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“The ideas he’s most
associated with
involve aggressive
acquisition—and what
can best be described
as the brutality school
of management.”NEUTRON JACK Welch’s aggressive
management style led to explosive
growth even as he decreased the
workforce. The end results are mixed.assets, a process that earned him the
nickname “Neutron Jack,” because
like a neutron bomb, he destroyed
the people but left the buildings intact.
His formula led to explosive growth in
both revenue and profits even as the
number of employees plummeted.
He expanded particularly aggres-
sively into financial services. When
the Great Recession hit, GE’s financial
businesses tanked, and it was forced to
take a bailout. Its market value at the
end of 2019 was $96 billion, less than
a fourth of what it had been in 2001.
Welch blamed Immelt for the
struggles of GE. But that just won’t
stick. Welch always said that he
should be measured by how GE did
after he left. And that is not very well.
Immelt was his carefully chosen
successor. If he wasn’t up to the job,
then Welch erred in choosing him.
And Immelt’s formula was Welch’s—
acquisitions and expanding into
financial services. Welch may own
GE’s success, but he also owns at least
some part of its failure.
But it was not just what Welch did.
It was how he did it. He was brutal in
slashing costs and firing people. He
was brutal in the demands he madeon his managers. This resulted in
extraordinary performance but also
in managers going to any lengths
to avoid his displeasure. One of
Welch’s dictums was the importance
of being “number 1 or number 2 in
every market in which we compete.”
It’s a sophisticated rule of thumb
that despite its apparent simplicity,
embodies both economics and game
theory. Nonetheless, for those des-
perate GE managers with a business
stuck at number 3, it led less to cre-
ative business strategies than to cre-
atively defining markets in ways that
kept their businesses from being sold
off, what former University of Chi-
cago professor Milind Lele scornfully
dismissed as “being number 1 north
of Broad Street and east of Main.”
It also led to questionable report-
ing and accounting practices. In
2009, the SEC accused GE of false
statements, and the company paid a
$50 million fine. Welch was equally
brutal on a personal level, famous for
honest-to-the-point-of-cruel feedback
and for firing those managers rated
in the bottom 10 percent in terms
of performance. Welch’s approach
to people management epitomizes
what the current generation of busi-
ness leaders strives to avoid. It is less
an example than a cautionary tale.
After leaving GE, Welch continued
to pontificate on business and politics,
staying in the public eye long after his
moment had passed. He lived long
enough to see his legacy. It’s anyone’s
guess whether he liked what he saw.Ơ Sam Hill is, among other things,
a NEWSWEEK contributor and best-
selling author.