One of the big problems that most of us have in life is that we never get to read our own obituaries, which would be our best chance to see people saying nice things about us. But high-profile corporate chieftains who announce their departures don't have this problem. They get to hear all that nice stuff while they're still around, because retirement stories strongly resemble obits, except that the subject is still alive and kicking. As witness the gushing and slobbering over General Electric Co. Chairman Jack Welch last week after he mentioned on a TV show that he plans to retire in April 2001. Welch would then be 65, and he would have had a nice, round 20 years at the helm of GE.
Welch, the highest-profile corporate manager in the world--not to be confused with Microsoft Corp.'s Bill Gates, who's a founder, not merely a manager--is one of those people who make you feel good about subscribing to the Great Man Theory of business: the idea that one person can make a huge difference. No matter how much of Welch's success you ascribe to historical forces and luck--the economy was dead in the water, with interest rates at 20 percent, when he took over, and it is roaring ahead now--it's clear that a good part of what's happened at GE since Welch took over in 1981 must have a lot to do with the man and the people he picked as subordinates. GE's stock price has risen from $4.18 3/4 (adjusted for four stock splits) on March 31, 1981, the day before he took over, to $134 yesterday. That 3,100 percent increase is more than triple the 900 percent rise in the Standard & Poor's 500-stock index during that period. GE stock has risen 20.5 percent a year, compounded, compared with 13.2 for the S&P.
But even as the encomiums pile up for Welch, known as "Neutron Jack" in his younger days for vaporizing jobs while leaving buildings intact, it's time to play my traditional role as skunk at the garden party. Welch is clearly very, very, very good. But as effective as his leadership has been in helping GE transform itself from an old-line industrial company into a sleek, finance-oriented conglomerate, it's not yet clear how good a manager Welch is. How can I say that? Because picking a worthy successor is one of the most vital elements of managing. Since we don't know who Welch's successor is or how worthy he (all the leading candidates are men) will prove to be, I think it's too early to call Welch a management god.
This may sound like nitpicking, but please bear with me. Consider, if you will, what's happened to Coca-Cola Co. since the charismatic and wonderfully well-regarded Roberto Goizueta died in 1997. He was on the same level as Welch in the business pantheon. But Goizueta's handpicked successor, Douglas Ivester, has had nothing but trouble since taking over the Coke chairmanship. Similar fates have befallen the people who succeeded two other well-regarded, visionary corporate chieftains: Charles Lazarus, who retired as Toys R Us Inc. chief executive in 1994, and Anthony O'Reilly, who retired from H.J. Heinz Co. last year. Lazarus and O'Reilly were good leaders--but not, in my humble opinion, good managers. It's a bad reflection on them that their successors all seem to have had feet of clay. Hmm. It makes you wonder whether these guys were really as good as they seemed to be when they left office. And whether they'd have had trouble if they'd stayed around.
Why does this matter? Because it's important to keep perspective and not get swept away by conventional wisdom. Reporting about the personalities and peccadilloes of corporate managers has in large part replaced reporting about the corporations they run--both in the media world and on Wall Street. That's partly because people are generally more interesting than companies, partly because they're easier to analyze.
A possible pitfall for Welch's successor is that so much of GE's profits--41 percent last year, 44 percent for the first nine months of this year--comes from GE Capital Corp., its financial arm. It's much easier to produce nicely rising earnings from financial businesses than from other businesses because you have lots more latitude--perfectly legally--in deciding to cash in profits or defer losses. When Welch took over GE, the financial business was only about 6 percent of the company. Any problems lurking in the portfolio? Beats me.
GE, as you can imagine, pooh-poohs the notion that it's too early to call Welch a great manager. "Jack's legacy is that he's ensured a smooth transition and ensured he will have a great successor," a GE spokesman says. An interesting comment, since Welch hasn't picked a successor yet.
The bottom line? Welch seems to be a shoo-in for business immortality. But let's take our lead from sports halls of fame and wait until well after his retirement to put him among the immortals.
Sloan is Newsweek's Wall Street editor. His e-mail address is email@example.com.