General Electric (GE) is a true global company with presence in more than 100 countries. Clearly, with a workforce of more than 320’000 employees, GE also has to have proper human resources processes established. Its dynamic Business Operation Model and sophisticated and evolved human resources strategy are results of the steady growth over more than 130 years of corporate history. Since its incorporation in 1878, many CEOs have shaped the company’s products, people and processes – few very intensive and a bit less. GE’s Human Resources Strategy and Talent Machine:
The word GE evokes the thoughts of People Focus, Performance Oriented growth. Leadership and Talent development, Retention and Maximum Talent utilisation. GE’s HR strategy is completely aligned with the Business goals of the organization. This strategic framework of double sided benefit (Employee and Employer) based on the talent or growth Potential can be called as a Talent Machine. Given by the fact that the CEO and senior leaders spends valuable time helping devise the HR strategic goals division by division at the beginning of every year. They dont‘ work in Silos. Visions are communicated and shared throughout the business process.
GE spends a huge sum of around 1 Billion Dollars every year for the employee development. The growth potential of the employees especially the leadership potential is tracked closely and are rewarded appropriately. The performance review at GE is highly effective and evolved. It has a long-term orientation and constructive criticism and an in built succession planning. The most important HR strategic policy is that more than 90% of the leadership positions are filled from within the organization. Therefore, Success in GE needs not just performance, but also a true display of GE Culture and values.
On the whole, GE’s maturity in the area of HR is clear when one looks into the sophisticated performance management process and tools and how the organization benefits itself and at the same time promises a good return to the employee. The pros and cons of GE talent machine: Over decades, GE has been setting benchmark and new models in all business aspects, including their people management. Their employment policy has been reformed to cope with the overall strategy planning. As a well diversified multi-division organization, GE has developed a highly systematic personnel management mechanism.
They set up a corporate system which contains individual evaluation (Session C), performance reviewing (EMS), training centre and programs (Crotonville’s school, MDC, BMC, EDC courses) to train the “high potentials”- High performers with huge growth potential. This system is tailored so that each employee’s performance can be measured using fair criteria. The internal Executive Development Courses provides extensive professional network for the attendants, as well as a forum to exchange experiences, consequently grows a GE society.
Also, its large business scale provide each individual plenty opportunity to find his/her niche, someone may fail on one job, but he can be strategically reallocated to where his talent will be more efficiently utilized (for instance, Dow Wilson). For those hardworking, self-motivated and employees, GE is their career oasis where their competencies and talent will be challenged, then rewarded financially and psychologically. Over the year, GE has established corporate culture to allow “second voice”, ”boundary expansion” and provide mentor so that all individual get the opportunity to shine.
In turn, company will receive instant positive outturn. Even though most of their personnel management have contributed greatly to their business success, it’s still not possible to create a flawless system especially when the economic environment changes so fast. This implies a possibility of conflicts or attack in terms of competition. First, anyone who runs such a gigantic power machine with decentralized infrastructure should expect high cost. That’s why at certain point, GE has always been having a high percentage of HR expenses over their total revenue.
Another undeniable disadvantage of talent machine is the highly selective mechanism. To become the top 10% amount 300,000 talented candidates is undoubtedly stressful. For those who cannot make to the top of pyramid, their career seems to run into a dead-end. Under most circumstances, they would choose to move on and find better opportunity somewhere else. Even for those who is promoted, the performance evaluation constantly will load great pressure on them. For instance, even the genius CEO Jeff Immelt had his lows.
Throughout one’s GE career, he/she may have wide exposure to various business sectors, but the trade off is, it takes long time to learn all aspects on one level before moving onto the next one. In another word, personal development can be potential lengthy. Finally, internal promotion limits possibility of finding the “perfect match” from other sources. Managers who are on the upward side of their career path will find a hard time to crack the door of GE. Talent Machine –Business model alignment in Case 1: The talent machine has evolved through the years, as GE’s business model has evolved.
However, there have been some “core values” that have continued to live throughout, even as the business model, the management, and the employees changed within the GE. These “core values” are the concept of meritocracy (performance/results-oriented evaluations) and the continued focus on management development (CEO Factory). These core business values were instilled into the HR talent machine in the 1890s by then CEO, Charles Coffin. The business model of GE eventually went through a period of decentralization in 1950s, where the transfer of power went to over one hundred different departments.
As a result, there were massive management tasks (such as budgeting, forecasting) that GE managers were responsible for. As a result of this need for greater management focus, HR developed better internal management development programs, such as Session C, which focused on identifying management interests and career development for existing managers. In the 1960s, GE grew its business across a variety of industries, such as nuclear power, computers, and plastics. As a result of their increased breadth, GE decided to change its business model to incorporate better strategic planning.
Notably, the company added an additional layer of organization called “the sector,” which made it easier for managers to track employees, as well as prepare for CEO succession plans. This was also the time period during which the Executive Management Services HR team was established, to keep an eye on the top 2% of employees of GE. As we move to the 1980s, GE was led by the ‘legendary’ Jack Welsh, who made it clear that he wanted every one of GE’s business to become in the top 1 or 2 ranking of their respective industries or close the business.
Even though he focused on cutting costs, he still made it a top priority to continue to develop managers within the firm. He implemented various HR policies during this time to complement his business model. For example, he established the “Work Out” initiative, which encouraged bottom-up participation and gave all employees a say in how to fix GE’s business process. This program gave top management a sense of how values evolved within the company. The Session C was “improved” by establishing the “vitality curve,” a system used to frankly rank employees by percentages.
Jack also encouraged the specialized EMS staff to take on a more hands-on approach in order to closely monitor employees placed in the SEB program, an elite program of employees being tracked to become high-level executives. Jeffrey Immelt was identified as a “young hot-shot” in one of these programs, and eventually rose up the ranks to become the present Chief Executive Officer. Under Mr. Immelt (beginning in 2001), GE shifted its business model to a more technological focus, identifying certain growth sectors such as health care IT, water technology (among others) for managers to focus on generating revenues.
In addition, they emphasized greater “customer focus” in their businesses and looked towards growing internationally as well. In this stage, HR decided to include more engineers in the SEB program, and encouraged more transfer of talent into sales/marketing positions in order to emphasize their desire to establish long-term customer relations. The talent machine had to change to be in line with the changing business environment. Talent Machine – Need for a Change: Over time GE has realized that its Talent machine needs a change to fit the current business environment.
For example: It has been recruiting the MBAs energetically in the recent past after identifying the value addition in doing so. Diversity of the workforce has also been increasingly stressed, thereby adding a new dimension to the work area. In the old Talent machine only the top most 20% were rewarded and hence, the capable people below that preceived a glass ceiling effect that prevented them from getting benefits or moving up i. e felt less valued. This policy has been changed from 20% to 25 % to 30% to be more inclusive.
More stability has been brought in the work place by offering Pillar jobs, which offer fewer job rotations and increased accountability, unlike the past where people used to move to various sectors and divisions very rapidly. There is also a strategice consolidation of business segments thereby condensing the reporting hierarchy. From the bird’s view point, we can clearly identify the maturity and the sophistication of GE’s HR framework . They are the best example to see how the Business equation is consciously pushed towards profits by aligning the HR framework including the talent management towards the Business Goals.