“If a Romanian comes to the US or Europe, he will not get good management position while he is young. In Romania, if their managers treat them well, they will get a very good position while still young. The west will only give them money,” said Jack Welch in his first interview for Business Standard and the first for a Romanian publication, ahead of a conference he will attend in Bucharest on June 2nd.

While running G, Welch instituted a rule by which he laid off 10 percent of managers with the least performance every year, a practice later adopted widely by many of the world’s companies. When he left the held of GE, the company was the most valuable on the world’s market.

Jack Welch, considered the best manager ever, has never heard of Romanian Petrom company, but thinks that growth above 50 percent, which several Romanian companies enjoyed in recent years, can be managed through a good human resource policy instead of useless bureaucratization of organizations.

How do you think the corporate world will evolve in the coming decade? What model will be successful and which of the models (multinational listed companies, family businesses, conglomerate companies) existing today on the market will disappear?

The models won’t change that much. I think, without question, that the family business is going to come under the most pressure. Family businesses have been wrestling with lots of issues: Can they attract the best talent? What about succession? Longevity, for example, is impacting the old family patriot. He’s living longer and the children are not willing to wait. The lack of professional management is causing stress in the companies. So, the family business, in my opinion, will be under the most stress, particularly large family businesses.

Chinese companies, in their pursuit of resources and raw materials, are increasingly aggressive in terms of external acquisitions. The Chinese state has become a shareholder in France’s Total, and Chinese banks are expanding to foreign markets. On the other hand, China is the world’s hottest emerging market and major Western companies are investing huge amounts of money in that part of Asia. Do you think China’s economy will become the world’s largest? If so, why and when will this happen?

I think China will clearly, by the middle of this century, divide the top position with the US. I think that, if one extrapolates today’s growth rates in the US and growth rates in China, the cross-over point will be 2045, something like that. However, one has to assume in that calculation that China will grow in a straight line, without bumps. They’re undertaking the most massive experiments in social and economic transition ever taken, and you have to ask yourselves: "Will this experiment go in a straight line or will there be bumps?" Most things don’t grow in straight lines. However, I’m not smart enough to know when the bump will occur or what will cause the bump. But China will be a world force, there’s no question about it.

What changes do you foresee occurring on international financial markets by 2010? Will the dollar revive to become stronger than the single European currency?

I think you’re going to see the same things you see now: lots of liquidity around, a lot of the money transferred to China, to the Gulf States with oil, to Russia, and with these huge sums of money and some of the financial crisis in the US, you will see investors taking advantage of this situation, with the weak dollar and moving into those with natural resources will become the haves and they’ll be looking to spend their money to get good returns around the more developed economies.

Speaking about the dollar, do you think it will revive to be stronger against the EU currency?

I think you’re saying "stronger" as in tougher. But I can't predict where it will go. I think the dollar in may 2008 is undervalued How much value it will get back - that’s how currency traders get rich or poor, not me.

How do you think the subprime crisis will affect companies? Which ones will be most affected and how can they protect themselves from the shock wave already felt on stock markets, as well as real estate and currency markets?

Obviously, the financial and real-estate industries have been hard hit. And all of those who serve the real-estate industry - contractors, suppliers, home repair - have been hurt. But as this subprime crisis moves on and if home values decline, people are going to feel less wealthy and it's going to impact consumer spending in the US for sure and I think Australia and many places. And that’s going to cause a further slowdown in the economy and will require government stimuli to get things back on track.

Money is increasingly expensive on the international market, while risks are rising and becoming more varied. How would you advise companies looking for financing on external markets?

I think money is only expensive compared to how cheap it was a year ago. I don’t think it’s particularly expensive if you look over a long period of time. So I think there’s money available for good companies, at very good prices these days. But I think money is going to be tougher for those companies that don’t have a good business plan and don’t convince the financing markets of the lack of risk. People weren’t paying the risk premiums 12 to 18 months ago. Now, the risk premiums are back in the market. So, companies that are high risk are having more and more trouble financing at good rates. Companies will have to show pretty solid business plans, with lower risks, in order to get financing.

Oil companies, those with industrial and technical operations and banks are currently dominating the corporate market. Is it likely that company rankings will change?

Oil companies and retail companies have jumped to the top. Wal-Mart, I think, is the largest revenue company in the world and Exxon is number two. So, as oil prices move up, you will see more and more oil companies moving to the top ten.

In the battle between global companies and regional and local ones, some voices have indicated that the age of the "dinosaurs", or giant companies, will end, as these are more vulnerable to threats that appear in various parts of the world. What is your view on the matter?

I don’t agree at all with that. I think size is an enormous asset in the global world. Now, size is of no value if you spend all your time trying to manage it rather than use it. So, a large company has to constantly be innovating, taking risks, being out in the market place and not being bureaucratic and slow, et cetera. Who wants to be smaller? Have you ever heard of companies that want to get smaller?

How long do you think the General Electric company model, in which several autonomous companies operate, each in its specific field and each part of an organization focusing on efficiency, cost effectiveness, and the identification of new sources of growth to meet investor demands, can resist on an increasingly competitive and ever-changing global market?

Well, it’s been going on for over 100 years and I feel confident it’s got another 100 years in front of it. After that, I don't know what will happen to it. But the GE model of winning global businesses, sharing best practices, sharing intellect across businesses, sharing talent, and allocating resources depending on the opportunity is a winning formula and has been for 100 years.

Human Resource and Communication Managers have moved forward significantly in recent years, sec uring strategic positions within company management and are included in top management structures. What other positions do you expect will become increasingly important within companies in the coming years and which ones could lose their influence?

