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To learn more about Jack Welch and about GE’s performance management practices, read “Performance Management Is Key to Thriving in Tough Times,” a Kore Access case study.

To learn more about Jack Welch and about GE’s performance management practices, read “Performance Management Is Key to Thriving in Tough Times,” a Kore Access case study.

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Ka  welch case_study Ka welch case_study Document Transcript

  • Case Study Performance Management Is Key to Thriving in Tough Times
  • Customer Profile: Multinational, billion-dollar company Introduction Challenge: Management, in particular performance Increase the speed management, is critical to the sustenance of innovation and and growth of a business in any economy. decrease the time to These uncertain times, however, challenge market organizations in their efforts to effectively satisfy customer needs and to efficiently accomplish more Solution: Implement with fewer resources. In order to deliver increasing both a learning culture value to customers and to remain competitive, organizations and a performance need management systems that both identify and develop, management system to the greatest degree possible, the talents and skills of their Results: Market employees. leadership and exponential growth of business About Jack Welch John Francis Welch, Jr. is one manager recognized for his ability to drive exponential business growth though his unique leadership style and his innovative management strategies. “Performance Better known as Jack Welch, he gained international recognition for his contributions to the success of General Electric Company (GE). management is the Jack joined GE in 1960 as a Chemical Engineer and served as GE’s process of creating a Chairman and Chief Executive Officer from 1981-2001. 2 In his 20 work environment or years at the helm, Jack’s innovative leadership transformed GE from setting in which people an ordinary company into a lean company with a focus on growth. This focus was of great benefit to both GE’s business groups and to are enabled to perform GE’s managers and employees. to the best of their Jack Welch was uniquely qualified to lead GE. As a successful abilities. Performance manager and a talented engineer, he had insight into both the GE management is a business model and the people management systems that would whole work system allow GE to thrive. During his tenure as CEO, the company’s market capitalization rose from $13 billion to $400 billion, revenues grew that begins when a job from $27 billion to $125 billion, and earnings grew tenfold—to is defined as needed. almost $14 billion. 3 It ends when an employee leaves your organization.” 1  www.koreaccess.com
  • “There is probably Overview of General Electric Company nothing worse in General Electric Company, established in 1892, is now a global business than to work company with more than 327,000 employees in 160 countries. for a boss who doesn’t GE is made up of five business groups: Technology Infrastructure, Energy Infrastructure, GE Capital, NBC Universal and Consumer & want you to win.” (A, p. 66) Industrial. These businesses provide “products and services ranging from aircraft engines, power generation, and water processing and security technology to medical imaging, business and consumer financing, media content and industrial products.” 4 At one point in 2001, GE was the largest company in the world, with a market capitalization of $400 billion. As a testimony to its long-term viability and success, “GE is the only company listed in the Dow Jones Industrial Index today that was included in the original index in 1896.” 4 Problem At the time Jack Welch became CEO, GE was a company that ran on autopilot. The many layers of management slowed down communications and inhibited quick action in the marketplace. Undaunted, and to gain worldwide market dominance, Jack set out to deliver on GE’s mission to remain in the forefront of technology and to ensure the development of the best products and solutions in a competitive world market economy. Jack Welch recognized that GE’s competitive advantage was rooted in the ability of people in the organization to innovate. Thus, he considered the employees to be GE’s largest and most untapped asset. Jack’s vision was to continue GE’s history of individual and team innovation. The company traces its beginnings to Thomas A. Edison, inventor of the electric light bulb. Edison merged his company, the Edison General Electric Company, with its competitor, the Thomson-Houston Electric Company, to create General Electric Company in 1892. To repeat the early success achieved by Edison, Jack recognized GE would be best served by a culture of continuous learning and good performance management practices.  www.koreaccess.com View slide
  • “In a learning culture, GE’s employees would Solution and search for new ideas- Implementation inside or outside In the forefront of GE’s transformational strategy and implementation the company-and plan were two programs: one to develop and promote a culture of learning and another to identify and nurture talent. These programs were implement the best created to propel GE into the next century, a century Jack envisioned as a highly competitive world marketplace. In order to win and to retain ones actively and market share and market leadership, his goal was to be fast and first with aggressively.” (B, p. 47) the innovation, development, production and marketing of the next innovative product application, or “killer app.” Learning Culture: An Environment for Innovation In order to tap into the vast talent that GE harbored, Jack passionately focused on programs and methods to create and spread a culture of learning in all its business groups. In order to create leaders who would be able to promote and nurture a learning culture, Jack updated Crotonville, GE’s training facility. He had the facility remodeled and also completely revamped the programs to focus on “softer” issues rather than the usual “profit and loss” management concepts. Among the “softer” issues of leadership training that Jack emphasized were the nurturance of the five essential