Former General Electric CEO Jack Welch has died. He was 84 years old. Welch, a Massachusetts native, ran the company that's now based in Boston from 1981 to 2001 and in that time gained respect as one of the best business leaders in America. He also faced criticism over big job cuts and environmental issues.
Harvard Business School Professor Ranjay Gulati knew Welch. Gulati spoke with WGBH News' All Things Considered anchor Arun Rath. This transcript has been edited for clarity.
Arun Rath: Give us a bit of context for who Jack Welch was when he took over GE in 1981.
Ranjay Gulati: So Jack, in 1981, was a young, brash leader and he himself said that he'd been warned that his being outspoken would get him in trouble. So this is somebody who was a scientist who became a manager, who had worked his way through the ranks at GE. And just to get a perspective on GE at the time when he became CEO, his predecessor, Reg Jones, took him to his office and said "Jack, I give you the Queen Mary. This is designed not to sink." And Jack turned to Reg and said, "I don't want the Queen Mary. I plan to blow up the Queen Mary. I want speedboats." But that was Jack. He once said that if an organization won't change at least as fast as the environment around it, it's only a question of time before the organization is gone.
He had a simple mantra that he used that everyone has heard about — it was, he wanted businesses to be the leaders in their field. Number one or number two or you're out.
Rath: It's remarkable how he was able to grow the company tremendously, but then also at the same time reduce the workforce — to do more with less. Can you talk in broad strokes how he pulled that off?
Gulati: At the time, I think Jack understood that he had to take some radical action in reconfiguring the businesses to focus on businesses where he saw there being the greatest value creation opportunity for the business. This led to some very tough and very unpopular decisions. But in the zeitgeist of the time, he was focused on optimizing the business footprint of GE. Those were decisions I think they were able to do back then, but would be much harder today.
Rath: A lot of people were fired.
Gulati: Jack brought, I think, a laser sharp focus on performance. GE was a sprawling empire of very disparate and loosely connected businesses, some performing well, some not performing well. And his thinking, and the way he presented it, was that if he didn't deal with those issues and those businesses, it would come back and affect the entire company. The way he explained it was, "if you're going after me for the people I let go of, how about the people whose jobs I was able to protect?"
Leaders at any point in time are dealing with competing and conflicting stakeholder demands. On the one hand, I've got my employees. On the other hand, I've got my customers. I've got my shareholders. I've got my environment. I've got my community. And I'm having to balance and trade off and make tough choices across all these stakeholders. And I think Jack's story maybe, over time, shows how sometimes those choices are very, very hard ones to make.
Rath: I understand you got to experience, in a way, Jack Welch practicing the art of firing.
Gulati: I had him actually do a roleplay with me.
Rath: And this was in your class?
Gulati: In my class. And I found it really interesting because he did it with compassion. He tried to gently explain to me why I might be a great leader. I was just not the right leader for GE. at that time.
One of the other legendary stories about Jack was how he let go of so many people who were in the bottom 10-percent. A more common one was when you might have the performance, but not the behaviors. In the second half of his tenure, he really focused in and said, 'performance is not all I care about — it's the way you choose to behave in the organization as a leader that is as important to me as performance.' And so you could be the best performer, but if your behavior didn't align with the values of GE — that's where he really brought in the values and expected behaviors around dealing with minorities, gender, global scope and how you mentored and developed other people.
Rath: One other aspect of what might be considered a mixed legacy, and I don't want to seem disrespectful since he has just passed away, but of course here in Massachusetts, the city of Pittsfield saw so much industry and prosperity from GE, but also environmental damage to the Housatonic River.
Gulati: Absolutely, and I think that is a mixed legacy. A GE engineer was interviewed and said it wasn't deliberate that they were dumping PCB's into the river, it was really carelessness, out of just ignorance. Nonetheless, you know, carelessness and negligence are no excuse for what I would say is a disastrous outcome. I am pleased that they have chosen to make amends for it, the cleanup continues. But I think it had a devastating set of consequences for the entire community. And I think it's a case study that shows us about how business leaders need to think more broadly about their role in society today.