Former General Electric Chairman and CEO Jack Welch warned energy companies to not to be shortsighted during the oil slump and to avoid losing their best employees.
Welch, who led GE for 20 years until 2001, said low oil prices are teaching energy companies to become more efficient and potentially more profitable in the long run. Speaking at the KPMG Global Energy Conference in Houston, Welch said upstream energy companies are forcing themselves to produce oil and gas more cheaply with oil prices below $60 a barrel.
“Shale is like everything else. I think they’re a lot smarter than they were two years ago about costs,” Welch said. “This too will pass. You’ve got to make the bet for the long term”
He criticized companies making across-the-board cuts, arguing that doing so is the “worst thing ever invented.”
“This is the time to pay your best people more than you ever paid them,” he said. “You need your best people. You don’t need them feeling insecure.”
Welch oversaw GE from 1981 to 2001 when the company grew from $14 billion to $400 billion in market capitalization value. At the time, GE was the biggest American company. Welch was named the “Manager of the Century” by Fortune magazine, but has also has been called the world’s toughest boss for the large job cuts that often went along with his streamlining.
He said the best CEOs surround themselves with the best people. He compared business to sports and argued that the team with the best players wins and that talent is more important than strategy.
“Finding talent is the toughest job you’ll ever do,” he said. “Hiring is the toughest part of the game.”
Welch said great leaders have a “generosity gene.” They should love to give raises and not represent “not skimpy old people who hold onto the last nickel.”
“We’re not in these grinding jobs to squeeze more oil out of a rock,” he said. “There’s more things to do.”
He also argued that leaders should reward calculated risks, even when they fail.
“If you talk about risk and innovation, you have to support failure. You have to have a party for failure,” Welch said. “You can’t say, ‘I knew that was a bad idea all along.’ No, you have to own it.”