GE's Talent Machine: The Making of a CEO | Analysis

This assignment will critically evaluate BARLETT and MCLEAN GEs Talent Machine: The making of a CEO and Prokeschs How GE Teaches Teams to Lead. It will the lessons that can be learnt from General Electric (GE) and apply them to my organisation. GE is currently listed the 3rd largest business in the world (Adams, 2012), it is also ranked in the top 20 for other awards such as ‘best company for leaders’ (Fig 1). GE operates globally in four areas: Technology Infrastructure, Energy, Capital Finance and Consumer & Industrials. To understand GE a S.W.O.T analysis was undertaken (Fig 2),

Stewart, Fletcher & Barrett (SFB) is a small Nuneaton based business. Originally a firm of accountants, they now provide business services in Wealth Management, Human Resources and Marketing. With recent growth they now are opening a third office in Coventry.

GE’s Talent Machine: The making of a CEO”

Literature Review

GE has always excelled over its competition, one is their ability to develop and uphold quality managers. Forbes showed that GE is the world’s best companies for leaders beating the likes of IBM and Microsoft. (Anonymous, 2012 ).

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What led GE to produce talented leaders was the emphasis they forced into developing quality leaders. GE has appointed twelve CEOs since Edison and many of them have contributed to management development which has helped GE to successfully maintain its growth in revenue and profit.

Coffin, who succeeded Edison, devoted 20 years to creating a meritocracy within the organisation to reward employees promotions based on performance. In 2003, Coffin was named “The Greatest CEO of all time” by Fortune magazine (Collins, 2003). This went onto become the foundation of GE which went on to make GE “a CEO factory”. When Cordiner came into power, he thought it was best to decentralise GE, this increased the company management efficiency.

Reg Jones increased the development of managers by strategic planning to a more formal structured approach, this served as an upgrade to Session C and the EMS reviews. When Welch took charge introduced the “Work Out” initiative which saw employees (over 200,000) meet for three days to discuss how their individual area of work could be made more efficient.

Analysis

The main reason for GE’s constant business success is they use human capital as a competitive advantage, this combined with continues improvements in the training and development of staff created a culture for success. GE maintain being a revolutionary organisation; by hiring from within GE and always looking out for new management talent. The following points were analysed:

Human Resource Management for Growth

GE had devoted to a HRM Strategy by implementing new procedures and policies. This enabled them to uphold a healthy and vital pool of new managers. Butler (1988/89) identified this as a HR-driven model (Fig 4) which identifies HR as being the driving force to achieve business targets. Coffin who created a meritocracy-based culture used a well defined succession management process which became part of the GE culture. This process put performing employees in lower management positions, in a variety of industries. This was seen as a more Holistic model (Fig 4), which Torrington, D et al (2008) described this being “where people of the organisation are recognised people as the key to competitive advantage rather than just the way of implementing organisational strategy.”

This process gave individual a defined career path, and clear goals, which in turn intrinsically motivated them as they could see their progression within the company.

This particular performance oriented culture was extremely tough to uphold and apply in each business; however it shows the commitment GE has towards their human capital. Immelt concurred this by saying “Unless you are really dedicated to a whole system, it doesn’t work.” (Barlett, C and McLean, N, 2006).

Communication

Even due to GE’s size it could maintain uninterrupted communication with managers; this was helped by their clear structure that Cordiner had implemented. Immelt added additional channels of communication, such as conference calls and forums. This allowed employees from different industries around the world connect with ease.

Recommendations

The Vitality Curve

The vitality curve is a rankings-based system and is now considered by GE employees to be apart of the company’s meritocracy based culture. This is controversial to outsiders and complicated, relying on faultless incorporation of employee feedback, training and coaching. GE lost employees from the 70% range (Fig 3) to other companies such as the BankAmerica who had successfully recruited over 90 GE employees.

Making the rankings more flexible would allow ‘B’ Players to feel valued thus reducing de-motivation and increasing output. Immelt should consider expanding the top level or introducing an additional band of classification so that ‘A’ Players are differentiated from ‘B’ Players. GE should also consider a system of reward to all individuals’ achievement of the business; this will make majority of employees feel more rewarded for their efforts and also increase retention.

Recruitment

Immelt should focus on more international recruitment targeting the likes of Europe and Asia. Since 40% of GE’s revenues are generated offshore this would also reduce the company’s dependence in American for talent. GE can attract candidates by offering graduate programmes. GE previously had problems with MBA turnover in previous years, and similar issues offshore can be avoided if GE emphasising on its reputation as develop management talent. This would bring positive diversity to the business. Cameron K, 2011, states there are three types of positive outcomes; intergroup equality, positive intergroup relations and positive group outcomes.

Executive Brands

Having seven executive bands causes employees, particularly in international locations, to believe that promotional opportunities were limited. In business cultures such as India, status is highly valued. To them this would be a psychological reward, this is a process that reinforces behaviour something that, when offered, causes a behaviour to increase in intensity (Wilson, T. 2003). GE’s should think consider adapting to provide employees with psychological reward and also acknowledgment in these areas of cultural variation.

What has been learnt?

