‘Untold pain’ for firms that don’t get HR right: Jack Welch

Treat employees fairly now to ensure future success
By Shannon Klie
|Canadian HR Reporter|Last Updated: 10/11/2011

Jack Welch, the legendary former CEO of Fairfield, Conn.-based technology and services conglomerate General Electric, has long been one of HR’s most vocal supporters. Canadian HR Reporter sat down with Welch for a Q&A session to get his take on how HR has evolved through the years and what role it has to play in the current economic climate and in the future.

CHRR: How has HR evolved over your career?

Welch: It was birthday parties, picnics, newsletters, benefits plans — basically an administrative function that did some management development. My view of the function is that it should be the coach, management development, leadership development focus of the company and must lead it with the CEO.

Unfortunately, too many companies don’t take HR seriously. It’s clearly better than when I started. There’s more training, more management development, more leadership development, more discussion of appraisals being serious. But we’re not far enough along the curve.

It is improving but the financial crisis just put more and more attention to the CFO versus the HR executive. We’ve had a step back in this crisis as the CFO has naturally come to the fore.

How does the organization perceive HR — as an equal player to the CFO or relegated to another position in the organization? I’ve asked that question talking to thousands of HR people and 10 to 20 per cent say they’re perceived as equal. In the organization that I worked for and built (GE), 90-plus per cent of the HR people said they were perceived as equal to the CFO.

If you were running a sports team, who would you want to be talking to everyday — the team accountant or the head of player personnel? The head of player personnel because you want to win. What’s different about that in business? Money is a product of a team’s success. If you have great success with your people, you make a lot of money.

CHRR: What role should HR play during the economic crisis?

Welch: They can be sure the best people are being taken care of. HR is important in good times — it is critical and it defines you in bad times. In these times right now, HR should in fact be stepping up and not taking a back seat to finance.

There are layoffs and HR has to make sure that the company is treating people fairly, that a good appraisal system is in place to be sure we’re laying off the right people, that the best people are being taken care of.

HR’s job right now is to be sure the best are being nurtured, cared for, well-treated and everybody isn’t being treated equally. There’s going to be a day, if everybody’s been treated equally, when the headhunters come and the recruiting starts up in earnest — your best people will leave.

If they didn’t have a great appraisal system before the downturn, they better have one now. If they didn’t learn the lesson of not having good documentation of employee performance and they had to take action, they’ll never make that mistake again, hopefully.

Performance cultures need an appraisal system with the same rigour as Sarbanes-Oxley is for finance. Phoney appraisals must be burned out of the company’s culture.

CHRR: What role should HR play once the economy improves?

Welch: There’s going to be a reshuffling of the deck with people. There are going to be companies that didn’t take care of their people in these times. There are opportunities to move on people, to upgrade your organizations from that.

There will be the same fight for talent there always is. You’re going to go back to where the employee is going to be king again and not vulnerable to job loss. You’re going through a period now where employees are fearful of their job. They weren’t fearful of (losing) their job two years ago — jobs were plentiful.

Don’t start to think employees will be lining up like they’re lining up during this period. The days of that are going to end as soon as the recovery comes in. You will be defined by how you handle things and you will be defined by how you treat people now. That will serve you in good stead if you’ve been good and it will cause you untold pain if you have neglected the human resource function during this period, in callous response to the downturn.

CHRR: What should a company be doing to weather the recession?

Welch: It’s got to communicate like it’s never communicated before. Its CEO and its managers at all levels have got to be sending out the message about where the company is, where it stands, where it’s going and why we’re doing things and what’s in it for you.

Once they’ve got their employees on board, they’ve got to look at their competition and they’ve got to go out and buy them or bury them.

You’ve got to take advantage of this. If you’re in good shape, you’ll never get companies at better prices. You’ll never get (good) employees who have been mistreated (as some are now) — go steal the best salespeople from your competitor. That’s what I mean by buy them or bury them. Bury them by stealing all their talent, by going on offence while everybody else is on defence.

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