Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright

Exercise 20

How General Electric Develops the Best
In the past, as General Electric entered a wide variety of industries, it emphasized the strong set of general management skills that could enable the company to outperform rivals in industries as diverse as jet engines and finance. That approach led to management development in which GE's top talent moved from one business unit to another so they would be familiar with many parts of the company. For example, before John Krenicki became vice chairman and the head of GE's energy business, he held leadership posts in units that made chemicals and materials, lighting, superabrasives, transportation equipment, plastics, and advanced materials. Lorenzo Simonelli, the executive in charge of GE Transportation, took that job after working in the consumer products unit for six years and on the audit staff for four.
Recently, however, under the leadership of CEO Jeffrey Immelt, GE has shifted its approach to management development. Now the company is more interested in deepening executives' knowledge of particular business units' products and customers. The strategy seems to be based on recognition that competition in some of its industries, such as medical equipment and power plants, has become too difficult for a general-purpose leader to master. Susan Peters, who is in charge of executive development at GE, expresses the need this way: "The world is so complex. We need people who are pretty deep."
GE takes leadership development very seriously. On its careers website, the company claims, "There is simply no other company in the world with such a diverse set of businesses in which to work, and such a development-focused culture in which to grow." GE spends about $1 billion a year to train managers. The company's John F. Welch Leadership Development Center in Crotonville, New York, is famous around the world as a center for learning to lead. GE has entry-level leadership programs in which recent college graduates combine classroom training with rotations through varied assignments over the course of two years. It also has leadership programs for experienced high-potential professionals. These future leaders progress through the development program in teams so they can share best practices and help each other drive the changes they identify as important.
Whereas the old approach to development created a set of top executives who could step into any business unit as needed, it had drawbacks. If a new manager took over a business unit just as sales were taking off, the new manager would have great growth numbers to report, but likely the leader responsible for that growth would have been the one who was replaced. In the same way, a new manager could wind up taking the blame for a downturn unrelated to any of the manager's decisions. The newer focus on in-depth knowledge of a particular business unit enables the company to make managers more accountable for results. The new approach also may be more practical in recent years because the company has shed many of its businesses to focus on the core businesses of energy, aircraft engines, health care, and financial services.
For evidence that deeper knowledge is working, Immelt points to Anders Wold, the head of GE's ultrasound division in its imaging business (part of the health care sector). Relative to pricier equipment such as MRI machines, ultrasounds were a fairly small part of the imaging business, but Wold's in-depth knowledge of customers and products helped the company capture a big share of the market. He was determined to make GE the industry's specialist, as opposed to a maker of basic equipment. Wold's strategy built sales from $200 million to $2 billion in a single decade and made ultrasounds the biggest division in the imaging business.
With results such as these, it is easy to see why Susan Peters see GE's leadership development as a necessary investment in the company's future. Just as the company invests in research and development so it will be able to offer the products needed in the world of the future, it invests in leadership development so it will have the people who can drive innovation in their business units.
How can GE's development program meet the challenges of the glass ceiling and succession planning?