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Welch has transformed what was an old-line American industrial giant into a highly competitive global growth engine. Welch has reshaped the company through more than 600 acquisitions and a forceful push abroad into emerging markets. How did Welch, who sat atop a business empire with $304 billion in assets, $89.3 billion in sales, and 276,000 employees in more than 100 countries, did it?

He did it through sheer force of personality, coupled with an unbridled passion for winning the game of business and a keen attention to details many chieftains would simply overlook. He did it because he was a fierce believer in the power of his people.

Welch’s profound grasp on General Electric stemmed from knowing the company and those who work for it like no other. There were the thousands of «students» he has encountered in his classes at the Croton-on-Hudson campus. Then there was the way he spent his time: More than half was devoted to «people» issues. But most important, he has created something unique at a big company: informality.

Welch liked to call General Electric the «grocery store». «What’s important at the grocery store is just as important in engines or medical systems,» said Welch. «If the customer isn’t satisfied, if the stuff is getting stale, if the shelf isn’t right, it’s the same thing. You manage it like a small organization. You don’t get hung up on zeros.»

You don’t get hung up on formalities, either. If the hierarchy that Welch inherited, with its nine layers of management, hasn’t been completely undermined, it has been severely damaged. Everyone called him Jack. Everyone could expect to see him hurry down an aisle to pick through the merchandise on a bottom shelf or to surprise an employee with a bonus.

Making the company «informal» meant violating the chain of command, communicating across layers, paying people as if they worked not for a big company but for a demanding entrepreneur where nearly everyone knows the boss. It had as much to do with Welch’s charisma as it had to do with the less visible rhythms of the company – its meetings and review sessions – and how he used them to great advantage.

When Welch became CEO, he inherited a series of obligatory corporate events that he transformed into meaningful levers of leadership. These get-togethers allowed him to set and change the corporation’s agenda, to challenge the strategies and the people in each of GE’s dozen divisions, and to make his opinions known to all.

Welch believed that efficiencies in business were infinite because there were no bounds to human creativity. «The idea flow from the human spirit is absolutely unlimited,» Welch declared. «All you have to do is tap into that well. I don’t like to use the word efficiency. It’s creativity. It’s a belief that every person counts.»

Not surprisingly, Welch embraced the largest corporate quality initiative ever undertaken. For years, he had been skeptical of the quality programs that were the rage in the 1980s. He felt that they were too heavy on slogans and too light on results. That was before he heard Lawrence Bossidy telling about the benefits he was reaping from a quality initiative he had launched at AlliedSignal. Bossidy had borrowed the Six Sigma program from Motorola and reported that the company was lowering costs, increasing productivity, and generating more profit.

A Six Sigma quality level generates fewer than 3.4 defects per million operations in a manufacturing or service process. GE is running at a Sigma level of three to four. The gap between that and the Six Sigma level is costing the company between $8 billion and $12 billion a year in inefficiencies and lost productivity. To make the ideas take hold throughout GE required the training of so-called master black belts, black belts, and green belts. Welch launched the effort in late 1995 with 200 projects and intensive training programs, moved to 3,000 projects and more training in 1996, and implemented 6,000 projects and still more training in 1997. In 1998, Six Sigma delivered $320 million in productivity gains and profits, more than double Welch’s original goal of $150 million. «Six Sigma has spread like wildfire across the company, and it is transforming everything we do,» boasted Welch.

Show and Tell

The success of the program was evident in 1998 at Boca Raton, where Welch kicked off each year with a meeting for the top 500 executives. That year, 29 managers spoke about their Six Sigma projects describing how they used new ideas to squeeze still more profit out of the lean machine that is GE. One after another explained how quality efforts cut costs and mistakes, enhanced productivity, and eliminated the need for investment in new plant and equipment.

William Woodburn, who headed GE’s industrial diamonds business, was one of the 1998 heroes at Boca. In just 4 years, Woodburn had increased the operation’s return on investment fourfold and halved the cost structure.

Employing Six Sigma ideas, he and his team have squeezed so much efficiency out of their existing facilities that they believed they have eliminated the need for all investment in plant and equipment for a decade. Some 300 other managers from GE have visited the plant to learn directly how Woodburn has done it.

But the main event was Welch’s wrap-up comments. Even though GE had just ended a record year, with earnings up 13%, Welch wanted more. Most CEOs would give a feel-good, congratulatory chat. But Welch warned the group that it would face one of the toughest years in a decade. It’s no time to be complacent, he said, not with the Asian economic crisis, not with deflation in the air.

Then, the ideas tumbled out of him for how they can combat deflation. «Don’t add costs,» he advised. «Increase inventory turns. Use intellectual capital to replace plant and equipment investment. Raise approvals for price decisions.»

Roses and Champagne

Welch was uncommonly conscious of the signals and symbolism of leadership. His handwritten notes sent to everyone from direct reports to hourly workers possessed enormous impact, too. Moments after Welch lifted his black felt-tip pen, they were sent via fax direct to the employee. Two days later, the original arrived in the mail.

They were written to inspire and motivate as often as to stir and demand action. In 1996, for example, Woodburn turned down a promotion from Welch that would have required a transfer because he didn’t want to move his teenage daughter out of school. Welch spoke to Woodburn on the phone and within a day sent a personal note to him.

«Bill,» wrote Welch, «we like you for a lot of reasons – one of them is that you are a very special person. You proved it again this morning. Good for you and your lucky family. Make Diamonds a great business and keep your priorities straight.» To Woodburn, the note was an important gesture. «It showed me he cared about me not as a manager but as a person. It means a lot.»

Or consider how Welch became involved in the excruciating details of the tubes that go into GE’s X-ray and CAT-scan machines. In the mid-1990s, Welch, who spent 15% to 20% of his time interacting with customers, heard some complaints about the poor quality of the tubes. The product was averaging little more than 25,000 scans, less than half what competing tubes were getting.

To fix the problem, Welch reached two levels down into the organization and summoned to corporate headquarters Marc Onetto who had been general manager for service and maintenance in Europe. His orders were simple and direct: «Fix it,» Welch demanded. «I want 100,000 scans out of my tubes!»

For the next four years, Onetto faxed weekly reports direct to Welch, detailing his progress. Back would come notes from Welch every three to four weeks. Some would nearly growl for greater progress; others would flatter and cajole. The experience astonished Onetto. «I was just running a little business here, about $450 million in revenues, and I was so amazed that he could find the time to read my reports and then even send me back notes,» he said. Since then, Onetto’s team has created versions of the tubes that average between 150,000 and 200,000 scans. The improvements added about $14 million in productivity benefits to the division last year.