by BETSY MORRIS REPORTER ASSOCIATE JOE MCGOWAN

THERE ARE ALL SORTS of ways to grade a chief executive. Look at his return on equity. Calculate his return on investment. Take quarterly note of his earnings growth. Rank him against his peers. Rank him against his industry.

Or judge him by the most fundamental measure of all--how much wealth he has created for his shareholders.

If it's the last point that you're really interested in, then the yardstick to use is market value added, or MVA, a calculation devised by the New York City consulting firm Stern Stewart. The calculation zeroes in on shareholder wealth by asking a very basic question: What is the difference between the cash that investors have put into a business over its lifetime and the amount they could get out of it today by selling their shares?

When big American companies are evaluated this way, the field is not crowded at the top. Two men--Roberto C. Goizueta, chairman and chief executive of Coca-Cola, and John F. Welch Jr., chairman and chief executive of General Electric--stand head and shoulders above the rest. Coca-Cola was No. 1 as of the end of 1994, with $61 billion in MVA; GE was No. 2, with $52 billion. No other company came close. Wal-Mart, in third place, had $35 billion in MVA; Merck, $32 billion; Microsoft, $30 billion. (For a list of the 200 biggest American companies ranked by MVA, see "Creating Stockholder Wealth.")

What MVA really measures is how efficiently the chief executive has been able to use the capital entrusted to him--how well he's been able to keep his eye on the ball. By that standard, Goizueta and Welch are genuine champions. Goizueta created nearly all of Coca-Cola's MVA--$59 billion--during his own tenure. Welch created all of GE's $52 billion MVA on his own watch.

What are the qualities that set them apart? "Both men have an ability to sort out the noise from the signal and then to drive just for the essence of what's important," says George M.C. Fisher, chairman and chief executive officer of Eastman Kodak, who knows both of them well. "A lot of executives can intellectualize the process, but these two can follow through."

Though they share a unique set of wealth-building skills, the two men couldn't be more different. One, the son of a wealthy Cuban sugar magnate, became an impoverished immigrant when, as a young adult, he left Cuba for Miami to escape Castro's orbit. He and his wife had $40 between them and 100 shares of Coca-Cola stock. The other, the son of a railroad conductor, was a hotheaded young ruffian who wanted to go to Dartmouth but couldn't.

Goizueta is aristocratic, formal, ever polite, always measured--a gentleman CEO who likes a nice predictable schedule and a certain sense of decorum, and never seems to take off his suit jacket. Welch is impulsive, captivatingly charming, still proud of his Animal House fraternity, most comfortable in his shirtsleeves. Goizueta has a deep and abiding respect for tradition; Welch has little use for it. Goizueta doesn't like open confrontation; Welch thrives on it. One is a technician; the other, a charismatic. One runs essentially a one-product company; the other, a conglomerate with a dozen businesses, nine of them big enough to be on the FORTUNE 500.

For Goizueta, the concept of shareholder wealth is almost an ideology. A video monitor at the entrance of the main building at Coca-Cola headquarters shows the stock price, updated several times a day. It is the first thing employees see each morning and the last thing they see when they go home at night.

For Welch, an avid athlete, business is the most absorbing game of all. The creation of wealth is how you keep score: It is the result of winning, which is what business is all about in the locker-room GE culture.

Yet there are uncanny similarities too. Both men are chemical engineers. Both were raised as Roman Catholics. They became chairman and chief executive officer of their companies exactly a month apart in the spring of 1981. Their birthdays are a day apart in November. Both inherited blue-chip corporations, then proceeded to navigate them through one of the most troubled times for blue chips. Both were plucked from relative obscurity to take the top jobs.

In some very fundamental ways, Goizueta and Welch did business similarly. They weren't distracted by outside events. They figured out what they needed to do. They told their employees. And then they did it--relentlessly--over the past 14 years. Their stories say something about ego, something about succession in a big bureaucracy; something about strategies. For Welch, getting the top job meant that the big game was beginning. For Goizueta, it was a chance to rebuild all that he'd lost. For both men, it was a chance to settle up with the past.

Wealth is a theme that has run through the lives of Goizueta and Welch in very different ways. Goizueta was born to it on November 18, 1931. His maternal grandfather, Marcelo Cantera, had emigrated to Cuba from Spain with little more than a high school education. But he was a hardworking and thrifty man, who would impress on his grandson the importance of cash. When the Depression hit Cuba, he had saved enough to acquire a sugar-refining business and some real estate, and then to build a mansion in Havana large enough for his extended family, Roberto's parents and their children. It was a tight community and a nurturing one. Roberto's paternal grandmother lived next door, and numerous cousins lived nearby.

And it was a childhood rich in culture, for the clan had its share of Renaissance men. Roberto's father, Crispulo Goizueta, attended the University of Pennsylvania and worked as an architect before returning to take over and add to the family holdings. After he retired, Marcelo wrote verses (he wouldn't permit them to be called poetry) in elegant handwriting, and "held court" in an office off the living room, with his young grandson at his knee. "My grandfather had a saying for everything," recalls Roberto, who would grow up to run his company by many of the Spanish proverbs his grandfather had taught him.

FOR ROBERTO, it was an easy road to adulthood. He took a schoolbus to the Belen School, a nearby Jesuit institution. Then for a year he attended Cheshire Academy, a private secondary school in Connecticut, to learn English. He moved on to Yale University, his way smoothed both by outstanding performance and by connections at Cheshire. He majored in chemical engineering, a discipline he thought would be helpful when, someday, he would take over the family business.

