Part 49: The Jack Welch Model – How Small & Mid Sized Companies Grow

Many people have read Jack Welch’s books such as “Straight from the Gut” and “Winning” But do you know you should apply it to your own company and when it may not be applicable? As with any prescription for success, not every formula is fit for every diet. One must know what works for them and which ones will not be appropriate. I have used his concepts as cover stories in select periodicals, denoting when to apply his ideas for smaller companies, so here are a few thoughts one might consider if you are not a Fortune 500 Corporation.

Jack Welch had the nickname of neutron Jack, which connoted the fact that being intolerant of bureaucracies he often terminated large numbers of people while leaving the business still standing, like a wide swath of people while leaving the building still standing, like the proverbial neutron bomb is supposed to do. This in fact is a typical strategy when doing an acquisition and there are many redundant positions and to make the deal work similar jobs are synergized out of existence to make the economics work, saving money and increasing efficiency. During poor economic times downsizing (now called right sizing) is appropriate and of course every so often the organizational tree must be trimmed as it tends to become overgrown if not watched. This can be overdone however and cutting back may have its disadvantages such as terminating people who have not been given time to learn the system yet, leaving oneself without replacement people (bench strength) and being caught short when unplanned resignations happen, or increasing near term profits at the detriment of long term potential.

Related to this syndrome was Jack’s so called vitality curve used to rank employees. He handsomely rewarded the top 20% of his people, kept the middle 70% with modest increases and mandated the firing of the lowest 10% every year in every department and business unit. In GE’s case this was particularly interesting as they were known to hire the best and brightest, so undoubtedly they lost some good people along the way, but one could not argue with their success. The concept might be even better applied to the average or sub par company where the bottom 10% of their workforce would likely be far below the lower 10% of GE’s employees. Holding people to meeting high standards is not done often enough in most companies and when poor performers are allowed to stay people get the message that there are no consequences for not meeting expectations. We call this the government mentality and is a motivational killer.

There are many other principals that can be explored from his “boundryless” markets concept and span of control to information systems, market domination, et al.

We welcome your questions as to the challenges you face in order to grow.

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