In this month’s series on intrapreneurs, there are several inspirational stories about people who have made a massive difference to companies from the inside. But few intrapreneurs have managed to raise the value of their firms by as much as 4,000 per cent, as Jack Welch did with General Electric.
This change maker not only transformed his company, but has also influenced management policy all over the world.
Born in Peabody, Massachusetts in 1935 to a homemaker mother and a train conductor father, the boy Welch pursued a variety of summer jobs in his school holidays while he studied. He grew up to take a Chemical Engineering degree at the University of Massachusetts, Amherst. He received several corporate offers but turned them down to go to the University of Illinois, where he gained a Masters degree and a PhD in Chemical Engineering.
Even then, Welch demonstrated a single track focus in pursuing his studies.
At 24, he joined General Electric (GE) as a junior chemical engineer in Pittsfield Massachusetts. His starting salary in 1961 was $10,500. Soon after joining General Electric Welch found the place to be so bureaucratized that he decided to quit his job - but was persuaded to stay on by an executive, Reuben Gutoof.
While he had been working, Welch had looked around him at General Electric, saw a lot of things that needed improving and developed some ideas about how good companies should function.
Gutoff promised Welch that he would help him create the kind of small company atmosphere that the engineer was calling for, the theories he started to come up with were to transform General Electric and much of leadership training all over the world.
By 1972, he was Vice-President, then he became Vice-Chairman and Executive officer. In 1981 he was appointed Chairman and CEO; at 45, he was the youngest CEO GE had ever had.
Here are some of the ideas implemented that enabled him to transform GE.
Welch felt that bureaucracy creates waste, slows down decision-making, and makes a company less competitive because of an emphasis on approvals and procedure.
He wanted employees to work on eliminating bureaucracy on a daily basis. So he advocated simplifying work as much as possible, making the workplace informal, dropping unnecessary tasks, and working with colleagues to streamline decision making.
Welch wanted to bring excitement into business so worked to eliminate as much jargon and complexity as he could. That waste meant complicated letters, memos or even managers. Each year, Welch would fire the bottom ten per cent of his managers, however well they had done in absolute terms. The policy became known as Rank and Yank.
Get less formal
Welch discouraged ties, held informal meetings and encouraged everyone to relax more. He also asked people to brainstorm and socialise more. Informality, he said, inspired people to have more ideas and was one of the keys to GE’s success.
Never assume that companies are in good shape, said Welch. Always examine with a fresh eye and give yourself options. When he joined GE, he found a sinking ship that was losing market value and was overstaffed. He set about challenging that position and turned the company around.
Change is good
Change can be mean opportunity, so change became a company value under Welch. He encouraged people to expect the unexpected and move fast enough to stay ahead. Agility equalled success.
Lead by energising, not controlling
Welch called his leadership 'Boundaryless' which meant loosening rigid patterns, letting others know how their efforts were helping the organisation, and sending hand-written notes to colleagues and customers.
Under Welch, employees were encouraged to question every aspect of company behavior and contribute ideas to changing something important at GE.
Managers had their power removed under Welch. He did not want workers to blindly follow orders, but instead contribute ideas. He created a learning environment where ideas ruled over hierarchy. He asked staff to spend one hour a week learning what competitors were doing and offered rewards for the best ideas.
Welch’s other principles included Pouncing, i.e. pleasing customers and snapping up opportunities. He expected employees to lead by example and not to micro manage but to manage less by empowering, delegating and stepping out of the way. In his 21 years as CEO, Jack transformed GE into the world's most admired and successful company with his innovative management techniques. Revenues grew five-fold from $25 billion to $130 billion and income grew ten-fold, from $1.5 billion to $15 billion. His profile states,
This ultra-intrapreneur’s achievements are considerable, and so thousands of companies around the world have adopted the Welch Way.
In 2010, Jack founded the Jack Welch Management Institute, a business school that offers executive education and management training. Now in his eighties, Jack Welch still encourages learning.