Good afternoon everyone,
Early in my column-writing career, I took a swipe at legendary GE CEO Jack Welch, who recently passed away at 84.
A reader recited in voluminous detail that I was off base in criticizing Welch, who at the time was known as “neutron Jack” for slashing thousands of jobs while hacking away at the company’s layers of management.
Jack’s mantra was to retain businesses that held leadership positions and jettison holdings that performed poorly or held secondary positions in their respective markets.
As the years went on, I came to accept the reader’s criticism. Welch seemed to have the magic touch in getting mature businesses, ranging from locomotives to kitchen appliances, to perform well in tough markets.
His appetite extended to the media as he acquired RCA and its crown jewel NBC. He also moved into financial services, a hot industry at the time.
After moving to Delaware, I came to realize that Welch had a big admirer in DuPont Co.
DuPont adopted many of GE’s practices including Six Sigma process improvements.
Like GE, DuPont sold off businesses where it did not enjoy a leadership position.
Siemens, a German company with a history similar to GE, later ended up with DuPont’s medical equipment business and at last report employs 1,000 in Delaware.
It turned out that Welch was an admirer of DuPont early in his career. A chemical engineer who was hired by GE after earning his Ph.D. at the University of Illinois, Welch thought highly of the company and early on hired DuPonters.
Welch admitted in an autobiography that he later found DuPont alumni were no better than other hires. He became well-known for his system rating managers, with the bottom tier usually forced to leave the company. That approach continues at many companies.
Welch retired from GE and enjoyed a profitable second career as a business guru, author and celebrity former CEO. He was aided by his third wife Suzy, a former editor of the Harvard Business Review.
Meanwhile, the house that Jack built began to crumble. Cracks appeared in many businesses as sell-offs and spin-offs continued.
Financial services proved to be a particularly difficult area. Even the profitable medical equipment and locomotives businesses were spun off or merged in an effort to focus the company on areas such as aerospace. The appliance business is now controlled by China-based Haier.
GE’s conglomerate approach is no longer in fashion among investors who insist on a focus on selected areas, even if individual businesses are performing well.
One of the survivors of the continued restructurings of the company is a GE plant in Newark that produces jet components.
The debate will go on about Welch’s legacy. But we do know that for better or worse, he assembled an impressive global enterprise that we will never see again.
Here’s to a productive Tuesday. If this newsletter was passed along by a friend or co-worker, sign up here for a five-day-a-week look at business news. – Doug Rainey, chief content officer.
