Jack Welch's 6 Tips for Managing Employees

Jack Welch spoke to Stephen Dubner for his Freakonomics Radio's "Secret Life of CEOs" series.

One thing that came up repeatedly during their hour-long conversation is what Jack Welch learned about managing employees during his long tenure running General Electric (GE).

While Welch is best known as the CEO of the conglomerate, his background was not rooted in finance or management, but in chemical engineering. Welch says this degree was helpful as the field of engineering always leads you to critical thinking.

“You’re working on unknown paths to try and find a solution. And that thinking is very helpful in management,” said Welch.

From a Degree in Engineering to a Degree in Drucker

Welch is also known for being an advisee of Peter F. Drucker, the founder of modern management. Drucker studied GE for years and consulted Welch when he was the newly appointed of the ever-expanding GE conglomerate.

Drucker challenged Welch by asking, “if you weren’t already in business, would you enter it today? And, if the answer is no, what are you going to do about it?”

Clearly, Drucker's teachings influenced Welch’s management philosophy for decades to come.

Welch’s excerpted quotes below will make any manager re-think how they manage and interact with their employees. Are you managing for greatness?

1. "Everybody's got to feel like a participant. And you find ways to include everybody in the party in some way. Some get rewarded more than others. But we had 65,000 people getting stock options at the end. We started with 150."

2. "Everybody who works for you must know where they stand, what their boss thinks about them, what the company thinks about them. This idea of false kindness is pure nonsense, pure nonsense...

We had the appraisal books that said everybody was promotable. Everybody. No one said what they thought of people and their performance."

3. "Treating everybody the same is ludicrous, and I don't buy it. It's not cruel and Darwinian and things that people like to call it. A baseball team publishes every day the batting averages...

And you don't see the 180 hitter getting all the money or all the raises. Athletics is the purest form of differentiation because it's public. Everybody understands it - the fans understand it, the people understand it...

Big business is more subtle and it's more qualitative. The precision isn't there to differentiate. So judgment's important. But you don't win with a gang of mediocre players in business or in baseball."

4. "I feel when we have to lay somebody off, it's the manager's responsibility in many ways, not the person's. They hired them. They're responsible for developing them...

I have a phrase: love them on the way out. I teach this to my school: love 'em on the way out the way you love them on the way in. And I'll tell you another one: a severance dollar is the cheapest dollar you'll ever spend...

Those two things, if you practice that religiously, you'll stay out of trouble, you'll be perceived as fair. Maybe not loved, initially, but people will come to respect you."

5. "Businesses don't celebrate enough. I fought that battle for 40 years, celebrate more! At GE, when we won a big contract, we'd open the bar at five o'clock in the building."

6. "I had plenty of money in the first three years I was C.E.O.; the next seventeen was spent making other people rich. I used to call guys in my office and give them a million bucks. Do you realize how good that feels?

I'd bring them in, and some of them would cry. I mean, it's an amazing emotion. You're in the club now. Here's a million dollars stock.

That's power, it makes you feel good. They go home thrilled. Think of the party they're having in their house that night."