The Welch Revolution

While Crotonville "students" and industry watchers rave about Welch today, he has not always been regarded with such warmth.

Welch earned the nickname "Neutron Jack" in the early 1980s for the massive layoffs he initiated at GE--he eliminated nearly two-fifths of the company's total workforce in his drive to get the conglomerate out of businesses it could not dominate.

"I went [to Crotonville] when 60 percent of the audience would sneer at me," Welch said in a 1998 interview with Business Week. "Most of them wondered, 'Is this guy a nut? Should he be arrested?' It was difficult."

Buckman, who says the layoffs are ancient history, criticizes those who use the moniker in reference to past or present layoffs.

"The early '80s was a horrific time for all of us in the industry. All kinds of businesses just went in the toilet and GE was in some of those businesses," Buckman says.

"Even now they're in so many businesses competing in so many markets around the world that it would be astonishing if there were no lay-offs," he adds.

Welch has also come under fire recently for shirking GE's obligation to clean the upper Hudson River, the biggest toxic site on the Superfund list of the Environmental Protection Agency.

A spokesperson for Welch did not comment on the situation.

While the first "revolution" of GE under Welch's watch was characterized by a slice-and-dice philosophy, subsequent phases have focused on growth of both informality and of quality control.

One of Welch's most significant contributions to GE's culture is his concept of "boundarylessness." After the layoffs, Welch cleared out the underbrush in his remaining businesses by streamlining and de-bureaucratizing them. He reduced to five the layers of management that exist between the factory floor and his office at 30 Rockefeller Plaza in New York.

"He's always been absolutely a nut about getting rid of bureaucracy," Tichy says. "He wants to be remembered for creating a nimble, fast moving, non-bureaucratic company--boundarylessness was a way for him to capture the concept of speeding up an organization by taking hierarchical layers out."

Welch has also transformed GE into a higher quality organization through his thorough implementation of Six Sigma. An overarching business improvement strategy that originated at Motorola in the 1980s, Six Sigma is a quality control initiative that aims to increase product quality. To achieve a six sigma level of quality, a process must produce no more than 3.4 defects per million parts.

To date, Six Sigma has delivered billions of dollars in savings to GE's bottom line, with $3 billion worth of returns last year alone.