Management Quote : S No. 14, July 14,2014 This quote is courtesy my young friend Mahender Mohan, GGNIMT-BCA alumni, now settled in UK.This is from Jack Welch, Legendary CEO of GE. Emphasies the importance of motivation and compensation and their correlation If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don’t have to manage them.” John Francis Jack Welch, Jr. (born November 19, 1935) is an American business executive, author and chemical engineer. He was chairman and CEO of General Electric between 1981 and 2001. During his tenure at GE, the companys value rose 4000%.In 2006, Welchs net worth was estimated at $720 million. When he retired from GE he took a severance payment of $417 million, the largest such payment in history.]Welch joined General Electric in 1960. He worked as a junior chemical engineer in Pittsfield, Massachusetts, at a salary of $10,500. In 1963, an explosion at the factory under his management blew off the roof of the facilities, and he was almost fired for that episode. In 1961, Welch planned to quit his job as junior engineer because he was dissatisfied with the raise offered to him and was unhappy with the bureaucracy he observed at GE. Welch was persuaded to remain at GE by Reuben Gutoff, an executive at the company, who promised him that he would help create the small company atmosphere Welch desired. Welch was named a vice president of GE in 1972. He became senior vice president in 1977 and vice chairman in 1979. Welch became GEs youngest chairman and CEO in 1981, succeeding Reginald H. Jones. By 1982, Welch had dismantled much of the earlier management put together by Jones and led an aggressive simplification and consolidation initiative. One of his primary leadership directives was that GE had to be No. 1 or No. 2 in the industries it participated in. Through the 1980s, Welch sought to streamline GE. In 1981 he made a speech in New York City called Growing fast in a slow-growth economy. Welch worked to eradicate perceived inefficiency by trimming inventories and dismantling the bureaucracy that had almost led him to leave GE in the past. He closed factories, reduced payrolls and cut lackluster old-line units. Welchs public philosophy was that a company should be either No. 1 or No. 2 in a particular industry, or else leave it completely. Welchs strategy was later adopted by other CEOs across corporate America. Each year, Welch would fire the bottom 10% of his managers, irrespective of absolute performance. He earned a reputation for brutal candor in his meetings with executives. He rewarded those in the top 20% with bonuses and stock options. He also expanded the broadness of the stock options program at GE from just top executives to nearly one-third of all employees. Welch is also known for destroying the nine-layer management hierarchy and bringing a sense of informality to the company. During the early 1980s he was dubbed Neutron Jack (in reference to the neutron bomb) for eliminating employees while leaving buildings intact. In Jack: Straight From The Gut, Welch states that GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 who left the payroll, 37,000 were in businesses that GE sold, and 81,000 were reduced in continuing businesses. In return, GE had increased its market capital tremendously. Welch reduced basic research, and closed or sold off businesses that were under-performing. In 1986, GE acquired RCA. RCAs corporate headquarters were located in Rockefeller Center; Welch subsequently took up an office in the now GE Building at 30 Rockefeller Plaza. The RCA acquisition resulted in GE selling off RCA properties to other companies and keeping NBC as part of the GE portfolio of businesses. During the 1990s, Welch shifted GE business from manufacturing to financial services through numerous acquisitions. Welch adopted Motorolas Six Sigma quality program in late 1995. In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26.8 billion. By 1999 he was named Manager of the Century by Fortune magazine. In 2000, the year before he left, the revenues increased to nearly $130 billion. The company had gone from a market value of $14 billion to one of more than $410 billion at the end of 2004, making it the most valuable company in the world. Welchs walk-away package from GE was not valued at the time of his retirement, but GMI Ratings estimates its worth at $420 million.[12
Posted on: Mon, 14 Jul 2014 13:44:57 +0000
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