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I Am American Business

Jack Welch

Producer Notes

The great thing about visiting Jack Welch at his elegant home office in Boston is that you get to see the Welch management principles in action. Take informality. He invited us into his home to shoot, and there was his wife Suzy, making breakfast in the kitchen while we were setting up. Pretty informal, and very comfortable too. What about sharing information? Well, when we had to stop shooting briefly, because a strip of lighting get fell off a window, he didn't just sit there and wait. "What's going on?" he wanted to know. He didn't want to be kept out of the loop about any delays. Share the information. Get everybody on board. And authenticity? Well, when you have Jack Welch giving you the play-by-play recap of the previous evening's Boston Red Sox game, you know you're getting the real thing. He has set business standards that are refreshing and honest. And it was a thrill to see them in action.

Video Interview

Speed is Critical
There's One Message
Everyone Counts
Reaching, Stretching, Dreaming

The "I Am" Q&A

What car do you drive?
A Toyota and a Mercedes.

What is your favorite place to go?
Nantucket, Mass.

What websites do you like to visit?
Gawker and Drudge.

What was your worst moment in business?
The day that Kidder, Peabody blew up.

What's your favorite drink?
A great red wine.

What's your favorite food?
Chicken parmesan.

What's your idea of fun?
A Red Sox game. Dinner with friends and my wife, hanging around with the kids.

And at work?
Everyday. Every minute.

What business weaknesses do you forgive?
Someone who takes a risk and fails, always give them a second chance.

What movie star do you like?
Jaden Smith. I am president of the Jaden Smith fan club, that's my boy.

Who is a business hero of yours?
I'm impressed as hell with what Steve Jobs is doing.

What personal qualities do you admire in business?
Authenticity, courage, and being out there.

What personal qualities do you admire in life?
Candor. People who are in love, express it, and are not afraid of emotion, both up and down.

What was your greatest moment in life?
Marrying Suzy.

What is your dream?
To live a hell of a lot longer.

And what is your present state of mind?
Unbelievable happiness.

Transcript

CNBC:
What meant the most to you in your twenty years at GE?

JACK WELCH:
I was at GE for forty years. The first twenty was building businesses, being more of an entrepreneur, starting from nothing. I was the first employee of the plastics business. I hired my second employee and became a good communicator. I went on to get the top job. What I got the most kick out of was the great people, hiring great people and building the team, making it better every year. I had plenty pretty early on. I started with nothing but when I got to be CEO, I got my little pile. To see others get it, to see them change their lives, second homes, cars, and the excitement of winning. It’s like being in the winning locker room. Would you rather be with the winning Super Bowl team or in the losing locker room? We were winners and the teams were winners. And we all felt camaraderie. It was remarkable. When we made a transition to the new leader, we all stayed friends. That’s one of the great parts about it. We probably broke a lot of the friendship rules of business. We vacation together a lot. We play tons of golf together. We saw each other do well and we saw the people who worked for them do well and then we saw people we didn’t even know in the company do very well and that was so exciting.

CNBC:
You had a well-known goal of being the number one or two company in every market that GE was in. Do you think that kind of aggressive stance would still work well today?

JACK WELCH:
Who wouldn't want to be number one and number two? Obviously you're going to exist in different niches. When you start out in a new venture, you're clearly not number one. But you really would like to be a leader. I can’t think of anybody running a business saying, “Lets not be a winner here”.

CNBC:
What is your philosophy regarding change?

JACK WELCH:
Change is what excites people. You can’t stay the same. If you're growing, you have to keep growing. If you're going down, you got to turn it around. If you're stagnant, you're dead. And so in the end, you’ve got to get people to embrace change and not be paralyzed by it. Some people are scared of change. People were shaken up when the Wall Street Journal went to four sections from three. Most people don’t make the case for change. Lets change things. Why? You have to make sure that it’s clear to everybody, “What’s in it for them”? If I want you to change, I better tell you why. And why it’s good for the company, why it’s good for your group, and why it’s good for you. You have to personalize change and the benefits for them.

CNBC:
How do you think companies should react to this sort of changing world?

