ka welch case_study

11
Performance Management Is Key to Thriving in Tough Times Case Study

Upload: maria-pinochet

Post on 20-May-2015

2.506 views

Category:

Business


1 download

DESCRIPTION

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.

TRANSCRIPT

Page 1: Ka  welch case_study

Performance Management

Is Key to

Thriving in

Tough Times

CaseStudy

Page 2: Ka  welch case_study

� www.koreaccess.com

IntroductionManagement, in particular performance management, is critical to the sustenance and growth of a business in any economy. These uncertain times, however, challenge organizations in their efforts to effectively satisfy customer needs and to efficiently accomplish more with fewer resources. In order to deliver increasing value to customers and to remain competitive, organizations need management systems that both identify and develop, to the greatest degree possible, the talents and skills of their employees.

“Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organization.” 1

About Jack WelchJohn 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. Better known as Jack Welch, he gained international recognition for his contributions to the success of General Electric Company (GE). Jack joined GE in 1960 as a Chemical Engineer and served as GE’s Chairman and Chief Executive Officer from 1981-2001. 2 In his 20 years at the helm, Jack’s innovative leadership transformed GE from 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 GE’s managers and employees.

Jack Welch was uniquely qualified to lead GE. As a successful manager and a talented engineer, he had insight into both the GE business model and the people management systems that would allow GE to thrive. During his tenure as CEO, the company’s market capitalization rose from $13 billion to $400 billion, revenues grew from $27 billion to $125 billion, and earnings grew tenfold—to almost $14 billion. 3

Customer Profile: Multinational,

billion-dollar company

Challenge: Increase the speed of innovation and decrease the time to market

Solution: Implement both a learning culture

and a performance management system

Results: Market leadership and exponential growth

of business

Page 3: Ka  welch case_study

� www.koreaccess.com

Overview of General Electric Company General Electric Company, established in 1892, is now a global company with more than 327,000 employees in 160 countries. GE is made up of five business groups: Technology Infrastructure, Energy Infrastructure, GE Capital, NBC Universal and Consumer & 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

ProblemAt 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.

“There is probably nothing worse in business than to work for a boss who doesn’t want you to win.” (A, p. 66)

Page 4: Ka  welch case_study

� www.koreaccess.com

Solution and ImplementationIn the forefront of GE’s transformational strategy and implementation plan were two programs: one to develop and promote a culture of learning and another to identify and nurture talent. These programs were 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 market share and market leadership, his goal was to be fast and first with the innovation, development, production and marketing of the next innovative product application, or “killer app.”

Learning Culture: An Environment for InnovationIn 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.

“In a learning culture, GE’s employees would search for new ideas-inside or outside the company-and implement the best ones actively and aggressively.” (B, p. 47)

Page 5: Ka  welch case_study

� www.koreaccess.com

As the implementation phase progressed, Jack overcame these challenges when he became personally involved in the development and transformation of each program. He used a methodology where he asked open-ended and thought-provoking questions so that the members of each class could share and build upon each other’s knowledge and mine new ideas. To have a cross-section of ability represented, he allowed people at all levels of the organization to be involved in the training. However, in order to promote a free flow of ideas without any perceived or real repercussions, he prohibited supervisors from being in a class with their direct subordinates.

A tradition of learning continues at GE. Prominently displayed on the leadership page of the GE Web site is a statement from current CEO, Jeff Immelt, “A leader’s primary role is to teach. People who 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 TalentJack’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.

“Take care of your best. Reward them. Promote them. Pay them well. Give them a lot of [stock] options and don’t spend all that time trying work plans to get C’s to be B’s. Move them on out early. It’s a contribution.” (B, p.24)

Page 6: Ka  welch case_study

� www.koreaccess.com

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 things happen, open to ideas from anywhere, and blessed with lots of runway ahead of them. They have the ability to energize not only themselves, but everyone who comes in contact with them. They make business productive and fun at the same time.” (A, p. 158)

“The B’s are the heart of the company and are critical to its operational success. We devote lots of energy toward improving B’s.” (A, p. 159)

An employee who is a C is “Someone who can’t get the job done. C’s are likely to enervate rather than energize. They procrastinate rather than deliver.” (A, p. 160)

Once classified, employees are then put into a vitality curve on a 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 is cultivated. The Vital 70 are taken care of and nurtured, while the Bottom 10 are left to find opportunities elsewhere. (A, pp. 158-159)

Vitality Curve

“Performance management has been a part of everyone’s life from the first grade. It starts in grade school with advanced placement. Differentiation applies to football teams, cheerleading squads, and honor societies. It applies to the college admissions process when you’re accepted by some schools and rejected by others. … Why should it stop in the workplace, where most of our waking hours are spent?“ (A, p.162)

“Top 20” “The Vital 70” “Bottom 10”

Page 7: Ka  welch case_study

� www.koreaccess.com

ResultsJack Welch’s focus on being proactive in both business strategy decisions and people management concerns realized tremendous success for GE. During his 20 years as Chairman and CEO of GE, the company’s growth was phenomenal. When he assumed the position of CEO, GE had annual sales of $25 billion and earnings of $1.5 billion. In 2000, the year before Jack Welch retired, GE had $129.9 billion in revenues and $12.7 billion in earnings. (B, p. viii)

The legacy that Jack Welch left at GE continues today. Eight years after Jack’s departure, GE continues to prosper. In a year of 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.

“But differentiation is all about being extreme, rewarding the best and weeding out the ineffective. Rigorous differentiation delivers real stars-and stars build great businesses.” (A, p.25)

Page 8: Ka  welch case_study

� www.koreaccess.com

RecommendationsJack Welch accomplished a transformational change at GE by guiding management decisions with a certain belief: “The team with the best players wins.” 6 In the pursuit to create the best team, GE became an employer of choice and attracted the best people.

To tap into the most powerful competitive advantage, its people, Jack established six key components to GE’s performance management systems: 5

1. Company commitment to continuous learning initiatives

2. Consistent and rigorous appraisal systems that link pay and promotions to performance

3. Encouragement extended to employees who take risks 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.

“As we became leaner, we found ourselves communicating better, with fewer interpreters and fewer filters. We found that with fewer layers we had wider spans of management. We weren’t managing better. We were managing less, and that was better.“ (B, p. 12)

Page 9: Ka  welch case_study

� www.koreaccess.com

ConclusionTo accomplish more with your staff, GE provides both inspiration and a template for thriving in any economic environment. It is reassuring that Jack, along with his top executives, dealt with and overcame the same management issues that confront all organizations, large and small. The great success that GE 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.

“Self-confident leaders produce simple plans, speak simply, and propose big, clear targets.” (B, p. 68)

Page 10: Ka  welch case_study

10 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

Page 11: Ka  welch case_study

11 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, IncorporatedPhone: (850) 341-9075E-mail: [email protected] 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.