1INTRODUCTORY CASE GE’S TALENT MACHINE SUMMARY GE This case continues the story of GE’s management development process covered in the GE’s Two Decade Transformation case. It expands on the history of management development at GE, the impact of Jack Welch in developing top leaders and how the GE process led to the appointment of Jeff Immelt as Welch’s successor in 2001. The case ends with Immelt just finishing his first year as CEO and describes the challenges he is facing as he goes forward. The curious trainee will look at what has happened at GE since 2003, under Immelt’s leadership, and how he has addressed the company’s challenges. Be sure to look at the exhibits in this case; they are arguably even more important to help you understand this case than the written text itself. GE had always promoted its top leaders from within the company. The company’s commitment was to create a ―meritocracy‖ where people were promoted based on measured performance. Jeff Immelt was named CEO in 2001, at the age of 44. Immelt was a product of the GE ―talent machine‖ and as he took over his new responsibilities he wondered if he could keep GE developing executives who could continue driving the company’s superior performance. Borsch: 1. 2. Fix. Supercharging the System: Welch’s Initiatives Jack Welch became CEO in 1981. sell or close businesses that were not #1 or #2.‖ 4. median and maximum level salaries for each level. Had GE business leaders identify potential managerial talent and track all ―high potentials‖ to make sure they were exposed to a wide range of GE businesses. Overcame department managers’ tendency to keep talented managers to themselves by having the top 2% of GE’s employees (PLs 13-27) report directly to him. Collapsed the 29 positions levels (PLs) into seven broad bands. Under his leadership. Decentralized its management structure. 3. Eliminated over 100.000 jobs. 3. showing entry. GE: 1. Implemented a new round of corporate diversification. 2. Initiated a new management evaluation process. Introduced a system of objective performance evaluation tied to 28 position levels (PLs). GE to become #1 or #2 in businesses they were in. known as ―Session C‖ which resulted in career development plans and rating subordinates on a six-point scale from ―high potential‖ to ―unsatisfactory. 4. Systematizing HR Processes: Borsch and Jones Fred Borsch was CEO from 1963-1972. creating 43 strategic business units and adding another organizational layer—the sector—to put groups together based upon common characteristics.2 Building the Talent Machine: History of GE’s HR Practices Strengthening the Foundations: Cordiner’s Contributions Ralph Cordiner was president of GE from 1950-1958 and CEO from 1958-1963. Spent $40 million annually on management education. 3. Concentrated on improving performance. Highlights: 1. transferring authority down to nearly 100 department-level businesses. almost 10% of its earnings. 2. He introduced a more formal and structured approach to strategic planning. Reg Jones was CEO from 1972-1981. . 9. highly valued 70% and least effective 10%. Added a disciplined performance analysis to Session C by asking managers to rank subordinates on a ―vitality curve‖: the top 20%. The recruiting executive recommended Immelt to senior management and suggested that Jack Welch get involved to make sure Immelt didn’t take a job somewhere else. Immelt held positions as product manager. He was a 25-year old Harvard MBA who impressed the GE Harvard MBA recruiting executive so much that Immelt didn’t even need to go through the normal process of going through the corporate referral center. Insisted managers be evaluated on how they lived up to GE’s values. This course was important for Immelt’s possible selection as a company officer and provided him excellent networking opportunities with other high potential managers. Within 30 days of his hiring.3 5. HR systems were tightly integrated with other business elements to constantly look for ―high potentials‖. Invested heavily in management development. . He was one of 150 other young ―high potentials‖ being tracked for positions at the highest levels of the company. night schools and former military officers. as well as objective performance measures. The Making of a CEO: The Rise and Rise of Jeff Immelt Jeff Immelt joined GE in 1982. The Plastics Experience: Building Skills Immelt started out as a regional sales manager for GE Plastics with 15 people reporting directly to him. self-motivated candidates from Midwestern engineering programs. Stock options granted for performance. 6. 7. Over the next seven years. Immelt was part of a team presenting to Welch. Went after disciplined. 8. Reconsidered competing for management recruits from the pool of most hunted college and business school graduates. Immelt was selected to attend the Executive Development Course at Crotonville. 10. In 1987. sales manager and global marketing manager. Immelt was named head of Plastics Americas. Immelt was appointed to run GE Medical Systems. Plastics Redux: Trial by Fire After a year back at Plastics. General Motors. Immelt’s style was to engage and energize those around him. and had tried to renegotiate prices with its big customer. Prior to Immelt’s arrival. He started acquiring companies.