Jack Welch’s new career — distinguished professor
The May 23 Wall Street Journal reported that GE is planning to continue selling off large parts of its GE Capital financial business. It has already sold off real estate businesses, insurance operations and overseas stakes in banking that were acquired by Jack Welch, its previous CEO. Jeff Immelt, GE’s CEO, wants to improve and grow industrial while shrinking GE Capital’s business. Immelt aims to get industrial profits to be 70 percent of the company’s total, up from 54 percent in 2012.
This essentially dismantles the house that Welch built. The new plan is to have GE Capital focus only on finance operations that support its industrial businesses as it was before Welch became CEO. Welch used to boast of how he was decreasing the ratio of industrial to financial earnings from year to year when he was CEO and how he was turning GE into a financial giant. These insurance and financial acquisitions nearly bankrupted GE during the financial crisis. GE was forced to turn to Warren Buffett for a $3 billion bailout at 10 percent interest.
Immelt is trying to undo the damage done by Welch to its industrial businesses. Welch fired 100,000 workers, including thousands of engineers and scientists working on the next generation of turbine-generators, major appliances, motors and lighting. GE industrial businesses were deprived of nearly two decades of focused research and development that supported these business by shuttering the labs that supported these businesses. While Welch destroyed for short-term financial gains, the competition continued to invest in new product developments for them to become much stronger competitors.
While GE is struggling as a result of Welch’s failed strategy, Welch is still promoting himself as the “CEO of the Century.” Welch partnered with Michael Clifford, an online education entrepreneur, to launch the Jack Welch Management Institute (JWMI). It was established as part of Chancellor University, a struggling for-profit college in Cleveland. JWMI opened in January 2010. In April of that year, it was reported that Chancellor, and other for-profit colleges, had been recruiting students from homeless shelters and registering them to obtain federal student loans. These loans formed the bulk of the school’s revenue.
The JWMI is now associated with Strayer University, a Virginia based for-profit college. Welch holds the title of distinguished professor at the school. The school charges $31,000 for 12 online courses that make up an executive MBA certificate.
The website of the JWMI quotes Welch, “we don’t teach theory; we teach winning.” Winning for Welch means financial engineering and manipulating earnings to raise the stock price. Winning for him means short-term financial gains by not investing in product development and firing many thousands of productive and experienced engineers and workers. Winning for him means not taking any responsibility for his strategy that nearly destroyed GE.
Welch boasts that his JWMI will have 5,000 students by 2016, far eclipsing Harvard’s 1,800 MBA candidates. Harvard doesn’t use homeless shelters to recruit its students.
The writer is a GE retiree.