MANAGEMENT:Having successfully run one of the biggest corporations in the world, Jack Welsh has an unique insight into the problems facing the world economy, writes KARLIN LILLINGTON

WHEN JACK Welch, the gruff, likeable, tough-talking former chief executive of General Electric (GE) speaks, people listen. Actually, they hang on his every word. Audiences love him. So when he is the keynote speaker, as he was recently at CA's (formerly Computer Associates) regular user conference in Las Vegas, the auditorium is packed and expectant. In tough economic times people clearly hope this American business icon will offer some wisdom that might illuminate a way out.

However, he has few words of solace. "This is the sharpest recession I've ever seen. I've seen worse recessions - in 1981, we had 11 per cent unemployment and a 20 per cent prime rate - but today we really hit a wall and went off a cliff. I don't think the first half of next year will be a picnic either," he says.

He doesn't see recovery until the end of next year or the start of 2010. Like many people he is looking to president-elect Barack Obama for inspiration.

"I am hoping that with a new leadership, and with new confidence, greed will overcome fear," he half jokes. "I'm hoping Barack Obama is a left of centre government leader. I'm buying the 'hope' argument. I'm getting on the train."

As for George W? "This was not a well run administration." Bush, he notes sardonically, had an MBA - Welch doesn't. He is scathing on the government overall. "They're terrible. They're just plain dysfunctional," he says.

However, he does think they did well in getting bailout packages in place. "We're at a remarkably contentious moment", he says, but the federal government and congress "wrestled something to the ground, with bullets flying."

Of GE's current financial woes, he says he might not be the best to comment: "I haven't been in the office in seven years. The day I left was my last day there. But GE's going to make - plus or minus a few hundred million- $20 billion this year. Financial services will make $9 billion. So they make a few hundred million less? The numbers are pretty darn good."

Though massive conglomerates are often seen as dinosaurs, he fully believes in the strength of what he testily says he prefers to call "a multi-business group".

"Business is all about building a great team and transmitting intellect. In GE you've got all this intellect piled together and if you can spread it around a number of businesses, who wouldn't?" He argues that having a range of businesses means a conglomerate can survive business cycles better, as a weak sector one year can be supported by revenue from the winning divisions.

He has some specific advice from his current teaching stint at MIT's Sloan school of management. "We're giving our chief executives four clear messages," he says. The first is that "2009 is going to be worse. Get your house in order cost wise. De-layer, get leaner, get cash."

His second point: "Over-communicate like hell. Your people are scared. You've got to make sure you're telling them what you're doing, where you're going and why you are doing it."

Thirdly: "Reward your best people. You want to take care of them. You want your army to be marshalled and you want to reward them with cash, not a plaque."

Finally, as for other companies, "Buy them or bury them. The prices are right - this is the time to buy. Or go steal your competitor's best people."

Despite having been known during his GE tenure for large layoffs - the company lost over 100,000 people in his first four years - Welch says of the current jobs loss climate: "The worst thing you see are these blanket layoffs. I hate these announcements that satisfy Wall Street - it's a classic knee-jerk reaction."

Nevertheless, he feels managers need to be tough, because the toughest decisions they face are in managing people. They must be willing to fire the lower 10 per cent of their workforce, reward the top 20 per cent, and develop the remaining 70 per cent.

"Managers mistake cowardliness for kindness. That's the cruelest form of management and it always occurs in downturns. That's where it comes down to having candid appraisals of your people. [Then] you can never surprise any member of your group."

There are no such things as kind managers, he scoffs. "Baloney. You're a chicken." He also shrugs off the notion of corporate social responsibility. "I think it's the biggest load of nonsense. Your corporation's biggest social responsibility is to win. You win and then you do the right thing with the winnings."

GE was "huge on voluntarism" he says. "It was the character of the people, not some goddamn slogan on a box." And don't talk about corporations as faceless institutions. "A corporation is not a thing. It is made up of flesh and blood," he argues. "Rupert Murdoch is a capitalist, but the Wall Street Journalis made up of human beings. It's the character and the value and the ability of the individuals that make the company."