‖ Medical Systems: Putting It All Together In 1997. The recall operation went well and Immelt was asked to run the entire marketing and product marketing operations. Immelt faced challenges when his operation missed its numbers by $30 million. Welch was not happy with Immelt but he knew that the decisions made regarding the relationship with GM would be Immelt’s and that he would not be punished for making a mistake. due to cost overruns. He knew however. reporting directly to the CEO of Appliances. Instead. Immelt got frank feedback during his Session C evaluations and was counseled that he needed to listen better.4 The Appliances Challenge: The Turnaround Test In 1989. reporting directly to the CEO of Plastics. . he was a company officer and vice president and was placed in the Appliances business to figure out what to do about over one million defective refrigerators that had been sold by GE. Over one million refrigerator compressors were replaced with new units that came from competitors. Jack Welch moved Immelt back to Plastics. investing in new technologies and restructuring global operations. Immelt emphasized growth and started to expand into other businesses and make GE Medical a more global company. In 1992. Immelt knew this was an excellent opportunity and that he would either ―sink or swim‖. Welch checked with Immelt regularly to see how Immelt was handling the situation. By this time. GE Medical had been focusing on cost-cutting. to empower his subordinates more and to channel his energy into bringing his people along with him when he wanted action. that ―you can fail‖ but ―we don’t allow you to make the same mistake twice. Immelt was moved to the Appliances service business. GM was ready to stop doing business with GE when Welch and GM’s CEO worked together to solve the problem. faced hard times and a drop in its stock price. by 2001. Review the business’s engineering pipeline. members of GE’s board would visit various GE businesses to get a direct impression of potential CEO candidates. Immelt was unanimously voted CEO designate. CEO Jeff Immelt’s first day as CEO was September 10. some senior corporate officers and about a dozen young ―hot shots‖.‖ Immelt’s five key human resource initiatives were: 1. 2001. Named a new president and CEO of . The next day was 9/11 and from then on. He called that the ―one good day‖ of his first year on the job. the organization of its engineering function and evaluate the potential of its engineering talent. Over a period of years.5 Immelt began to mentor and coach other high potential managers and as a result of his leadership and the success of his team. Jim McNerney and Bob Nardelli. Open new channels of communication between businesses and geographical areas. Jeff Immelt had become one of the front-runners to succeed Jack Welch as CEO of GE. Immelt was concerned that technologyoriented managers were under-represented in GE’s executive ranks. like Immelt. Emphasize customer relationships and marketing. the board discussed the three finalists and in November. like those of other companies. 4. Immelt’s Priority: Leveraging Human Capital for Growth Immelt was committed to GE’s continued growth and he spent an estimated 40% of his time on human resource issues. GE Medical’s sales doubled and its profit more than doubled. The Succession Process Welch’s list of CEO succession candidates included then-current business heads. Target technology skills during Session C reviews. in four years. it was widely speculated that the three top contenders were Jeff Immelt. He said. Share ideas. In October 2000. 2. Appointed Ferdinando Beccalli as the company’s first CEO of GE Europe. New Hands on the Controls: Jeff Immelt. Because of his excellent work leading GE Medical. 3. GE’s businesses. Develop GE’s globalization strategy. By 2000. Crotonville and Session C. ―Every initiative I’m thinking about gets translated immediately into recruiting. Since 40% of GE’s revenues were generated offshore. employees would be motivated and engaged. These employees had been targeted. security and sensors. longterm GE employees viewed it as part of the company’s meritocracy-based culture.6 China and began offering courses at Crotonville to Chinese management and Chinese customers. water technology and services. coaching. Times had not been good. should there be more non-Americans in executive positions? . Immelt wondered about the talent pool he would need to run these businesses. One proposal was to target MBAs with marketing management career interests. Immelt also wondered if GE was not over-reliant on its US-based recruitment programs. oil and gas technology. Identified six growth platforms—healthcare information technology. not from the top 20%. in early 2003. The Vitality Curve While the rankings-based vitality curve had been controversial to many outsiders. Immelt felt this group was the backbone of GE and were not to be considered just average. or Overhaul? In 2003. Should the system be modified to differentiate within this group? Should recognition and rewards be less sharply focused on the top 20%? Or. Immelt felt that other companies had experienced difficulty with the process because it requires feedback. but from the highly valued 70%. 