In some ways it was too easy. When Goizueta returned home to work for his father, he was restless. "I had no compass. Everything was perfect. It was very difficult to do anything wrong," he recalls. He wanted to strike out on his own. Although he could easily have used his family connections, he answered a blind ad in the newspaper, landing a job as an entry-level chemist at the Coca-Cola Co. in Havana. He reported for duty on July 4, 1954. "It was going to be a temporary thing for me, $500 a month," he recalls. "My friends thought I was absolutely crazy."

It turned out to be perhaps the smartest move he ever made. After Fidel Castro took over in 1959, it became clear that Castro intended to take over both the Goizueta family enterprise and Coca-Cola's Cuban operations. So in 1960 the Goizueta family scattered, some to Mexico and others to Miami. Roberto, his wife, Olga Casteleiro, their three children, and a nursemaid shared a motel room for a month on Miami's Venetian Causeway. He counts himself lucky; Coca-Cola gave him a job in a new Miami office, and he had his 100 shares, kept in a bank in New York. "You cannot explain that experience to any person," he says. "That was ten times more important than anything else in my life. It was a shocker. All of a sudden you don't own anything, except the stock. One hundred shares. That's the only thing I had. It brings a sense of humility. It builds a feeling of not much regard for material things."

JACK WELCH came from the other side of the tracks in the small, gritty city of Salem, Massachusetts. He was born on November 19, 1935, four years and one day after Goizueta, into much different circumstances. His father, John Sr., was a conductor for the Boston & Maine Railroad and away much of the time; it was his mother, Grace, who played the most powerful role in his life. She raised him, doted on him, pushed him. "Don't get me started on my mother; she's my whole game," he says.

It was a simple life, in a little gray stucco house on Lovett Street. Jack was an only child; his extended family was his neighborhood. And it was filled with "kids that didn't have anything. You were lucky if you had food on the table," recalls Lawrence McIntire, a childhood friend who is now the superintendent of parks and recreation in Salem. Welch and another pal, Sam Zoll, would caddy at the Kernwood Country Club, picking up $1.25 for 18 holes, which they would then turn over to their parents, who usually allowed them to keep a quarter.

The kids did have one thing that many of them now point to as being a major factor in shaping their success: an excavated gravel pit turned into a makeshift park, called the "Pit," a Darwinian laboratory of sorts in which Welch and his buddies learned how to win, lose, fight, compromise, and charm. There was no recreation department funding, certainly no Little League. So the kids of north Salem built their own basketball court and made a hockey rink from the snow-packed swath left by a snowplow. The older, bigger kids played first; only when they got tired did the younger, smaller ones get a turn. Fistfights were common. "We were all jocks of sorts. I mean, we played ball countless hours, played street hockey all night. That was everything. Sports were everything," Welch recalls.

"We didn't have parental development and supervision, uniforms and all that," says Zoll, who is now the chief justice of the district court of Massachusetts. "Inter-city and playing teams from other cities was left to your own creativity." In that milieu, Welch made a name for himself. He put the games together and figured out how the kids would get there and home. He became known as a fearless negotiator who, through aggressiveness and charisma, could talk the bigger kids into sharing the basketball court. He was a ferocious and judgmental competitor. His teammates "always knew where they stood," recalls one.

McIntire says that among the kids from that neighborhood, "there is a group of about 15 guys who made out pretty well. A lot of us didn't go to college. We just worked hard and ended up with positions. Jack and all of us grew up in that very competitive atmosphere, so when we went out into the world, we said, 'Hey, we can do anything. Nothing can be as tough as going to the Pit.' "

Welch went to Pickering Elementary and then on to Salem High School, where he was involved in practically everything, but was perhaps best known for sports. He was captain of the hockey team and golf team. His class voted him the "most talkative and noisiest boy." In his high school literary magazine, he listed his "repressed desire: to make a million."

If, as a young adult, Goizueta was stifled by his family connections, Welch had the opposite problem. He and two of his close friends from Salem High were nominated to receive Navy ROTC scholarships that would provide full room, board, and tuition to college. Welch's friends won them, and got to go to Tufts and Columbia. Welch didn't. It was a disappointment. "I don't know what my problem was. I didn't know enough people. I can remember my father calling our Congressman and things like that. He didn't really know how to do it very well," he recalls. Welch ended up at the University of Massachusetts, "which at the time didn't have a unique reputation by any means. It was a state school and used to be called Mass Aggie," he says.

His mother wanted him to be a priest or a doctor. He wanted to be a "great hockey player," but he wasn't fast enough. He settled on engineering "because we only had one person in our whole family that was at all educated beyond high school," he recalls. "He was called an engineer, and he worked at a power plant. So I went to engineering school."

At college he had a ball, the only engineer in a wild jock fraternity, and still he managed to graduate with honors. "We were on scholastic ban all the time. We drank more beer and had more fights than anybody there. And we'd play cards all night," he says. "And I had great grades." He went on to graduate school at the University of Illinois, got a Ph.D. in chemical engineering, and then, out of three job offers, chose to go to work for General Electric in Pittsfield, Massachusetts. "It was in Massachusetts, where I came from, so it was like going home in a way. That may sound ridiculous, but in those days that was kind of important."

