DESCRIPTION GE believes its ability to develop management talent is a core competency that represents a source of sustainable competitive advantage. This case traces the development of GE's rich system of human resource policies and practices under five CEOs in the post-war era, showing how the development of talent is embedded into the company's ongoing management responsibilities. It describes the development of a 25-year-old MBA named Jeff Immelt, who 18 years later is named as CEO of GE, arguably the biggest and most complex corporate leadership job in the world and how he frames his priorities for GE and implements them, pulling hard on the sophisticated human resource levers his predecessors left him. Immelt questions whether he should adjust or even overhaul three elements of GE's finely tuned talent machine.
LEARNING OBJECTIVE To examine the importance of managing human capital as carefully as financial capital as a scarce strategic resource.
SUBJECTS COVERED Business policy; Competitive advantage; Core competencies; Corporate strategy; Diversified companies; Human resource management; Implementing strategy; Leadership; Management development; Organizational behavior
SETTING Company Employee Count: 300,000 Company Revenue: $132 billion revenues Event Year Begin: 1960 Event Year End: 2003
1|GE’s Talent Machine
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. Under his leadership, the following initiatives were implemented: 1. Decentralized GE’s management structure, transferring authority down to nearly 100 department-level businesses. 2. Spent $40 million annually on management education, almost 10% of its earnings. 3. Initiated a new management evaluation process known as “Session C,” which resulted in career development plans and the rating of subordinates on a six-point scale from “high potential” to “unsatisfactory.” 4. Introduced a system of objective performance evaluation tied to 28 position levels (PLs) that showed entry, median and maximum level salaries for each level. Systematizing HR Processes: Borsch and Jones Fred Borsch was CEO from 1963-1972. During his tenure he: 1. Implemented a new round of corporate diversification. 2. Overcame department managers’ tendency to keep talented managers to themselves, which was accomplished by having the top 2% of GE’s employees (PLs 13-27) report directly to him. 3. 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. Reg Jones was CEO from 1972-1981. He introduced a more formal and structured approach to strategic planning, creating 43 strategic business units and adding another organizational layer—the sector—to put groups together based upon common characteristics. Supercharging the System: Welch’s Initiatives Jack Welch became CEO in 1981. During his time as CEO, he: 1. Concentrated on improving performance in order for GE to become #1 or #2 in their current businesses. 2. Implemented the “fix it, sell it, or close it” strategy for businesses that were not #1 or #2. 3. Eliminated over 100,000 jobs. 2|GE’s Talent Machine
4. Collapsed the 29 positions levels (PLs) into seven broad bands. 5. Granted stock options for performance. 6. Invested heavily in management development. 7. Reconsidered competing for management recruits from the pool of most hunted college and business school graduates. Went after disciplined, self-motivated candidates from Midwestern engineering programs, night schools and former military officers. 8. Insisted managers be evaluated on how they live up to GE’s values, as well as objective performance measures. 9. Added a disciplined performance analysis to Session C by asking managers to rank subordinates on a “vitality curve”: the top...