and more about GE
First of all, Happy Thanksgiving to all!!
There are probably more pleasant things to talk about on Thanksgiving than the demise of one of the most iconic of all U.S> Corporations. Yet it si good to talk about as we learn from the past, so we don't make the same mistakes in the future.
About the Board of Directors. From what I hear, most were hear, most were afraid of Jack Welsh. CEO's can get rid of Board remembers. And one of Jack's methodologies to put people in line was to verbally abuse GE employees in front of their peers if they disagreed with him. So it seems that many of the Board members were little more than sycophants.
As a stockholder, I got the GE annual Report each year. It was hard to stomach as you opened it and there was a full page picture of Jack and his sycophants. Some even dressed like him. No doubt that pleased Jack very much. I
Bradfordwhite--you mentioned Jack's book and did I get my information from it. It is hard to get information from it as it was 300 pages of self-promotion/self-gratification.
Oddly, Jack was honest about one thing, indicating he was not a very good engineer. When he was a chemical engineer at GE Plastics (where he got started at General Electric) he made a mistake that caused a major explosion at one of the polymer plants, that caused significant damage to the plant. Seems he was as bad at engineering as he was at being a CEO.
Jack went directly from college to an engineer at GE, then to the divisions chief of GE Plastics, to CEO. He had no other managerial experience. From running one division to running an entire corporation with international holdings is quite a jump with no experience in between.
Other literature states that GE's administration took notice of Jack, while he was in plastics due to his "aggressiveness" and they liked that. Not aggressive in research or new products, but aggressive in sales growth. They got the "aggressive" attribute right. Aggressive to the point where he destroyed GE.
There is an abundance of literature on GE and its transition out there, Bradfordwhite, if you would like to avail yourself to it. It was a public traded company. One of the better works, not told from Jack's perspective, is "At Any Cost: Jack Welsh, General Electric and the Pursuit of Profit." by Thomas O'Boyle
There are a plethora of other publications in trade magazines as well as consumer periodicals.
It lays bare what went on behind the scenes at GE with information from memos, personal accounts and legal documents.
Just one of the many famous Welsh tyrannical ragein thes occurred between Welsh and the division chief at GE Appliances at Appliance Park.. You may recall nineties when GE had just developed at new in-house rotary compressor for its refrigerators. Once in the refrigerators and out into the market they then started dying..... by the millions.
What happened was When they compressor was first developed, GE Appliances was running it through it involved and comprehensive durability tests. These take time, often years. Jack wanted them on the market...now. He got in his usual tyrannical rage with the division chief at Appliance Park and was told him to get the in compressors out in the market NOW. If he didn't he would be replaced by someone who would. So the compressors went out into the market, they failed, and it it cost GE millions in recalls/repairs.
So what happened, you guessed it, the new compressors design was scrapped instead of revamped and GE compressors began being imported from China.
I worked with General Electric for over thirty years. Not for GE, but WITH GE. at the time, I was Asst. Chair of the Electrical Engineering Department at Wright State University and we had a co-op program for out students with GE. We sent our students to several GE division, but most went to GE Aviation in Evandale, Ohio (just outside of Cincinnati) and Appliance Park (GE Appliances) in Louisville, KY. because of their geographic proximity to the University.
I became friends with many of the GE reps who came to the University. Sometimes we would go out to lunch. It is surprising what you can learn from inside sources over thirty years. Some were more guarded in their responses about what was happening internally at GE, others were so disgusted that they told everything they knew.
I a case like this, if you hear one thing from one person, you learn to take it with a grain of salt. When you hear it from different reps from different divisions you take it more seriously. When you hear it from multiple reps and its in agreement with current literature you give it credence.
One thing they all agreed on, at least the ones I met, was Welsh was bad for GE. Some predicted he would run GE into the ground. Turns out these were the ones who were right.
The viewpoint of stockholders and employees is often quite divergent. You make money and the stockholders are willing to turn their heads aside to what is happening internally. Money talks and Welsh was putting money into their pockets.
I took the money as all stockholders did, but I didn't turn my head to what was happening. Wanting to know what was going on and I researched it, being piqued by the information I was getting from those who worked under Welsh during his regime. Beside talking to people wo were internal to GE I read everything I could get my hands on. When I see an injustice I attempt to do something about it. But, in this case, there was little I could do except try to make changes through my votes and try to educate others about what was happening a GE as it was being torn apart limb by limb by Welsh.
Of all the GE employees/reps I talked to at the University during the Welsh years, No one, not one single person liked Welsh or had a good thing to say about him despite the fact that GE was making money and stocks were climbing. They were viewing it from different eyes and different perspectives than the world, and they saw what was happing internally.
It all boils down to what is a corporation for.
To answer that, we have to go back to the origins of the company. I think many companies started with someone who had a passion. An idea...a goal that drove them. They pursued it. Whether it be a product/invention a service, etc. Their passion and drive led them to start a company to produce this product or conduct this service.
They knew if you pleased the customers they would come back, and they would tell others and your company would grow and prosper. Over time, the idea of the corporation developed. This allowed people share and participate in the growth of a company.
The stockholders provided a means to have finances grow, to reach more consumers, and continue to research for new and better products. It was all about pleasing the consumer. As the company prospered the stockholders were rewarded for their monetary loans to the company.
Somewhere along the line, it seems them emphasis switch from pleasing the customer to pleasing the stockholders and the goal of companies was to be an entity to make money. Dong what you have to do, even if it means giving up what the company was created for.
That is it became a game where you buy and sell other companies to get more profits, whether these companies are related to the original vision of the company and its founder, or not.
Jack Welsh made it abundantly clear what he thought a corporation was for. A gigantic toy that he could use to get fame for himself and show the world he was a force to be reckoned with. Little Jack was now able to play with the big boys and he did whatever was needed to aggressively destroy the internal electrical infrastructure of GE, which he so hated, so he could rebuild it in his own image.
He envisioned GE as a giant financial service empire, with he at the helm. Basically he was attempting to converting General Electric to a bank and insurance company. Despite Welsh's and Immelt's attempts it didn't take. (Although Immelt at the very end showed some minor signs of wanting to get GE back into industry as its prime focus..but it was too late.)
It's not sentimental to realize that 100 years of experience being an electrical manufacturer and billions of dollars of electrical manufacturing infrastructure is not designed to be turned into a financial institution.
But Jack's drive for recognition and power drove him to ignore these things. With every division he sold, it pumped money into the corporation, stocks went up and Jack looked good. He beamed with pride and his ego swelled. Selling off Ge divisions right and left, he had play money in his pockets now and he purchased his financial institutions and insurance companies, no doubt just knowing that GE would one day be the Welsh Financial Services Corporation.
All House of Cards look nice and get praise, until they begin to fall. Once the fall begins, no power on earth can stop it. For there is no foundation there, no support. Welsh destroyed GE's foundation decades ago.
How ironic, though, that as the CEO, board members and managers try to sift through the rubble, all that what they are able to salvage from Welsh's ego trip are just three entities: aviation, electricity generation/energy and hospital/health care equipment.
All manufacturing, and all electrical related, and all the very things that Welsh despised and spent his career trying to destroy or get rid of.
Nevertheless, money holds a prominent value in our society and people would rather think praise of a man who temporarily enriched the pockets of stockholders than look at the reality of a man whose ego and drive for control set one of our country's largest and oldest companies into a death spiral from which it never returned.
Welsh is gone now, and so is GE.
