TheFiresideCEO 2231979, Welch has redefined major aspects of business management.
In his widely followed annual letters to GE shareholders, Welch ar-
ticulates a creative set of core operating elements and explains how
their practical applications produce a new kind of company that ex-
ploits the vast resources of a large organization with the passion and
hunger usually associated with smaller companies, all within a cor-
porate culture committed to cultivating the best practices.
GE is one of the largest companies in the world. Welch trans-
formed it from a widely diverse set of 350 businesses and major
product lines into what he calls an “integrated, diversified company.”
Welch determined that GE’s strength from diversity could be real
only if each business was number one or two in its particular market.
Through a policy of “fixing, selling, or closing” businesses that
weren’t, Welch led GE to occupy a leadership position in the dozen
businesses it now operates. Those businesses are integrated as an
overall company through a boundaryless culture united by a shared
thirst for better ideas to wor kfaster and reach higher.
GE shareholders benefited enormously from this culture of
boundaryless and integrated diversity, enjoying average annual re-
turns on equity exceeding 24% during Welch’s stewardship. Hun-
dreds of thousands of GE employees also benefited through an en-
hanced system of internal rewards and recognition that encourages
involvement. A large number of GE alumni moved on to lead other
businesses, including Larry Bossidy, former CEO of AlliedSignal and
coauthor with Welch of a number of his letters.
Ideas generated or adapted at GE were celebrated among other
businesses and leaders, for the concept of boundarylessness is taken
so literally at GE that it shares its ideas the world over. As Welch
notes, a key GE value is to treat resource allocation as a dynamic
process: “Sometimes a business benefits as a net importer of dol-
lars, ideas and talent while at other times the same business will be
called upon to be a net exporter for the benefit of the Company as
a whole.”
Accolades for GE flowed during Welch’s stewardship.Fortune
magazine named GE its “Most Admired Company in America” in
1998 and 1999, andThe Financial Timesnamed it “the World’s Most
Respected Company” in those two years.Timemagazine upped the
ante, calling GE “the Company of the Century,” and a 1999Business
Weeksurvey said that GE boasted the best board of directors. As
Welch said in his 1999 letter, Thomas Edison would be pleased with
the company he founded over a century ago.
Welch’s letters not only contain a firsthand account of the de-