Critically evaluate the GE system of leadership development (GE’s Talent Machine: The Making of a CEO). What lessons can you and your organization take from this approach?
Overview of General Electricity
General Electricity Company is a company involved in the manufacturing of products targeting the fields of energy, capital finance, and health sector and technology infrastructure. According to a report by Fortune 500, the company was ranked the sixth among the largest companies and the fourteenth among the companies generating the largest revenue in the USA. The company enjoys a significant competitive ability in the world market due to its products.
The success of the company dates back to its foundation in 1892 by Charles Coffin, Edwin Houston, Thomas Edison and Elihu Thomson, but the main boost in the business happened after the World War II. Currently, the company has grown and established its branch offices in over 150 countries. Under the leadership of Jeffrey Immelt, the company’s gross revenue by June 2012 constituted $147.3 billion with over 301,000 employees (GE.com 2012). The spirit of innovation and thinking big transcend the culture of the company for years, hence enabling higher achievement.
Leadership is a crucial factor that maintains the effectiveness and promotes growth of a company or an organization from one generation to another. In fact, with poor leadership, an organization’s or company’s future is doomed. A well-developed leadership strategy has to be established and promoted. Effective and good leadership will exemplify the performance and achievement of an organization.
The process of succession from one leadership tenure to another should be smooth and one that enhances growth of a company without affecting the positive values that hold the company strong in the market. In this respect, succeeding leaders need to be conversant with the culture of the company, the areas that need improvement, and the threats facing the company. In this regard, the General Electronic Company has a well-established strategy of developing new leaders who succeed their CEOs. The paper will focus on a case study of General Electric Company article by McLean “GE’s Talent Machine: The Making of a CEO, 2006” and “How GE Teaches Teams to Lead Change”to probe the importance of good leadership and its repercussion.
GE Leadership Development
A phrase that can be used to describe the leadership development in GE Company is “growing our own”. The leadership in GE is presented as a smooth transition from one CEO to another selected within the leadership cocoon of the company. Right since the time of its foundation, the company has maintained the culture of recruiting top leaders from their well-developed employees. The adoption of decentralization by Condiner, 1950s CEO, enabled the company to facilitate growth of talents among new recruits (Prokesch 2009). However, this was a continuation of his predecessor’s ideation of producing skilled managers within the company’s operational field.
The organization has a number of factors employed in developing leaders and managers; these aspects are worth noting. To begin with, the organizational culture promotes the spirit of being part of the company’s family. Coffin introduced the meritocracy that demanded sound performance for consideration in the management position. Individuals were provided with the necessary support aimed at developing leadership traits in order to exploit their talents in their duties. Based on their performance and achievements, the executive would then decide who of them to head which department. This culture has persisted since then, and now employees are judged in regard to their potential for promoting, rather than academic qualification or friendship ties.
Decentralization forms another noteworthy icon in the leadership factor in GE. Condiner introduced the idea of decentralization in GE management, thus promoting delegation and sharing of duties in the company. This promoted the emergency of new avenues where upcoming leaders and managers can exercise their expertise and potential. Therefore, decentralization allowed the company to test their potential leaders, identify peculiar skills among the employees and determine the areas of reinforcement.
Third, staff training is another key pillar in developing leaders in GE. Following decentralization introduced by Cordiner, there were 100 management levels in the company that required managers. These levels were established along lines that could easily be managed by a single individual. The levels were to act as micro companies within the company; thus, failure of one would undoubtedly affect the performance of the company at large. Realizing the importance of competence and managerial roles education, Cordiner initiated training session for managers to equip them with the necessary skills and knowledge required in running the company. This practice has been maintained due to its effectiveness in promoting the organizational culture.
The fourth factor to consider is the involvement of the division and subordinate employees in the decision making process. This was identified and introduced into the organization’s culture by Jack Welch in 1987. Welch noted that involving the employees in defining areas of concern in the company structure would help increase the production. Such an action would also reduce the rate of conflicts since the workers would be given an opportunity to air their feeling, ideas and opinions. The open discussions were referred to as Work Out.
This process of involving the employees exposed the potential leaders to avenues and challenges faced by the managers in their line of duty. Therefore, they began to develop traits necessary to solve problems amicably. The practice has enabled the organization to promote the development of ambitious, motivating, objective and attainable goals. It is through these goals that the company is able to increase its production and achieve higher level of success.
The fact that the positions in the organization are won through competitive bases forms another factor that motivates leadership traits development. The newly recruited will engage in objective competition in meeting their goals and set targets in time. Consequently, the company’s production increases and the potential managers grow to levels of tackling any challenges in their line of duty.
Increased company output can be best achieved through an enhanced smooth succession of the top leaders, ensuring that the successors are ready to maintain the competitive culture and raise proper foundation for constant war against challenges facing the company. According to Stadler (2011), talent and skills development forms a crucial step in an effective succession. In addition, raising people from within the organization enables the company to reduce its cost of hiring since the recruiting process is a monitoring progress (Doan 2009).
