Published in The Financial Times
Of course, I know that Jack Welch, former chairman and chief executive of General Electric, is a big deal. I know that in his first year in charge, GE was America’s 11th largest company, and that when he left in 2001, it was number one, with a market cap of about Dollars 400bn. And I know that for four years in succession, between 1998 and 2001, the FT ranked him the “world’s most respected business leader”.
But still, the Jack Welch Q&A session at the Royal Lancaster Hotel in London, arranged by the Institute of Directors, feels… excessive. It feels excessive that 638 people have paid so much – Pounds 198 each! – to see a man who, after all, is no longer running a company. It feels excessive that some members of the audience have travelled from as far as Asia to see a man who, after all, will only answer questions for an hour. And it feels excessive that Jack’s arrival on stage is marked over the loudspeakers by the blaring out of Snap!’s “The Power”, a hit from 1989.
“Oh-oh-oh-oh-oh-oh-oh-oh-oh yeah-eah-eah-eah-eah-eah,” go the vocals as Welch takes his seat on stage. “I’ve got the power!”
Indeed, the event, arranged by the Institute of Directors for its members, feels more like an evangelical rally than a business seminar. Certainly, the questions that get posed indicate that they regard their guest as some kind of god, capable of solving any organisational crisis: Jack, how should the American government have dealt with Katrina? And: Jack, what can we do to compete with China and India? And: Jack, will you ever run for office?
“Never!” he barks in response to the third question, which incites a disappointed groan across the room. “Basically, government is riddled with bureaucracy, waste and inefficiency! In a company, you can clean those up and you have to! In government they’re there forever!” A murmur of assent.
On stage, Jack, who hams up his Boston accent and makes great store of what his publisher calls his “optimistic, no excuses, get-it- done mindset”, is the personification of American business – competitive, focused on the bottom line. “All of you managers know who the turkeys are in your business. But have you told ‘em?” Applause. “When you think in terms of China, just trimming costs by 4 per cent is not enough! That’s the road to suicide! You need to think about taking out 30 to 40 per cent!” Louder applause.
As soon as he is done, and the IoD has marked his exit with a standing ovation and another excerpt from “The Power”, Jack is off to catch a plane to Milan to repeat the performance there. In this one week he will answer questions in front of about 6,500 people across Europe. The appearances will push the number of people he has answered questions in front of since retirement to well over the 300,000 mark. And for a couple of hours during that busy week, I am given a Q&A session of my own.
We meet at another London luxury hotel, the Lanesborough on Hyde Park Corner. Welch arrives accompanied by a PA, a publicist, and Suzy, age 46, who last year became his third wife – a slimmed-down entourage from his GE days, when he was habitually accompanied by a team of burly security men – and gets things going by yawning expansively.
“I’m sorry,” he says, taking a seat in the bar, Suzy tucking herself next to him. “We were out at Annabel’s last night. Till early in the morning.”
Blimey, I say. I’m less than half your age and was in bed by 11pm.
“Ha! We were dancing the night away!” Jack casts a loving smile at Suzy. Suzy responds by putting her arm around Jack, in the process revealing an engagement ring bearing the biggest diamond you’ll see outside the Crown Jewels enclosure in the Tower of London. They look strange together – Suzy a younger, glossier, version of Anna Ford, Jack an older, shorter version of Jim Carey.
His appearance surprises me. Having read about Neutron Jack, the tough-talking, working-class Irish-American, the one-time “Toughest Boss in America” (Fortune magazine, 1984) who cut 10 per cent of his staff every year, I expect him to be physically imposing – but, up close, he looks fragile, taking his seat with a gingerliness that betrays the fact that he has recently had both a shoulder operation and the third in a series of back operations. His voice is raspy.
The reason for this chat, and for Jack’s tour of Europe, is the publication of Winning, his new book, which attempts to provide answers to the questions that Jack has faced most often in the 150- odd Q&A sessions he has conducted around the world since retiring from GE. Even though some of the material in Winning is covered in his autobiography, Jack: Straight from the Gut, and even though the blurb on the front from Warren Buffett – “no other management book will ever be needed” – is ridiculous, Winning is intriguing.
One of the main reasons why it is intriguing is that it is by Jack Welch. And, as the intensity of his Q&A sessions demonstrates, this 69-year-old pensioner, whose main claim to fame is that he once ran a company that specialised in manufacturing turbines and lightbulbs, still matters. Indeed, what Winning has to say on subjects such as work-life balance – refreshingly, Jack admits what we all fear, that bosses want as much time as we can give, and will do anything to get it – and his famous 20-70-10 concept – through which he separated employees into three performance categories and managed them accordingly – alone makes it worthwhile.
