Before space flight, before Babe Ruth’s 60-home-run season, long before the Wright Brothers got off the ground, before Henry Ford’s Model T, before Oklahoma was a state and even before the death of England’s Queen Victoria, there was GE.

The only remaining company from the original 30 in the 1896 Dow Jones Industrial Index, General Electric has continued to bring good things to life through the Great Depression, two World Wars and the terms of 20 U.S. Presidents. But for all its noble history – the company was founded by Thomas Edison and counts numerous inventions and “firsts” to its credit – today General Electric is in its prime largely because of the grit and determination of its eighth chairman and CEO, John Francis Welch Jr.

Under Welch’s leadership, GE sales grew from $27.24 billion in 1981 to $90.84 billion in 1997. Also in 1997, GE became the first company in the world to surpass $200 billion in market value.

Last year, Fortune magazine proclaimed GE “America’s Most Admired Company,” following a poll of more than 12,500 business leaders. Such esteem is testament to GE’s financial success in spite of its complexity. Welch sits atop a diversified technology, manufacturing and services company with 276,000 employees in more than 100 countries.

Next year, at the top of his game, Jack Welch will step down, capping a career that has already provided reams of how-to material for the nation’s business schools. But Welch is not yet reflecting on his achievements; he is instead displaying the same restless drive that helped him transform a staid institution into a lean competitor.To share how Welch led GE through the most comprehensive revolution in business history, Selling Power researched Welch’s career and spoke with GE observers and current and former GE employees in sales and senior management.

Then there was Jack
In 1981, at age 45, Jack Welch succeeded Reginald H. Jones to become the youngest CEO in GE history. He inherited a profitable, much-lauded General Electric. Sales and earnings were at record levels, and the company mood was upbeat. Radical change was the last thing almost anyone – from outside observers to the 420,000 employees – expected from the new chairman.

But in a company that valued tradition and conformity, even Welch’s appointment signaled a fresh new breeze. As Jones told Fortune, Welch stood apart from the other candidates for the chairman’s seat because he was “the least typical GE guy. Definitely a maverick in his style.”

From the start of his career at GE Plastics in Pittsfield, MA, Jack Welch rebelled against the company mold, and the results were literally explosive. (In addition to managing the phenomenal growth of plastic sales, Welch once blew up a small chemical plant in an experiment-gone-awry.) In this Siberian outpost, Welch led a small operation that was lean and efficient. He instituted a scrappy, innovative sales culture that tirelessly pursued new markets for GE Plastics.

“Some of the most exciting and memorable times of my life will always be those frantic days as part of a team trying to grow a plastics business out of Pittsfield. Bureaucracy simply cannot get a foothold in an environment like that, the way ice can’t form in a fast-moving stream,” Welch said in a 1992 speech.

Fat and happy
During his rise to chairman, Welch had managed few GE divisions, so in 1981 he faced the full extent of a complacent corporate culture. GE was fat and happy. He found the company’s energy more focused on running and appeasing internal bureaucracy than on meeting the needs of its customers. In addition, Welch was one of the first major American executives to recognize storm clouds building in the form of decreasing U.S. productivity and increasing global competition.

“While Welch was warning that the sky was about to fall, the company was posting record financial results,” writes Noel Tichy, GE consultant and co-author of the best-selling Control Your Destiny or Someone Else Will. Welch’s goal as the new chairman was expansive growth, and in order to achieve that, he believed, GE had to change before it was too late.

“There’s a whole set of phrases that tell you to wait until disaster strikes,” Welch told an audience at Cornell University in 1984. “Phrases like: ‘If it ain’t broke, don’t fix it,’ or ‘Don’t be a solution in search of a problem,’ or ‘Don’t break up a winning team.’ But in truth, the wisdom may lie in changing the institution while it’s still winning – reinvigorating a business, in fact, while it’s making more money than anyone ever dreamed it could make,” Welch said.

Embrace change
“His most fundamental management belief is that change is continual and should be embraced for its opportunity,” Tichy told Selling Power. Welch’s commitment to change convinced Tichy to take a two-year leave from his teaching post at the University of Michigan’s business school and direct GE’s management development center at Crotonville. Welch recognized that the center could be a powerful tool in implementing change.

“As a leader, he intuitively knew Crotonville was a staging ground for revolution,” says Tichy. Welch was clear about his goal of transforming the organization, and Tichy’s job was to help “figure out faster and better stagecraft for driving his agenda.”Welch realized that GE’s future success would depend on its ability to adapt quickly to shifting market conditions. Transforming the sluggish corporation would require a complete overhaul.

Speed and simplicity
Welch began to preach the gospel he’d learned in Plastics, in sessions at Crotonville, in corporate meetings and in speeches. “Our challenge is to make General Electric have all the benefits of a big company and yet act with the speed, decisiveness and knowledge of a small company,” Welch said in a 1981 interview in GE’s internal newsletter.

