1. What philosophy, policies, and practices have made GE a “CEO factory” as Fortune called it? General Electric (GE) has traditionally had a hands-on approach to talent management. There is a high degree of involvement of the top management in its people policies. There is a top-down approach to human resource policy. Also, GE recognized the need to be a strategy focused organization early on. The people policy of GE and its HR systems show a high degree of alignment to its strategy implementation.
The emphasis on management talent development by four successive CEOs has lead to GE having the most sophisticated of HR processes. Though the operational details of the visions of each of its CEOs since Edison have differed, their philosophies have always concurred on the cornerstones of a good HR strategy, namely an emphasis on nurturing talent, a good performance monitoring and evaluation system and commensurate performance oriented rewards and returns schemes.
The philosophy of GE was also to look beyond traditional operational measures for performance measurement to more strategic ones. GE’s policies and processes are uniquely suited to make it a CEO factory. GE has been very successful in achieving a high level of correlation or fit between HR and overall strategy of the firm in two key areas as illustrated in Table 1.
Table 1: GE's HR System – Internal and External Alignment Fit Components/Objectives Internal fit – aligning HR components HR planning, recruiting and selection, training and development, performance management and appraisal, compensation and benefits, work organization, communication systems, HR performance measurement External fit – aligning HR system with Strategic objectives, HR deliverables, Culture, Structure GE has within its HR processes, managed to link HR deliverables to elements influencing human performance namely, employee skills, motivation and strategic focus.
Table 2 connects the initiatives taken over the years by successive GE leaders to these key drivers of strategic human performance. GE always promoted its top leaders from its own ranks. executive development practices were rooted in the cultural values put in place by Charles Coffin, the CEO who succeeded Edison in 1892.
a thorough decentralization of the responsibility and authority for making business decisions first corporate university, known within the company as Crotonville In 1956, GE spent $40 million annually to support management education, almost 10% of its $424 million pre-tax earnings strong commitment to upgrade GE’s on-the-job management development processes. A new corporate system, known as Session C, was designed to support an ongoing dialog about managers’ career interests and development needs.
Individual Career Forecast, rating each subordinate on a six-point scale from “high potential” to “unsatisfactory. ” They also prepared an Organization and Staffing Plan, identifying three replacements for his or her own position and for each subordinate. plans for promoting “high-potential” employees, remedying “unsatisfactory” ratings papercamp. com/print/…/10993 1/4 3/25/2011 Ge Making Of Ceo To fuel this growth, Borsch needed to overcome department managers’ natural tendency to hoard talent.
To help him manage GE’s executives as a corporate resource, he created a corporate Executive Manpower Staff (EMS) reporting directly to himself as CEO. In contrast to the existing human relations staff working on plant level industrial relations issues, EMS focused only on jobs classified as PLs 13 to 27, a group representing the top 2% of GE’s 300,000 worldwide employees. Believing that decades of diversification and delegation had fragmented businesses and led to a preoccupation with operational efficiency, Jones introduced a more formal and structured approach to strategic planning.
Finding it increasingly difficult to monitor and evaluate the plans, budgets, and requests of 43 SBUs, in 1976 Jones added another organization layer—the sector—to aggregate business groups with common characteristics. Participation in a Crotonville course changed from being a seniority-driven rite of passage (and sometimes a consolation prize for a missed promotion) to a sought-after reward and signal of future potential. Welch also saw Crotonville as a vital resource for driving cultural change through GE—“a common coffee pot,” he called it.
create a process capable of replicating throughout the company this kind of open dialog where managers could discuss what was wrong at GE and how to fix it. The result was the “Work Out” initiative, and over the next six years, in groups of 50 to 100, over 200,000 company employees met for two or three days to discuss how their particular area of work could be made more effective, then challenged their boss to make the changes. monitor evolving cultural values and employee attitudes in the company’s worldwide operations GE’s overall attractiveness as an employer to personal job satisfaction and career opportunities.
Breakdowns by business and region allowed him to identify potential trouble spots, and year-on-year comparisons helped him plot progress. GE began to reconsider the allocation of recruiting resources. A portfolio of leadership programs provided attractive entry points, great initial development, opportunities, and an internal marketplace for exposing entering talent to multiple businesses new cultural changes became embedded, Welch insisted that managers be evaluated not only on their performance against objectives, but also on how they lived up to GE’s values.
