Founded in 1878 by Thomas Edison, General Electric is nowadays a leading business in electrical generation, distribution and use in America and in the world. The company has been experimenting successful business models since its creation, and its human resources policy has been considered for a century one of the most sophisticated. It consists in a strong focus on human potential through executive development to the top ranks of the firm: this performance based meritocracy has made GE a “CEO factory” for the company and for all corporate America. In 2001, Jeff Immelt, the company’s new leader was faced with the problem of how to keep this talent machine humming.
In the last half of the 20th century, four CEOS made GE’s HR management one of the most successful in the world. Confronted to a strong diversification (due to World War II), Ralph J. Cordiner (1950-1963) implemented a thorough decentralization of the business decisions, created the first corporate management university and heightened GE’s dialogue with its executives (self-evaluation, performance evaluation, career forecasts, succession plans…). His successor, Fred J. Borch (1963-1972) intensively diversified GE and accompanied the operation with the creation of the Executive Manpower Staff to centralize the high potentials of the company.
Reginald H. Jones (1972-1981) first reduced the role of HR in strategic planning but ended up aggregating business groups according to the sector, thus facilitating again the succession plans. John F. Welch, Jr. (1981-2001) restructured GE and based the HR policy on the company’s performance through executive rankings and stock options. He heavily promoted the participation in corporate courses and later extended the company evaluation system to all employees (polls, open dialog…).
The “CEO factory” thus became effective when GE no longer felt the need to compete for business graduates because the company had become attractive and offered its particular kind of bottom-up, company oriented, meritocracy based career. These cultural changes were accompanied by a shift of performance evaluation towards company’s objectives and values, with a strong intervention of HR experts and a daily performance management (“in GE, it’s not just a focus on people; it’s an obsession”).
Jeffrey R. Immelt is a pure product of this system: he underwent harsh evaluation, corporate courses, career planning and was confronted to economic challenges (in the Appliances, Plastics and Medical Systems businesses). He successfully passed every step of the performance evaluation and was finally picked as the new CEO in 2001, based on his adaptation skills and his attachment to the company’s performance and values. The day after his nomination was the 9/11, but Immelt’s commitment to growth remained intact.
HR were a key factor in his strategy of strengthening the assets of GE,: Immelt aimed at aggregating the engineering talents of GE (to keep a technological leadership), at facilitating the communication (to accelerate the services), at promoting a “passion for the customer” (to ensure enduring customer relationships), at focusing on human capital (as a resource reallocation) and at developing a global strategy (to capitalize on globalization).
In 2003, it appeared the talent machine, despite its success at producing top-notch engineers, also caused a visible destruction of human capital. The performance ranking system and the bottom-up logic seemed to have worn out as a magnet for high potential employees, mostly because the promotion opportunities looked limited in a globalised, high demanding and little value added company.
Jeff Immelt himself acknowledges the need of diversity, understanding and, at some point, tolerance in the HR policy as the company is faced to an ineffective internal competition. Each employee is different from the other and does not intend to be put at the same level as his fellow worker in a race for promotion (this disparity between the apparent fairness of performance evaluation and the way it is perceived by the employees is proven by the flawed vitality curve system).
GE’s values (unyielding integrity, commitment to performance and thirst for change) appear to be imposed by upper executives and do not take into account what it is to be a young or middle-aged executive at GE. In a global context, where the workers want to be seen as individuals with a freedom of choice, the fair cruelty of GE’s HR policy is out-of-date.
The Human Relations movement (circa 1929-1951) proved the importance of job-oriented interpersonal skills for compatible relationships between the employees, those in management positions and the customer, and applying mechanical evaluation systems to a global human network may be, in a way, fair (because it fills the gaps between divisions with different working methods), but it is not attractive anymore.
GE would be able to become one of the best working places in the world again if it displayed some incentives to creativity and personal development (outside of the company). It is not rewarding anymore for a high potential executive to work at GE, an ageing, highly polluting firm which focuses solely on performance: it is the company itself that has to rethink its image and its commitment to the happiness of its workers.