Gutsy Welch Says He Was Too Cautious

Despite overseeing massive layoffs and selling and buying billions of dollars worth of businesses, Jack Welch says in his new book he was too cautious--even timid--as General Electric Co.’s chief executive.

Welch, who releases “Jack: Straight From the Gut” today, earned the unwanted nickname “Neutron Jack” after tens of thousands of job cutbacks in the 1980s. He sold cherished GE operations and boldly bought new ones, including RCA, which owned the NBC television network.

“Contrary to reputation, I’ve often been too cautious,” Welch wrote. “I waited too long to get rid of managers who weren’t willing or able to face reality. I was hesitant with some acquisitions, slow to embrace the Internet, even timid about blowing up all the rituals and traditions of what once had been a bureaucracy.

“Almost everything,” Welch continued, “should and could have been done faster.”

Still, Welch wrote, GE became a company that relished change, used its size to take risks and is now respected around the world.

Many experts agree, calling Welch one of the best business leaders of the 20th century.

During Welch’s two decades as its leader, Fairfield, Conn.-based GE expanded from a $13-billion maker of appliances and light bulbs into a $480-billion industrial and financial services conglomerate that provided strong profits even in difficult economic times.

Welch, who retired Friday, writes that his mother, Grace Welch, was the most influential person in his life. Welch grew up with a speech impediment, but his mother instilled self-confidence in him by telling him: “No one’s tongue could keep up with a brain like yours.”

“And many of my basic management beliefs--things like competing hard to win, facing reality, motivating people by alternately hugging and kicking them, setting stretch goals, and relentlessly following up on people to make sure things get done--can be traced to her as well,” Welch wrote.

Welch started working for GE in 1960 in its plastics division and nearly quit when he initially received the company’s standard $1,000 raise. The experience, he said, taught him the importance of “differentiation,” a phrase he invokes often in the book.

Saying the concept builds the best leadership team, Welch forced managers to rank the top 20% of their managers, the 70% considered vital to the organization’s success, and the bottom 10%.

The top performers got raises two to three times what the next group received to ensure they stayed on. The bottom tier got no raises and faced dismissal.

“That standard raise I got four decades ago has probably driven my behavior to an extreme,” Welch wrote. “But differentiation is all about being extreme, rewarding the best and weeding out the ineffective.”

Five years after Welch got the top GE job, one of every four people was gone from the GE payroll--for a total of 118,000 employees. GE became the first large profitable company to take such drastic action for competitive reasons in the face of recession, inflation and rising Japanese imports, Welch said.

Welch defended the layoffs, saying those affected received significant notice and good severance pay. He said the moves reflected a change from guaranteeing jobs to a new “psychological contract” that made GE jobs the best for those willing to compete.

Welch also devoted a chapter to GE’s unsuccessful attempt to acquire Honeywell International Inc. for $41 billion.

Welch received a $7.1-million advance from AOL Time Warner Inc. for the book.