FlyTitle: Jack Welch
The former boss of GE transformed American capitalism—in good ways and bad
IN HIS AUTOBIOGRAPHY, published soon after retiring from GE in 2001, Jack Welch explained the challenge he had faced when taking over as chairman and chief executive of the iconic American company 20 years earlier. The firm had grown top-heavy and sclerotic. Some divisions had not posted profits in over a decade. In his farewell speech, Reginald Jones, his patrician predecessor, likened the industrial conglomerate poetically to the Queen Mary, a majestic ocean liner, caught in a storm.
In his inaugural address Mr Welch maintained the nautical metaphor—with less decorum and a greater sense of urgency. He told his charges that he wanted GE to be like a speedboat in the harbour “trying to move like hell”. The threat from sophisticated competitors from Japan was growing. He did not want GE to go the way of Detroit’s carmakers or IBM, which failed to adapt. As corporate America mourns his death on March 1st, aged 84, the company he reinvented is itself struggling to keep up with the times.
Mr Welch certainly revved up GE’s propellers. Under Jones, who led the firm from 1973 to 1980, it doubled revenues to $25bn and saw its share price sink by about a fifth. Under Mr Welch revenues quintupled from $27bn in 1981 to $130bn in 2000. Total shareholder returns, including dividends, rose 70-fold, more than three times as fast as those for the S&P 500 index of big corporations (see chart 1).
This made him the talk of corporate America. In 1999 Fortune magazine anointed him “manager of the century” (never mind Henry Ford, who pioneered mass production, and Alfred Sloan, who more or less invented modern management at General Motors). The plain-spoken Mr Welch had admirers outside business circles, too. Beth Comstock, a former GE vice-chairwoman, recalls attending overflowing shareholder meetings with him where “little old ladies were shaking like they were meeting a rock star.”
这让韦尔奇成为美国企业界的热议人物。1999年，他被《财富》杂志评选为“世纪经理人”（当然获此殊荣的还有率先实现大规模生产的亨利·福特，以及或多或少可算是现代管理开创者的通用汽车的阿尔弗雷德·斯隆[Alfred Sloan]）。直言不讳的韦尔奇在商界之外也有众多仰慕者。GE前副董事长贝丝·康斯托克（Beth Comstock）回忆了和他一起参加人山人海的股东大会的情景：“小老太太们身体摇晃着，就像见到摇滚明星一样。”
The Welch revolution rested on four pillars: people, process, purpose and profit. Start with people. Ex-lieutenants praise him for nurturing talent. He encouraged employees to take risks and speak their minds, remembers Jeff Sonnenfeld of the Yale School of Management, who taught at the company university in Crotonville.
He also promoted an obsessive, ruthless meritocracy. To tame GE’s bloated bureaucracy, he introduced the policy of “rank and yank”, sacking the bottom 10% of managers, measured by financial and other metrics, each year. “Public hangings are…worth a thousand CEO speeches,” Mr Welch once quipped. He lavished praise when managers excelled, but upbraided them publicly if they did not. “You were either a pig or a prince,” recalls a senior aide.
Mr Welch was also obsessed with processes. Some were radical in his day but have since become commonplace. To prevent turf wars from killing new ideas, for instance, he insisted that town-hall meetings (dubbed “work-outs”) be held so that all relevant parties could raise objections. He championed Six Sigma, a series of techniques that aimed to keep manufacturing defects below 3.4 per million parts.
GE’s purpose also changed on his watch. Since its founding by Thomas Edison in 1892 it had focused on engineering, from refrigerators to turbines. Mr Welch extended it to product-related services, like selling airlines flight time rather than merely jet engines. More controversially, he also grew GE’s financial-services arm.
Everything, always, in the service of profits. To boost them further, Mr Welch slashed costs and sold flagging units, insisting that every GE division be first or second in its industry. Net income duly soared from $1.7bn in 1981 to $12.7bn in 2000.
Mr Welch always had critics. His insistence on downsizing while GE was still profitable—headcount fell from above 400,000 in 1980 to below 300,000 five years later—earned him the epithet “Neutron Jack”, in reference to the neutron bomb, which kills people but leaves buildings intact. Tom Peters, co-author of “In Search of Excellence”, a hallowed management tome, accepts that GE needed discipline as its woes were “obvious to a fourth grader”. But he likens Mr Welch’s methods to “dumping loads of bodies off the side of the cruise ship”.
韦尔奇从来不乏批评者。他坚持在GE还在盈利的时候裁员——员工人数从1980年的40多万下降到五年后的不到30万——他也因此得了个“中子弹杰克”的外号，因为中子弹能在不损坏建筑物的情况下夺人性命。管理学经典巨著《追求卓越》（In Search of Excellence）的合著者汤姆·彼得斯（Tom Peters）认可纪律对GE的必要性，因为“即便四年级小学生都能一眼看出”它麻烦缠身。但他将韦尔奇的方法比作“从邮轮边上抛下大量尸体”。
More important, GE began to unravel almost as soon as he left. His hand-picked successor, Jeffrey Immelt, was finally ousted in 2017 after failing to reverse a sharp decline. John Flannery, who replaced him, lasted barely a year. GE’s market capitalisation fell from a peak of $600bn in 2000 to $95bn today.
