General Electric is one of the most well-known companies on the face of the planet today. Craig Donaldson spoke with the corporate giant’s Steve Bertamini and Sam Sheppard about the vital role HR has played in the company’s success, how it identifies leadership talent, and what they think it takes for HR to make it to the top
Operating in more than 100 countries with 315,000 employees worldwide, General Electric’s (GE’s) business ranges from aircraft engines and power generation to financial services and television programming.
With such a diverse range of commercial interests and a not inconsiderable number of major acquisitions over the years, engendering a homogenous culture across the company has been made easier largely due to strong leadership support for GE’s HR function and a heavy focus on alignment of HR with business strategy.
Aligning HR with business strategy
Rather than being a administrative function, GE’s vice president of human resources for Australia and New Zealand Sam Sheppard says that it’s vital to make sure HR initiatives, actions and priorities are aligned in terms of the business plan.
“There is no point being an add-on function, a reactive partner for the business,” she says. “The thing about GE is that there are great opportunities for HR to play a role at any point of the business decision-making process. It’s very easy sometimes to get sidetracked on what we would like to be doing, but if we can’t translate that into a bottom-line impact for the business, then that lessens our value to the organisation.”
HR’s contribution to the bottom-line is ensured by integrating it into the company’s management system, according to Steve Bertamini, CEO for GE’s Australian & New Zealand operations.
At the beginning of each year GE’s management and HR teams sit down to review the template of common goals and objectives for the HR function, he says. The discussion then turns to what are key elements that the HR strategy should drive, relative to business objectives and both internal and external customers.
“So even at the beginning of the year when we are going through what we need to achieve, so there is already a linkage to measuring people and to the overall business strategy. We can then confirm that we are on track throughout the year.”
Sheppard echoes Bertamini’s comments, adding that HR’s goals and objectives have to be aligned with business goals and objectives at the end of the day.
“The aim is to have everybody driving in the same direction with a clear vision of what that business is looking to deliver in that year. Now obviously there might be initiatives and one-off instances that come along, but Steve is not going to let me off for the whole year without continuing to measure HR’s impact. We continually monitor whether it really is delivering the results that we are requiring,” she says.
Leadership within GE
GE’s global CEO Jeffrey Immelt takes one month out of the organisation each year and travels from business to business to assist in the strategic HR planning process. Sheppard believes this is testament to the emphasis that GE places on its people planning processes and their importance to the management of the company.
Another example, she says, is that GE’s leaders are encouraged to take ownership of the people development process within the organisation as a driver for HR strategy. To illustrate, one of the competencies that Bertamini gets measured on is the support he provides to people development initiatives within the company.
Sheppard says that HR is very much a partner to the business leaders, and looks at its role from many dimensions. Leadership is a hot issue in many HR circles, and Jack Welch took a pioneering role in driving many of the leadership strategies that GE has in place today.
One of the core competencies that GE drives is ‘energising the organisation’ and Sheppard believes leadership is key to this competency.
“A leader can energise others – they can create an environment that propagates vision, and their team will execute on that vision. More importantly they inspire and motivate others, they are constantly listening to others in order to empower employees, and they’re expected to follow through on what they require of their teams,” she says.
“But the real difference for the cream of the leadership crop is in those who are prepared to listen to feedback and act on it. Everybody gets feedback within GE, but the people who want to be successful, regardless of their background, are those who actually hear what the organisation, employees and peers are telling them, and they change their behaviour. This is critical at the senior level, as some people will start with a strength in one particular area and need to grow in another.”
Succession planning GE style
With a strong focus on leadership, the succession planning process within GE has been developed and refined to an extent probably unmatched by any other organisation. At the heart of its succession planning process are its annual ‘Session C’ leadership and organisational talent reviews.
These intensive reviews see the CEO and vice president of HR meet with leaders and heads of HR from across different business units. In each session, they review the talent pool and organisational focus of each unit in order to understand the future leadership potential coming through GE.
This Session C process is given equal, if not more, weight in GE than financial processes, according to Sheppard.
While she is quick to point out that numbers in GE are very important, she adds that focusing on identifying talent cannot be underestimated.
GE leadership meets with its top talent pool regularly, and ensures they are monitored to ensure they receive the development they need to be successful. Talent within GE is tracked on a variety of layers, from up and coming executive talent, through to promising new hires.
GE’s leadership spends a lot of time on what’s happening in the business and ensuring that they have the right people in place, says Bertamini. For example, GE has long been recognised as one of the world’s best producers of leadership talent, according to Larry Bossidy and Ram Charan in their book Execution: the Discipline of Getting Things Done.
Many of GE’s division presidents are highly sought after by top headhunters in the US, and Bossidy and Charan cite an example from 2001 when the president of GE’s US appliance division announced he was leaving to head up another company.
Given the focus on succession planning in its Session C reviews, GE was able to announce his successor on the same day as his decision to move on. Furthermore, the company announced at the same time who would take up all the positions created down the line as a result of the promotion.
“If a person is promoted or is not performing, we know who the right person is to put in their place. We also track who is ready to move to a different business in order to accelerate their career development. We also drive diversity to ensure we have a strong diverse pipeline of future leaders we are developing at every stage of their career,” Bertamini says.
“We take a whole new look at our talent pools each year and look at people’s achievements. It’s a fairly active process. That then gets rolled out and goes through several other screens, so by the time you go through that thorough process you really do have a group of people who stand out from the others.”
GE’s L&D options
In order to support GE’s succession planning process, GE has set up a comprehensive learning & development program for all employees. The company invests about US$1 billion annually on such programs – from assembly lines to corporate classrooms to boardrooms.