I don’t quite agree that HR have moved ahead significantly. My experience in travelling the world is that HR managers don’t get enough attention, don’t get enough position in the company, that the CFO is always much more powerful with the CEO. It's a very rare occasion when companies give the HR function the importance that it deserves. So I, for one, disagree with how fast they’ve moved ahead. I hope that in Romania, which I don’t know enough about, that’s true. But generally, in the world, that’s not the case and I am frustrated by that and I’m pushing very hard to move the HR managers to a higher level in the company and to greater importance.
There is no question that information technology, run by business people to make information available faster to the whole organization will become increasingly important, as it has been in the past several years and will only increase in its intensity.

How do you view the current evolution of leadership in the corporate world, and where do you think this should be heading?

I think, without question, that today’s leaders are the best we have had in the world. We have got more aggressive and bold leadership, leaders who know that knowledge is not power – you earn your power through the ability of your teams to function successfully.

Organizations will be flatter, they’ll be faster, people will have more empowerment and leaders will be energizers who excite people to do things they never thought they could do and be less in the office issuing dictates on what should be done.

As a leader, your job is to make their job the most exciting one in the world. So your job is to reward your best people, evaluate them when they’re doing their job, make sure they know how important they are to you, move them quickly. People don’t want to wait 20 years to get promoted. They want to move quickly in the organization and you need to take risks on younger people. You have to move them faster, you have to reward them quicker and that’s true wether you’re in Romania, Mexico, Turkey or India. People want the satisfaction of winning and they want to see their opportunities grow rapidly.

How does a manager keep his employees enthusiastic?

By showing them the vision of what’s in it for them, why winning is good for them, how their careers can grow, how their compensation can grow, how their families can benefit from it, that’s what you do. You excite them.

Romania's largest company, Petrom...

I have no idea.

What opportunities do you think Romania is providing for major international companies? What are Romania's strengths and shortcomings in the eyes of major strategic and financial investors?

I'm not qualified. I'd rather talk to you about that three weeks from now. I've never to Romania. As I read about it, I like its growth rate, I'm worried about its inflation and I hope it doesn't get in trouble with the EU. There has been some discussion about the fact that they could be punished for their work in agriculture, their judicial reforms have been criticized, from the readings I have no first hand knowledge.

Many Romanian companies have registered annual growth exceeding 50 percent, in the past few years. How does a company manage success? How does it manage such growth?


That’s a lot more fun, a lot more exciting than managing a 2% growth. Managers have an easier time getting people to feel the rewards from that success, as long as they’re converting revenues into profits and as long as employees are participating in the fruits of that success. So, from my standpoint, what you do is you try and keep the agility and speed and all the things that got you that growth and don’t end up adding layers and structure only reluctantly to your business so that you continue enjoying the fruits of that success. One of the things you worry about with fast growth is that people start adding too many people, too many layers, too much structure, and all the things that got you the growth start slowing down.

After Romania’s EU accession, we found ourselves facing new business rules, while the work field became open as well. How does a manager retain his employees under these new circumstances?

Obviously, that’s the problem that many developing economies have. You’ll see there will be a trend for people to go abroad and then, as you see in India and China, people are coming home. So there may be a dip in the retention until they see the Romanian economy going in the direction they want in terms of lifestyle, values, living standards, etc. And then you’ll see them come home for the pride in their country. Today, when you are in India, you’ll see all kinds of Indians who have spent years in America or the UK coming home to build their own country, because of the ties they have with their own country. I think you see that in every economy. You see people moving out and then coming back as they see their own country develop. Now, if I were running a Romanian company, I would be sure that the few key people that I need desperately to run my business were so well taken care of that I’d be fighting their desire to move every day, by giving them bigger jobs, better jobs, more compensations to keep them there. But that is a tough thing to do as the world is opening up to them.

Can you provide a few examples of things that you would offer your key employees to keep them?

Bigger jobs. Bigger jobs. I wouldn’t make a 30-year-old wait another three years to get a big job. I’d move young people into high risk, high growth positions. That’s the best thing you can do for them. Give them experiences that going abroad they won't get.

So you’re saying that it’s not specifically about salaries, its more about the challenge?

The challenge and the opportunities to do things. If a Romanian comes to the US or Europe, they won't get, at a young age, a big wide management job. In Romania, if their managers are treating them right, they’ll get a very big job, very young. You have to give them money too. But the combination of the two... well, the West will only offer them money, it can't offer them the jobs we’re talking about.

Romanian entrepreneurs face the possibility of either attracting strategic investors or decide to bet on regional development. Which one is the best solution, in your opinion?

That depends so much on their ability to raise capital, to manage their expansion. It would be industry specific. Many young entrepreneurs prefer to cash-out, by taking some money off the table, by selling a piece of their business, and using the resources of their acquiring company to grow faster and broader. Others might want to struggle short term in their expansion plans, with less resources, but keep control of their business. That’s true in any economy, its true in the US! As an entrepreneur builds a business, it's always that point: do I take some money off the table for myself and take more resources to expand, or can I take this further myself? That’s true in developed countries and in developing countries.

A somewhat personal question. You have reached the top, career wise. Where do you go from there?

I’m having the most wonderful learning experience. In the last month I’ve been in Turkey, Abu Dhabi, Duba i, India, Mexico. All over the place. In each country I’m learning, we’re writing our column which appears in Business Week. I’m in private equity, we’re acquiring companies, I’m working with an interactive company to work on the new internet age companies. It's a wonderful learning experience. And I’m having a lot of fun too.