Why should we learn from GE or Welch?
General Electric is one of the largest most respected corporations in the world. Jack Welch, the CEO of GE from 1981 till recently, is widely regarded as America’s most respected manager. He steered GE with great success, as we shall see, through turbulent times.
Jack Welch attached great importance to HR issues. “I have never heard of a chief executive who devotes as much time to people issues as Welch does,” write Tichy Sherman. So it may be worth reviewing he has done in HR.
What are the key HR initiatives practices that Jack Welch followed in GE?
Down - Sizing
To an HR professional, the most striking is down-sizing of General Electric. Manpower reduced from 420,000 to 230,000 in 12 years between 1981 1993. The painful part of the reduction was that 170,000 people who lost their jobs through layoffs attrition. Newsweek named Jack Welch as “Neutron Jack” for his willingness to vaporizing people.
Downsizing was part of larger changes which Jack Welch brought in General Electric. At end of the changes, GE was healthier - value of company’s stock increased by 7 times as against 2 times for S&P 500 over the period. Overall, Forbes rated GE as the world’s most powerful corporation. By contrast, several other Fortune 500 companies had started wilting. For example, IBM, famous for its no-layoffs policy, had shed 100,000 jobs till 1993 planned to shed another 100,000.
The reason (=blame) for down-sizing should be put on changed economics realities. “Companies can’t promise lifetime employment, but by constant training and education we may be able to guarantee lifetime employability,” Welch said.
Shared Values:
This is a unique concept that Jack Welch has implemented in General Electric. He believes that to lead people in today’s environment, all GE managers must hold the “Shared Values.” The person who does NOT hold these “shared values” typically forces performance out of people rather than inspire it: the autocrat, the big shot, the tyrant. Too often all of us have looked the other way tolerated such managers because they always deliver - at least in the short term.
His reason for rejecting such managers runs like this: “And perhaps this type was more acceptable in easier times, but in an environment where we must have very good idea from every man and woman in the organization, we cannot afford management styles that suppress and intimidate…”
Jack Welch has used every available tool to implement Shared Values- pre-placement talks, , training programs, including in appraisals forms, rewards by way of higher compensation promotions, and dismissals in extreme cases.
Recruitment:
GE has been accustomed to produce more talented managers than it needs, so the company almost never recruited outsiders for senior positions. After Welch’s becoming CEO, a couple of consultants were inducted in think tank of GE. GE develops enough leaders from within and has some to spare for other companies.
The core of recruitment is from campuses and here Jack Welch urges business leaders to personally go to campuses. They explain GE culture and hire people who would fit in the GE culture.
Training:
Company invest heavily in training. It has some of the best training facilities in the world. This reflects Welch’ philosophy that GE can ensure employability by providing training (but not continuous employment).
The center for development of GE leaders is at Crotonville. It trains about 10,000 top managers annually. The CEO himself spends at least half-a-day every month talking to participants at the facility.
Appraisals:
GE employees rate themselves on several criteria. They are rated by their peers, subordinates bosses in 360 Degree appraisals. The person being rated always sees the data and discusses it with a capable person. Senior managers are rated on holding Shared Values also.
Session-C:
Session-C is the pinnacle of a painstaking system for appraising executives and helping them improve their skills and plan their careers. It covers GE’s 3500 most senior managers.
Jack Welch spends a full month every year on this rigorous management appraisal succession planning review. He visits each of the 13 business leaders their staff, and discusses qualifications, achievements, development needs of every single member of top management. These discussions are based on hard facts.
GE’s elite Executive Management Staff amasses data to bolster these judgments. The data includes:
Compensation:
Greater flexibility is the aim of compensation policy. For this the number of pay levels has been reduced from 29 in 1981 to a few broad bands.
Incentive pay constitutes about 25% of the total pay for top 3500 managers, and 35-40% of pay for the top most 450. Every year the CEO personally devotes several days to reviewing adjusting the incentive compensation for each of the top 450 managers. Here also managers holding Shared Values get better rewards.
In addition to incentive pay, about top managers get stock options.
Employee Communication / Management of Change:
The massive change that GE has undergone to re-invent itself, could not have been possible without getting support of many internal employees. This necessitated a massive communication effort.
Phase-I: In 1988, the now famous “ Work Outs” were introduced for this purpose. Rank-and-file employees participated in these. Workouts involved communicating corporate philosophy behind the massive changes to employees and to get the employees to speak out share their ideas. Work-Outs could cover about 200,000 employees till 1993 whereas training programs could reach only 10,000 each year.
In Phase-2, Work-Outs implemented the “Best Practices” Program, a thing which now has become very popular. In Phase-3, Work-Outs implemented a Change Acceleration Program (CAP).
Jack Welch himself spends at least half-a-day every month speaking to rank and file employees in these Work-Outs Programs.
Can We Adopt GE practices?
Each one of them may not work for you as it did for GE. They require commitment of top management to breathe life into them. And some of them may not be accepted in all organizational cultures. The lesson is that revolutionary change will be necessary for most organizations. We must act proactively. What exactly to do how should be discussed and decided within your organization.
References:
Factual data is taken from Control Your Destiny or Someone Else Will, by Noel M. Tichy Stratford Sherman, Harper Collins Publishers, Inc., 1994.
(Contributed by Rajeev B Bhatnagar, DGM-Personnel, Larsen & Toubro Limited, Chennai)
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