May 24, 2005
To Be A Great Leader, Encourage Great People, Says Welch

Jack Welch, the former chairman and CEO of General Electric, has been described as one of the greatest business leaders and innovators of all time. During a Q&A event in Austin May 23, moderated by McCombs management professor Jim Fredrickson, Welch emphasized one of his key bits of advice: Hire people who are better than you.

By the time he reached the top spot at GE, Welch explained, he had a vision. “I knew what I wanted to do. I wanted to get better people, I wanted to streamline the place, and I wanted to take on competition.” That’s an ambitious set of goals, but Welch emphasized that he had not tried to go it alone. “One thing you always do,” he said, “is put a system in place to get stars around you."

In his new book, “Winning,” Welch addresses the importance of human resources. “Without a doubt, the head of HR should be the second most important person in any organization,” he writes, “From the point of view of the CEO, the director of HR should be at least equal to the CFO.”

During the Q&A, Welch underlined the point with a rhetorical question: “If you were running a baseball team, would you hang around the accountant or the team’s player manager?”

Leaders should be committed to employees, said Welch, and evaluate employees on their results and behavior. If an employee behaves in accordance with a company’s core values, but their results occasionally fall short of the goal, “take care of them.” The more difficult situation is when an employee delivers results but fails to maintain proper behavior. In that case, said Welch, “make a public example of them.”

In any case, Welch said, leaders should communicate candidly with workers. By failing to let people know when their performance falls short of expectations, he explained, you ultimately do them a disservice. “The most tragic thing I hear from audiences everywhere is, “I’m too kind a manager to have a bottom [10 percent of my workforce].” So what do you do when a recession comes?” said Welch. “If you manage two people, it’s your responsibility to let them know where they stand.”

A leader also takes care, said Welch, to leave the company’s future in good hands.

When he decided to leave GE, for example, Welch took care to plan an orderly succession. They had three candidates, and eventually settled on Jeffrey Immelt, who has held the top spot since 2001. The other two candidates were soon snapped up by other large companies, who had not exercised such foresight. “Now they make two to three times what Immelt, who won the contract, makes,” said Welch.

That might sound like a bad deal for Immelt, but Welch explained that for top executives, “the money very quickly gets out of the way.”

“Rewards come in two places,” he added. “The soul, and the wallet.”

The crowded Q&A session was a great success, according to Fredrickson. "It reinforced a lot of things I believe, and it reinforced a lot of things I teach my students, such as the concept that great companies have inordinate impact because of the values they perpetuate" he said. Fredrickson noted that about ten of his MBA students were in attendance, of whom a handful were able to ask questions.

"Welch emphasizes the people side of the equation with great depth and great commitment, and that’s shown in the way he ran the company," Fredrickson continued. "He’s very passionate about the people side of the business. He’s very passionate about implementation. And first and foremost, he’s very passionate, period. He believes in his bones that business can change the world." 
 

---

For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.