Jack Welch Says Only Two Words Matter for Leaders Today: Truth and Trust

No living person is more closely linked with the concept of business leadership than Jack Welch. Even for those who have never put a foot on the corporate ladder, who couldn’t tell Six Sigma from Six Flags, Welch’s name is instantly recognizable. During his time as CEO of GE — a two-decade span that started in 1981 — he took it from a $14 billion company that was thought of mostly as fine but lumbering to a $500 billion one that was fast, full of talent and willing to take risks (though GE is now unwinding some of those big bets).

Fourteen years later, Welch's business lessons are still followed and debated: That management has to ruthlessly weed out mediocre employees (“not removing [the] bottom 10% early in their careers is not only a management failure, but…a form of cruelty,” he declared in one annual report); that if you’re not No. 1 or No. 2 in your industry there’s no point in being in it; that problems can be solved in rank-defying, public "work outs" vs closed-door, hierarchical meetings. His LinkedIn posts, co-written with his wife, former HBR editor Suzy Welch, almost always become instant hits. What they write about is what professionals are wrestling with every day: How to get better, how to move faster, how to stay relevant.

One way? Skip the traditional MBA.

A few weeks ago, Jack and Suzy came by our offices in NYC to talk about their latest book, The Real-Life MBA. After Welch left GE, he taught at MIT’s Sloan School and recognized some of the same problems he’d seen in business: inefficiency, lack of customer-focus and a lack of speed. He teamed up with for-profit education company Strayer to launch his own school, the Jack Welch Management Institute, and declared that business principles would rule. They’d go for reaching a lot of people not a few elites; teacher success was evaluated on NPS, not the number of scholarly articles published; what he taught needed to be applicable not theoretical. The book is another way of bringing even more scale at even less cost.

“I am not in any way in this book, or in this school, downgrading the traditional MBA,” he said to me — before doing exactly that. “You graduate, you go to work for four to five years, you quit work, you give up your $100,000-a-year job, you go back to school, you spend $65,000 for two years, each year. You've got $330,000 out-of-pocket costs. " His plan? "The book costs $25 to get a piece of it, and the school costs $40,000 to get all the practical aspects of it. It's a different model.”

Welch didn't want or need any preparation for our talk. True to his belief that candid feedback is the best kind, he was most animated when being pressed on some of his declarations. He folded his black-sneakered feet underneath him, leaned forward and in his Boston accent, defended himself and explained the future.

The only thing he wouldn't talk about? NBC or anything GE related. "I'm not going to comment on GE no matter how you come at this question," he said, laughing. "I've never been back to the office there. The day I walked out, I have never been back. It's gone. It was another life."

What good is it to look back when the world is changing so fast?

Some highlights from the interview:

On why he got into education:

Education is a less-than-competitive field. Cost continues to go up, and it's moving away from most people. We're doing it in a professional business way, where the student is the customer, not the faculty.

 On how much faster business is today than when he was at GE:

In my first days in GE ... people were preparing the budget starting in July for the big show and tell in December. By that time today, the world is upside down. [For instance,] oil and currency in six months have flipped upside down.

If you can't move, you're dead.

On the dangers of becoming a big company:

You're a big company. You have massive investments, tons of people. You've got plans that, even though you make strategy sessions all the time, you have to know what's going on, you have to be able to change. Big companies can't change quickly. Every big company's gotta be a small company in their head. You want the muscle of a big company, and the soul of a small company. I fought for that every day. I never got all the way there, but I fought for it every day.

On how people inside big companies have to act:

You want people to think every day about speed.

So you think about things like layers. If I'm a middle manager, how tough am I making it for you to get things done? Have I got a system where I can get action because of you? Or am I a pain in the ass with layers in there, making you get approval checking on somebody else? “What do you think Dan'll think about this?” No. I want you to be spontaneous, I want you at me.

 On why constant appraisals are the way to get that kind of employee:

You always want your people to know where they stand. See, one of the things about appraisals for people, appraisals shouldn't be every year. The world changed in a year, they've changed in a year. You've got to let them know, "Here's what you're doing right, here's what you can do to improve." And you've got to be on them all the time.

Leadership today is all about two words: It's all about truth and trust. You've got to have their back when they didn't hit it out of the park, you've got have their back when they hit it out of the park.

When they trust you, you'll get truth. And if you get truth, you get speed. If you get speed, you're going to act. That's how it works.

On the simple way to lead:

You've got a conference room right down across the hall there.  People walk into your conference room.  You're the boss.  They're spinning you.  They're giving you a flavor that might sell. If a neon light was flashing at that room, "Truth only! Truth only!"  think how much faster you'd be. You wouldn't have to go through the, "What do they really mean?  What?"  But that only comes from trust. 

That's why all these leadership books and stuff about leadership, it's all crap.