JACK WELCH:
Particularly in the media, it’s so easy to get into businesses. YouTube and Facebook are there. My kids couldn't live without Facebook. You never heard of Facebook ten years ago. So that’s the opportunity. Can the major companies spawn these things or grab these new ideas? Instead of paying umpteenth billion dollars for each one, isn’t there a way they can spawn them? And they’ve got to challenge the best and brightest in their places and fund them to take swings.

CNBC:
Do leaders need to change?

JACK WELCH:
Clearly leadership always changes. In the seventies, you could sit back and rock in a chair ‘til the Japanese showed up. I think it turned upside down. You have to dig into your companies, make it more competitive. Now, it’s much more focused on corporate governance. The scandals of 2000 created a lot of legislation. So that means mostly a CEO’s got to pay much more attention to his public shareholders. The media is pulverizing on corporate compensation. A CEO has to show more of a public face than ten years ago. You can make a choice for yourself. You can be out front with the public or you can build your company, or you can do both. Of course, you’d like to do both. It clearly has become a more public game.

CNBC:
Do management styles have to change?

JACK WELCH:
Not at all. I consult for a lot of companies. I still see what works and what doesn’t work. Bureaucrats don’t get anywhere. People that are more form than substance get nowhere. People want CEOs that are engaged, that are dealing with employees, that care, that are authentic. Authenticity is enormous. The big puffy, blowy leader gets nowhere. That’s the same, and it’ll always be the same. People want to follow people who they believe care for them. It’s a big deal.

CNBC:
How important is it to be open with your employees?

JACK WELCH:
Candor is one of the secrets of business. I think if we walked around and talked to everybody here in this crew today, and asked them when was the last time they had an appraisal? Do they know what their next job is? How straight is their boss with them? Do they have an open understanding of what the company’s plans are and how they fit in? You wouldn't get very high grades. And that still exists. It’s crazy. Unwillingness to look eyeball to eyeball with people, and tell them what you like about what they’re doing. Tell them what they could do to improve. And if they don’t improve, suggesting they move on. But tell them in plenty of time, work with them, but always be in their face, so that no employee should ever come to work not knowing where they stand in the outfit.

CNBC:
What about candor in terms of where the company’s going?

JACK WELCH:
It’s critical. Years ago as a CEO, many CEOs I knew used to have a card in their wallet. This is what they said to the public, this is what they said to the analyst. This is what they said to the employees. There’s no such thing. There’s one message. Everybody gets the same message. Candor is clear. When you’ve got problems, you talk about them. You don’t hide them.

CNBC:
What about formality?

JACK WELCH:
Formality slows a company down. It’s ridiculous. People acting rather than giving us their true character and feelings. People having meetings before the meetings, before the meetings to present things. All that nonsense. People should be able to be themselves. I’m back to that word, authenticity. Authenticity and informality go together. Say this guy over here in the corner starts selling swirls of cotton candy. He’s got no management plan. He’s out there with his two kids, they’re hustling sodas and they’ve got a business and they all know what’s going on. Every business should act like the corner grocery store. I have a management philosophy. Some will agree with it, some will not. I’ve seen it win in big companies. I’ve seen it win in small companies. I would hope that people would understand this core value, this core belief in that candor counts. Differentiation counts. Differentiate between the best and worst. Treat the best the best, businesses and people and the worst, treat them in a way that’s fair but move on with it. Get people to understand a mission, and tie missions to behaviors. So that people know where we’re going and here’s how you behave if you get there. And measure them on both and get everybody in the game. Everyone counts. Don’t go by the number of stripes you’ve got on the thing. Values count. You can’t say we got to win without telling people how to behave. And if people don’t behave, then you don’t want them on the team. Then differentiate the best and the weakest. Reward the best, give the middle of that group the chance to get to the best, and then make sure that you are giving voice and dignity to every employee in the company. And if you get that philosophy and you believe it and you measure it, and you reward it, and you review it, and people get appraised on it, and businesses get appraised on it, you don’t need much more. You will engage a crowd of people who want to take on the world and have fun doing it.