For both Goizueta and Welch, the road to the top was anything but conventional. After emigrating to Miami, Goizueta spent most of his corporate life in the technical side of the business. His accomplishments there were impressive, and his integrity was respected. But in a company where people talk about having Coca-Cola in their veins, he never ran a soft drink operating division. Although he became executive vice president in May 1975, and was later given responsibility for the company's administrative, external affairs, legal, and technical divisions, in the horse race set up by his predecessor, J. Paul Austin, he was still considered the darkest horse.

What the outside world couldn't see was the strong bond Goizueta had forged with Robert W. Woodruff, who had run the company for decades and was still referred to as "the Boss." Woodruff frequently invited him to lunch, and Goizueta respectfully attended what he calls those "command performances." On his way home after work, he would visit Woodruff to chat, much the way he had sat with his grandfather many years before. He had the kind of modesty and humility that the courtly Woodruff surely respected. "I never set a goal to be this or that. I always believed that if you could do the best job you can, somebody will notice it sooner or later. You hope it will be sooner," Goizueta says. Donald R. Keough, Coca-Cola's former president and chief operating officer, says, "Mr. Woodruff trusted him and admired his integrity and saw in him a fundamental toughness." Woodruff also must have appreciated Goizueta's fundamental respect for tradition and decorum; for if Coca-Cola was to be changed, it would have to be changed very carefully.

There was nothing especially subtle or careful about Jack Welch, on the other hand. When General Electric's famous management-succession machine first cranked up and delivered to Reginald H. Jones a list of some 30-odd candidates in 1975, Welch's name wasn't on it. He was young. He was, Jones says, "the least typical GE guy. Definitely a maverick in his style." At GE, you weren't anybody unless you were part of the "electrical ring"--the businesses that were part of Thomas Edison's direct legacy. Welch had been hired in a little bastard outpost of the company called the Chemical Development Organization, charged with developing new chemical businesses. "We had a Green Beret, almost SWAT team mentality," recalls Reuben Gutoff, who was Welch's boss at GE for 12 years. The enemies were not just outside competitors but the GE bureaucracy too. "We talked a lot about that--the bureaucracy-speak, the bureaucracy babble. We had met the enemy, and it was us."

If Goizueta was a good corporate soldier, Welch was a rebel. Rather than entertain GE customers at Palm Beach, Florida, he would take them to Lake Placid, New York, organizing ice hockey games and ski races, most of which he won. He argued against the bonus system, which included a high percentage of deferred stock; with four children, he needed income. At one point he told Jones: "It's golden handcuffs. It's imprisonment." He resisted moving to the corporate headquarters in Fairfield, Connecticut, because he wanted no part of the bureaucracy, and he got away with it because he delivered. But Jones finally prevailed: "I told him he had to get out of being a hick up in Massachusetts, running his own little bailiwick, with everybody genuflecting to him; that if he wanted to amount to something, he had better get down here where the real competition was going on."

GOIZUETA became chairman and chief executive of Coke on March 1, 1981. Welch assumed the same posts at GE exactly one month later. The coincidence was a kind of high-water mark in succession planning. As Gutoff puts it, "I think people who come up from the nonmainstream route are not so captured by the folklore, the mystique, the baggage. They are more likely to be able to tell that the emperor has no clothes. It's one thing to have a Lou Gerstner come in to fix an IBM. But if you can get an insider with an outsider's point of view, you get the best of both worlds."

Then as now, Coca-Cola and General Electric were two vastly different worlds. Coca-Cola was a Southern soft drink company with an identity crisis. For nearly 100 years, it had sold essentially two things: the fountain drink made with the syrup that Atlanta pharmacist John Styth Pemberton had concocted, and that soft drink's image. But with soft drinks flagging, Coca-Cola had become paralyzed and self-conscious.

General Electric, northern and industrial, had become smug. Born in 1892 as the offspring of a merger of two electric companies--one of them Thomas Edison's--it had tried to be all things electrical, from toasters and hair dryers to jet engines, many of them tough, cyclical, low-margin businesses. It had gotten so big, bureaucratic, and diversified that it was blissfully insulated from the threats of global competition and changing technology.

Despite the differences, Welch and Goizueta perceived their jobs in surprisingly similar fashion: to come up with some formula that would get them into the right businesses and to spur their tradition-bound bureaucracies to accept change. In Atlanta, Goizueta began to gather data. In September 1980, as president and chief operating officer, he had met with his executives for business planning sessions, and what had traditionally been a series of presentations became a fact-finding mission for Goizueta. Just the fact that he was asking questions was such a shock to the culture that it became known as the Spanish Inquisition.

But it was clear to Goizueta that things had to change. His immediate predecessor, J. Paul Austin, had been ill. Coke management, along with the rest of the world, it seemed, had lost faith in the soft drink business. Business Week magazine ran a cover story on "The Graying of the Soft Drink Industry," warning that shifting demographics spelled doom for soda pop. Wall Street analysts were bearish. M. Douglas Ivester, now Coke's president and chief operating officer, recalls one of them insisting, "I don't care what you say, your company can only grow at 3% a year."

The business was a mess. The domestic bottlers had a stranglehold; many had contracts that had assured them not only fixed prices but ownership in perpetuity. Worse yet, Coca-Cola had been losing market share, bit by bit, for nearly two decades. But the company, afraid of doing anything that might hurt the trademark, was paralyzed. "Coke had been a single thing in a single package, like an egg. That's Coke," recalls Keough, the former COO. "When it came to the trademark, there was always a tentativeness. What are people going to think?" So besides trying to fix soft drinks, Austin's management had acquired what had come to be known as "the supporting cast": wine, coffee, tea, plastics businesses--even a division that made steam generators and industrial boilers.

