Welch: People Matter

Jack Welch, former CEO of General Electric and one of America’s most admired business leaders, Friday told HBS students who hope to lead companies that they can learn important lessons from the way public officials like New York City Mayor Rudolph Giuliani reacted to the terrorist attacks on New York City and Washington, D.C.

“We have all seen the ultimate in leadership in [New York City Mayor] Rudy Giuliani,” Welch told a packed house in Burden Auditorium. “He got out front, reassured some and cautioned others. He was everywhere. The community saw him, and he encouraged them to go forward.
“We’ve also seen a great lesson in leading and working in teams in the Bush administration,” he said.
Welch said those lessons have direct relevance for businesspeople, and spoke with pride about how Jeffrey Immelt, Welch’s hand-picked replacement at GE, reacted to the crisis.
“My successor, who got the job two days into this tragedy, was a corporate Rudy Giuliani,” Welch said.
“When other companies were canceling analyst meetings, he held a meeting and told them what he knew and what he didn’t. He was on the Internet talking to employees,” he said. Leadership is “all about visibility. It’s all about being out there and letting them know what you know.”
Welch’s appearance, which was tied to a publicity campaign for his new autobiography, Jack: Straight From the Gut, took the format of an interview with Jason Lockwood (OF), followed by questions from the audience. In addition to saluting the nation’s public officials for their response to the attacks, Welch addressed topics ranging from GE’s approach to people management and the mega-firm’s future growth to the European Union’s antitrust policies and the impact of globalization.

Leading Every Day
Welch made it clear that managers need to exercise leadership constantly, not just during periods of crisis, and that the performance of a company ultimately relies on the achievements of its people.

“You have to be sure that you’re finding ways every day to turn people on,” he said. “The team that fields the best players wins the game.”
Although he used stock options during his tenure at GE to help motivate performance, he said the current swoon in stock prices will not be a permanent impediment to rewarding people.

“The stock market has been an aid, but if the stock market isn’t there, you have to find other ways,” Welch said, suggesting that salaries and bonuses might have to rise in place of stock options. “People aren’t going to come work for you for charitable purposes-despite your charm.”
Welch said growth is crucial for keeping people performing at a high level, and in response to a question from Lockwood, predicted that GE managers would continue to find enough opportunities to sustain the company’s long history of double-digit growth.

He went on to say that the lessons HBS teaches in dealing with and evaluating your peers are more valuable than any specific frameworks or theories taught in the classroom.

“Who…would you like to go to the battlefield with? That’s what you’ve got to learn and do all the time. Who sees around the corners? Who’s got a nose for these things?” Welch said.

EU Issues
Friday’s talk was the second time in five months Welch addressed the HBS community-he was also the Class Day speaker in June. At that time, Welch was in the midst of trying to win European union approval for GE’s proposed merger with Honeywell, which was ultimately denied on antitrust.
In response to a question from Lockwood about whether the EU’s antitrust policies could pose a threat to globalization, Welch made little effort to hide his frustration with the decision, but cautioned the audience to remember that the EU has relatively little institutional history.
“People think of Europe as the Old World, and the U.S. as the New World, but that’s exactly backwards. The EU is seven years old-and they behave very often like seven-year-olds,” Welch said, arguing that the EU will need to adopt clearer standards for businesses in the future.
“How was the United States when it was seven years old? Did we have it all figured out? No way,” Welch said. “This is a lawless game going on now. It’s a very difficult problem, but it will get solved.”

No Interviews?
In response to another question from Lockwood, about why GE does not recruit at HBS, Welch said that he had actively recruited at the school early in his tenure as GE’s CEO, but was disappointed by high turnover among the people he hired.

“They got into a job that didn’t give them what they thought they should get fast enough,” he said. “Our company only looks pretty when you’ve been at some other places.”

With that in mind, Welch said GE has been more successful hiring HBS graduates several years after their graduation, and regularly re-hires GE people who left the company to attend HBS. “They know what they’re getting into,” he quipped.

Later, in response to a question from the audience about whether the growing gap between the world’s rich and poor needs to be reversed, Welch delivered a strong support of globalization.
“We’re going to have to do more to get to the places that haven’t been touched,” Welch said. “Where globalization has gone, globalization has done an incredible job of improving the living standards of many people.”