traits a leader exhibits: positive energy, the ability to energize others, the talent to execute, passion, and edge. 5 The type of dedication to learning Jack established has allowed GE to maintain a very successful process that continually develops the “next generation” of leaders and innovators. Along with educating staff at this training facility Jack used two additional tools to implement a learning culture: 1) open discussion groups, also called Work-Out sessions that emphasized personal empowerment and 2) case studies that detailed real world examples from GE rather than case studies from other companies. In the creation, establishment and nurturance of a learning culture, Jack Welch and GE business group managers had five key challenges to overcome: 1) bureaucratic systems that hindered collaboration, 2) intimidation by employees who resisted change, 3) slow communication channels that made the development of innovations cumbersome, 4) lack of empowerment of staff who tried to pursue changes and 5) micromanagement practices that delayed implementation efforts.  www.koreaccess.com View slide
  • “Take care of your As the implementation phase progressed, Jack overcame best. Reward them. these challenges when he became personally involved in the Promote them. Pay development and transformation of each program. He used a methodology where he asked open-ended and thought-provoking them well. Give them questions so that the members of each class could share and build a lot of [stock] options upon each other’s knowledge and mine new ideas. To have a cross-section of ability represented, he allowed people at all levels and don’t spend all of the organization to be involved in the training. However, in order to promote a free flow of ideas without any perceived or real that time trying work repercussions, he prohibited supervisors from being in a class with plans to get C’s to their direct subordinates. be B’s. Move them A tradition of learning continues at GE. Prominently displayed on the leadership page of the GE Web site is a statement from current on out early. It’s a CEO, Jeff Immelt, “A leader’s primary role is to teach. People who contribution.” (B, p.24) work with you don’t have to agree with you, but they have to feel you are willing to share what you have learned.” 5 Performance Management: Recognition of Talent Jack’s efforts to focus on the well-being of GE employees extended beyond their training and development. He understood that people have many things that push them to go above and beyond the basic job description. He made GE a culture that rewards the best players, called “A” players, through monetary gain, recognition and stretch assignments. “Losing an A is a sin. Love ‘em, hug ‘em, kiss ‘em, don’t lose them!” (A, p.160) For GE to thrive, therefore, distinctions had to be made among individuals. Jack’s belief was that “Year after year, differentiation raises the bar higher and higher and increases the overall caliber of the organization.” (A, p.160) Jack thought this strategy was key to GE’s success, and he required his managers to differentiate among A, B and C players.  www.koreaccess.com
  • Vitality Curve “Top 20” “The Vital 70” “Bottom 10” Supervisors were responsible for the evaluation of an employee as an A, B or C player. Samples of the guidelines they used follow: “A’s are people who are filled with passion, committed to making “Performance management things happen, open to ideas from anywhere, and blessed with lots has been a part of everyone’s of runway ahead of them. They have the ability to energize not only life from the first grade. themselves, but everyone who comes in contact with them. They make business productive and fun at the same time.” (A, p. 158) It starts in grade school “The B’s are the heart of the company and are critical to its operational with advanced placement. success. We devote lots of energy toward improving B’s.” (A, p. 159) Differentiation applies to An employee who is a C is “Someone who can’t get the job done. football teams, cheerleading C’s are likely to enervate rather than energize. They procrastinate squads, and honor societies. rather than deliver.” (A, p. 160) It applies to the college Once classified, employees are then put into a vitality curve on a admissions process when 20-70-10 grid: the “Top 20,” “The Vital 70” and the “Bottom 10.” The Top 20 are rewarded generously for their contributions, and their talent you’re accepted by some is cultivated. The Vital 70 are taken care of and nurtured, while the schools and rejected by Bottom 10 are left to find opportunities elsewhere. (A, pp. 158-159) others. … Why should it stop in the workplace, where most of our waking hours are spent?“ (A, p.162)  www.koreaccess.com
  • “But differentiation is all about being Results extreme, rewarding Jack Welch’s focus on being proactive in both business strategy decisions and people management concerns realized the best and tremendous success for GE. During his 20 years as Chairman and weeding out the CEO of GE, the company’s growth was phenomenal. When he assumed the position of CEO, GE had annual sales of $25 billion ineffective. Rigorous and earnings of $1.5 billion. In 2000, the year before Jack Welch differentiation retired, GE had $129.9 billion in revenues and $12.7 billion in earnings. (B, p. viii) delivers real stars- The legacy that Jack Welch left at GE continues today. Eight and stars build great years after Jack’s departure, GE continues to prosper. In a year of businesses.” (A, p.25) economic downturn and a tough credit market, GE reported on March 14, 2009, that it is liquid. With $48 billion in cash reserves, GE has already raised over 90% of its long-term debt needs for the year. Performance management and the strategy of differentiation continue to be successful at GE. Countless leaders have been groomed, and some have even left GE to take over as CEOs in such high profile businesses as 3M and Home Depot. Former GE managers, therefore, who have been mentored by Jack and/or who have spent a significant portion of their careers at GE, have an advantage over others to win top executive level positions. This advantage is created in part by GE’s world market dominance, but it is also solidly grounded in Jack’s fame across industries for his ability to groom great leaders and to build strong teams.  www.koreaccess.com
