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.

1. Case
Study
Performance
Management
Is Key
to
Thriving
in
Tough
Times

2. 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
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3. “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.
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4. “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.
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5. “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.
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6. 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)
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7. “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.
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8. “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.
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9. 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.
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10. 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
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