5. Management and employee turnover was low but Immelt wanted to make sure that when the economy picked up. training and clear performance goals. Tune Up. Hispanic broadcasting and consumer finance. However. The Talent Machine in 2003: Service. should the entire concept of performance ranking at GE be questioned? Recruitment GE was driving toward more service-intense global businesses. Immelt noticed that BankAmerica had successfully recruited over 90 GE employees. Invest in businesses heavier in human capital than in physical capital. He wondered if it was time to adjust or overhaul GE’s talent machine. GE’s stock was down and employees were uneasy about the economic downturn. Immelt was reflecting on his first year as CEO. All the elements of the evaluation system must work together. such as India. felt that their promotion opportunities were limited and the frequency of clearly defined job promotions decreased. perceived status and level were highly valued. While it might not make much real difference between a PL15 and PL16. . especially in international locations. In more hierarchical business cultures. for many it represented an important psychological reward.7 Executive Bands One problem with the collapse of the 29 PLs into seven broad executive bands was that some employees. How do Samsung executive levels compare or contrast with GE’s executive bands? Should Samsung modify its managerial levels to suit employees’ cultural differences.8 KEY POINTS OF THIS CASE To prepare for any group discussion of this case. How are Samsung employees selected for MBA programs? How are Samsung employees selected for Regional Specialist postings? How do these kinds of assignments affect a Samsung employee’s profile? CONTENT ANALYSIS Discuss the following questions in small groups. Should Samsung companies expand their recruitment of global talent? How? 4. How does GE identify and develop its future leaders? How did this system work in Jeff Immelt’s case? 2. How generalizable are GE’s management development policies and practices? How transferable across cultures? Across industries? Across companies? . How does this compare or contrast with Samsung’s system of promoting leaders? 3. 1. 1. that is. While most companies have difficulty producing sufficient quality candidates for top management succession. How does Samsung educate and train its future leaders? 2. how has GE been able to create a surplus? What philosophy. and ―easily the world’s best machine for churning out corporate talent‖ as The Economist described it? 2. such as in India? Does Samsung do this already? RAISING BACKGROUND KNOWLEDGE Discuss the following questions with your colleagues. policies. The GE system is widely regarded as based upon meritocracy. trainees should ask themselves some of these questions: 1. What is the selection process for high potential employees? What are the criteria involved in the selection process? 3. promotion and leadership development based upon objective evaluations of merit and performance. and practices have made it a ―CEO factory‖ as Fortune called it. what do you see as the key success factors in making talent management what Immelt claims is an important source of competitive advantage for the company? . What lessons do you take from this case? Reflecting on your analysis – positive or negative – of GE’s development of its management pipeline. and the executive bands? 4. As Jeff Immelt. is it time to tune up or even overhaul GE’s management development policies and practices? Specifically.9 3. how would you deal with proposals to change the vitality curve. MBA and international recruitment. resignation. to someone else Disillusionment (noun): a freeing or a being freed from illusion or conviction. duty. right. Crusty (adj): grumpy and not easy to approach or talk to Daunting (adj): making you feel slightly frightened or worried about your ability to achieve something Delegation (noun): the act of giving a particular job.10 GLOSSARY Abandoned (verb): to leave or to stop Aggregate (verb): to combine into a single group Appetite (noun): strong desire for something Attrition (noun): a gradual. disenchantment . as through retirement. especially a financial crisis Bands (noun): a group of people who share the same interests or beliefs. etc. natural reduction in membership or personnel. or who have joined together for a special purpose Bankruptcies (noun): a situation in which a business or a person becomes bankrupt Blunt (adj): saying what you think without trying to be polite or considering other people's feelings Bracing (adj): harsh or critical Compile (verb): to collect and put together many pieces of information Consolation prize (noun): something that is arranged for or is given to a person to make them feel happier when they have failed to achieve something better. or death Axes (noun): plural form of axis Bail out (verb): to relieve or assist in an emergency situation. Go-go (adj): period of time is a time when people make a lot of money and businesses are growing Grab (verb): to take the opportunity to get.11 Elite (adj): people or organizations are considered to be the best of their kind. usually in order to use its power Headhunted (verb): to persuade someone to leave their job by offering