Speed has become even more imperative with time. “Today’s global environment, with its virtually real-time information exchanges, demands that an institution embrace speed. Faster, in almost every case, is better,” Welch wrote in the 1995 Letter to Share Owners.

Speed is crucial to the sales process, says Gib Bosworth, account manager with GE Capital Fleet Services. “Speed and simplicity is what we’re all about. Our ability to compete is based on our ability to respond. If you can’t respond quickly and effectively to your customer, you’re missing the boat,” he says. Bosworth wears a pager and strives to return every customer call within two minutes.

One, two or nothing
Welch wanted the speed of driving a team of race horses rather than plow horses, and in 1981 he announced his intention to limit GE’s portfolio of 350 business units to those that were number one or number two in their markets. If a business fell under that rank, GE would fix, close or sell it.

This strategy made GE the first U.S. company to launch a restructuring, and it divested more than a hundred businesses in Welch’s first four years. He also acquired companies, including RCA and its broadcast network NBC, to strengthen the portfolio with growth businesses. Because of the restructuring, GE emerged from the 1980s recession much more competitive, but in the process Welch had been dubbed “Neutron Jack” after the bomb that wipes out people but leaves buildings intact.

Welch contended that the nickname wasn’t fair, that GE had always provided soft landings for those who lost jobs. “For all his toughness, he doesn’t like to be called Neutron Jack because he bends over backward to be fair,” says Noel Tichy. “He genuinely likes people and shows a lot of compassion.”

Job security
In facing GE’s bureaucracy, Welch still had difficult work to do. He dismantled it by removing entire layers of management, a process he termed “delayering.” The idea was to speed internal communication and get closer to the customer. “Delayering was a shocking concept to those GE managers who believed tradition stood guard over their jobs. Employees who prospered in the new GE understood that the only person who can offer job security is the customer.

“GE has taught me to forge a partnership with my customers,” says Gib Bosworth. “Quite honestly, they’re my boss. They’re the ones paying my bills.”

Welch is still preaching that the customer is king, says Jeff Kiesel, president and general manager for GE Capital Fleet’s new small-business unit. “Almost inevitably, the first thing out of Jack’s mouth is about the customer. He wants to be certain we’re always directing the internal resources of the company to have an external view.”

Best teams
Obsessed with winning, Jack Welch has set a goal to fill every GE position with the best possible people. “What coach with any instinct or passion for winning would field an Olympic swimming or gymnastics team, or a Super Bowl team, that wasn’t made up of the absolute best available?” he asks in his 1997 Letter to Share Owners.

Ultimately, Welch wants “A” leaders and players. “An ‘A’ leader is a man or woman with a vision and the ability to articulate that vision to the team so vividly and powerfully that it also becomes their vision,” says Welch. They have “enormous personal energy” and “edge” – the ability to make tough decisions fairly and with integrity.

“In sales, ‘A’ players will use the enormous customer value that Six Sigma (GE’s quality initiative) generates to differentiate GE from the competition, to find new accounts and to refresh and expand the old ones – as contrasted with ‘C’ players, whose days are spent visiting friends on the milk-run circuit of customer calls,” he says.

The winners are easy to spot because Welch has created a very lean organization, says Matt Diamond, co-founder of Alloy and a former GE employee. “If you’re not performing, there’s no place to hide. On the other hand, a salesperson who’s performing well is going to be rewarded. It’s an environment where you can rise to the level of what you’re capable of.”

Jack Welch’s emphasis on quality people is a helpful prospecting tool, says Bob Zinsser, regional vice president for GE Financial Assurance. “When you have GE on your business card or on a trade show booth, people are immediately drawn to it. That helps in a sales environment. It almost gives you instant credibility,” he says.

Lessons in leadership
Welch doesn’t want managers; he wants leaders. “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 wrote in the 1992 annual report.

Welch’s own management style is feisty and combative, but employees say it’s his way of testing the strength of ideas. “He can be intimidating if you don’t know your stuff,” says Jeff Kiesel. “If you don’t, good luck. But if you do, no one enjoys a good debate more than Jack.”

Welch engages employees in a decision-making process that involves bringing everyone associated with an issue together for vigorous discussion. Often, he makes decisions on the spot. Welch’s almost superhuman grasp of the issues surrounding each of GE’s businesses keeps managers on their toes.

“It’s amazing the information the man has at his fingertips,” says Patty Bianco, who recently left a sales management position in GE Capital’s Fleet Services to oversee the implementation of a $14-million sales force automation project in the same division. “He’ll sit through 16 presentations on completely different businesses, one right after another, and still manage to ask the most pointed questions. All without notes,” she says.

Welch can be abrupt. “If he gets a point, he doesn’t let you finish. He moves on and you need to, too. You have to synthesize all of your sales skills into those four minutes,” says Bianco, who’s presented information to Welch on three separate occasions.