更重要的是，GE几乎从韦尔奇一离任就开始分崩离析。由他亲自挑选的继任者杰夫·伊梅尔特（Jeffrey Immelt）未能扭转一落千丈的局面，最终在2017年被罢免。而接替他的约翰·弗兰纳里（John Flannery）的在位时间只维持了一年。GE的市值从2000年时6000亿美元的峰值下降到如今的950亿美元。
Was Mr Welch to blame? Some strategies that fuelled heady returns during his tenure no doubt played a role. “The dark side of worshipping at the altar of Six Sigma is that breakthrough innovations get cut,” says Vijay Govindarajan of the Tuck School of Business. The checklist culture and underinvestment in research left GE’s innovation engine sputtering.
这该归咎于韦尔奇吗？他任期内采取的一些让回报率猛增的刺激性策略无疑有一定责任。“对六西格玛顶礼膜拜的负作用就是阻断突破性的创新。”塔克商学院（Tuck School of Business）的维贾伊·戈文达拉扬（Vijay Govindarajan）表示。检查单式的企业文化以及研发投资不足导致GE的创新引擎运转不良。
Mr Welch also missed the digital revolution. He admitted in his autobiography that he was “slow to understand the impact of the internet”. Mr Govindarajan points to his aggressive outsourcing of information technology to Indian firms, a move that saved money in the short run at the expense of surrendering the future. “If Jack had been visionary, we could have done what Google or AWS [Amazon’s cloud-computing arm] did,” grumbles a former senior GE man. Instead, Mr Welch bought trophy assets like NBC, a television network and Kidder Peabody, an investment bank.
Mr Welch’s most consequential mistake was to grow the financial arm, GE Capital, into a monster. The division’s easy profits during the long economic expansion of the 1990s masked plenty of sins, including mounting troubles at GE’s core industrial units. As Mr Peters puts it, mincing no words, Mr Welch handed his successor “a real pile of shit” in the form of GE Capital.
韦尔奇犯下的最严重错误是把金融部门GE Capital养成了一头巨兽。该部门在上世纪90年代的长期经济扩张中轻松获利，掩盖了大量过失，包括GE核心的工业部门日益增多的问题。正如彼得斯直言不讳地指出的，韦尔奇交给继任者的GE Capital“真是一堆屎”。
The division grew quickly from the early 1990s, bolstering profits, free cashflow and returns on capital. Its loaded up on debt and relied on fickle short-term funding. By 2000 it generated 51% of GE’s revenues; GE’s industrial and power divisions eked out barely a tenth each.
GE Capital自上世纪90年代初期以来发展迅猛，带动了利润、自由现金流和资本回报的增加。它大举借债，依赖不稳定的短期融资。到2000年，公司收入的51%来自GE Capital，而工业和电力部门分别只勉强贡献了10%。
Industrial performance peaked as Mr Welch left, and collapsed between 2001 to 2003, with Mr Immelt in charge. Part of this was down to a recession in 2001. However, after 2003 GE’s industrial businesses continued to deteriorate; their returns on capital collapsed and cashflow dried up. Mr Immelt pursued pricey acquisitions (most notably of France’s Alstom, which makes power equipment, and Baker Hughes, an energy firm) and ill-timed asset sales. For years he continued to expand GE Capital. Though less dependent on short-term funding, it remained highly leveraged. It was pushed to the brink by the global financial crisis of 2007-09, saved only by a federal bail-out. Only then was Mr Immelt forced to shrink the division, a move his successors have since intensified.
GE工业部门的业绩在韦尔奇离任时达到顶峰，在2001年到2003年伊梅尔特掌舵期间大幅下滑。部分原因是2001年的经济衰退。然而，2003年之后其业绩继续恶化，资本回报率暴跌，现金流枯竭。伊梅尔特实施了几次高价并购，其中最有名的是法国电力设备制造商阿尔斯通（Alstom）和能源公司贝克休斯（Baker Hughes），还在不当的时机出售了一些资产。多年间，他继续扩张GE Capital。尽管GE Capital对短期融资的依赖有所降低，但其杠杆率依然居高不下。2007到2009年的全球金融危机将GE Capital推到了破产边缘，依靠联邦政府的纾困才逃过一劫。直到那时，伊梅尔特才被迫缩减了该部门的规模，此后他的继任者们一直在加大缩减力度。
There is no denying that Mr Welch was a towering figure who helped jolt America Inc out of the complacent 1970s. At times, he may have shaken too hard. On March 4th the current boss, Larry Culp, observed that Mr Welch had “changed the business landscape as we know it”. He did not say whether it was for better or worse. ■