them another job with more pay and a higher position Hoard (verb): to collect large amounts of something and keep it because you don’t want others to have it Hot shots (noun): a person of impressive skill and daring. briskly active Impending (adj): describes an event that is going to happen soon In my face (idiom): criticizing someone Indictments (noun): formal legal statement of accusing someone Keep tabs on (verb): keep a record on or watch attentively Kept an eye on (idiom): to watch someone or something. Entailed (verb): to involve something or to cause something Exemplar (noun): a typical or good example of something Frank (adj): open and honest Fraud (noun): the crime of getting money by deceiving people Give-and-take (noun): compromise or co-operate for it to be successful. especially one who is highly successful and selfassured Humming (adj): very busy. to monitor someone or something closely. use or enjoy something quickly Harnessed (verb): to control something. . one of the American stock exchanges Nickname (noun): an informal name for someone or something. not because of their money or social position Middle of the road (adj): average. an improvement Looming (verb): happening soon and causing worry Magnet (noun): a thing or person that attracts Marshal (verb): gather something together and arrange it for a particular purpose Matrix (noun): an arrangement of information in rows and columns which is used in evaluating information Meritocracy (noun): a social system or society in which people have power because of their abilities. Lauded (verb): praised and admired Leaked (verb): to allow secret information to become generally known Let the sun shine in (idiom): to make a change for the better. not to one extreme or the other NASDAQ (noun): National Association of Securities Dealers Automated Quotations. usually based on your proper name or your character On his feet (idiom): independently Out of the blue (idiom): something that happens unexpectedly Overhaul (verb): to investigate or examine thoroughly for repair or revision Peppered [with questions] (verb): has a lot of something in it Pipeline (noun): a channel of information .12 Knack (noun): a particularly clever or skilful way of doing something successfully. especially something which most people find difficult. activity or success to something Rising star (noun): someone who is starting to do very well and who people think will soon be very successful Rite of passage (noun): an event in a person's life indicative of a change in position or social status Sidestepped (verb): to go around or evade Sink-or-swim (idiom): succeed (swim) or fail (sink) completely by your own efforts Sluggish (adj): moving or operating more slowly than usual and with less energy or power .they were damaged Redux (adj): brought back (*this particular adj is placed after the word it modifies) Reliant (adj): having or showing dependence Remedying (verb): to do something to correct or improve something that is wrong Replicating (verb): to make or do something again in exactly the same way Revitalized (verb): to give new life. or place Polled (verb): to ask people for their opinion as part of a general study of what people think about a subject Portfolio (noun): a specialized collection Prodding (verb): to stimulate into action Pummeled (verb): to defeat easily or to hit someone or something repeatedly. period. used figuratively here to indicate that these GE businesses ―took a beating‖. usually in the form of lines or curves between a series of points on a map or piece of paper Poachable (adj): to steal or take someone away Political climate (noun): the prevailing attitudes of a group. energy. movement or development of something.13 Plot (verb): to make marks to show the position. honest. selected Tarnished (verb): to diminish or destroy the purity of. powerful. big. Tapped (verb): to get or make use of. To be left to his own devices (idiom): to allow to someone to do as they please Traits (noun): a particular characteristic that can produce a particular type of behavior Transparency (noun): the characteristic of being candid.14 Sought-after (adj): wanted by many people and usually of high quality or rare Sound (adj): able to be trusted Spike (noun): a sudden increase Stiff (adj): strong Stretch [goal] (noun): something that seems unattainable Talent pool (noun): a group of people within a team that can be employed to perform similar tasks. etc. Titan (noun): a person or group who is very important. strong. stain. quality or scale . especially the ability to perform well under pressure Under water (idiom): the market value of the stock is less than the discounted price offered to employees through stock options Unilaterally (adj): involving only one group or country Unprecedented (adj): very great in amount. sully Tenure (noun): the period of time during which someone holds an important job. clever. open Traumatized (adj): to shock and upset severely and for a long time Trial by fire (idiom): a test of one's abilities. 15 Up-and-coming (adj): people are likely to be successful in the future Visibility (noun): the degree to which something is seen by the public Vitality curve (noun): energy and strength Volatile (adj): changeable. mercurial. flighty .