Business is all about finding and building great people, no matter
where they come from. At GE, I had a passion for making people our core competency,
and the rigor of our people system played an important role.
In any company, you need more than good intentions to manage people
effectively. You need to have a structure and system so that everyone knows the
rules of the game. The heart of our people system was an appraisal cycle: formal,
full-day sessions and informal personnel reviews—in the lunchroom, hallways,
and in meetings. That intense people focus—testing everyone in a myriad
of environments—defines effective people management. We build great people
who then build great products and services.
Other than the advance agendas, nothing is neat about the people
review process. What counts is the passion and intensity everyone brings to the
table. When managers put their necks on the line for their direct reports, I learn
as much about them as the people we are discussing.
Why are these sessions so intense? One word: differentiation. Differentiating
people is one of the hardest things a leader has to do. Over the years, I’ve
used all kinds of bell curves, block charts, grids and 360s to differentiate talent
and to rank performance and potential.
I was always seeking a better way to evaluate people. We eventually
found one we really liked and called it “the vitality curve.” Every
year, we’d ask all managers to identify the people on their teams who performed
in the top 20 percent, the middle 70 percent, and the bottom 10 percent. If there
were 20 people on the staff, we wanted to know the four in the top 20 and the
two in the bottom 10—by name, position, and compensation. The underperformers
had to go.
Making these judgments is not easy, and not precise. Yes, you’ll
miss a few stars and a few late bloomers—but your chances of building an
all-star team improve dramatically. Year after year, differentiation raises the
bar higher and increases the caliber of the people. This is a dynamic process,
and no one is assured of staying in the top group forever. They have to constantly
demonstrate that they deserve to be there.
Differentiation comes down to sorting out the A, B, and C players.
The As are people who are filled with passion, committed to making things happen,
open to ideas, and blessed with lots of potential. They can energize not only
themselves, but everyone who comes in contact with them. They make business productive
and fun. They have high energy levels, the ability to energize others around common
goals, the edge to make tough yes-and-no decisions, and the ability to execute
and deliver on their promises.
These four Es (energy, energize, edge, and execute) are connected
by one P—passion. Passion separates the As from the Bs. The Bs are the heart
of the company and critical to its operational success. We devote lots of energy
toward improving Bs. We want them to become As, and the manager’s job is
to help them get there.
The C player can’t get the job done. Cs are likely to enervate
rather than energize. They procrastinate rather than deliver. You can’t
waste time on them, except to redeploy them elsewhere.
The vitality curve is the dynamic way we sort out As, Bs, and Cs.
Ranking employees on a 20-70-10 grid forces managers to make tough decisions.
The vitality curve doesn’t perfectly translate to my A-B-C evaluation of
talent. It’s possible for A players to be in the middle 70 because not every
A player has the ambition to lead. Yet, they still want to be the best at what
they do.
The vitality curve must be supported by the reward system: salary
increases, stock options, and promotions. Every time we hand out a raise, give
an option, or make a promotion, the vitality curve is our guide. Attached to every
recommendation for a reward is the person’s position on the curve.
Losing an A is a sin. Love ‘em, hug ‘em, kiss ‘em,
don’t lose them! We conduct postmortems on every A we lose and hold management
accountable.
This system—like any other—has its flaws. Identifying
the As is one of the treats of managing. Everyone enjoys it. Developing and rewarding
the valuable keepers in the middle 70 percent poses little difficulty. Dealing
with the bottom 10 is tougher. The first time new managers name their weakest
players, they do it readily. The second year, it’s more difficult. By the
third year, it’s war. By then, the most weak performers have left the team,
and many managers can’t put anyone in the C column. They’ve grown
to love everyone on their team.
No leader enjoys making the tough decisions. We constantly faced
resistance from even our best people. I’ve struggled with this problem myself
and have often been guilty of not being rigorous enough. Every impulse is to look
the other way. I’ve fought it. If a leader submitted bonus or stock option
recommendations without identifying the bottom 10, I’d send them all back
until they made differentiation real.
