The Jack Welch Era

The Jack Welch Era

John Francis “Jack” Welch Jr. became CEO of General Electric in April 1981. He held this position for twenty years. Within those twenty years he accomplished things no other CEO had in GE’s history; he fulfilled the company’s primary economic responsibilities to society by turning it into an exceptionally profitable conglomerate. Shareholders and managers became rich off of Welch’s vision.

Within his first five years as CEO he closed 73 plants, sold 232 businesses and eliminated 132,000 workers from GE. There were opposing views to his tactics, many supported him and many did not agree with him. Many called him “Neutron Jack” because as he rolled out his vision, GE had mass layoffs of many people that had been loyal to the company for a long time. Many despised him and felt he had no heart because he discouraged the use of the word loyalty within the entire company.

In 1986 he emphasized globalization to lower costs. He held managers responsible for globalizing the departments they were in charge of. He stressed globalization at the expense of employees. Although many viewed him as a “ruthless job cutter”, he brought GE to rank #1 in foreign assets.

Jack Welch believed that having the right people in management positions was imperative for success in a business. He believed that managers must confront reality and adapt to the world as it is, not as they wish it to be. With this in mind, Welch developed a ranking system. In this system managers were ranked on a “vitality curve” system that differentiated among As, Bs, and Cs. The As were the top twenty percent, the Bs were the middle seventy percent and the Cs were the bottom ten percent. If you were classified as a C manager; you were viewed as incompetent and were let go. This system hurt the morale of GE’s employees but Jack did not care. The vitality curve rating method had its flaws, it caused low morale among employees, it made it difficult for some to work in teams and it encouraged backstabbing behavior to get ahead. But Welch did not care, he compared people to plants, he said, “If they grow, you have a beautiful garden. If they don’t, you cut them down.” His idea was to find the brightest and intelligent managers and create a high performance management team that could lead his employees.

In 1983 the Environmental Protection agency (EPA) found that GE had released more than 100,000 pounds of Polychlorinated Biphenyls (PCBs) into the Hudson River. This was very harmful to animals and humans. The EPA made GE liable for the cost of cleaning this mess up but GE objected. Because of their political