Goizueta set to work looking for a way to impose order. Even before he got the job, he came up with a two-page, double-spaced document, simple as an egg and dry as dust, titled "The Job of the Chief Executive Officer." It outlined, among other things, what he could delegate and what he couldn't. He also developed a mission statement that laid out (forgive us, Lou Gerstner) his vision for the company, which he would update every few years.

And early on in his tenure, he developed what has come to be known as gospel to almost everybody who works at Coca-Cola: that the name of the game is creating wealth for what he calls "shareowners," and that the key is efficient allocation of capital. The way to accomplish this, Goizueta says, is to employ one simple little formula that has now been all gussied up and given a fancy name that consultants sell for lots of money. As Goizueta puts it, "You borrow money at a certain rate and invest it at a higher rate and pocket the difference. It is simple. It is the essence of banking." The theory, which essentially amounts to economic value added, or EVA, is one he didn't learn from the consultants. He learned it from his grandfather, who used to say: "I am a great believer in cash flow. Earnings is a man-made convention, but cash is cash. The larger the company is, the less it understands cash flow. The smaller the business, the better it understands cash flow..." and so on.

As Keough puts it, "Roberto is a person who thought like an owner. He wasn't a hired hand. His family were owners. He had tremendous pride in ownership. That was very important to him."

After developing the formula, Goizueta followed through. He got rid of the companies that didn't meet his returns. He resisted the temptation to get into the cable and pharmaceutical businesses. He renewed the company's commitment to soft drinks--the introduction of Diet Coke rejuvenated the business. He did buy Columbia Pictures, not to hedge his bets, he says, but to shore up earnings until he could get the soft drink problems straightened out. And he introduced New Coke.

The latter two moves only served to reinforce his commitment to soft drinks. "I don't like surprises. Even good. He who can surprise me with good news can surprise me with bad," Goizueta is fond of saying. And the movie business was filled with surprises. When Goizueta and Keough previewed Ghostbusters, they thought it was silly. "That's how much we know about picking hits," says Keough.

New Coke also pointed Goizueta back to Coca-Cola's roots. For a man who doesn't like surprises, for a company scared to death to monkey with its trademark, it was the crucible. Ronald L. Kuehn, chairman and chief executive officer of Sonat Inc., spent time with Goizueta during the backlash. "He was more serious than usual. He was obviously very intense. He didn't like it at all that Coke might have made a faux pas," Kuehn recalls. But nobody involved ever saw him lose his temper. Goizueta recalls walking on a beach at Sea Island, Georgia, with his father, Crispulo, in May 1985. "Dad was upset. I said 'Dad, you have to have faith.' "

The experience had huge significance for him. "I realized what I should have before," he says. "That this was a most unique company with a most unique product. We have a product that people have an unusual attachment to. I had never felt so bullish about it." From that point on, says Anthony Adams, a professor and consultant who has observed Coca-Cola from both inside and outside the company, "it was as if a light bulb went on. Aha! This is the essence of what we own," says Adams. "From that point on, Roberto has reduced the company basically to its trademark, and the returns are so astronomical as to be off the boards. It just absolutely added a jet engine to their performance."

IF GOIZUETA'S APPROACH to the creation of wealth was cerebral, Welch's was primal. He had worked in businesses that were good and businesses that were bad, and he knew which he preferred. While the old darlings of GE had included businesses (like housewares) that supposedly endeared the company to consumers, Welch's darlings were the winners: what would come to be known as the "invest and grow" businesses like plastics, medical supplies, NBC.

To him, the whole notion of wealth creation was not an ideology but the game itself. It was pure rules of the Pit. The strong survive; the big, the fast, get to play. The more you win, the more wealth you create. And the first and most obvious rule: "Don't play with businesses that can't win," he says. "Businesses that are No. 3, No. 5 in their market--Christ couldn't fix those businesses. They're going to lose anyway."

So a year after Goizueta's Spanish Inquisition, Welch gathered his executives together to lay out his formula. Businesses had to be No. 1 or No. 2 in their global marketplace. If they weren't, he told them, we will fix you, sell you, or close you.

If Goizueta, ever respectful of the past, worked to effect change without causing too many ripples at Coke, Welch created a tidal wave. Just like a coach trading his players, he began bailing out of the businesses he didn't think were going to strengthen his hand. Tradition didn't matter; winning did. In one 12-month period, he unloaded both housewares and Utah International, a mining subsidiary Jones had acquired just eight years earlier in what had been celebrated as the biggest U.S. merger ever. Within another 12-month period, he bought RCA and Kidder Peabody. Although GE's strategic planning process, complete with 400 strategic planners at headquarters, had become the darling of the B-school set, he dismantled it. By 1988 he had bought and sold scores of companies and reduced his work force by 100,000.

There is in almost every aspect of GE management a heavy element of competition. John Opie, vice chairman of GE, prepares for every meeting the same way he'd psych up to run the 440 or to play football. "You go in pumped up. You go in ready for combat," he says. And prepared to take a certain amount of heat. If Welch doesn't like an acquisition proposal, "he might say, 'You're crazy, that's too much money; not even close. Go get it for half.' You'd better have a thick skin, or when you come out, you will be a hurting person."

