GEs Talent Machine: The Making of a CEO

- Case Study
Report of Findings and Recommendations

For: Professor Ernest Jewell

MGT 500 Human Behavior in Organizations

Table of Contents
Executive Summary.........................................................................................................................1
Analysis...........................................................................................................................................2
Human Resource Management for Growth.................................................................................2
Communication............................................................................................................................3
Recommendations............................................................................................................................4
The Vitality Curve........................................................................................................................4
Recruitment..................................................................................................................................5
Executive Brands.........................................................................................................................5
Lessons Learned..............................................................................................................................6
Meritocracy..................................................................................................................................6
Recruiting.....................................................................................................................................6
Communication............................................................................................................................7
Executive Bands...........................................................................................................................7
Conclusion.......................................................................................................................................7
Works Cited.....................................................................................................................................8

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

Executive Summary
GE, the worlds largest and most well know electricity producer and distributor had
always excelled over its competition in many feats. Among them, was their ability to develop
and sustain world quality managers and CEOs. What led GE to produce these talented and more
than capable leaders was the amount of emphasis they drove in developing top notch
management. Twelve CEOs since Thomas Edison as the inaugural leader of the company and
many of them with major contributions to management development helped GE position itself to
successfully maintain growth in both revenue and profit through most of the 20th century.
Among those CEOs were Charles Coffin, Ralph Cordiner, Fred Borsch, Reg Jones, Jack Welch,
and Jeff Immelt.
Methods implemented by each of these capable CEOs allowed for GEs ongoing success.
Coffin, who immediately succeeded Edison as CEO in 1892, spent the next 20 years devoted to
creating a meritocracy within the organization to reward employees promotions based on
performance. This became the foundation which went on the make GE a CEO factory (in
2003, Coffin was named The Greatest CEO of all time by Fortune magazine). Ralph Cordiner,
committed to a thorough decentralization GE into 100 department-level businesses which
increased company management efficiency. In addition to this contribution, Cordiner built the
first corporate university dedicated to support management education and upgrade GEs on-thejob development process. Fred Borschs worked to include harnessing the decentralized
management structure to implement a bold new round of diversification that allowed GE to
expand into new businesses such as nuclear power, computers, and plastics. Reg Jones
introduced a more formal and structured approach to strategic planning which served as an
upgrade to Session C and EMS reviews. This further increased the development of managers.

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

Among Jack Welchs contributions, one of his most noted was the development of the Work
Out initiative which saw over 200,000 company employees meeting for two to three days to
discuss how their particular area of work could be made more effective. This initiative not only
increased company efficiency but allowed for individuals to step up, voice their once reserved
thoughts and take over the reins of management positions. Welch also moved EMS consultants
from headquarters out into the field to help business leaders develop their talent and personally
was responsible for the professional development of 600 SEB members. Jeff Immelt targeted
technology skills as a key organization development requirement during session C reviews and
also implemented resources reallocations by investing in businesses that were heavy in human
capital (skills and expertise). These CEOs during their tenures with GE took the responsibility of
management development seriously and were successful of implementing methods to do so each
in their unique way.

Analysis
The main reason for GEs constant success was its talent to use sustainable human capitol
as competitive advantage, combined with continues improvements in the human resource
strategy, creating a culture with strive for operational excellence. GE used a variety of tools,
helping them to maintain being a cutting edge organization by constantly looking out for new
management talent, hiring from within the company. The following points were analyzed:
Human Resource Management for Growth
Ever since the foundations for HR management were laid by Coffin, GE managed to
develop a variety of tools to implement ever new strategies, procedures, and policies, enabling
them to maintain a healthy and necessary pool of new managers. GEs human resource

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

management process [is] among the most sophisticated in the world. (1) The company used a
well defined succession management process as part of their meritocracy-based culture. In this
process well performing mangers started off in lower management positions which were used as
on the job training, in a vast variety of industries, following very specific performance goals.
During this process GE did not only test a managers job specific skills, but also looked at their
personality and character in order to determine a persons abilities as a whole. It was known to
GE how strong a manager had to be in specific industries and used this approach as training and
testing ground. During this process managers received support from higher level managers or
mentors who evaluated each person based on their characteristics, strength and weaknesses. Due
to an individually defined career path, and clear goals, new mangers felt motivated and could see
their progress within the company. At the same time, executives were able to get an overview of
highly motivated candidates, who had the potential of becoming managers in existing or new
branches, or even the new CEO of the company. This particular performance oriented transparent
culture was very difficult to maintain and implement in any business, and shows the dedication
of GE towards their human capital. Immelt mentioned: Unless you are really dedicated to a
whole system, it doesnt work. We give feedback, we coach, we invest in training-and we have
clear performance goals.1 Following this approach, GE was for many the employer of choice.
Communication
Even as a diverse and big corporation, GE was able to maintain direct communication
with their managers. Due to their focus on new talent, executives allowed for much face-to-face
meetings, trying to learn about the individual person, the characteristics and talents. They were
basically hand-picked for specific positions and industries. After Immelt became CEO, he
implemented additional channels of communication, such as forums, in order to connect people

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

around the globe and different branches of their company. Immelt was able to understand how
important communication is to grow the company even further in a global market, and to keep
the cultures connected without geographic or industrial boundaries.