To support a focus on people development, Welch believed his business managers needed strong HR professionals on their management teams. He moved most of the EMS consultants from headquarters out into the field, to help business leaders develop their talent. He encouraged managers to focus rewards and development efforts on top performers, and urged them to counsel those who remained in the bottom 10% to improve or move out of the organization. The annual calendar of reviews also provided many opportunities to evaluate the performance and potential of young managers in these highvisibility forums.
papercamp. com/print/…/10993 2/4 3/25/2011 Ge Making Of Ceo General Electric (GE) has traditionally had a hands-on approach to talent management. There is a high degree of involvement of the top management in its people policies. There is a top-down approach to human resource policy. Also, GE recognized the need to be a strategy focused organization early on. The people policy of GE and its HR systems show a high degree of alignment to its strategy implementation. The emphasis on management talent development by four successive CEOs lead to GE having the most sophisticated of HR processes.
During the leadership of Ralph Cordiner, GE saw itself grow to a $4bn company with immense diversification. This lead Cordiner to embark on a decentralization strategy. To face up to the huge management development task that faced GE after such decentralization, Cordiner launched GE’s corporate university, called Crotonville. The Session C system was launched to address managers’ career interests and development needs. These and succession plans for every top executive were rigorously reviewed to keep the strategy implementation process under control.
Also, the belief in the measurement of performance, enforcement of standards and rewards correlated to performance lead to alignment of individual employee and organizational goals. GE, with its phenomenal growth had become highly decentralized and there was an overt focus on operational efficiency. This lead to a systematic approach to HR process set-ups. He viewed executives as a corporate resource with the creation of Executive Manpower Staff (EMS). The inventory of corporate talent that was identified as ‘high potentials’ was then identified to be exposed to a wide range of GE businesses to mould them for top management.
Reg Jones, on taking over as CEO in 1972, sought to address this situation with a more formal and structured approach to strategic planning. Jones added a sector level which made review processes more manageable and created positions to evaluate CEO succession. Jack Welch brought in a balance between operational controls and strategy implementation. He drove businesses to be #1 or #2 in their industries. Welch also placed particular emphasis on the rewards and compensation practices, rewarding people based on a vitality chain. He leveraged rewards by giving them only to top performers.
The Work Out initiative was a mechanism by which those on the front line were given a voice. He also introduced a commitment towards boundaryless behaviour. There were also employee surveys conducted to monitor evolving cultural values. Performances were evaluated based on both performance objectives and GE values. Welch believed that to support a focus on people development, business managers needed strong HR professionals in their management teams. By the end of Welch’s tenure, formal HR systems were tightly integrated into other elements of what he ‘s operating system.
called GE# How generalizable are GE’s management development policies and practices? How transferable across cultures, across industries, and across companies? 3. GE’s management development policies have been carefully honed over many years. Thus any sweeping changes to these established procedures for management development at GE would be counter-productive. However, GE must change its systems incrementally to align its HR processes with the demands of a new order following its rapid international expansion.
With an ever-increasing international presence, GE should review its MBA recruitment processes and accommodate more international recruits. This would allow them to leverage local knowledge and would tie in very well with GE’s business model which is based on global integration. The diffusion of local talent would allow it to respond to the unique challenges of each geography better. The executive bands too can be tailored to be specific to the region in which a particular division of GE is operating.
One particular problem is as mentioned in the case, the psychological reward factor in hierarchical societies. GE can slightly modify its PLs for these countries so as to keep its workforce motivated. The vitality curve has been the heart and soul of GE’s performance management system. This is non-negotiable in terms of a complete overhaul. But, it does have the problem of a huge number of people in the ‘highly valued’ papercamp. com/print/…/10993 3/4 3/25/2011 Ge Making Of Ceo category where motivation can be sapped especially for those on the higher reaches of the band.
Conversely, those at the middle of this may not see themselves differentiated from those at the bottom. So, GE can consider splitting this band into three providing a further benchmark for employees for self-assessment of contribution to the firm. As Immelt, is it time to tune up or even overhaul GE’s management development policies and practices? Specifically, how would you deal with proposals to change: MBA and international recruitment? The executive bands? The vitality curve? GE papercamp. com/print/…/10993 4/4