“Without doubt, I get more questions about 20-70-10 than anything else,” he says, toying with a glass of mineral water. “People tend to love it or hate it.” And what does he say to the people who hate a system that lavishes bonuses on the top 20 per cent of the workforce, urges the middle-ranking 70 per cent to greater things and fires the bottom 10 per cent? “Well, I have seen it transform companies from mediocre to outstanding. And it is as morally sound as a management system can be.”
How? It sounds pretty mean to me. “The thing is, protecting people who don’t perform hurts the people themselves. For years, they are carried along with everyone looking the other way. At appraisals they are told they are doing just fine. Then a downturn occurs and these under-performers are almost always the first to go, and always the most surprised because no one has ever told them the truth. The awful thing is that this often happens when the under- performers are in their late forties or fifties. Then suddenly, at an age when starting over can be tough, they are out of a job.”
Suzy nods enthusiastically as Jack explains this. Which brings me to the second reason why Winning is intriguing: it is co-written with his new wife. And as anyone who spends more than two minutes with Jack will realise, Suzy is the centre of Jack’s post-GE world. There are some things he still does by himself: consulting for Barry Diller’s empire, for instance, and advising Clayton, Dubilier & Rice, the private equity firm. But Suzy is involved in almost every other aspect of his professional life. This month sees the launch of their joint business column, syndicated by The New York Times. Next month they are hosting a two-day workshop on management in Boston together. And Jack says Suzy will in future moderate some of his Q&A sessions.
“I would describe Suzy as the smartest – about the smartest person, I can’t think of anyone smarter in a variety of subjects – I know,” rasps Jack.
Suzy: “But you’re smart, Jack!”
Jack: “She is witty. Funny, funny, funny. I mean she really can mimic anything. She does her mother in such a great way… ”
Suzy: “Jack, don’t say that. If my mother knew… ”
Jack: “Suzy is high energy, giving. She has friends from high school, deep long friendships. And I think she is gorgeous! Gorgeous and sexy as hell. And one of the great joys of our life is that, unlike other couples, we get to be together constantly. We are living in a dream world. How did it happen? Well, luck comes into it, but we seized it. We went through some troubles but now we have it.”
Of course, the troubles. In 2001 Jack was interviewed by the then Suzy Wetlaufer, in her capacity as editor of the Harvard Business Review. One thing led to another and before long they were having an affair – an affair that Jack’s wife of the time discovered when she picked up his BlackBerry and read several messages from Suzy.
The relationship cost Suzy, herself a divorcee, her job and Jack his second marriage. During Jack’s subsequent divorce negotiations, his former wife’s lawyers leaked details of his lavish GE retirement contract, which allowed him unfettered use of a corporate jet, a company-owned apartment overlooking Central Park, a limousine, a cook, and free flowers, tickets to sporting events such as Wimbledon and free laundry services, among other items. These revelations created a second wave of scandal, that this time not only filled the gossip columns, but the pages of the Financial Times and Wall Street Journal too.
I expect Jack to resist discussing the scandal, or at least rush through his account like a man holding his breath as he swims for his life down an underwater tunnel, but, being so used to facing questions, he claims to relish the opportunity to discuss it. “Pleeeease ask me about it,” he says, pushing his glass of mineral water to one side. “I love clarifying it.”
Well, the main question, I guess, is this: was his retirement package, or his retention package as he calls it, justified? If so, why did he give it back? “Good question.” He leans forward to emphasise the importance of his answer. “OK. It’s 1995. December.” He sounds like he is reading out a passage from Raymond Chandler. “I have just had a five-way bypass operation. I’m approaching 60. The company is doing extremely well. And the board says they would like me to stay until 65. They want to make it worth my while. So they offer me Dollars 100m in restricted stock that will become Dollars 300m at the vesting date. In return, I cannot work for a competitor (afterwards).”
“I say: I don’t want money. I have enough money. What I want when I retire is to live the way I am living now: I want access to the company plane; I want to keep my apartment; I want to be able to go to sporting events like I go to now.” He leans back. “In a way it was a stupid Irishman’s decision – what I requested costs Dollars 2m a year. I would have to live about 150 more years to make up for what I was offered. Anyway, during that period Business Week, The Wall Street Journal, The New York Post all wrote stories about the deal.”
Suzy: “The New York Post!”
