“Neutron Jack” Welch, whom the financial media canonized for his singular pursuit of raising General Electric’s stock price, would be a pariah in today’s corporate world of “purpose.”
He would scoff at the notion of workers as a company's best asset, or the sense that a corporation is obligated to contribute to the public good.
Fortune’s “Manager of the Century” hollowed out the core of GE’s industrial base because Welch became infatuated with the idea that profits were easier to come by via financial engineering rather than bending metal to produce stuff.
In his quest to make GE the most valuable company on Earth, Welch recast the culture of “Generous Electric” by stressing downsizing, dealmaking and financialization.
Welch, who became the poster boy for unbridled capitalism, considered employees costs vs. assets. His goal: get rid of as many of them as possible.
And if you can't fire them, outsource or offshore their divisions or jobs.
Welch is the subject of a new book, “The Man Who Broke Capitalism” by Dave Gelles, a New York Times business reporter.
Blowing up the Queen Mary
The coarse, avuncular, power-hungry Welch succeeded courtly Reg Jones as GE’s chief in 1981.
In handing the CEO reins to Welch, Jones told his successor that he was inheriting the Queen Mary, a ship designed not to sink.
Welch replied: “I don’t want the Queen Mary. I plan to blow up the Queen Mary. I want speedboats.”
During his 20-year tenure at the top, Welch fired thousands of workers, devastating communities across America.
His ruthless “rank and yank” policy of canning employees, who ranked in the lowest 10 percent of performers, every year destroyed morale and fostered a sense of paranoia and fear.
GE had 411,000 employees at year-end 1980. Within two years, Welch shed nine percent of them (35,000).
Though Welch despised the Neutron Jack moniker that was cooked up by Newsweek, he admitted that the name rang true.
“I hated it and it hurt,” he said. “But I hated bureaucracy and waste even more.”
Gelles notes how Welch attempted to whitewash the downsizing, saying he was doing the axed workers a favor.
“Some people think it’s cruel to remove the bottom 10 percent of our people,” said Welch. “It’s just the opposite. What I think is brutal and false kindness is keeping people around who aren't going to grow and prosper. There is no cruelty like waiting and telling people late in their careers that they don’t belong—just when their job options are limited and they’re putting their children through college or paying off big mortgages.”
How’s that for PR spin?
Welch, who acquired more than 600 companies ranging from RCA to Kidder Peabody, would immediately shed units and workers of the acquired entities.
He acquired RCA in 1985 for a whopping $6.3B. At that time, it was the biggest non-oil deal.
Welch then began to sell off RCA piece by piece, reducing its labor force from 88K to less than 36K.
“The model Jack had was really the Pac-Man model,” Beth Comstock, GE’s former marketing chief told Gelles. “Just eat up companies. Acquire growth, acquire growth, acquire growth.”
Welch did have a soft spot for one PR practice: investor relations.
In 1982, the Reagan Administration lifted the Depression-era ban on companies from buying their own stock.
That was a godsend for Welch, who diverted some of GE’s best talent into the IR department. He seized the opportunity to announce a record $10B stock buyback.
The IR unit became the chief marketing officer for the company’s stock. Staffers were constantly on the road pitching the GE narrative and blessings of stock buybacks to investors.
Their work helped Welch achieve his goal of making GE the most valuable company before he exited in 2011.
In retirement, Welch attempted to soften his image by soft-peddling his stock-price-above-all-else management philosophy. That ship already had sailed.
Welch died in 2020.
GE is in the process of dying.
The once mighty GE is splitting into three separate aviation, healthcare and power companies.
It is the undoing of Neutron Jack's legacy.