The problem with not dealing with Cs in a straightforward manner
hits home later when a new manager shows up. With no emotional attachment to the
team, he or she has no difficulty identifying the weakest players. The bottom
10 percent is quickly identified.
Some think it’s cruel or brutal to remove the bottom 10 percent
of their people. It isn’t. It’s just the opposite. What I think is
brutal is “false kindness,” keeping people who aren’t growing.
There’s no cruelty like waiting and telling people late in their careers
that they don’t belong—just when their job options are limited.
Such cruelty is an outgrowth of a culture that practices false kindness.
Why should any manager ever stop measuring performance and differentiating people
at work? Our vitality curve worked because we spent a decade building a performance
culture with candid feedback at every level. Candor and openness are the foundations
of a performance culture. I wouldn’t advise injecting a “vitality
curve” into an organization without a performance culture.
I’d always remind managers that they had to share my passion
and transmit the same energy, commitment, and accountability to their people.
Treat people with dignity and give them voice. I urged every manager to remember
that “they were the CEO” to their people.
Being a CEO is nuts! The schedule is packed, with many hours blocked
out a year in advance, yet every day brings new crises that butcher your calendar.
The days are long, yet the hours race by because you’re always fighting
for more time.
Seven Principles
There’s no magic formula to being a CEO, but here are seven
ideas that worked for me.
1. Tell it straight. People may not have agreed with me on every
issue—and I may not have been right all the time—but they always knew
they were getting it straight and honest. Candor builds better relationships with
customers, suppliers, analysts, competitors, and governments. I never had two
agendas. There was only one way—the straight way.
2. Set the tone. The organization takes its cue from the person on
top. Your personal intensity determines your team’s intensity. How hard
you work and how many people you touch will be emulated thousands of times over.
You set the tone. Every day, I tried to get into the skin of every person in the
place. I wanted them to feel my presence. I would lead exchanges with other leaders
to understand their concerns so they could understand mine. I didn’t want
to be a picture in the annual report. I wanted to be someone who everyone knew.
3. Maximize intellect. Getting every employee’s mind into the
game is a huge part of what the CEO does. I would take everyone’s best ideas
and transfer them to others. I tried to be a sponge, absorbing and questioning
every good idea and being open to the best of what everyone, everywhere, had to
offer. I would then transfer that learning. Work-Out drove boundaryless behavior
and developed the ideas. We rigorously evaluated everyone on this value to reinforce
its importance. Searching for a better way and sharing new knowledge brought out
the best in everyone.
4. Put people first, strategy second. Getting the right people in
the right jobs is a lot more important than developing a strategy. I sat in rooms
for years, looking at promising strategies that never delivered results. Service
was always a second-class citizen until we put service leaders in place. We learned
that we could have the greatest strategies in the world. Without the right leaders
developing and owning them, we’d get good-looking presentations and so-so
results.
5. Show passion. Passion defines an A player. For me, intensity covers
a lot of sins. Winners care more than anyone else. No detail is too small to sweat
or too large to dream. I always look for this characteristic in leaders. Passion
doesn’t mean being loud or flamboyant. It’s something that comes from
deep inside. Great teams ignite passion.
6. Celebrate more. Business has to be fun. For too many people, it’s
“just a job.” Celebrations are a great way to energize a team or organization.
I always looked for ways to celebrate even the smallest victories. I’d often
ask our managers, “Are you celebrating enough?” If they said “no,”
I’d say, “I can’t celebrate for you. We’re not going to
have a VP of celebrations here. You have to be the manager of celebrations. Go
make it happen. Make sure your team is having fun—while they’re being
productive. Measure and reward the specific behavior you want.”
7. Conduct appraisals all the time. In a meritocracy, nothing is
more important than appraisals. I was giving appraisals all the time—whether
I handed out a stock option, gave a raise, or bumped into someone in the hallway.
I always wanted people to know where they stood. Every year, I’d send a
handwritten note to my direct reports, outlining what I was looking for in the
coming year, and attach to it the prior year’s letter to give continuity
to the process. My direct reports realized that there would be follow-up—and
that I cared a lot. The process was time-consuming, and sometimes late at night,
I would wish I hadn’t started it, but it was great discipline. LE
