Human Resource Functions at GE - Essay Example

Human Resource Functions at GE Introduction In the modern business environment, human resource functions for any company can be used as a part of the strategic business processes which allow a company to gain competitive advantages as compared to the other companies in the same field. One company which has been respected and appreciated with regard to its human resource management principles is GE and to better understand the positioning of making HRM a part of strategic business management it is important to appreciate how GE handles two important functions of HRM i.e. training and managing labor relations. Training When businesses can call on the most advanced technology available to man to get benefits for their organization, any company can have access to the same development and production tools as their competition and in such cases the worth of human resources becomes extremely important. In the real world, two companies can have the same computers and software, the same quality of raw materials, even the same machinery this is used for production but if one of them has better employees, then that company will have an advantage over the other. With training, labor and human resources have the advantage that they can grow with the company and while other equipment might have to be replaced with time, human resources only improve in quality with experience and training. Moreover, with effective training they can improve their skill set to play larger roles for the company and take on more responsibility. Training might also be nothing less than a necessity for the company when the business model changes to a certain level or when the company is looking to enter new markets where the existing skill set of the employees is insufficient. Undoubtedly, the advantages connected with training have been recounted by many HR related professionals but there is also a significant investment involved in training and developing human resources which may not turn out to be as loyal to the company as expected. With regard to training, GE comes across as a very good company and it has been used as a shining example of a good company by several business gurus. For example, Colvin (2006) and Demos (2006) both admire the company as well as its human resource management and give it the title of being one of the most admired companies in the world. Jack Welch, the long time CEO of the company stated clearly in his book titled Winning that the training provided by GE becomes a large part of the reason why the company is so well respected because training employees, “Motivates people by showing them a way to grow, that the company cares, and that they have a future with the company (Welch, 2006, Pg. 109)”. The ideas given by Wilson (1999) also add to the comments given by Welch regarding training by saying that training can become a part of the strategic objectives of a firm if that training is internalized and added to the process by which promotions are made within the company. The value of training and the weight of training can be used as an evaluation factor for the strategic promotions of individuals and to earmark those people who are likely to be the future leaders and stars of the company. As a part of business development strategy, a company like GE can train a number of selected individuals in various fields which the company expects go into for the future. For example, as reported by Welch (2005), training for market entry into China was provided to GE employees before the company started operations in China. Smith and Hayton (1999) suggest that the overall business case for providing training and managing training as a function of investment in HR is certainly there since training can improve the bottom line for the company. By providing sufficient training to a multitude of individuals within the company, it is entirely possible that the need for certain positions can be reduced substantially or eliminated altogether. Consider the example of an office worker trained for maintaining printers and some computer related hardware and software. Since such devices can run efficiently most of the time without regular human intervention, the company can save on the position of an IT support specialist if one or more office workers can manage the some computer devices it they ever need maintenance work. Welch (2005) agrees with the idea and says that individuals who have many talents are likely to make good leaders in the future and as GE seeks to groom leaders for the company, they also train those individuals in diverse fields who they know can take up leadership positions. Of course, this situation does not mean that every person within the company can do several highly specialized jobs at the same time or that every individual working for the organization will one day be the head of their own department. However, it does go to show that that investment in training can save a company a lot of money in the long run. This investment also means that the people can be trained for different functions within the company if they are to be kept within the company for the long term. Since there is a definite advantage which comes from providing employee training as a part of the rewards given to performing employees, there is no reason why training itself could not give benefits for the company in dollar terms (Welch, 2005). The idea of using training as a function of strategic human resource management agrees with the theoretical concepts outlined by Wilson (1999) who suggests that training is a fundamental part of human resource development. In fact, he places training at the top of the list amongst other functions of the human resource management department at any given big or small company. By using training as the primary function of HR management, both Wilson (1999) and Welch (2005) show how the agreement between theory and actual practice helps a company become much better than their competition. Training can also be used as a part of the labor relations which a company needs to uphold. Welch (2005) suggests that along with case rewards, training can be also be used to reward those individuals who show improved performance because it shows that the company expects them to rise further and is willing to make an investment in them. Training employees for new and expanding businesses or for upcoming changes in business patterns allows a company to create individuals who can take up responsible positions and become responsible position holders of the new divisions once the business has been established. Training can be conducted by professionals coming from the outside but both Welch (2005) and Wilson (1999) agree that a company should have internal training facilities if they can be afforded as a long term investment for the organization. Labor Relations The way GE relates to employees working for the company is directly connected with their system of differentiation which establishes the base of their employee relations. It is also deeply linked with the mission and vision of the company and as reported by Welch (2005) the company keeps people that can handle being with the company while the rest are simply removed from service. He says that, “Every decision or initiative was linked to the mission. We publicly rewarded people who drove the mission and let go of people who couldn’t deal with it for whatever reason (Welch, 2005, Pg. 16)”. GE’s own mission when Jack Welch was running the company was to be the most competitive company in the world which fits with the two pronged approach to labor relations which depend on rewarding