CNBC:
How important is speed to you?

JACK WELCH:
Speed is critical and that’s why we talk about informality. That’s why we talk about hating bureaucracy. You can’t have speed with bureaucracy. I was talking to a kid yesterday that I was interviewing for my MIT class. He’s going to be my teaching assistant. He worked in the White House and he was the communications director in the War Room, which is where you need the speed response. His memos from the War Room had to be approved by two people. He got to the White House, got to the President’s desk in forty-eight hours. In forty-eight hours, there’s been two news cycles or five news cycles. What an incredibly bureaucratic job. How can they respond quickly with a War Room with forty-eight hours response time?

CNBC:
Did you ever want to work for the government?

JACK WELCH:
I didn’t want to go into government. The principles I just talked about wouldn't work. Because of candor, I couldn't go into government. Take a hike, that ain’t for me.

CNBC:
What perspective should a company have on its stock price?

JACK WELCH:
The stock price is in fact a report card on the performance of a company. And it’s deeply engrained in every employee. But the stock price isn’t the objective. The stock price is the product of the successful efforts, of collective efforts of all these people. If it’s not working, the stock price isn’t going to move. So the stock price in the end reflects the success of a hundred thousand people, fifty thousand people pulling together around a mission that they want to achieve. The beneficiaries are the employees who will participate in savings plans, hopefully more options, granted lower in the organization, and they’re shareowners. We’re all employees. So the idea that you drive for shareholders, they get the results of your work. People say to me, “Tell me about shareowner value”. Shareowner value comes about. You don’t say, “I’m driving the company for shareowner value”. Shareowner value is a product of successful strategy executed by great people having fun doing it.

CNBC:
What advice do you have for entrepreneurs today?

JACK WELCH:
This morning’s Boston Globe talks about entrepreneurs. They talk about kids in the tenth grade hiring two Indians from Bangalore. Tenth grade high school kids are starting a little software company there. They talk about all the young kids in Boston, twenty, nineteen, eighteen, seventeen, starting their own companies. It’s the most exciting trend. People talk about Generation Y. My wife and I just wrote an article for next week’s Business Week on Generation Y. Generation Y is the most exciting group in the world. They want to do their own thing, they want to change the world. Technology’s changed so fast. The internet’s come, they can do it. It’s fantastic. I think my advice to them is, “Go for it. Take a swing. You have nothing to lose. Take a swing”. You’ll have enough time to worry about a second house and picket fences in your thirties and later. But go for it, grab it. And now I’m seeing it everywhere. We know one thing. This is the most entrepreneurial generation we’ve ever had.

CNBC:
How high should you set goals for your employees?

JACK WELCH:
Well, I think you should have stretch targets. The stretch targets should not be ridiculous and unachievable. But they should take a Herculean effort to get there. There ought to be an objective to be reaching all the time. People ought to be reaching, stretching, dreaming, and then beating last year and beating the competition is the measurement. Not beating the budget. The budget’s something I negotiate with you. Customers aren’t there, competitors aren’t there, it’s a little private deal in a windowless room in an office. Get people to measure against competition not against the prior year.

CNBC:
Should we have impossible goals?

JACK WELCH:
No. Impossible goals are stupid. Why do you want people to think they missed all the time? You should have a stretch budget where they might be able to make it. But when they fall short, you both understood the degree of stretch that was in it.

CNBC:
How should companies face the power of the new consumer?

JACK WELCH:
When hasn’t the consumer had control? There’s more knowledge available, but the consumer’s always been in control. Look at the customer, there are no businesses without customers. From the beginning of time, people had to focus on satisfying customers. Today, customers have more choice. So you’ve got to have a more penetrating argument, a better way of touching them. A better way of connecting. And only because they have more choices, but it’s the same game. Get to the consumer or the business consumer, any consumer and understand their needs and don’t have your lab come up with a project that has no bearing on consumers. Tie your research to consumer needs all the time. But nothing’s new. More choices are available but nothing’s new. Businesses don’t work without customers. It all starts there. Without consumers none of us would have a job.