John F. Welch is taking his final bow on the corporate stage as he leaves General Electric Co. (GE
) after 41 years, half of them as chairman and CEO. It is a testament to the success of the man that no other business manager anywhere rivals him in terms of peer respect. Welch's legacy will be much discussed and debated. Chief executives and business-school professors are already seeking to distill Welch's strategies so as to replicate them. Many are certainly transferable--being first or second in your market; the leveraging of services for industrial products; the key role that finance plays in a conglomerate. But in the end, Welch's success is likely to underscore the power of personality in changing organizations. And that will be very hard to transfer.
Demanding, intense, coarse, sarcastic, volatile, restless, Welch practiced a "tough love" kind of locker-room leadership that brought out the best in most but alienated many (page 82). The high school hockey captain from a working-class family in Salem, Mass., was able to mold GE's culture to reflect his own kind of in-your-face personality. This is rare in big institutions, which usually force individuals to conform to the existing culture. Welch used emotion far more than most managers to get results. He expressed anger often, and some employees were afraid of him. Yet Welch could also be very warm to close executives around him, lavishing them with handwritten notes and showing concern for personal family matters. Welch turned GE into what he was most comfortable with--an aggressive, competitive male culture, with harsh penalties and rich rewards. Women especially found it an uncomfortable environment. It did work, however, in delivering on the bottom line year after year.
But Welch's way has serious limitations. In an increasingly multicultural, global world, GE's top managerial culture is too homogeneous, too male, and probably too American. While the middle ranks of the company are filled with Asians and Europeans, that's not so higher up. As with so many charismatic people, Welch's strengths turn out to be his weaknesses.
And he knows it. To his credit, Welch didn't try to clone himself in appointing a successor. He chose a very different personality, one who promises to improve GE's corporate culture in ways that Welch couldn't. Jeffrey R. Immelt is soft-spoken, Ivy League, and intent on building a multicultural cadre of GE executives (page 78).
There is no one corporate playbook that Welch is leaving behind, and Wall Street is beginning to take notice. GE's stock is down 30% for the year. But what Welch leaves behind may be more lasting than the shrinking "Welch premium" for GE stock. His real legacy may be that at the right time, in the right place, one individual can make a huge difference. This is a valuable lesson transferable to all of society, not just the business community.
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