  • “As we became leaner, we found ourselves Recommendations communicating better, Jack Welch accomplished a transformational change at GE by with fewer interpreters guiding management decisions with a certain belief: “The team with the best players wins.” 6 In the pursuit to create the best team, and fewer filters. We GE became an employer of choice and attracted the best people. found that with fewer To tap into the most powerful competitive advantage, its people, layers we had wider Jack established six key components to GE’s performance spans of management. management systems: 5 We weren’t managing 1. Company commitment to continuous learning initiatives better. We were 2. Consistent and rigorous appraisal systems that link pay and promotions to performance managing less, and that 3. Encouragement extended to employees who take risks was better.“ (B, p. 12) and who apply creativity to problem solving 4. Organizational promotion of GE values: diversity, flexibility and acts that benefit society 5. Maintenance of high hiring standards 6. Focus on profitability and growth goals in performance reviews of business groups The implementation of the six key components included many management initiatives. One of the most innovative programs that Jack created was called Work-Out. It was launched in 1989 as a way to tap into the genius of those working with the transformational process on a daily basis. (B, p. 6) They brought in trained facilitators who fostered an environment of openness. “Groups of 40 to 100 employees were invited to share their views on the business and the bureaucracy that got in their way, particularly approvals, reports, meetings, and measurements.” (A, p. 182) Work-Out sessions usually lasted a couple of days and helped develop a culture of empowerment and commitment.  www.koreaccess.com
  • Conclusion “Self-confident leaders To accomplish more with your staff, GE provides both inspiration produce simple plans, and a template for thriving in any economic environment. It is speak simply, and reassuring that Jack, along with his top executives, dealt with and overcame the same management issues that confront propose big, clear all organizations, large and small. The great success that GE targets.” (B, p. 68) and its employees achieved is a motivating driver to tackle organizational change. GE’s performance practices have stood the test of time and continue to reward employees and GE with outstanding individual and company performances. With Jack’s personal involvement and commitment, GE successfully implemented a learning culture that is, to this day, a main driver of the company’s market leadership. GE’s culture of continuous learning is an example of how diverse and multicultural staff can work together—despite language, cultural and time barriers—to arrive at innovations accepted worldwide as standards in their industries. In today’s competitive economy, GE’s top-rated performance management programs provide a plan for systems that, once implemented, allow an organization to thrive. Learn More from Jack Welch: Since leaving GE, Jack Welch has consulted with and inspired thousands through his Web site at www.welchway.com and through his regular Business Week articles. He also writes for various other publications and makes numerous personal appearances.  www.koreaccess.com
  • END NOTES All the direct quotes used in this case study are quotes by Jack Welch. They are taken from the following book sources: A. Welch, J., & Byrne, J. (2001). Jack: Straight from the gut. New York: Warner Books. B. Slater, R. (2003). 29 leadership secrets from Jack Welch. New York: McGraw-Hill. C. Welch, J., & Welch, Suzy. (2006). Winning: The answers. New York: HarperCollins. When the quotes are listed in the sidebars or in the text, the corresponding letter (A, B, C) and the page number will follow the quote. All other citations in the text will be noted by numbers and will refer to the following references: 1. About.com, Human Resources. Retrieved March 23, 2009, from http://humanresources.about.com/od/glossaryp/g/perform_mgmt.htm 2. General Electric Company biographies. Retrieved March 13, 2009, from the GE Web site: http://www.ge.com/company/history/bios/ john_welch.html 3. Jack Welch biography. Retrieved March 22, 2009, from http:// www.welchway.com/About-Us/Jack-Welch/Biography.aspx 4. General Electric Company fact sheet. Retrieved March 13, 2009, from the GE Web site: http://www.ge.com/company/businesses/ factsheets/corporate.html 5. General Electric Company careers. Retrieved March 20, 2009, from the GE Web site: http://www.ge.com/careers/life_at_ge/meet_our_ people.html 6. Marvel, Stacey. (2007, December 17). Seven tips for attracting the best players to your green business. GreenBiz.com. Retrieved March 24, 2009, from http://www.greenbiz.com/blog/2007/12/17/seven-tips- attracting-best-players-your-green-business 10 www.koreaccess.com
  • Marketing Resource Writing an effective case study requires a command of certain basic skills: writing, interviewing, general analytic skills, specific market research and analysis, a working knowledge of marketing and sales approaches, and a familiarity with the appropriate use of explanatory and illustrative concepts. For further resources on case study writing, contact: Kore Access, Incorporated Phone: (850) 341-9075 E-mail: info@koreaccess.com Web site: www.koreaccess.com About Kore Access, Incorporated Kore Access offers professional business writing services. We specialize in creative concepts and content for commercially successful marketing campaigns. We offer many types of marketing communications, both as packages and as individual projects, and can bill per project, hourly or as negotiated. Combined copywriting and multimedia packages are available to meet your budget. We offer multiple turnkey and customized solutions to meet your marketing goals. Learn more about us. Visit our Web site – click here. Get More with Kore – contact us today! Copyright © 2009 by Kore Access, Incorporated. All Rights Reserved. No portion may be reproduced without permission. 11 www.koreaccess.com