Jack On Jack: His Next Chapter

During 21 years as the chief executive of General Electric, Jack Welch handwrote elaborate appraisals of his subordinates, reviewing what they did well--and what they didn't. Then, upon his retirement in 2001, Welch published his memoir, "Jack: Straight From the Gut," which gave the former boss the chance to receive some candid reviews of his own. "When confronted with a topic that might have actually made his memoir interesting, Welch runs in the other direction," wrote The New York Times. The Miami Herald concluded: "This thing might have emerged from the wrong end of the author's alimentary canal." "There were some great ones, too," Welch countered recently, when NEWSWEEK reminded him of those slams. Despite the book's sales--more than 2.7 million copies--Welch's associates say the bad reviews bothered him. He admits his first literary foray left room for improvement. "It didn't go far enough," he says. "It was just one guy's story."

His bid for redemption hits bookstores next week. It's the product of a transformative retirement. In late 2001, Welch began an affair with Suzy Wetlaufer, editor of the Harvard Business Review. The relationship filled gossip columns, ultimately costing Wetlaufer her job and Welch his second marriage. During his divorce, his former wife's lawyers leaked details of his lavish GE retirement contract, creating a second wave of scandal. But eventually the headlines faded--and the love affair didn't. Married last April, the couple now resides in a massive 19th-century town house near John Kerry's home on Boston's Beacon Hill. On the top floor, Welch's office is equipped with his-and-her desks. And for the past year, the newlyweds--he's 69, she's 45--have stopped cuddling long enough to take a second stab at burnishing Welch's literary credentials. They've co-authored "Winning," a 372-page management book that's everything Welch's first tome wasn't: smart, practical and not afraid to address tough subjects. Designed as a comprehensive instruction manual for corporate climbers, "Winning" describes his rules on leadership; how to implement Welch's famed system for rating employees as A's, B's and C's; how to hire and fire; how to survive when your employer is acquired, and how to plot strategy. In an unlikely bit of self-help from a man once derided as "America's Toughest Boss," he even includes a chapter on balancing work and family (excerpts begin on page 45). The couple is donating the $4 million advance to charity, but must also be hoping for a different payoff: that the book will help remove whatever tarnish the scandals put on his legacy.

Sitting in his office a few hours after the first bound copies of the new book arrived, it's evident Welch the retiree has discovered some balance himself. Once a maniacal golfer, he's ditched his clubs and now practices Pilates. Once lukewarm on religion, he's now a churchgoer; last month he and Suzy dined with Rick Warren, author of "The Purpose Driven Life." Mostly, though, he's gushingly--some might say obnoxiously--in love. "We have every sensibility the same. It's the happiest thing one could ever dream of," he says. "We think the same, we laugh the same... we have this mind-meld; we call it the Vulcan mind-meld." Seeing the Welches together, one can imagine couples being terrified to go out with them, since it will lead to an inevitable argument on the drive home: How come you're not as over-the-moon for me as Jack is for Suzy? "He looks at friendship and family differently because of Suzy," says Andrew Lack, Sony Music chairman and a close friend. "[She's] renewed his life and changed his spirit."

Welch hasn't changed completely. He recently asked Suzy and his longtime assistant, Rosanne Badowski, who shares their home office, to submit memos to help him write formal performance evaluations of the couple's household help. "You can't have a subordinate-superior relationship without having frequent, handwritten--typed if necessary--[feedback on] what you like about them and what can be improved," says Welch. Even if the job is cooking and cleaning.

It's a step down from managing a company of 313,000 employees, but it's a small piece of a busy life. Welch consults for Barry Diller's growing Internet empire and advises Clayton Dubilier, a buyout firm. He gives talks around the globe (at $150,000 per speech). And he follows the news voraciously. Every morning at 6:30, four newspapers land on the Welches' doorstep, and the couple spends hours each day dissecting and debating the business pages. (Later, Suzy visits a newsstand for the New York Post, the gossipy tabloid that is Welch's favorite read.) Inevitably, the phone starts ringing. Ask Welch about any big business story--a CEO's removal, a merger, an investigation--and he not only has an opinion, but he's often spoken directly with those involved. His voice drops a few decibels when he dishes, lacing the scuttlebutt with phrases like "my sources tell me..." Welch may be even more plugged-in these days, since other moguls are more willing to seek his advice now that he's not a competitor. "Other CEOs talk to him in ways that are unvarnished," Lack says.

Some of what Welch hears troubles him--especially when boards overstep their bounds. He harshly criticizes HP's directors for dumping chief executive Carly Fiorina before she had time to execute the strategy the board had endorsed. He's most offended by the HP board's attempt to "micromanage" Fiorina by telling her who should be running HP's various divisions. "[Boards] aren't there to micromanage the company, and some are losing sight of that," he says. He says Michael Eisner deserved a voice in choosing his successor, despite dissident shareholders' complaints. Even after Enron and as regulators shift power to independent directors, Welch believes companies still need strong, empowered CEOs.

Welch makes similar observations in "Winning," but mostly the book focuses on his formula for succeeding in business and grooming subordinates to do well, too. "The Welch legacy is all about Jack as a teacher [who] developed other leaders," says Noel Tichy, a University of Michigan management professor and longtime Welch confidant. Indeed, four of the 30 Dow Jones industrials are now led by Welch proteges. Welch credits his wife with shaping the book; in fact, several of the case studies in which Welch describes something happening to "a friend" are drawn directly from his wife's career. Other examples draw on their everyday life, such as when they analyze the strategic advantages of Upper Crust, a pizzeria near their mansion. "They're very much in love, but they have an unbelievably effective work relationship," says Andy Wasynczuk, a Harvard Business School lecturer and close friend.

As Welch describes their work together, his wife enters the office and takes off a leather jacket. Perfect timing: he's just been raving about how she's in phenomenal shape. She grabs a copy of the newly arrived book and explains that though she loved Welch's first book, the second is much more useful for folks who don't happen to work at what she calls "G-Eden," the utopian corporate culture Welch created.

They appear to have put their scandalous past behind them. But the controversy over his retirement perks still irks him. Welch says his contract, which was filed with the SEC years earlier, was entirely proper, and that he never even used many of the goodies--Knicks tickets, free postage--to which he was entitled. He agonized over giving up the deal. "If I gave it back, I looked like I did something wrong," he says. "If I kept it, I looked like [a] greedy pig. I picked the first one."

As ebullient as Welch is about their marriage, it's tinged with sadness over their 24-year age difference. "It's very painful to have missed all this time together," he says, acknowledging that his age has led them to decide, after much agonizing, to forgo having a child together (each has four children from previous marriages). "She very much would like to," Welch says, but he believes it'd be unfair for a child to have such an elderly father. A few minutes later, however, he backtracks: "I'm not sure I'd even lock it up that it's done. Rupert Murdoch did it older than we are." Welch had a heart attack 10 years ago, and now with a younger wife and an unresolved debate over having another child, mortality is on his mind. "I want to live a long time now, particularly with her," he says. These days Jack Welch worries more about the Red Sox score than earnings per share, more about service at the local pizzeria than whether to buy Honeywell or sell NBC. But he's still setting goals, and still stretching to reach them.