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John F. Welch Jr. did not invent Six Sigma or many of the processes that made him famous in the 20 years that he led General Electric Co. (GE). But the relentlessly curious and blunt guy from Peabody (Mass.) imbued his corporation with an energy and culture that made it -- and him -- an icon of American business.
Through his own proselytizing personality, penchant for pithy slogans, and a rigorous performance system that demanded every manager become a mentor, Welch turned a disparate conglomerate into a global teaching organization. He inderstood that great talent was at least as important as great products. In the process, he showed how a vast, complex company could stay nimble and hungry even as it dominated rivals.
Welch, who joined GE in 1960 with a PhD in chemical engineering and became CEO in 1981, held few things sacred. He regularly jettisoned nonperforming units and was famous for annually lopping off the bottom 10% of his managers. But Welch made it his mission to manage and foster top talent with hawk-like attention. Every April he would clear his agenda to visit each business and review the performance of thousands of high-potential employees through a grueling process known as Session C. Up-and-coming leaders were moved around the 300,000-strong company and judged, among other things, on how well they were leading and nurturing others. Welch would prod and praise them, sending out a flurry of handwritten notes, or champagne to spouses, for a task well done. "Jack put his time and energy into developing people," says Noel M. Tichy, the University of Michigan management professor who helped Welch revitalize his Crotonville training center in New York's Hudson Valley. The center annually draws more than 8,000 employees for leadership training alone. Welch transformed routine meetings into rousing debate sessions and launched initiatives such as the Six Sigma quality process and the Workout approach to team problem-solving that touched practically every employee around the planet.
As a result, GE developed what many consider the deepest bench of executive talent in American business. In the years leading up to Welch's retirement in 2001, he helped to develop several contenders for his job. When Jeffrey R. Immelt was chosen, the losers immediately became chief executives at 3M (MMM) and Home Depot Inc. (ABS). Contrast that record with the succession angst that has played out in other American icons such as Walt Disney Co. (DIS) and Coca Cola Co. (KO).
Welch had his weak spots. His talent hunt seemed to capture mostly white men, with few minorities and women in the upper ranks. His fierce resistance to cleaning up the toxic chemicals that GE had dumped into the Hudson River between the 1940s and mid-1970s also did little to enhance his reputation as a model corporate citizen. Even his lavish retirement perks, which Welch and GE insist were justified, look ill-considered in today's transparent corporate climate.
But Welch-style training programs are as popular as ever. Shanghai now boasts its own Crotonville-style facility and GE's management prowess still inspires envy. Cultivating top talent is part of the GE brand, with competitors worldwide striving to mimic the systems that Jack built.
By Diane Brady