and doing the utmost to keep the best employees within the company and simply letting go of all those who do not perform up to a certain level. While this method may seem draconian it must be noted that this method has worked for GE for several years. As early as the 1930s, GE was focused on having cooperative labor relations and the company had created profit based employee bonus plans as well as pension plans for those who had served with GE for a certain number of years. It is difficult to find companies which have innovated to such an extent that their name becomes associated with certain management practices. The vast majority of organizations will fade into history without establishing any leadership in management innovations but GE holds the unique position of not only having an established name, they have been the leaders in management innovation for the better part of their existence (Colvin, 2006). Shelly Lazarus has been the CEO of Ogilvy & Mathers’ and she has also been on the GE board of directors for the past five years. While discussing GE’s labor relations, she says that the process of creating a positive relationship with employees begins as soon as the recruitment process is started (Colvin, 2006). It is easy to be in agreement with this concept and the idea of creating a relationship with employees as soon as they are recruited since it could go a long way towards motivating them to work towards something big as soon as they come to join the company. The nature of the employee relationship and the rewards themselves are made public and all members of the company know who they need to emulate in order to establish a similar relationship (Welch, 2005). This also inspires people to stay on with the company so they can get the same relationship for themselves (Morris & Colvin, 2006). The idea of the employee relationship being based on the overall merit of an employee is not a new one but GE applies this idea to the letter. Their review and evaluation process ensures that no person gets bonuses and awards for mediocre performance and every star in the company is given the relationship s/he deserves. At the same time, GE has the policy of terminating the employment relationship with the bottom 10% of its employees every year. Perhaps, the most interesting aspect of GE’s reward plan is the public nature and disclosure of the development of the relationship which follows the evaluation process at GE. All divisions of the company are required to list by name, position and compensation the amount of money and bonuses given to the top 20% of the company as well as the bottom 10% (Schmitt, 2001). So if an employee is given some stock in the company to create a better relationship for creating a new product, this information will be disclosed to all member of his/her department. This can be a good idea if there is no element of jealousy involved and those who see it happening know that the improvement in the relationship was justified. While the public nature of the employee relationship may be seen as difficult to swallow, Jack Welch defends this by saying that even though we may seek to protect the reward system from criticism by not letting others know about the bonuses and rewards given to their coworkers, people seem to know this information anyways. By making it public, the information can be used as a motivational factor and it lets all employees see which persons have the best relationship with the company and who are facing the risk of the termination of the relationship (Welch, 2005). Therefore, as recommended by Boxall and Purcell (2003) GE is using rewards as a tool for strategic management as well as individual motivation. Jack Welch, the most well known and outspoken CEO of GE wrote very clearly about maintaining, improving and enhancing the employees when he said: “When people differentiation is real, the top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the stars at a company that differentiates. They are the best and are treated that way (Welch, 2005, Pg. 41)”. A bonus is a lump sum payment which is significant enough for an employee to improve upon the relationship. Clearly a hundred dollar bonus would do little to motivate an employee who makes $200,000 per annum but a $40,000 bonus would be certainly useful. None of the sources given declare the exact amount of bonuses per salary bracket at GE but Grote (2002) suggests that the useable figures for realistically improving the employment relationship are between 9-12% of the person’s yearly income. This is a significant amount and GE uses them as a reward tool at the end of a quarter for those employees who show commitment in their relationship to the company and its values. Recommendations When it comes to training, an internal training centre would only be useful when a company knows that it will continually need the resources provided by the institute to train and educate its workers. Most of the time, a company will find that professional trainers can effectively learn the proper procedures of a company and teach incoming recruits or employees various skills which the management thinks are important for them. At the same time, present employees can also be effectively used as training mangers for the rest of the organization. The recommendations for establishing good employee relationships would be incomplete without saying that the nature of disclosure for the employee relationship could cause cultural conflicts. Some employees may not feel comfortable in letting others know what sort of relationships they have with the company whether the relationship is good or bad. On the other hand, Morris and Colvin (2006) accept the idea of publicly announcing the employees who have a positive relationship and those who do not since it means that everybody can know exactly where they are in the company. However, they also say that GE’s labor relationship management system is the best since it is so accurate in pinpointing the position of an employee because it is based on facts, further, it is tested rigorously and is honest in assessment. Once the results are published, there are few cases where a person’s position is challenged by them or asked to be revaluated. In conclusion, the HR systems used by GE are quite effective and efficient therefore changes in the system can only be used for optimization, not for radical alterations. Works Cited Boxall P. and Purcell J. 2003, Strategy and Human Resource Management, Palgrave & Macmillan: New York Colvin, G. 2006, ‘What Makes GE Great?’, Fortune, vol. 153, no. 4, pp. 90-96. Demos, T. 2006, ‘The World’s Most Admired Companies’ Fortune, vol. 153, no. 4, pp. 72. Grote, D. 2002. Forced Ranking: Behind the Scenes. Across the Board, vol. 39, no. 6, pp. 40-46 Kerr, Steven. 1996. Risky business: The new pay game. Fortune, vol. 134, no. 2, pp. 94-97. Morris, B. and Colvin, G. 2006, The GE Mystique. Fortune. vol. 153, no. 4, pp. 98-104. Neo R.A., Hollenbeck J.R., Gerhat B. and Wright P.M. (2000) Human Resource Managemetn: Gaining a Competitive Advantage, 3rd Ed. McGraw-Hill: New York ONeill, G. and Kramar, R. 1999, Human Resources Management, Allen & Unwin. Schmitt, J. 2001. Welch has a lesson, even for small shops. Contractor Magazine, vol. 48, no. 10, pp. 16. Smith, A. and Hayton, G. 1999, ‘What drives enterprise training?, International Journal of Human Resource Management, vol. 10, no. 2, pp. 251-272. Torrington D. and Hall L. 1995, Personnel Management: HRM in Action, 3rd Ed. Prenetice Hall: London. Welch, J. 2005. Winning. Harper-Collins. Wilson, J. 1999, Human Resource Development: Training for Individuals & Organizations. Kogan Page. Read More