazine dubbed him “manager of the century” in 1999. “Though he acted with what seemed at the time like blitzkrieg aggressiveness, he regretted in later years that he hadn’t moved even faster,” Fortune editorial director Geoffrey Colvin wrote in explaining the title. “Having been handed one of the treasures of American enterprise, he said, he was ‘afraid of breaking it.’ Not only did Welch not break it, but he transformed it as well and multiplied its value beyond anyone’s expectations.”
Welch retired from GE in September 2001, days before the 9/11 attacks. Upon his retirement, The New York Times published an editorial that gushed over his professional record.
“Mr. Welch was a white-collar revolutionary, bent throughout his career at G.E. on championing radical change and smashing the complacency of the established order,” the editorial said. “His legacy is not only a changed G.E., but a changed American corporate ethos, one that prizes nimbleness, speed and regeneration over older ideals like stability, loyalty and permanence.”
For GE, the accolades turned to disbelief over the next decade and a half. Welch’s hand-picked successor, Jeffrey Immelt, had to grapple with an era that included the dot-com bust, 9/11 and the Great Recession. As the company’s fortunes evaporated, Immelt had to shed NBCUniversal and most of the once-too-big-to-fail GE Capital. He resigned in 2017.
GE would get two more CEOs, John Flannery, who lasted a little more than a year and saw the company removed from the blue chip Dow Jones Industrial Average after 110 years, and Lawrence Culp Jr., who has been in charge since fall 2018. As of Monday, GE’s stock was trading around $11 a share and its market capitalization was down to $95.1 billion.
The house that Jack built — a sprawling global conglomerate that encompassed diverse parts including industrial manufacturing, entertainment, technology, finance and health care — fell out of fashion with investors, in favor of more focused enterprises.
“Did the Jack Welch Model Sow Seeds of G.E.‘s Decline?”’ a headline in the Times read after Immelt’s resignation.
“It’s always tough to follow a legend,” New York University finance professor Aswath Damodaran said in that Times article.
After leaving GE, Welch became a business consultant, engaged in public speaking and TV appearances, including on CNBC, wrote a column and books and opened a for-profit management institute.
A staunch Republican, he accused President Barack Obama’s economics team of cooking the books on employment data a month before the 2012 presidential election. The Labor Department reported that unemployment had fallen below 8% in September for the first time since the Great Recession.
On Twitter, Welch blasted the data.
“I wasn’t kidding,” Welch told The Wall Street Journal later that day.
Survivors include his third wife, the former Suzy Wetlaufer, whom he married in 2004. He filed for divorce from his second wife, Jane, after reports surfaced that he was having an extramarital affair with journalist Wetlaufer. Four days before the divorce trial was to begin, Jack and Jane Beasley Welch reached a settlement that reports said was worth $180 million. He divorced his first wife, Carolyn, the mother of his four children, in 1987.
Disclosure: NBCUniversal is the parent company of CNBC and this station.
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