“I WAS looking for work,” jokes Jack Welch, explaining why he agreed to become a partner at Clayton, Dubilier & Rice (CDR). The much-admired former boss of General Electric surely had no shortage of job offers after he stepped down in 2001. But, he says, “today I see private equity as about as much fun as you can have if you like managing, improving assets, building leadership teams—which is what we do at CDR.”

Mr Welch, one of several former bosses of big global public companies to move into private equity, was hired by Don Gogel, CDR's boss, to help get the venerable private-equity firm back on track after a few disappointments, notably an investment in Fairchild Aerospace. Mr Welch's main activity in his part-time role at CDR is to conduct in-depth quarterly reviews of all the firms in the CDR portfolio. He treats each management team to three hours of intense questioning and inspiration—a personal tutorial in the applied management philosophy described in his bestselling autobiography, “Straight from the Gut”. The offer of regular meetings with a business legend may also help CDR clinch deals with managers of firms that have a choice of prospective owners. A call from Mr Welch can convince executives to work for, or join the board of, a firm that CDR owns.

Mr Welch used to conduct similar quarterly reviews of the firms within GE's diverse portfolio of businesses, helping to make the firm the exception to the rule that conglomerates underperform. “We do all the same things we did at GE—sit down with the CEO, look him in the eye, go over performance in the past quarter and plans for the next,” says Mr Welch. “The only real difference between here and GE is we aim to sell the firm one day.”

CDR is probably the most hands-on of the leading private-equity firms in its dealings with the companies it owns. It believes it can still add value, especially with Mr Welch's extra clout. Without the pressure most public companies feel under because they have to publish their results every few months, companies owned by private-equity firms can pursue longer-term strategies, says Mr Welch. CDR combines this long-term perspective with a strong emphasis on corporate governance. “If you don't bring governance, you are not going to be able to make it work.” That is why CDR does not take part in club deals, he says.

Mr Welch's biggest challenge so far? At GE, he wanted to buy only good businesses. At CDR, he has had to “reset my brain to buy broken businesses and fix them”. This has not been easy. “It takes a year to get into the right way of looking at these businesses. Your first reaction is, ‘Jesus. Why would I want to get into that?' ”

Copyright © 2004 The Economist Newspaper and The Economist Group. All rights reserved.