The heart of this process is the human resources cycle — full-day Session C human resources reviews at every major busi- ness location (held in April), two-hour videoconference Session C follow-ups (held in July), and Session C-II’s, held in November, which confirm and finalize the actions committed to in April.
And that is only the formal structure. At GE, there is an informal, unspoken personnel review — in the lunch- room, the hallways and in every business meeting. That intense people focus — testing everyone in a variety of environments — defines managing at GE.
All these people-centric endeavors, both formal and informal, are done in an effort to differentiate GE’s best employees and managers from the rest of the pack. Differentiation isn’t easy; over the years, the company used many kinds of bell curves and block charts to differentiate talent, in an effort to rank performance and potential (high, medium and low). Eventually, Welch found a ranking tool he liked — the “Vitality Curve.”
Every year, the company asked each of its businesses to rank all of their top executives, in an effort to force these business leaders to differentiate their leadership. They had to identify the people in their organizations that they considered in the top 20 percent, the vital mid- dle 70, and, finally, the bottom 10 — by name, position and compensation.
Those who did not perform to expectations generally had to go. While making these judgments is not easy, doing so is how great organizations are built, Welch felt. Year after year, differentiation raises the bar higher and higher, increasing the overall caliber of the organization in a dynamic process that makes everyone accountable for his or her performance. People (particularly those in the top echelon) must constantly demonstrate that they deserve to be there.
One of Jack Welch’s passions as CEO of GE was to create a corporate culture devoid of the kinds of territorial walls that can sink even the best operations. This type of “boundaryless” culture (introduced at the company’s 1990 annual meeting) would remove the barriers among all the various functions at the company — engineering, manufacturing, marketing and the rest. It would recog- nize no distinctions between “domestic” and “foreign” operations. It would knock down external walls, making suppliers and customers part of a single process. It would eliminate the less visible walls of race and gender. It would put the team ahead of the individual ego.
Boundaryless would also reward people who recog- nized and developed a good idea, not just those who
came up with one, encouraging leaders to share credit for ideas with their team, rather than take full credit themselves. The concept also opened GE to the best ideas and practices from other companies, like Wal- Mart’s process to gather and use market intelligence quickly (see box above). It would make each employee and leader at GE wake up with the goal of “Finding a Better Way Every Day” — a phrase that became a slo- gan at GE plants and offices the world over.
In 1992, Jack Welch discussed with GE’s leaders how to differentiate GE’s managers, based on their ability to deliver numbers, while maintaining GE’s values, includ- ing being boundaryless. He described four types of man- agers:
● Type 1: The manager who delivers on commitments — financial or otherwise — and shares the values. His or her future is an easy call.
● Type 2: The manager who doesn’t meet commitments and doesn’t share the organization’s values. Not as pleasant a call, but just as easy as Type 1.
● Type 3: The manager who misses commitments but shares all the organization’s values. This type might be given a second or third chance, just in a different environment.
● Type 4: The manager who delivers on all commitments, makes numbers, but doesn’t share the values. This type usually forces performance out of people, rather than inspiring it. GE could not afford the Type 4 manager.
Welch immediately illustrated his commitment to these values by asking four corporate officers to leave the company, because they did not share GE’s values, particularly boundaryless behavior. Suddenly, “Finding a Better Way, Every Day” wasn’t just a slogan — it was the essence of boundaryless behavior, and by defining the expectations of everyone at GE, established the “social architecture” of the company. Over the course of three years, employ- ees used that architecture to hammer out a values state- ment for the entire organization, one that GE considered so important, it put them on laminated cards that all employees carry.