Welch has organized his management much the same way he used to organize ball games. Each quarter he gathers his top executives at the leadership development center in Crotonville, New York. Everybody knows the company initiatives: to increase such things as productivity, inventory turns, quality, working capital, customer satisfaction, and other goals Welch has set. And by the end of the sessions, everybody knows where each division stands. "Everybody wants to be at the top," says Robert L. Nardelli, president and chief executive officer of GE Transportation Systems. Being at the bottom is a humbling experience. "When somebody is floundering, there is a little bit of a Quaker shunning; the guy's not so popular at the coffee breaks," says Paul Van Orden, executive in residence at the Columbia business school and a former GE executive. "Jack has an awful lot of very talented people running those businesses. By rubbing them together, it can be very effective."

The GE approach clearly has its hazards. Welch admits that it is impossible to know everything about each of his businesses. "I don't know what color the refrigerator is or how it all works, but generally speaking, we know what the higher issues are...it's sort of a smell, a scent, a trust in the people." That may have contributed to the Kidder Peabody fiasco last year, in which GE was forced to take a $210 million charge against earnings after Kidder trader Joseph Jett allegedly created $350 million in phantom profits. If Goizueta kept his cool through New Coke, Welch lost it over Kidder. "He yelled, and I yelled, and people yelled back," recalls Dennis D. Dammerman, senior vice president for finance. "Were any of us calm for the whole weekend? No, you would've thought we were weird if we had been."

While Welch roiled GE with a macho style and massive changes, Goizueta toiled away in the Tower in Atlanta, quietly, relentlessly, reducing the company to its trademark. Together with Ivester, then Coke's chief financial officer, he pulled off a rapid series of moves in the middle to late Eighties that put his stamp on the company. They got out of the movie business at a price so high that it rendered moot any questions about how well they had managed it. They bought back stock at prices that seemed high at the time but which, in retrospect, were bargains. They revamped Coke's pay incentive plan, making millionaires out of even lower-level managers who succeeded at creating wealth for shareholders. And they let go of a Triple-A debt rating "that was like a university diploma to hang on the wall," says Goizueta, who borrowed money that could be invested in the higher-return soft drink business.

They poured money into overseas markets. And they worked assiduously to untangle the worldwide bottler problems. In most cases, instead of buying and owning their bottlers outright, they would take enough of a stake to be able to influence the business without having to burden their balance sheet. That way, "they were able to control the bottling situation without all the concomitant capital requirements," says Warren Buffett, a board member whose company is a major shareholder. "They were able to cycle money through when it was needed and then to get out." Coke even unloaded Minute Maid's capital-intensive orange groves last year, reducing its food business to what Goizueta calls "an internal flavor house" for the soft drink business. "He believed in the product," Buffett concludes.

To this day, Goizueta keeps his mission statement in the middle drawer of his desk. In the top left-hand drawer he keeps a simple chart comparing the financial characteristics of the businesses Coke has owned. He is proud of the fact that he's been so consistent.

With Goizueta so monomaniacally focused, there's no such thing as a casual conversation about soft drinks. Ex-GE chief Reg Jones once ran into him at a business event, where his wife, Grace, a diet soda drinker, mentioned that she was disappointed in Diet Coke's uneven quality. (Early on in its commercial use, the sweetener aspartame would start tasting funny if it sat on the shelf too long.) "His eyes got wide and his ears opened up, and for the next 30 minutes we were subjected to an explanation of aspartame, its pros and cons and all the problems," Jones recalls. Several days later they received a three-page follow-up letter from Goizueta. Not long after that came phone calls from managers at two of their clubs saying, "Coca-Cola has had their people crawling all over, looking at the inventory." Then followed another letter from Goizueta, explaining that the inventory had not been handled properly, but that the situation had been taken care of. "You can't get more intense," says Jones.

Suffice it to say that Welch doesn't take quite the same deferential approach to customer-service matters. Henry Kissinger and Welch are good friends. But when Nancy Kissinger called once to see if he could help her out with a broken appliance, he cracked wise: "What do you think I am, an appliance repairman?" (Welch did take care of it.)

Nor, in a miscellany of other style matters, do Welch and Goizueta bear much resemblance. GE's chief owns three homes; Coke's chief has rented the same vacation place at Sea Island for 20 years. (Goizueta did finally move into a big house in Atlanta, but only, he insists, to make room for grandchildren.) Goizueta says that more than 99% of his personal wealth is tied up in Coca-Cola stock. Welch spends free time tromping over assorted golf courses, including Augusta National, where he's a member. Goizueta's idea of a good weekend outing is taking in a Welsh corgi dog show. Welch is not a car buff; Goizueta loves them. One of his strongest outside interests is sitting on the board of Ford Motor Co. "I'm a frustrated auto designer, I am," he says. Ford board members get to test-drive "evaluation" cars, and Goizueta is about to receive a new Jaguar. "I can't wait," he says.

Yet the two have in common a relentless focus and a remarkable rudder of consistency. They have developed game plans, and they have stuck with them. Goizueta set out to remove all distractions except his highest-return business; Welch built a complex empire in which the cyclical parts complemented one another, managers spurred one another on, and the result was an enterprise grander than the sum of its parts.

BOTH WELCH and Goizueta are spending the home stretches of their tenures focused less on external adventures than on consolidating their gains. Opposites in so many other respects, they are once again singing off the same page when it comes to trying to break down bureaucracy, speed up decision-making, and keep their respective corporate revolutions going.