Recommendations
Immelts first year as CEO was challenged by the economic downturn. GEs stock
declined and employees were uneasy about the future. Although management and employee
turnover was low, it is recommended that GE take steps to ensure that employees would be
engaged and motivated even after the economy improved. To that end, it is recommended that
Immelt enact changes to certain aspects of GEs talent machine.
The Vitality Curve
The rankings-based vitality curve was considered by many long-term GE employees as a
core part of the companys meritocracy-based culture. However, it was controversial to outsiders
and complex, relying on seamless integration of feedback, coaching, training, and clear
performance goals into a single process. While ensuring that high-performers are rewarded is a
critical and positive component of organizational culture, GE was beginning to lose employees
from the highly-valued middle 70% to targeted recruiting efforts by other companies.
It is recommended that the rankings be made more flexible so that effective employees
feel valuable. Immelt should consider expanding the top tier or introducing additional strata of
categorization so that those in the eightieth percentile are distinguished from those in the
eleventh. Simultaneously, less emphasis should be placed on an employees ranking along the
vitality curve. GE should consider implementing a system of reconnection and rewards that is

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

less focused on the top tier and gives consideration to individual achievement throughout all
levels of the company.
Recruitment
To support GEs drive toward more service-intense global businesses, it is recommended
that Immelt expand the talent pool to run these businesses by re-energizing the companys MBA
recruitment program targeting MBAs with marketing management career interests. GE can
attract high quality candidates in this area by offering a Commercial Leadership Program entry
level development track. Although GE had had problems with MBA turnover in the past, similar
issues in the future could be avoided by solidifying the companys reputation as the premier
developer of management talent.
In order reduce the companys reliance on U.S.-based recruitment programs Immelt
should establish a more aggressive international recruitment approach. The number of nonAmerican GE officers should better reflect the fact that 40% of GE revenues are generated
overseas. It is recommended that Immelt set concrete goals to increase the number of non-U.S.
citizens in its executive band and officers group.
Executive Brands
After Welch collapsed Cordiners 29 PLs into seven broad executive bands, some
employees particularly those in international locations with hierarchical business cultures
where perceived status was highly valued felt that promotion opportunities were limited and
the frequency of clearly defined. While many proposed that Immelt expand the number of
executive and professional bands, doing so would likely be a step back to bureaucracy and
inflexibility. Rather than increase the number of executive bands, GEs culture should adapt to

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

provide employees with recognition and psychological reward through job enrichment and
acknowledgement of individual achievement.

Lessons Learned
GE has established itself as a well-diversified fortune 500 conglomerate business backed
by its strength in personnel. In doing so, GE has pioneered the business world and human
resource methods. In order to survive and thrive GE has always maintained flexibility in its
business. Although changes are aplenty, GE must now look at changing it long standing
recruiting and human resource approach. While leaving its culture completely behind isnt
necessary, changes are required to adjust to the new business and global climate but not at the
cost of losing its core strengths. In the past, changes have proven to be successful and
unsuccessful in the following ways:
Meritocracy
Meritocracy has been a strength for GE, since CEO Coffins inception in 1892, with their
human resource management. Employees were motivated by the results and the goal setting and
advancement opportunities created the optimal work environment for GE employees. CEO
Welch eventually implemented a shift in the vitality curve in order to encourage people to want
to be in the top 20, via rewards, praise and developmental efforts. While this has suited the
company for over a decade. the classification of the 70 percent has recently led to GEs leading
indicator of employee desertion. Also, their global approach initiative provides conflicts with
cultures in other parts of the world with its current meritocracy system. The success built on their
meritocracy process aimed at inclusion and providing career steps that were obtainable, and they
were largely welcomed by employees.

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

Recruiting
GE has always invested and preferred home grown talent. Immelt has recently boldly
hired from the outside when he felt an appropriate internal candidate wasnt available. The shift
in focus to customer service identified this need. As future business shifts occur, finding the right
person for the job must always be the objective with their hiring. Since GE has a unique work
environment, if hiring from outside is explored the need to forecast the candidates immersion
into the GE environment needs to be evaluated carefully. The message that it hierarchy system
will not be honored can be toxic for their human resources strategy. The innovation and success
attributed to their human capital was home grown in the past because GE conducting such an
innovative type of business.
Communication
The reason GE has had a successful human resource department resulting in leaps and
bounds in innovation from within has been its communication. Team meetings, continuing
education and performance reviews and rankings lead employees to high levels of involvement
with their jobs. If it wasnt for their strong communication, GE would not have been able to
install changes and programs to enhance their profitability.
Executive Bands
The contraction from 29 PLs to seven bands was a crucial cost savings step. The result
however left less hierarchy and less favorable supervisory jobs available. The recent international
push in India led them to a culture that was accustomed to promotions via job titles. The
retention level of non U.S. managers has been hurt by the contraction. While the cost savings
was crucial in a lean company, the elimination of leadership roles was not received well.

1104MGT500 - Module 10
GEs Talent Machine: The Making of a CEO

Jones, Mouradian, Perez, Volland

Conclusion
GE has led the way for the world, not only as a business but as an innovator, for over a
decade. In that time, flexibility in identifying business opportunities along with a strong human
resource commitment has kept GE successful. By being the leader in innovation, GE cannot look
at other businesses for guidance. In its changing environment, GE must continue to improve
itself from within, looking for ideas and human capital.

Works Cited
1. GE's Talent Machine: The Making of a CEO. Bartlett, Christopher A. and McLean,
Andrew N. Boston : Harvard Business School Publishing, 2005. 9-304-049.