Key lessons Jack Welch left firms

Jack Welch, a chemical engineer who was at the helm of General Electric (GE) for two decades, died at 84 on Monday.

Welch is well known for the huge impact he had on GE during his tenure as GE chief executive, and on the global corporate world.

He was appointed chief executive in 1981 and in the period to his retirement in 2001 was able to boost the market value of GE from $12 billion to $410 billion.

GE, which deals in aviation, healthcare, power, renewable energy, digital industry, additive manufacturing, venture capital and finance and lighting, was founded in 1892.

Welch became the youngest CEO in the history of the conglomerate and forever changed its fortunes in 20 short years.

Fortune Magazine named Welch ‘Manager of The Century’ in 1999. Before then, Welch had acquired the name “Neutron Jack” following his theory and practice of firing under-performing managers and awarding the best performers.

The ‘rank and yank’ method that he popularised saw 10 per cent of managers who were ranked last fired in spite of their output. The top 20 per cent were awarded bonuses and employee stock options.

He invented the ‘vitality curve’ in which he categorised the managers into three classes.

“The top 20 per cent “A” group was filled with passion, committed to making things happen. The “vital” 70 per cent “B” group was essential to the company and encouraged to join the A’s. Then there was the bottom 10 per cent “C” group. The underperformers generally had to go,” Welch wrote in his 2001 book, Jack: Straight From The Gut.

After Welch’s retirement in 2001, GE faced complaints from critics who felt that the company’s financial results were manipulated.