At GE, Welch is feverishly pushing for speed and productivity with all sorts of New Age business ideas: "boundarylessness," "workouts," "stretch targets," and the rest. He sets very high standards--"Looney Tunes stuff that he has no right to ask," says Steven Kerr, GE's vice president for corporate leadership development, who frequently watches Welch addressing the troops at the company's training center. But he is so charismatic, Kerr says, that it often works. "They get so energized. They don't know what part they are going to play, but they are damned well going to help him do whatever he asks," he says. At the end of a speech, Kerr says, Welch frequently tells the group: "This is the message. Go home and tell your people."

At Coca-Cola, of course, the effort is a bit more understated. "Today we are not finished. There is much to do," Goizueta says. "We are blessed in that we don't have to look outside our core business. But we have to do the things we do better, more efficiently from a cost point of view, more effectively from an impact point of view."

To that end, he is also encouraging speedier decision-making on every front. He wants to keep pushing hard into emerging markets like China and India, and to keep improving the company's marketing effort. "Five years ago, if I had said we were underskilled marketers, nobody would have believed me," he says. But too much of the company's marketing effort was directed at advertising, he says, and not enough at brand strategy or packaging. So Coca-Cola hired hundreds of new marketers and has been taking a more holistic approach to the discipline. Goizueta is constantly nudging a culture that is still a bit queasy about taking risks. At a worldwide gathering of Coca-Cola's quality-assurance staff in Palm Beach in October, one in the group expressed concern about all the change. "Don't wrap the flag of Coca-Cola around you to prevent change from taking place," Goizueta said gently. "It is extremely important that you show some insensitivity to your past in order to show the proper respect for the future."

If there is a lesson in all this, sum it up this way: For management--unlike, say, for Coca-Cola--there is no secret formula. But as these extraordinary opposites reveal, there are definitely essential ingredients.

Copyright 1995 Time Inc. All rights reserved.

A CONVERSATION WITH ROBERTO GOIZUETA AND JACK WELCH

ROBERTO GOIZUETA; JACK WELCH

Jack Welch and Roberto Goizueta don't know each other well--they see each other three times a year at meetings of the Business Council, and they exchange birthday cards in November. They have the kind of cordially formal relationship that comes naturally to members of the business gentry. And yet by the time they were well into a wide-ranging, two-hour conversation with FORTUNE editors, the chief executives of GE and Coca-Cola were finishing each other's sentences. Perhaps there really is a particular cast of mind that leads to the kind of management that enriches shareholders. Herewith, excerpts from our conversation with the two heavyweight champions:

FORTUNE: A lot of chief executives of big companies in effect flunked the Eighties. What went wrong?

Welch: I think the leaders you see today have a feeling that the day they get the job is the beginning of a new job. The beginning of a job. Without trying to make a broad-brush statement, a lot of the people who got the job in the late Seventies and the Eighties thought it was the culmination of a career.

Goizueta: If you look at the major companies, there was a sense of arrogance in all of them, whether it was GE or Coca-Cola or Kodak or any of them. I think in our predecessors, any insensitivity to the past was almost viewed as disloyalty. They wrapped themselves in the Coca-Cola flag or the GE flag or you name it, in order to prevent change from taking place.

FORTUNE: How did you avoid that trap?

Welch: I had the luxury of being an insider who ran high-growth businesses like plastics, or saw opportunities in wonderful things like GE Capital, and then had big, bureaucratic, hundred-year-old businesses reporting to me. I saw businesses that were No. 5 in the marketplace, not even No. 3, that we were holding on to as a shrine to our past.

GE trained me with good businesses and bad ones. I always felt sorry for the people in the bad ones because they never saw a good one. All they really did was work in the vineyard they were sent to toil in. They always compared themselves with their direct competitor. So if their returns were nine and their competitor's seven, they were doing very well. The fact that they should be getting 15 was difficult to comprehend.

Goizueta: My predecessor, Paul Austin, was terrific. He had problems at the end, but he did what it took: You'd plant your flag in a new country every time you needed to grow. We ran out of countries, so I had to do something different. Nobody had taken the time to explain what our cost of capital was, that we were not reinvesting in the business, that we were paying out in dividends 60-something percent of our earnings. When you explain those things, intelligent people will eventually come to their senses. Now once in a while you have to have a public flogging in the town square. We had to do that in a couple of instances. And I must say, the sound of the whipping, more than the hurt--the sound was what was important.

FORTUNE: How have you gone about creating market value--that is, putting wealth into the hands of shareholders?

Goizueta: Back in 1980 we made a study of the returns we were getting from our fountain business. And we found out that we were making much less than our cost of capital, which at that time, with no debt, was about 16%. So what we thought was a great business was, in fact, a lousy business. As a result of that, a number of things happened. We stopped buying all these expensive five-gallon, stainless-steel containers. We started delivering to McDonald's in big tank trucks, as opposed to thousands of little 20-gallon containers. So we eventually improved our return. We also found the same thing with our wine business [which was eventually sold]. Even in the best of circumstances, we were not earning the cost of capital. I didn't know anything about EVA or anything, but I knew something very simple, and that is: The way to become richer is you borrow money at a certain rate and invest it at a higher rate and pocket the difference. So we went very methodically over much of our business.

Welch: I would say that our whole thrust here was to get into the right businesses, find businesses with growth, get an organization that could respond to change quickly, and get as much out of the capital we employed as we possibly could. We didn't understand EVA or MVA or any of these other things, okay? But if you look at the Cokes and the GEs of the world, they've both gotten a lot out of their capital. You look at some companies that have had more difficulties, they've been investing a lot of capital without getting much out of it. So using capital efficiently is clearly a driving force.

