But I’m going to suggest something that most leadership gurus probably think is blasphemy. I’m going to suggest Jack Welch really shouldn’t be help up as a great business leader. Eighteen years after his retirement as CEO, General Electric is deep in dept, selling off assets left, right and center, and recently, the company has sunk to new lows and is struggling to stay afloat. What would have been unthinkable during Jack Welch’s time is actually a possibility – there's talk of delisting General Electrics altogether. In fact, the 125-year-old company might go into bankruptcy.
Jim Collins, author of the book 'Good to Great', defines a great leader as someone who is completely selfless, building up systems to ensure that the company lasts past his or her tenor. Unfortunately Jack Welch’s systems are already crumbling.
If there is one thing that Jack Welch can be faulted for it is reaching too far, stretching beyond the company’s means. Jack Welch reminds me of the fable that Stephen Covey wrote about in his famous book, ‘The 7 Habits of Highly Effective People”– the goose and the golden egg. In the fable, the boy finds a goose who lays a golden egg each day. He wants to increase production of golden eggs so he kills the goose. Jack Welch increased the company’s stock value exponentially, but in doing so did he end up killing the goose?
In 2011 GE ranked among the top 14 most profitable companies but since then it has severely underperformed in the market. In 2017, GE has reported losses of about $6.2 billion. As of October 2018, John L. Flannery was replaced by H. Lawrence Culp Jr as CEO in hopes of turning things around.
Immelt inherited a company that had a lot of underlining problems – some of which Welch swept under the rug and left to be cleaned up after he retired. Not long ago, the criticism of Welch would have been unthinkable. He was a larger-than-life force whom Fortune named "manager of the century" in 1999.
While things gradually recovered after 9/11 and went back to normal, GE was really hurt by another economic calamity. In 2004, with U.S. home prices rocketing, GE paid $500 million for a subprime mortgage company called WMC. In 2007, with home prices falling, GE laid off most WMC employees and sold the company, which lost $1 billion that year. The subprime mortgage can really be seen as the beginning of the end for GE.
Immelt once had a reputation as a world-class CEO but much like Welch, his name has also been tarnished by GE’s poor performance. He was named one of the "world's best CEOs" by Barron's three times and sat on CEO councils under both President Trump and former President Barack Obama.
From 2010 through 2014, when oil prices hovered around $100 a barrel, GE bought at least nine businesses in the oil and gas industry. Then, in 2016, with prices down by half, the CEO of the time Immelt had to consulate.
Fast-forward to 2019 year and GE is on the verge of a crisis. The ongoing deterioration in GE ability to become dig its way out of debt is obviously a major concern.
So how much can we blame Jack Welsh for all of this? Did he just pick the wrong person to succeed him or does the problem go deeper than that? No matter what, I think it’s safe to say that Jack Welsh probably shouldn’t be considered one of the best business leaders of all time.