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I Article Critique 2

1. If you were the CEO of a company would you use asystem similar to the one used by Mr. Welch? Why or

why not?

If I were the CEO of a company I shall definitely be using asystem similar to the one used by Mr. Welch at GE.

As a CEO, my deepest fear will be possible exits of the mosttalented and productive employees from the company. Andthe saddest part will be if the reason they left was becausethey felt that they are treated same as other lesserperforming colleagues.

Mr. Welch went through similar circumstances during hisinitial days at GE. He found out that his raise was standardand his hard work was not noticed at GE. It was Gutoff, anexecutive at GE, recognized the potential in Jack Welch andbegged him to stay. He gave Welch recognition andconsidered Welch as different and special.

This made a big impression on Welch. Ever since that time,

differentiation has been a basic part of how Welch managedemployees at GE. He believed that Rigorous differentiationdelivers real stars and stars build great businesses. Anddifferentiating between the good and bad performersremained central to his vision all throughout his days at GE.An intense people focus defined his management style atGE which was to build great people who then build greatproducts and services. For Welch what counted was thepassion and intensity that star employees brought to thetable. This management philosophy helped GE to retainmany star performers and was mostly responsible for GE tobecome one of the biggest conglomerates in our times.

It is clear that GE was not using suitable rewarding systeminitially and was about to lose a capable future CEO, wholater turned GE into half a trillion dollar company. Hence star

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employees need to be rewarded suitably and need to feelthat they are treated differentially. Company need tounderstand that good employees want their hard work to benoticed and rewarded. If everyone is to be treated almost

same, the star employees will feel unappreciated. They willsee that their hard work has no value. They might leave assoon as they find better opportunities at other companies. Ifsuch a system exists for some time, only mediocreemployees will be left in the company which will impactbottom line and long term survivability of the company.

Hence, I believe that the employees, the most importantassets a company has, should be rewarded and reimbursedbased on the work they do. Finally the companys success or

failure depends on the employees. The employees areresponsible for using scarce resources to deliver products,attract customers and earn profit for the company. Thesewill be hard to achieve for a company, if good employees arenot around.

As a CEO I will be responsible for designing suitablereimbursement and reward system with an understandingthat a good system will motivate employees to pursue

companys goals effectively and will retain importanttalented employees critical for companys success.

2. It is suggested that people should not have beensurprised when they found out they were in thebottom 10% and were going to be let go. Why shouldthey not have been surprised?

Mr. Welch followed the policy of employee retentionfollowing these rules:

Every year GEs businesses rank their topexecutives

Leaders were forced to identify people in theirorganization who they thought would fall in thebottom 10%

Under-performers generally had to go

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The only way to make the firing easier was to make sure thatthere was no surprise to under-performers that they wouldbe fired. Welch would have two or three meetings with the

under performers to express his disappointment and wouldgive them the chance to turn things around. He would followup every review with a handwritten note. Some may nothave appreciated the direct approach, but they knew wherethey stood and what was coming.

So the under performers should not been surprised whenthey found they were in bottom 10% and were going to letgo.

3. What type of system for weeding out incompetentemployees would you use, or would you not weed outincompetent employees? Why or why not?

I will follow a system where my companys resources areutilized efficiently and productively to maximum possible.Such state is only possible if there is a system to groom andkeep top notch employees. To achieve this, I will create aproper evaluation system where employees are ranked

based on their performance.

First an evaluation cycle will be created, where a full daypersonal evaluation is conducted each early fiscal year; atwo hour conference follow-up four months latter and asession right before fiscal year end that confirms andfinalizes the actions committed to in April. In addition to theformal evaluation routine, I would also initiate the informalHR Cycle in which informal and unspoken personnel reviewswill be done in the lunchroom, hallways and meetings.

The reviews will place employees in a ranking system ofthree categories: A, B and C:A players who are filled with passion, committed to making

things happen, open to ideas from anywhere

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B players, the heart of the company, are critical to theoperational success.C players are those who cannot get the job done. Theyprocrastinate rather than deliver.

This will set up vitality curve, similar to the one used by Mr.Welch at GE. The Vitality Curve is a bell curve which dividesemployees into the top 20%: A, the vital 70%: B and thebottom 10%: C.

I will create an appropriate reward system to support thevitality curve. A persons vitality curve rating will decideevery promotion, bonus, stock option or salary raise. The Aswill get raises 2 or 3 times the size of Bs. Bs will get solid

increases recognizing their contributions and the Cs shouldget nothing.

I will recognize the fact that managers will not assign Cs totheir subordinates as they are emotionally attached to them.

To overcome this situation, I will institute a policy wherebonus recommendations by managers without mentioningany Cs will be rejected and are sent back until managerscome up with recommendations with real differentiation.

The bottom C will let go after a year. The use of rankingsystem will have people know where they stand in thesystem. I feel that nobody wants to be at the bottom of a pilein a company and no one has any desire to be there. I thinkthat the employees want to move on and find a place wherethey are more respected, where they are more appreciated.

In case if my company lose employees rated A, I will conducta detailed post-mortem and then try to change policiesbased on the post-mortem findings. My goal will be to reducebest employee losses to almost zero. I realize that hiringemployees is expensive process. It takes eighteen monthsfor new hire to get productive. So it will be best not to loseexperienced and talented performers.

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The policy of rewarding employees if used year after yearwill cause the performance bar raise higher and higher untilcompany is left with a team of absolute stars. Such a systemwill focus my companys core competency which is the

people. I believe without question that the development ofleaders and the development of high integrity-driven leadersis the winning way for the company. A company is not justbricks and mortar. It is not an idea. A company is intellect,the combined intellect of all the employees. And myemployee pool will reflect that intellect.

The goal is to make my company a learning company. Theidea is that the best person will make other capable personalsmarter too. I will make effort to get the ideas spread so that

the entire company can learn. This is where the bestemployees at level A will help.

I will be more prudent in hiring process and hire peoplejudiciously. It will be necessary so that the count of lowerlevel employees is less and the company does not gothrough firing process frequently. I also realize there will besome positions where only routine skills are required andthose positions would be kept out the vitality curve review

process. The employees who fall under such group will berewarded as per companys success.

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