General Electric

"We embraced Topgrading, the percent A Players hired and promoted shot up, and GE became the most valuable company in the world."
- Jack Welch, Chairman and CEO (retired)

"The Topgrading methods are the best tools in our arsenal for getting an in-depth understanding of high-potential managers."
- Bill Conaty, SVP Human Resources (retired)

Company: General Electric

No. of Employees: 300,000 (in 2001)

Industry: Multinational Conglomerate

Consulting Dates: Late 1980s until Welch's retirement in 2001

Highlights:

  • Improvement from an estimated 25% to over 80% managers hired and promoted turned out to be A Players.
  • The “hockey stick” in talent improvement correlated with GE’s market capitalization improving from $14B to over $500B, as GE became the most valuable company in the world.

General Electric has been my most important client by far. I can't be positive, but academics and hundreds of top executives say "The Topgrading results at GE have to represent the most dramatic improvement in talent ever."

Years later I was hired for a day to discuss Topgrading with the CHROs of the largest 100 companies in the world. The average success hiring high performers was only 20% for this, the most elite HR group in the world. But the 12 Topgraders in the room averaged 80% high performers hired. The host company was Ingersoll Rand, and the CEO, Herb Henkel, said several times "Topgraders get 80% high performers, and the rest get 80% mis-hires." Throughout the day there were references to academic studies and the actual results for these companies, and no one could think of any study, any results in which another hiring method even remotely approximated the GE results.

How was Topgrading rolled out at GE?

Jack (as he insisted everyone call him) was promoted to CEO and was very frustrated with the mis-hires and mis-promotions. He and Vice Chairman Larry Bossidy (who later rolled out Topgrading as CEO of Allied Signal and Honeywell), checked with their peers and found NO highly effective hiring approach. So Jack and Larry sent dozens of GE's top HR executives to find one. They just about gave up when Don Lester found my first Topgrading book. He attended one of our public workshops and afterwards said to me "Topgrading is the best hiring and promoting method by far. How would you like to meet Jack Welch?"

Jack was a fantastic client, agreeing to almost everything I suggested for over a decade. Here is a brief overview of our years of consulting with GE:

  • GE estimated percent high performers hired/promoted started as low as 25%
  • I trained dozens of HR professionals, who trained hundreds of managers.
  • After a couple of years hiring/promoting success improved to 50%, but I thought these sharp executives, trained in Topgrading methods, could do better. I inserted a second interviewer, creating the now standard Tandem Topgrading Interview.
  • Percent hiring/promoting high performers improved to over 90%, with an average well over 80%.
  • I and other Topgrading Professionals interviewed candidates for hire and promotion alongside the senior leaders
  • Jack noticed that the executives we coached improved their Emotional Intelligence, and operating results improved. So I designed a program to hold all managers accountable for improvement. This became the famous 4-Box Model, with "Make Your Numbers" or not, and "Exhibit GE Values" or not. At my suggestion, all managers would have to Exhibit GE Values by achieving at least a 7 on a 10-point scale in "Treating People with Respect" when rated by A Players.

Opinions and Advice for Would-Be Topgraders (by Welch, Bossidy, and Conaty)

  • The CEO, not Human Resources, has to actively drive Topgrading. Why? Most managers will happily hire B Players, and HR does not have the authority to enforce Topgrading disciplines and standards unless the CEO has their back.
  • HR leaders frequently act as the Tandem Interviewers and get better and better at hiring.
  • HR leaders should earn the respect and get the pay levels of CFOs and other C suite executives

Should you Rank and Yank the bottom 10%? No, unless they are chronic underperformers.

In the 3rd edition of Topgrading, about 20 pages are devoted to General Electric under Welch, the most talented CEO I've known. In that book, I dispel the myth that Jack Welch says that managers should actually rank their employees and fire the bottom 10%. Bill Conaty states that GE never did that. During his tenure, chronic underperformers were identified - typically 5% of managers - and if they continued to not meet A Player performance expectations, they'd quit or, if not, they were fired. Welch's clarification from time to time is "You should not fire the bottom 10% or any percent of performers if they are A Players." Conaty shows how GE under Welch used a forced distribution of top to bottom performers, but the bottom group of underperformers is determined by performance - not some predetermined percent.

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