Jack: “And then I retire. I am using the package for several months, when the divorce happens. And in a divorce, assets get valued and divided. Her lawyers very cleverly raise the GE airplane question. The apartment question. The flowers in the apartment question. It was in the middle of Enron.”
Suzy: “The timing was unbelievable.”
Jack: “The timing was terrible. So, I had a choice – give it back and look like a crook, or keep it and look like a greedy pig. Meanwhile GE is in the middle of every story.”
Suzy: “Every story.”
Jack: “Every story. GE, GE, GE. So I give it back. I had plenty of money.”
Does he regret not taking the Dollars 300m option?
Jack: “Without question. Now, I think Dollars 300m is a little excessive.” The remark makes me laugh. Jack doesn’t laugh back. “I didn’t want the embarrassment of saying I had Dollars 300m.”
I ask Jack whether he thinks that the controversy has tarnished his reputation. Of course, there were people who regarded Welch as overrated before the controversy – believing, for instance, that his aggressive handling of European antitrust negotiations helped doom GE’s Dollars 42bn takeover of Honeywell. But in recent years his pedestal has been heard cracking: for instance, a cover of The Economist on the fall of celebrity chief executives showed him as a fallen Soviet-style statue.
Jack seems torn between saying he doesn’t care and defending himself. “In this game you go from pig to hero to bum,” he says. Another yawn. “That’s the way it works. You’re up and you’re down. Fortunately I’m on an up now.” Then he adds: “Let me point out a few things. One: my speaking engagements are overbooked. Two: in the last month Fast Company ran a survey of their readers about who most exemplifies great leadership and integrity. In this I was number one and Nelson Mandela was number three.”
Suzy: “That’s amazing.”
Jack: “It’s amazing. Judging from that, I wouldn’t say that my reputation has been damaged. I think I have been somewhat damaged in the FT. The FT has a little cynicism about me. And it shocks me, because we have always been quite… cordial.”
The comment is revealing. There has been criticism, but there has been lavish praise also. Last year, the FT asked chief executives which figures from history they would have on their boards and reported that Welch topped the list ahead of Bill Gates, Winston Churchill and Jesus Christ. But still, this isn’t enough for Jack. Indeed, it isn’t enough for Jack that countless business experts routinely celebrate his management style, bravado and acumen. It seems that he wants to dispel all existing doubt. He wants his reputation as the world’s most successful businessman to be cast in stone.
Perhaps this is why he has written another book, and why he continues to travel the world, answering questions. And perhaps this is why his devotion to Suzy is so intense – she shares his enthusiasm for the task. While I initially suspected that the story of Jack’s retirement was that he had replaced his all-consuming love for a corporation with an all-consuming love for a woman, it is probably more complicated: he is in love with a woman who understands that his first love is and will remain GE, a woman who will even help him articulate it.
Certainly, he’s not doing it for the money – although he earns around Dollars 150,000 per talk (“I think it could be higher!”), he has given his multi-million-dollar book advance to charity. “I got plenty of money,” he says. “And there is something unseemly about going out and selling books. You see, I want people to buy into this leadership system. This way, I can feel very comfortable at a business school selling it. It’s just too unseemly otherwise, with young kids, you know, struggling to make it through business school. Making them pay… ”
Suzy: ” …20 bucks.”
Jack: ” …20 bucks. With my two books we will have raised Dollars 12m for charitable scholarships.”
But then the Welches can afford to be so generous. They are extremely wealthy. So wealthy in fact that when I ask how many houses they have, it takes the best part of half a minute to provide an answer. “Hmmmm,” says Jack, counting on his fingers. “There’s New York… and… ”
Suzy: “Boston, Palm Beach, Connecticut, Nantucket… ”
Jack: “But one is for sale.
Suzy: “It’s five, I think.”
Out of the corner of my eye I can see the publicist hovering, so I wrap up, asking Jack whether he has any ambitions left to fulfil. As with many of his replies, the answer veers slowly towards the subject of Suzy. He says he regrets that they will not have children together, but also that their relationship just keeps on getting more intense and more rewarding day by day.
“When we met four years ago, we thought our feelings for each other were at a peak. But they look like a peanut to where we are today. I am so madly in love with her, I can’t think… of doing anything different.”
Does she not have any faults? “I told you last night, you were absolutely perfect,” he says, turning to Suzy, who looks back at him dreamily. “And that was at Annabel’s before two o’clock!”
Published 29 October 2005, FT WEEKEND MAGAZINE
Copyright Financial Times