The Cult of Welch

By John Hollon

Oct. 11, 2005

When Jack Welch speaks, everyone listens.

    At last month’s World Business Forum on leadership at New York’s Radio City Music Hall, a couple thousand executives paid a couple thousand dollars each to hear a who’s who of leadership impart some words of wisdom. The lineup was impressive–Rudy Giuliani, Colin Powell, Tom Peters, Yahoo’s Terry Semel and Richard Branson of Virgin were just some of the speakers–but Jack Welch was the only one who could generate an edge-of-the-seat, “I don’t dare miss a word he’s saying” reaction from the business crowd.

    But that made me wonder: Why is Jack Welch such a management superstar five years after retiring as chairman and CEO of General Electric?

    Maybe it’s because three of his former top lieutenants now head Fortune 500 companies (Robert Nardelli at Home Depot, Jeffrey Immelt at GE and James McNerney, who was at 3M and has recently moved over to Boeing). Or maybe it’s because he was able to weather a nasty public divorce and the airing of his generous (some would say whopping), perk-filled retirement package being splashed all over The Wall Street Journal without any lasting harm.

    More likely, however, Jack Welch’s cult status as America’s management icon comes from two things:

1. His tough-talking, common-sense approach to business and managing the workforce.

2. His surprising ability, despite all the tough talk, to treat people with fairness and sensitivity.

    Fairness and sensitivity? You may ask how that can be said about the guy who developed the famous 20-70-10 employee assessment plan (known fondly by its critics as “rank and yank”), where the top 20 percent of GE’s workforce each year got a big raise, while the bottom 10 percent got shown the door.

    Well, what you may hear about Jack Welch and his people management practices anecdotally is very different from what you hear from Jack Welch in person.

    For example, during a Q&A session in New York he was asked how he would handle two different types of workers: a high performer who delivered the numbers but didn’t buy into management’s philosophy for the company, and a low- to mid-level performer who struggled to deliver the numbers but enthusiastically bought into the corporate vision and embraced what top management was trying to do.

    Jack’s answer? Get rid of the high performer who delivered the numbers and give the low- to mid-level person another chance–maybe two or three more chances–because they buy into what top management is trying to do. His philosophy is that you need people with “positive energy” and need to get rid of the people who inject the workforce with “negative energy”–even if they are high performers.

    He had some of his strongest words for human resource departments, calling HR the “backwater of most companies.” To his way of thinking, HR should be “the most vital part of the company,” as important as finance. He went on to draw this analogy: If you were managing a baseball team, who would you rather talk to–the team accountant or the director of player personnel?

    In Jack Welch’s world, HR is not only a key part of the business, but HR people in the organization need to have special qualities to help the managers throughout the organization build leaders and careers.

    Most of what Jack told the business executives at Radio City was straight from his new book, Winning, but reading words on a printed page is not the same as hearing it uncensored and unfiltered from the master himself.

    There’s a reason Jack Welch can dominate a room and grab a crowd in a way that the other big-name mucky-mucks on the stage in New York couldn’t. It’s because after five years away from GE, he’s still got a powerful message that hits home for just about anyone in a leadership role.

    Whether you subscribe to the concept of “rank and yank,” the push for “positive energy” or the thinking that HR should be as important as finance, Jack Welch has a lot to say.

    If you manage a workforce, you would do well to listen.

Workforce Management, October 10, 2005, p. 74Subscribe Now!

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