Meritocracy forms profound culture that consistently provokes competition in the company. According to Toyama (2011), the culture of meritocracy needs to be crafted and established firmly in the organization’s culture. This is well reflected in GE’s structure. Tohmatsu (2009) emphasizes the importance of delegation and leadership development in an organization since it enables the organization to appoint their best performers, who they have confidence in and trust they are capable.
According to Tohmatsu (2009), growing and developing talents in an organization is essential in encouraging youngsters to meet the current job challenges in real life situations. This step also forms a mentorship relationship where individuals can consult without fear of litigation to mitigation obstacle. It is through mentorship and consistent monitoring that the current CEO and Chairman of GE developed to his current prowess in management and leadership.
Through staff training, the organization is able to reinforce the employees with the necessary skills and knowledge required to achieve the organization’s goals. The training is objective and focuses on particular areas of operations in the organization to improve the results of the organization. According to Galor and Moav (2002), career development offers the best avenue for experience enhancement in any organization.
Contract signing and performance evaluation is also reflected in this case study as a profound way of increasing the companies’ output. The best method of setting goals and objectives in an organization is through management by objectives (MBO). In GE, the managers set their own objectives and time line for meeting the goals. The managers are then expected to conduct a self-evaluation for their achievements.
Their seniors will then go through achievements and determine the best way to improve the performance and maintain an accelerated production rate. This is an excellent lesson that other companies can learn from GE leadership style. Individuals will be able to set their own challenging limits according to their direction of operation. On the same footing, objective performance evaluation enables individuals to compete and improve output, hence earning highly compared to their colleagues.
Probably the most significant lessons learnt from the GE company are the issues of decentralization and employees’ involvement in the decision making process. The Work Out forums, besides helping in determining the loopholes in the organization, also build employees’ loyalty, image and a feeling of worthiness. Employees believe they are part of the organization; thus, a feeling of commitment is developed (Duff 2011). The situation is different with scenarios where decisions are made by the top management team members, while the rest of employees are only allowed to follow the directions.
This type of leadership creates a feeling of “being in command” to act in a way that benefits the organization better (Mindtools.com notes 2012). It is a culture that should be discarded in the business world. The current input and target of the GE leadership under Immelt policy stand to be emulated. According to Galor and Moav (2002), investing in human capital rather than physical capital can be profitable since it is rarely affected by external factors such as politics and environment. Improving human capital will ensure that the employees are up-to-date with the current market trend and act accordingly to seize the available opportunities (Lopez-Bazo& Moreno 2007).
Finally, another lesson portrayed by GE leadership is the ability to diversify and flex according to the market needs. The organization has been steadfast in utilizing opportunities in the market (Alcatel-Lucent 2011). Instead of sticking to one line of production, they diversify to incorporate products in demand. For instance, after the World War II, the company realized the opportunity and stepped in to provide military supplies and weapons in the market. This boosted its production from $342 million to $3.46 billion. The idea of identifying potential market avenues is also reflected when the company decided to engage in the healthcare sector appliances production. Healthcare sector is one of the current growing business avenues in the world that increments in opportunities being developed (Zucchi 2009). The fact that the healthcare sector is embracing technology triggers a profound opportunity worth investing for companies willing to survive the heated competition in the contemporary world (Hoovers Inc. 2012).
Critically evaluate how the Leadership, Innovation and Growth (LIG) program has helped GE manage change in its organization, specifically with respect to leadership issues. What lessons can you and your organization take from this approach?
Holding a forum where stakeholders brainstorm their ideas with the aim of achieving the best option to be implemented in the company forms an initial stride in advancement. Collaboration in managing challenges in GE Company contributes to consistent increment in revenue generation, thus supporting the saying “two heads are better than one”. After Ammelt took over the leadership role in GE, emphasis has been on innovation and going “green”. With discussion all over the world on green economy, environmental friendly production approaches, and preservation of environment, Immelt realized an opportunity in this line of production (Dobholkar 2012).
The three pillars of advancement outlined by the LIG program form a formidable base for a contemporary market competition. Leadership offers the guidance necessary for achieving the organization’s goals. As mentioned earlier, leadership forms the most basic, as well as most crucial, icon in sustainability of an organization. Innovation brings in new ideas in the operation platform, hence ensuring that the organization meets the contemporary clients’ needs. It is through innovation that the company will be able to counter competitors, change brand design, improve their products, expand their consumer boundaries and initiate change.
However, the company must be prepared to handle management, which is resilient in change. In the same vein, change adopted must be evaluated for the repercussion to prevent instances where the company faces formidable losses in the name of embracing change (Lorenzi & Riley 2000). The manager should be adamant in approving change plans that are deemed to ruin or derail the organization’s performance.
