The Jack Welch Show (page 1 of 2)

The standing-room-only crowd, along with just about everyone else in corporate America, could probably have recited by heart the evidence of Welch's leadership - how, for example, as CEO of General Electric from 1981 to 2000, he grew the company's market capitalization from $13 billion to almost $500 billion; how that achievement is all the more remarkable considering that GE blazed a trail as a conglomerate in an era when the accepted business wisdom strongly favored pure-play companies; how his passion for training and managing people is now emulated by CEOs at many of the country's largest and most successful companies.

The talk, conducted as a question and answer session, covered the following topics:

The qualities of a great leader. According to Welch, the three principal qualities of a great leader are being passionate about what you are doing, caring about the people who work for you and being able to energize employees to reach beyond even what they believe they can achieve. To mentor leaders, he stressed nurturing self-confidence by giving people the opportunity to try new things and to succeed at them. Welch also spoke of the importance of caring about every employee and ensuring that they know they are valued.

General Electric's 20/70/10 management philosophy.General Electric operates an annual appraisal system in which every manager is ranked in the top 20%, the 'vital' middle 70% and the bottom 10% among their peers. The bottom 10% is fired.

Although the system has drawn criticism for being harsh, Welch said the cruelest thing you can do to employees is not give them candid feedback early in their careers. If an employee is not in the right job, he or she then has time to do something about it. All companies, he said, grade their employees; it's just that in some organizations, employees may not know they have been evaluated until their department starts cutting back.
Business, he added at one point, is about winning and, as with successful sports teams, the best players should be paid the most.

His greatest mentor. Welch said that his mother helped build the self-confidence that has been the bedrock of his success. She used to explain his speech impediment by saying that his brain worked faster than his mouth. Welch joked that he was stupid enough to believe her.

Wall Street's impact on General Electric's business plans. Managing for the short and long run, Welch noted, were not mutually exclusive goals. He argued that the challenge is to manage for the short term while continuing to dream for the long term. At General Electric, the employees were the largest block of shareholders and Welch advised his managers to look down the corridors rather than to Wall Street to see for whom they were managing the company.

Future growth industries in the U.S. economy. Welch expressed excitement about the prospects for biotechnology and diagnostic imaging in health care, adding that he regretted never having had the courage to buy a biopharmaceutical company while he was at GE.

Negotiating deals. General Electric made almost 1,000 acquisitions and more than 400 divestments under Welch's tenure. Deals work, Welch said, because the business strategy is right. In acquiring new businesses, he stressed the importance of not driving the hardest bargain possible and leaving something on the negotiating table as a way to develop a successful long-term relationship with the new subsidiary.

The European Commission in light of its obstruction of the Honeywell deal. Welch joked that the European Commission was 10 years old and like any 10-year-old it was badly behaved [in squashing GE's proposed merger with Honeywell].