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Weekend Thought

Engineers’s Leadership (A CEO story)

Mr. Welch was born in 1935. He received his B.S. degree in chemical engineering from the University of Massachusetts in 1957john_welch_leader_0 and his M.S. and Ph.D. degrees in chemical engineering from the University of Illinois in 1960.

In 1960, Mr. Welch joined GE as a chemical engineer for its Plastics division in Pittsfield, Massachusetts at salary of $10,500. In 1963, an explosion at the factory under his management blew off the roof of the facilities, and he was almost fired for that episode.

After few years he decided to quite from GE. Welch planned to quit his job as junior engineer because he was dissatisfied with the raise offered to him and was unhappy with the bureaucracy he observed at GE. Welch was persuaded to remain at GE by Reuben Gutoff, an executive at the company, who promised him that he would help create the small company atmosphere Welch desired.

Then his journey in GE was unstoppable; he was elected the company’s youngest Vice President in 1972 and was named Vice Chairman in 1979. In December 1980 it was announced that he would succeed Reginald H. Jones, and in April 1981 he became the 8th Chairman and CEO. He served in that position until he retired in September 2001.

The first step he took after becoming the CEO, he fired all the bureaucracy at CEO office. He took this step just to remove all barriers between the CEO and the staff. He started to write all notifications and circulars by his own hands. Welch took some very aggressive and unpopular decisions for his company.

Welch worked to eradicate perceived inefficiency by trimming inventories and dismantling the bureaucracy that had almost led him to leave GE in the past. He closed factories, reduced payrolls and cut lackluster old-line units.Welch’s public philosophy was that a company should be either No. 1 or No. 2 in a particular industry, or else leave it completely. Welch’s strategy was later adopted by other CEOs across corporate America.

Each year, Welch would fire the bottom 10% of his managers, irrespective of absolute performance. He earned a reputation for brutal candor in his meetings with executives. He rewarded those in the top 20% with bonuses and stock options. In his book “Jack Straight from the Gut Welch states that GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985. Of the 112,000 who left the payroll, 37,000 were in businesses that GE sold, and 81,000 were reduced in continuing businesses. In return, GE had increased its market capital tremendously. Welch reduced basic research, and closed or sold off businesses that were under-performing.

In 1980, the year before Welch became CEO, GE recorded revenues of roughly $26.8 billion; in 2000, the year before he left, they were nearly $130 billion. The company went from a market value of $14 billion to one of more than $410 billion at the time of his retirement, making it the most valuable and largest company in the world, up from America’s tenth largest by market cap in 1981.

Welch retirement was probably due in 1998 or 1999. But he decided to take extension for two to three years. Because he was concerned that if he retired the progress of the company might get slower, if it was driven in conventional manner. He trained the next CEO. He took him to every meeting and makes him able that after becoming the CEO of the company he knows every minor and major details of everything concerning the company.

Now I would like conclude with 4 E’s of leadership by John Welch

Energy: They have tremendous personal energy.

Energize: They energize the team and don’t intimate them.

Execution: They are action oriented and focused on getting results.

Edge: They have competitive edge and well to win.

It is the leadership who takes some ruthless decisions for the betterment of individuals, community, and country. If leader has no vision then he is derived by well of masses. If he has the vision then masses are driven by the leaders’ vision.

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About Muhammad Ahmad

I received my B.Sc. (Hons) degree in Electrical Engineering from Pakistan. Currently I am pursuing my master’s degree in Electrical Engineering from Shanghai Jiao Tong University, Shanghai, China.

Discussion

3 thoughts on “Engineers’s Leadership (A CEO story)

  1. This type of leadership changes the future i hope inshallah someday a Welch will be born in Pakistan ..

    Posted by Khuram Arslan | September 22, 2013, 7:50 AM
  2. He is also a true inspiration

    Posted by sohaib | September 27, 2013, 10:44 AM

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