Do we need more financial regulation? He says governments went too far in deregulation: "when you allowed leverage to be as high as it was - 35 or 40 to one - it was way too high".

"The French are leading the charge," he sniffs. "They always love regulation. That doesn't bode well for entrepreneurs."

Companies now need to figure out how to grow in a moneyless environment. "You've got to come up with new and ingenious ways without capital," he says.

He's sanguine about his years at GE and how he was viewed inside and outside the company. "There I was prince, I was pig, I was the smartest guy in the world, I was the dumbest."

But isn't he credited with being the genius manager? "Well, one person can effect change, but then get way too much credit," he says. "I was clearly not the smartest by any means, but I had the most knowledge. So you'd have to be an idiot" to be unable to run a successful company when it has so many good people.

He still feels that the best place to be in an industry is the number one or two company. "When number one gets a chill or a cold, number five gets pneumonia. So why wouldn't you want to be the biggest and the best?"

However, the next moment, he argues that "what happens in a bureaucracy is you can beat any mantra." As an example he says he was inspired to rethink whether a company should aim to be number one or two in market share. A critic noted that by doing this, GE might actually be limiting ambitions by defining the market in too-modest terms. Welch from then on mandated that managers were never to have more than 15 per cent market share in their sectors. "Our growth went from single to double digits," Welch says.

A second mindset change came after meeting with the head of one of GE's acquisitions in London, who noted he had one of the youngest employees in his company as his technology mentor, teaching him about the internet and new technologies. Welch instituted a similar programme in GE, assigning younger employees to older managers as mentors. "The higher up in the organisation you went, the less you knew about technology," he says. "Everyone got a mentor under 25."

He thinks a major area of future business innovation will come in the area of energy. "Without question, energy is the next frontier of innovation. Energy will be the Silicon Valley of the next century. We can't even fathom where energy is going to take us," he enthuses. "It's going to be incredible."

As for his own GE career, he has few regrets.

"The biggest shortcoming that I had: I didn't move fast enough. How often do you say, 'I wish I'd waited six months more'. Everything I did, I could have moved faster."

What makes a great chief executive? "If you don't reinvent yourself, if you aren't always learning, then get your butt out of there," he says. "If you think in your head there is a better way, if that thirst is there, if the fire is in your body, you will have one hell of a ride on this earth."

JACK WELSH - SUCCESS FROM THE BOTTOM UP

THE UNITED States loves a business guru and former General Electric (GE) chief executive Jack Welch is that and much more.

Welch, a kind of folksy Reagan of the business world, spins a line of common sense, straight-talking business commentary that appeals to a broad audience and has made him one of the more recognisable pundits in the US. Ask the average American to name a prominent business figure and Welch's name is a likely first.

His rise from a simple background to multi-millionaire appeals to America's enduring love of a rags to riches story.

Born in the Great Depression, he was the son of a railroad conductor and a housewife in Massachusetts. A bright student, he went on to university, eventually taking a PhD at a youthful 25 from the University of Illinois.

Welch joined GE in 1960 as an engineer on a salary of $10,500 (€7,800) annually and after a year, was ready to leave until a young executive persuaded him to stay.

Only 12 years later, Welch was a vice president of the company and well on his way up the ladder.

He led the one-time electronics company for 20 years, from 1981, making numerous acquisitions and expanding the company into fresh areas, most notably, financial services with GE Capital.

Famously, Welch built the company up from annual revenues of €26.8 billion (€19.7 billion) in 1980 to £130 billion (€91 billion).

He was famous at GE for a policy of firing the bottom 10 per cent of employees, and rewarding the top 20 per cent.

Since he stepped down from GE, he has written several best-selling memoirs and business books such as Straight From the Gut and Winning. The latter written with his third wife, Suzy Welch.

The couple also write a syndicated question and answer column.

Welch currently teaches at MIT's Sloan school of management and is said to have a personal fortune of $750 million (€580 million).