Here’s an excerpt from my recent CNBC interview with the legendary Jack Welch. The former GE chairman & CEO offered some fabulous advice on how great businesses can capitalize on current economic uncertainty and become even better. Mr. Welch is arguably the greatest business figure of his generation. It is always a great honor to have him on as a guest.
Kudlow: You took over as the CEO and chairman of GE in the early 80s, and that was a really bad economic period. Really, really, bad.
Welch: I came in the same time as Ronald Reagan.
Kudlow: That is correct.
Welch: And I was lucky enough to have him there doing things. We didn’t grow in the first couple of years. We reshuffled our portfolio, took a lot of costs out, got in position to capitalize on his policies later on.
Kudlow: All right, so let me ask you, you’ve got two questions implicit in what you just said. Number one, what is your advice to business right now? You talked about reshuffling portfolios. Whether it’s General Electric or other great businesses, what do you do now in the throes of such—this one is probably going to turn out to be as bad as the one in the early 80s, which itself I think was the worst one since the 30s. What’s your advice to business Jack?
Welch: Well, we have a four-pronged approach. One, believe it’s going to be 10 percent more than you think it is. It’s going to be worse than you think it is. So prepare the business for a lower volume case.
Two, communicate like you’ve never communicated before. Get out and talk to everybody, “Here’s what we’re doing and why we’re doing it.” People at moments like this go to their worst instincts. They get scared. They don’t know what’s happening. Their friends are getting laid off. Let them know why you’re doing things, why they should play ball, and what’s in it for them to do it.
Thirdly, make sure you take care of your best players. Don’t cut everybody. Don’t have across-the-board cuts. Take care of the right players. Be sure you’ve got the players going forward. Be sure that you take care of your stars. Be sure they’re on board.
And finally, think offensively. If you’ve done the first three—think offensively. Think of your competitors in the following way: Buy them or bury them. Number one, go after them, their price has never been lower. It’s easy to buy in an up market. Now is the time that it’s the best deal for shareholders. Go out and do it. Secondly, steal their employees. Steal those people that can help you going forward and weaken them. So buy them or bury them. Four prongs.