GE has pioneered the business world and human resource methods. For GE to survive it must uphold its flexibility. GE recruiting and human resource approach needs updating as it has been the same for many years and hasn’t evolved with the times. The change GE has gone through has been successful and unsuccessful in the following ways:

Meritocracy

GE staffs are still motivated intrinsically by results, goal setting and promotions, due to employees having common goals it caused a team working environment. Tuckman describes this stage as the performance stage, this is described as when the team share pride in what they are doing, they focus on the objectives and enormous energy occurs in completing the task. (Clayton, M, 2009)

‘The vitality curve’

This is apart of the GE culture and Welch decided the best way to retain the staff that were leaving GE (the 70%) was to support people to strive to be in the top 20%; he did this by adding motivating factors which include aspects of the working environment such as rewards, training and also praise, supervisory practices. (Herzberg F, Mausner. B, 1993)

Recruiting

GE has always relied on internal talent to fill positions. Immelt recently hired externally when an internal candidate could not be found, hopefully this shift will open up GE to a much wider variety of talent which can have a positive effect on GE. Research by O’Reilly, Chatman & Caldwell (1991) shows that new hires whose values fit well with the values of the organization and culture tend to adjust more quickly, feel more satisfied, and remain with the organization longer, this causes satisfaction increases, turnover is reduced and people are more productive.

Communication

Without effective communication on all levels GE would not be able to implement the changes it has go through such as reducing to seven executive bands and also implementing new business strategies. Immelt understood how vital effective communication was to the growth of the company in a global marketplace, and how it kept employees connected without geographic boundaries; this gave employees high levels of involvement with their jobs, made them more accessible and also made communication more effective.

Executive Bands

GE was going through a lean journey this is described as maximizing customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources (Beker, I. 2011). Reducing the 29 PL’s was vital in saving money the cost saving opportunity was somewhere between $7 billion and $10 billion (www.pqa.net). The impact it had on the hierarchy resulted in their being less promotional opportunities which then effected the India as they were accustomed to promotions and the emphasis on job titles. This lean journey caused a lot of change which can distress employees; However Welch backed the Six Sigma program up with a strong rewards system to show his commitment to it which attracted GE employee’s attention.

Conclusion

For over a decade GE has led the industry, not only as a successful profitable organisation but also as an innovator. In this time, GE has shown it’s self to be flexible in identifying business opportunities (such as acquisitions) but also with a strong human resource dedication. By being the leader in innovation, GE isn’t able to look at its competitors for guidance they must solve potential issues head on and alone. As the market is an ever changing environment they must continue to develop their staff and improve from within looking at gaps and development in its Human capital.

“How GE teaches teams to lead”

Literature Review

In September 2006 GE launched Leadership, Innovation and Growth (LIG) program which ran for the next two years, the purpose of LIG was to make innovation and growth apart of GE’s culture as Six Sigma had been under Jack Welch. Prokesch underpinned five principles that made the LIG at GE successful. (Fig 5)

The following shows what the management team at GE Power went through at LIG training. Before attending the LIG, they were asked to assess three areas, they would updated their 3 year strategy, it would conduct a 360 review on its growth values and finally it they assessed creating innovative There scores were collated and given back to the managers at the intervals.

The first step in training was to identify barriers, these included things such as identifying the levels of risk taking, idea support, involvement, conflict and debate. These barriers were discussed during intervals throughout the 4 days.

In the first interval the team learnt their actual team scores for the 360 degree review of their growth values. This automatically made them reassess almost every part of their business. This also triggered the team to ask questions such as “We’re not as good at anticipating major trends as we ought to be” and “Is solar a good place to be?” This time to reflect then generated insights in to their business “Does GE not understand Government Policies”

This constant evaluation became an ongoing occurrence after each internal with the mangers constantly adapting and evolving their thought process.

Analysis

Transformational leadership is, according to Northouse, “a process that changes and transforms people. It is concerned with emotions, values, ethics, standards, and long-term goals and includes assessing followers’ motives, satisfying their needs, and treating them as full human beings”.

A transformational leader stimulates the followers by setting challenging goals and offering them support and motivates them to share the same vision and goals as the company (Bass and Riggio, 2006,). This was shown when the mangers were shown their scores and they had to reassess this motivated them as they asked themselves questions such as “We’re not as good at anticipating major trends as we ought to be”.

Northouse, 2007 suggests The Transformational Leadership Model only exists when these 4 factors are present:

Factor 1: Idealised influence.

This reveals the importance for high standards of morality and strong ethical conduct among leaders (Northouse, 2007). This concept is about leading by example. LIG did not present concepts related this, Instead, leaders and their departments were heavily monitored for demonstrating these behaviours prior to attending the training (Prokesch, 2009). The screening included variables that measured the leader’s skill to grasp conflict, empower group members to try new approaches with their work, encouraging open communication and trust, and challenging group members in their work.

Factor 2: Inspirational Motivation

Here leaders inspire and motivating individuals through words and actions of encouragement (Northouse, 2007). The leaders learned the value for creating excitement and building loyalty and commitment among group members through individual attention. The training specifically included consideration for empowering and encouraging employees to experiment and develop new skills.

Factor 3: Intellectual Stimulation

Here leader’s ability to motivate followers and the leader to challenge their values. LIG encouraged leaders to develop relationships and encourage honest conversations (Prokesch,2009). Trust and openness were valued traits presented to leaders in the training which were consistently measured over time.

Factor 4: Individualized Consideration

The LIG course encouraged leaders in specific departments to consider relationships among its followers; it also looked how leadership is provided to followers across a period of change. Fundamentally, transformational leadership focuses on the ever-changing relationships between leaders and followers (Northouse, 2007). The training also encouraged leaders to assist followers to become leaders in their own respective industry.

Conclusion

GE’s alignment with the factors in the model suggested that many effective features existed in the LIG leadership-training course. The Transformational Leadership Model used in this study suggested that the combination of the four factors resulted in performance beyond expectations. The findings determine that the organization encouraged and trained leaders to demonstrate and use behaviours, tools, and techniques proven to be effective in leadership.

Northouse (2007) presented substantial evidence in transformational leadership that had found the transformational leadership factors to be effective elements in leadership. This also meant that performance was seen by way of satisfaction and motivation among subordinates. The findings suggest that the LIG training course offered to leaders at GE effectively trains leaders I encouraging performance among group members.