Jack Welch leads 276,000 people by endlessly repeating his message. “He puts an item on the agenda, then drives the hell out of it,” says Tichy. That fanaticism ripples its way out to the entire GE network. “He’ll tell you, ‘If I’m not a fanatic, how are the people at your level going to get it?'” says Bianco.

Stretch goals
Believing that continuous improvement applies to everything, Welch challenges his work force through stretch goals. A stretch goal takes any goal – a sales or productivity target, for example – and raises it much higher. “We have found that by reaching for what appears to be the impossible, we often actually do the impossible, and even when we don’t quite make it, we inevitably wind up doing much better than we would have done,” Welch said in a speech to shareholders in 1996.

Stretch goals are intense and force you to create opportunities, says Gib Bosworth. “They force you to step back and think outside the box. You realize you can’t get there through the normal course of action, that you have to get unique in your approach.”

Ideas from everywhere
Welch is quick to point out that many of GE’s management ideas are not his. He finds his ideas “anywhere he can steal them,” says Noel Tichy.

Welch knew that GE’s bureaucracy stifled many great ideas, so he constantly strives to remove barriers that prevent the flow of ideas. “The operative assumption today is that someone, somewhere, has a better idea; and the operative compulsion is to find out who has that better idea, learn it, and put it into action – fast,” he said to an audience of shareholders in 1997. As Welch told Business Week last June, “The idea flow from the human spirit is absolutely unlimited. All you have to do is tap into that well: it’s creativity. It’s a belief that every person counts.”

In 1989, Welch introduced an initiative called Work-Out to encourage the participation of all of GE’s workers in generating ideas for the company. Work-Out sessions bring together individuals from all ranks to address problems and propose solutions. At the end of the session, management implements, rejects or agrees to look further into the solutions. In addition to generating innovative ideas for GE, Work-Out empowers the work force. Welch called it a crucial step in helping GE create “boundaryless behavior,” which he defines as “business behavior that tramples or demolishes all barriers of rank, function, geography and bureaucracy in an endless pursuit of the best idea – in the cause of engaging and involving every mind in the company.”

The ultimate learning and teaching organization
GE has created the natural by-product of a boundaryless organization – a learning and teaching culture that shares best practices freely and spends hundreds of millions of dollars annually on training and development. Welch encourages all leaders to be teachers. “In every meeting I’ve been in with Jack, he’s turned it into a learning discussion for all involved,” says Jeff Keisel.

In a 1997 speech to shareholders, Welch likened GE to “a bubbling cauldron of ideas and learning, with tens of thousands of people playing alternate roles of teacher and student.”

Welch also teaches a course twice a month at Crotonville and has done so for more than 15 years. Students get the rare opportunity to see their chairman as fallible. He openly discusses mistakes he’s made, such as the failed purchase of brokerage Kidder Peabody in 1986. Within months of the acquisition an insider trading scandal broke out, and GE eventually sold the firm at a significant loss and after intense legal wrangling.

As Welch shared in an interview with Janet C. Lowe for her book Jack Welch Speaks, “I teach a course at Crotonville for six hours…on leadership. I always say, if the chairman can buy Kidder Peabody and mess it up, you can do about anything. It was on the front page of The Wall Street Journal 19 times. Now, if the chairman can do that and still survive, you ought to be able to take swings everywhere. You can hardly do worse.”

World’s best CEO succession
Welch identifies three initiatives critical to GE’s future success: quality, globalization and a continued shift in GE’s portfolio to service businesses. To these, Tichy adds, “the world’s best CEO succession. He’s absolutely committed to selecting the right person and ensuring that a team is in place to run the company.”

He won’t have to look far. Largely due to the learning and teaching culture that Welch has fostered, GE has more leadership talent in-house than any other major corporation. Competitors routinely raid GE’s ranks for executives. “Most companies that fire CEOs for underperformance in the capital markets hire from outside,” says Tichy. “IBM, AT&T and Kodak all went outside. But at GE, you have six to seven legitimate contenders for the top job within.”

When Welch steps down in the year 2000 at the mandatory retirement age of 65, he’ll leave behind a vastly different company than he started with. In addition to the astounding numbers, Welch led General Electric through a complete cultural transformation, one that altered the very essence of the company. His legacy?

“Success. Success. Success,” says Tichy. “The guy said what he was going to do and went out and did it. The good news for GE is that he’s defined that success as sustained winning. His legacy is that he is leaving behind a strong organization with leaders who can continue to win. It was not built solely around Jack and his personality,” he says.

While Welch has admitted he’ll miss the job, don’t expect him to hang around and linger on the sidelines.

“A neat thing about GE is when you retire, you’re off the Board. You’re gone,” says Tichy. “It’s in the governance rules and Jack believes in it.”

But just as a team sticks to its game plan even if the coach isn’t at the stadium, General Electric will likely use Welch’s playbook for some time to come.