Following succession planning, it’s important to “chart out the process to ensure we have the right development for each person”, says Bertamini. He often discusses individual development needs within GE at the HR level, looking at issues such as skills gaps and how to best address them.
“For example, should we be sending a person to an outside course to address a specific skill deficiency, or do we take more of a counseling or mentoring type approach to develop them. It’s all about developing the individual,” he says.
One such initiative GE has set up is a comprehensive business development course designed for the functional and unit business heads. The course sees each head undergoing simulations in running other business units in order to develop broader business skills. The CFO might take up the role of COO in the simulation, for example, while a senior HR executive could be shouldered with the position of CFO.
“It forces people to take on different roles and run a fairly sophisticated simulation against other teams. You can see how they interact, make decisions and interpret data. It gives them an idea of what the basic skills are in other functions,” Bertamini says.
“Fundamentally, we believe we can teach people new skills, or we wouldn’t be spending all this time on training. But having said that, some people are naturally better with employees, while some are naturally better with customers.”
He recounts seeing very senior people early in their careers who didn’t perform well in a public forum, yet their skills were highly polished two to three years later after working on particular skill deficiencies.
“So if someone wants to learn, there’s no reason why they can’t be at the top,” he says.
The value of deliverables
Values play a fundamental role in the running of GE’s business and HR operations. This is best illustrated in the ‘9 Block’, one of its key HR tools.
The 9 Block is a chart that is divided into nine squares, which are used to plot an employee’s ability to meet KPIs against their individual demonstration of GE’s values. Employees are assessed on how well they perform on both counts, and their position on the chart determines their annual performance rating.
The same 9 Block framework is also used to plot the performance of an employee against their potential. Again, employees are rated for both factors and is slotted into one of the nine blocks to give the company a view of their growth and succession potential.
Sheppard states that the values play an important role in sorting out the managerial chaff from the leadership wheat, as they help pinpoint the behaviours needed to climb up the GE leadership ladder. “They’re a good indication as to whether an individual is a genuine leader or a manager who simply gives workers a set task, manages deliverables and gets results,” she says.
“If a person achieves their results through autocratic management or using bullying, then you have no place in the GE portfolio. So our processes really examine how individuals demonstrate those values to inspire the people that they actually work with. Sure, they can achieve results, but the focus is on how they achieve those results.”
Bertamini emphasises that this is probably the biggest single factor in determining whether an organisation is serious about culture, especially at senior levels.
“That’s probably the one place where I think most organisations struggle. If someone is delivering, they look the other way when it comes to how numbers are delivered because they don’t want to take a chance and rock the boat, just in case the next person won’t do as well,” he says.
“You know who these people are in your organisation. You might think that you don’t have any, but they are there and eventually they are identified via a variety of methods that include skip level meetings, 360 reviews and employee surveys. Once we identify and counsel them, if they don’t quickly correct their behaviours, they are exited from the organisation. I think that really makes a big difference in terms of how you balance the culture with the deliverables.”
Bertamini says that values play an essential role in achievement of business results, hence their reason for inclusion in GE’s performance management system. If employees don’t meet their KPIs, but score well on values they are given a second chance, as opposed to those who get the results but don’t exhibit the values, he explains.
Consistency of communication
As one of the largest and most diverse companies in the world, GE has flattened its management structure in order to improve communication and build a more cohesive culture around its values.
Employees are schooled from day one about the values and GE approach to business, Bertamini says. “People get the message very early. You might be in Australia, but that doesn’t mean that we don’t have the same focus on the same values. So we try to get that message to them very early on so there is no confusion about what we mean when it comes to values versus execution. Every place has a bit of a sub-culture, no matter what you try to do, so you have to constantly reinforce the messages,” he explains.
This is particularly important when it comes to acquisitions. In such instances, GE firstly brings all employees into the fold and communicates with them about the GE values and approach to business. In some cases the business CEO may send their own local communication on a weekly or monthly basis to further update their employees on the status of the business and key values and behavior they are reinforcing. Bertamini says this approach is one example of ensuring a consistent message across all levels of the organisation.
Sheppard adds that consistency in the values is also important when communicating across different countries and cultures. “Depending on where you’re located in the world or which business you’re in, there can be considerable differences from a public or commercial perspective. But there is no difference in terms of our common and global policies and how we run the business – particularly when it comes to compliance,” she says.
Business respect and the changing HR skillset
As the role of the HR professional has evolved, it has sometimes struggled to keep pace with business leaders’ expectations – with a number of misconceptions born in the process.
Sheppard believes there are a number of misconceptions within the broader HR community. “There’s still a lot of talk about how people are treated in the workplace, and one of the biggest misconceptions is that HR takes sole responsibility for that. That is a leadership and business responsibility which HR must influence and support.
“The other misconception is that HR professionals don’t need skills and competencies which are business focused and commercially aligned. One of the dangers of the HR community as a whole is that we just concentrate on a warm and fuzzy people agenda. If that’s the case, we are in effect never going to be an effective business partner.”
This leads HR professionals to often trip up when it comes earning the respect of CEOs. CFOs are the most common frontrunners for CEO positions, which raises the question as to why more senior HR professionals don’t even get a look in.
“Why don’t we see more of this?” Sheppard asks. “I think it’s probably fairly common, maybe because strong commercial and financial acumen are needed for the CEO role. If HR people don’t develop those skills they’re not going to be effective business leaders. On the other hand strong people leadership is a core capability of any successful business leader; the challenge for HR professionals is to broaden their competency base early enough in their careers to make them a successful candidate for a CEO role.”