Therefore, the EG LIC program was best suited for moving the company a step further. The main idea of the program was to implement the practice of individuals holding leadership positions in the company, together with the aim of opinion brainstorming and consensus on the way forward. Immelt believes in the potential of leaders to harness their ideas in moving the company forward (Dobholkar 2012).The program offers a chance for ironing the contentious issues in the organization, thus facilitating fast adopting of new ideas. Through consensus, the managers are able to solve tough issues and overcome obstacles in the company. This facilitates development of leadership traits such as collaboration, democratic traits, conflict resolution and problem solving approaches.
In the program, one of the evaluation topics was determining of hard and soft barriers in advancement. Every individual input was regarded valuable in the heated debate and discussion. Therefore, the leadership where extensive ideas are used to arrive at a decision builds the spirit of accountability and responsibility among the managers. Therefore, each of them felt the need to contribute their level of experience to solving the current challenges. In addition, it is through a brainstorming forum such as the LIC program that new concepts in the company venture can be developed. The forum helps the participants to understand the operation of each and every subsection and their future plans. This challenges other departments with understanding of terms emphasized in the company, such as ecomagination and imagination breakthroughs (Schuler 2002).
Moreover, the company has been able to escalate the growth rates through programs such as annual growth strategic review and annual human resource review. The later involves analysis of the managers’ performance based on their growth values. These are set of concepts and approaches the organization has identified for motivating the workers towards the company’s growth and expansion. The evaluation acts as a reminder to the employees that their achievements will be evaluated; thus, they strive to achieve the best results possible. The growth values are the basis of definition of an exemplary leader according to GE culture. These values include “external focus, clear thinker, imagination, inclusiveness and expertise” (Harvard Business Review 2009).
Lesson Learnt from LIG Program
Collaboration in the management roles is crucial in achieving success and promoting the business. The fact that the company organized a team play exposition opens new ways of encouraging demarcating leadership style in the organization. The CEO leads as an example in promoting the organizational growth values (Bartlett &Mclean 2006). Through the opening of such a program, Immelt demonstrates that he has absorbed inclusiveness. He is able to accept the contribution of others in the company as valuable for the development of the whole company.
His imagination and expertise in the management chores affirms the fact that he is worth the management position. From this example, companies should embrace development of values that are feasible. Identification of the core issues and involving people in the ground level offer opinions on how the problems can be solved and serve as a clear example of outstanding leadership. Establishing and drafting solutions in offices without involving the implementers and evaluators of the decision making process may proof futile in solving the organization’s problems. Such expositions are also indispensable in promoting teamwork in the company. The individuals are able to share and socialize together, thus diluting differences that may develop in their line of duty.
Companies should involve their leaders in training and ideas exchanging forums. The 360 component of managing innovation forms another lesson that companies should implement in order to benefit from the GE LIG program. The companies should provide the managers and other team players with time to think and develop new ideas in their line of duty. This will also be ensuring that their ideas are understood by their fellow teammates in the company, thus potentiating adoption and support of the best ideas from within the company. Consequently, change management will be easy since positive ideas do not face stiff resistance.
Most of the stakeholders will be much willing to support development ideas. Consensus decisions are much easier to implement than individually arrived decisions, although they both affect the whole company. Managers will be willing to take the risk without fear of losing since they have the back-up from their core workers and managers. These lessons are crucial in improving the company’s achievement, thus maintaining the company’s competitive ability in the market.
Developing the leaders in the company has ample benefits for the organization. The company is able to undergo a smooth transition from one leadership tenure to another without undergoing leadership crisis (Dobholkar 2012). Young leaders and managers development in the companies identifies core areas that have not yet been exploited by the company. Once in power, they tap these opportunities, hence improving the company’s performance. This is different from recruiting top managers from outside the company. Such leaders will tend to take time in understanding the company which may cost the company much time and revenue. Developing leaders is a continuous process more or less compared to the monitoring process. This cuts down the cost of advertising and recruiting the personnel. Training the individuals in the company enables employees to develop their expertise in the job performance. Therefore, EG theory of leadership development is appropriate in maintaining and building the company’s achievement. It can be argued that this procedure of leadership development and succession process has contributed to the current stand and rank of the GE in the world.
In improving the GE theory of leadership, the organization has to develop a strong culture of competition. Though consensus promotes ideas development, the company should also consider setting the objectives that are always challenging to achieve in order to ensure that there are different inputs and outputs in the company. Such actions will accelerate the innovation process promoting diversification. Though the company believes in growing leaders, neglecting poor performers in the management levels should not be promoted. Proper guidance should be an offer to those leaders and managers not yield optimally in their line of duties. This will avoid instances where managers may feel exhausted to deliver even beyond their capacity. This may eventually lead to increased rate or employees’ turnover.