Will GE Boss Take Own Advice to Be Nicer?

After years of cutting, restructuring and streamlining to make his General Electric “lean and mean,” Chairman John Welch Jr. has decided the global conglomerate now needs to become “lean and nicer.”

Welch asserts in GE’s annual report that “in an environment where we must have every good idea from every man and woman in the organization, we cannot afford management styles that suppress and intimidate.” He continues: “Whether we can convince and help these managers to change--recognizing how difficult that can be--or part company with them if they cannot will be the ultimate test of our commitment to the transformation of this company and will determine the future of the mutual trust and respect we are building.”

Ignoring, for the moment, the unambiguous “don’t intimidate people . . . or else” tone of the missive, the fact is that Jack Welch--a charming, voluble, energetic and brilliant guy--also likes to be intimidating. He relishes a good argument and his management meetings are as intense and combative as any since the heyday of ITT’s Harold Geneen.

“I’ve always liked to say that going into a meeting with Jack was like going on a bucking bronco in a rodeo. The main thing was to just hang on,” recalls Roland Schmidt, president of Rensalaer Polytechnic University and a former GE vice chairman who worked with Welch for decades. “He can be intimidating, particularly for people with low self-esteem or who haven’t done all their homework.”

Other GE managers and alumni couldn’t help but find the notion of a kinder, gentler Welch amusing. “He would need a therapist--not a consultant--to change his management style,” contends one GE manager who, while asking not to be named, insists that he likes working with Welch because “he’s challenging and invigorating.”

Precisely because GE in general--and Welch in particular--are widely regarded as models for America’s business managers, the GE letter to shareholders always attracts special attention, much in the way super-investor Warren Buffett’s shareholder letter in the Berkshire Hathaway annual report receives extra scrutiny from the investment community.

Unlike the public relations pablum you find in most corporate annual reports, GE’s are always crafted to send its investors and employees a specific message. While recent messages have stressed desired changes in GE’s culture, emphasizing self-confidence, simplicity and speed, this is the first time the letter has proclaimed a value change so seemingly at odds with Welch’s own gung-ho manner.

Intriguingly, neither Welch nor Vice Chairman Edward Hood make any reference to changes that might be necessary in their own management styles in order to help their company attain the transformational values they so articulately espouse. Of course, what these letters don’t say is often more revealing than what they do.

Indeed, while Welch’s letter celebrates all kinds of new business practices within GE, there’s nary a mention of a new product or service that the company has pioneered. In fact, America’s most profitable industrial conglomerate says it learned the most about business management from Wal-Mart, America’s most successful retailer. What does that say about the challenges of high-tech innovation and commercialization in a global marketplace?

What’s more, there’s not a word about GE’s annual multibillion-dollar investment in research and development and whether it’s paying off.

To be sure, GE’s performance during this recession has been nothing short of exemplary. Earnings for the $60-billion-a-year giant grew 3% to more than $4.4 billion. The company’s relative success has given a lot of internal credibility to Welch’s relentless efforts to make GE more competitive.

That’s why this most recent announcement is so interesting. Welch is putting his personal credibility on the line by arguing that a different management style is now necessary for GE to succeed. Will Jack Welch be proven a brilliant hypocrite? Or has he truly become, like Saul on the road to Damascus, a convert to a management style that is quicker to support than to confront? The answers to those questions will determine just how effectively GE’s transformation is carried out.