FORTUNE: One of you sells essentially one product; the other sells thousands. One works to unload capital-intensive companies; the other uses them as a strength. One of you sells image; the other, performance. How do all these differences change the game of wealth creation?

Goizueta: We don't know how to sell products based on performance. When we had to sell boilers or desalting plants based on performance, we didn't know how to do it. Everything we sell, we sell on image. That's the reason we did so well with the wine business. Had it been a good business to start with--I mean, if we had found a way to store wine for 12 years with a return--we would have done very well. We did very well in selling it. But then we can spend $400 million on advertising and not bat an eyelash.

Welch: People say people are important in every business. But in a multibusiness company, where my knowledge of the business is far less than Roberto's knowledge of his company, I've got to have real experts and real good people to run businesses. Now, he has to have good people in his company too. But if I don't have them, the game's over. If he doesn't have them, he knows where they're not good.

FORTUNE: You both took over at about the same time, in 1981. Were there particular circumstances of that time that made what you did possible, or harder?

Welch: I think we may have faced different worlds. We were in a period of very high inflation in the late Seventies. We were dealing with Asian threats across every business. It was a reminder that we'd better get a lot better, faster. So I guess my message in our company was, "The game is going to change, and change drastically." And we had to get a plan, a program together, to deal with a decade that was totally different. The Japanese had moved since the late Sixties and early Seventies from poor quality and low price to low price and high quality. And their plants and their quality and their discipline were overwhelming us in some businesses.

Goizueta: I think in our case the situation was much more internal. We really lost focus on who our customer was. We felt our customer was the bottler, as opposed to the McDonald's and the Wal-Mart. So consequently, we were being either cheerleaders or critics of our bottlers. But hands off; we didn't have anything to do with it--that was their job. Item two, we really got to believe inside the company what was portrayed in the press as the graying (or the maturing) of the soft-drink industry. Also, we were terribly slow.

FORTUNE: Both of you said, in effect, "Something is terribly wrong here, and the world is changing, and we're going to change the way we run these businesses, and here's how we're going to do it." You spelled it out in your annual reports and to your employees, and both of you were largely ignored outside your own companies. Why?

Goizueta: I think the worst thing we ever had to do was to establish a sense of direction...

Welch: The game plan...

Goizueta: ...so that they know where they're going. Then you can let them have a lot of freedom. But if they don't know where they're going, I mean, you don't want them to get there very fast, I'll put it that way.

Welch: Well, in hindsight, if there's a criticism [at GE], it was too evolutionary. It was perceived on the outside as revolutionary, but if you want to criticize what the hell went wrong, I didn't do it fast enough. We didn't get at those things fast enough. It took us a decade to do a lot of the things we had to do.

FORTUNE: One thing the two of you have in common is that you seem personally demanding. Really, really demanding. True?

Goizueta: I hate to lose. I'll start with that one. I don't like to lose. I'd rather not play, you know.

Welch: No, I'd rather play.

Goizueta: And lose?

Welch: I'd rather play. But I like to fight like hell before I lose.

Goizueta: As it has been said, the way to win against Bobby Fischer is, don't play him at chess.

Welch: Pick another game. I think that's important in business. Don't play with businesses that can't win.

FORTUNE: You could argue that these are the two most global companies based in America, certainly among the most global in the world, yet the way you operate globally is very different. Right?

Goizueta: Soft drinks are very much a local product. I'd love for the Chinese to arrive in New York and say, "My goodness, they have Coca-Cola here too," you know.

Welch: We compete with giants. So we have an enemy, if you will. We compete with companies and governments.

Goizueta: That's great. If you don't have an enemy, the best thing is you create one.

Welch: You've got to have one.

Goizueta: You have to have one.

FORTUNE: Why?

Goizueta: That's the only way you can have a war.

Welch: You have to rally around a benchmark. There has to be a benchmark.

Goizueta: He's exactly right.

Welch: We're playing in a game where we'll show up and we'll be selling an engine against another engine competitor. Now, to get the deal, you've got to have performance and all the other things, but you'd better have low cost. And as you go around the world, and you want to sell turbines to developing countries, you'd better have a low cost base. Because in the end, you could have performance, you can have quality, but you'd better have cost. In our game, you have to have cost, and we've got to be more productive. That is a driver that you have to keep benchmarking.

Goizueta: Take, for example, this private label [the emergence a few years back of aggressive, store-brand soft drink marketing stratagems]. We were too slow to react in Canada because, you know, we're Coca-Cola; we can charge a little more. But the consumer may not want to pay more for Coca-Cola. Historically, our business in Germany was built by selling Coca-Cola at a premium. That no longer exists. Now we have reduced costs, and we're eating up the private-label business, and so is our main competitor [Pepsi]. Because now, if they lower the price, so can we.

Welch: Take a look at what a refrigerator cost 15 years ago, and take a look at what an automobile cost 15 years ago. A refrigerator sells for just about the same price as 15 years ago. An automobile is 22 times, or whatever it is. We've had to fight in competitive industries like that every day and grow margins and grow returns. Our price index for the last seven years is probably negative as a company, and yet our profits have grown at double-digit rates. That comes from using capital more efficiently, using people more efficiently, from systems behavior.

Goizueta: A two-liter Coke, per ounce, is pretty much like it was--a little over a penny.

FORTUNE: You both are strong advocates of the kind of business you're in: GE, the diversified portfolio; Coke, the one-trick pony. Why?

Goizueta: Our return on capital is almost 33%, about three times our cost of capital.

Welch: All our industries don't grow at the same rate. Our plastics business might be more like Roberto's business in terms of top-line growth. But in our other businesses, it allows us enormous staying power. For example, next year we'll go from A to B. I think I know how I'm going to go from A to B, and I know the company in total will get from A to B. I'm not sure the 30 or so businesses are going to get from A to B exactly as they all planned it, but I've got enough muscle that I can get from A to B.

If one of the businesses is going to be weak, and it's a great business but it's in a difficult moment, I can support it. If I'm a single-product guy in a weak business like that, in a business that cycles dramatically, I get whacked. So the staying power that our businesses have allows us to stay for the long haul.

Goizueta: To GE, it is different businesses. In our case the hedge comes from different geographies. Different countries.

FORTUNE: What would happen if you were to swap jobs? Would you enjoy it? Would you be good at it?

Goizueta: I know I wouldn't. Jack has been in the good businesses of GE and the bad businesses of GE. If you take somebody who's only been in a good business...It's just like when somebody in our business tells me, "You know, he hasn't had a failure yet." Watch out.

Welch: I happen to like the diversity, so I like being a little bit of everything, okay? On the other hand, it would be fun to run a machine as great as he has built. That'd be exciting. I like advertising. I like promotion. I'm the advertising manager of our company. I love it.

Generally, though, I wouldn't like a single-product business. One of the things I sell people on why you join GE is the stimulation of playing many different fields.

FORTUNE: Tell us about how you have approached the choice of a successor.

Welch: The challenge we have is to put lots of people in lots of different jobs, which we are doing, and have the board and the senior management team look at them and see how they perform under all kinds of different circumstances. It's interesting. You see people in different periods. Some people can do just fine as long as the growth curve's growing, but when all hell breaks loose, you see them change their whole personality. Some can adapt to any situation. You've got to watch all that. Then take a guess and pray you're right.

FORTUNE: What, specifically, are you looking for?

Goizueta: I don't think any of us can say we know beforehand.

Welch: No, but I think I know. I want somebody with incredible energy who can excite others, who can define their vision, who finds change fun and doesn't get paralyzed by it. I want somebody who feels comfortable in Delhi or Denver. I mean, somebody who really feels comfortable and can talk to all kinds of people. I don't know what the world's going to be; all I know is it's going to be nothing like it is today. It's going to be faster; information's going to be everywhere. I've seen our jobs--I'm sure Roberto would say the same thing--my job is three times as fast as it was.

Goizueta: Oh, God.

Welch: I mean, the activity, the action, the pace, from what it was in '80 till now, is not hardly even the same game.

Goizueta: I couldn't agree with you more. You've heard me say energy is No. 1. I will add two more qualities. I think integrity and intellectual courage are extremely important. That somebody who really has the intellectual courage to go on and do something. I think then you have to take the little jump in faith or the big jump in faith because, after all, you are judging somebody by...

Welch: the past...

Goizueta: So you take that little jump in faith to see how he is going to be in the future. If I were to judge by who is the fellow who does his present job the best, it's really nobody but my driver. But you know, I'm not going to put him in...

FORTUNE: What does the future hold for Coca-Cola and GE? What's on the agenda for the rest of the decade?

Goizueta: One advantage when you're No. 1 or 2 in an industry is that you can really have a hell of a lot of say in what the future's going to be like by what you do. I'm not a believer in always forecasting the future. But if you take actions that can create that future, at least shape it, then you can benefit from it. For example, time and again I have to correct folks in our company who say, "We grew our volume at 10%, and the industry grew at less than that." I say, "Well, what share of the industry do we have?" "We have 60%." I say, "Well, damn it, we are the industry. Why can't we grow faster?" It's creating what it can be, as opposed to what it is.

FORTUNE: So we can look for Coca-Cola to stay in its core business for the rest of the decade. How much will GE's business mix change?

Welch: I think, without question, that financial services, because of the opportunities available, will become an increasing mix of our business. That is absolutely going to happen. Not 70/30, but it'll be more than 30% or 33%.

Goizueta: That's interesting. I would never find excitement in the financial services. I would like to produce something that I could touch.

Welch: Our challenge in life is to take industries that may not be perceived as growth industries, pick the growth elements of those industries, and get on them. For example, plastics. We are on every PC that's being sold today, with a high-margin product. So plastics is growing. Take retail lighting. Going with the winners--having Wal-Mart, having the winners in distribution. That's the game. The point is you can take what seemingly looks like mature industries and tie your horse to winning elements.

Goizueta: I'd like to say the day that faucet in your kitchen sink is used for what God intended it to be used, then we will have a mature [soft drink] industry. But until that time arrives, there is room for growth.

Welch: The facts are, it's limitless. Our productivity is at the beginning stages. There's so much waste. There's so much more to get, it's unbelievable. And somehow or other, people think all these things are finite.

Goizueta: If you go back in history, all the changes take place when a new prince is made king. And then the king kind of works hard at keeping things the same. Now, GE and Coca-Cola--we're trying to change every day. The king of Coca-Cola and the king of GE are trying to change the thing every day because if we don't change, we're going to be left behind.

Welch: It's the biggest challenge we have. I'm always scared, okay? It's true. And [Roberto], I think you are probably. I mean, you're always scared.

Goizueta: They say, "Do you sleep well at night with all the competition?" I say, "I sleep like a baby." They say, "That's wonderful." I say, "No, no, I wake up every two hours and cry." Because it's true, you know. You have to feel that restlessness.

Copyright 1995 Time Inc. All rights reserved.