In today’s highly competitive business environment, every organization wants to be the next Apple or Toyota or General Electric. What is so special about these global giants? Apart from being massive global brands, these three organizations are at top of the game when it comes to running their individual businesses. These organizations are among the best high performance organizations in the world today.
Today many organizations are trying to move in to high performance business models from the traditional models to be more effective than their competitors in the market place. Although there is no definitive definition for a high performance organization, such an organization is distinguished from a traditional organization by being an organization that keeps continuously adjusting to the external conditions to maximize its performance.
This is achieved by today’s high performance organizations such as Toyota and General Electric by managing and empowering their people differently than in a traditional organization.
Toyota Motors
There is a common Japanese saying in Toyota which goes as “mono zukuri wa hito zukuri” which translates to English as “making things is about making people.” This simple statement gives us a good indication regarding Toyota’s philosophy on the Human Resource (HR) Management and the importance it places on developing its people.
Toyota is world renowned for its famous Toyota Production System (TPS), which is the Toyota’s version of a high performance business model. Toyota is the benchmark for many high performance business processes such as Lean Manufacturing and Continuous Improvement (Kaizen) Practices. All of these are components of the TPS.
However in the core of this successful model lies a strong culture of developing its people to their fullest potential and to make them strong followers of the TPS. Hence they can be the drivers of TPS in the organization. Many elements of the TPS such as Kaizen (a continuous improvement process) and 5S practices (a Japanese system of good housekeeping in the workplace) cannot be imposed upon the employees by force. Even if an organization tries to make their employees follow these practices only through rules and regulations, the final outcome will not be successful and such practices will not be sustainable in the long term. Therefore the employees need to be developed to embrace these practices on their own.
Within its factories and offices across many countries, Toyota uses every available opportunity during its day-to-day operations to develop its people towards this goal. Apart from the formal classroom type training given to the employees when they first join a Toyota plant, everyday events such as issues in the shop floor and resulting PDCAs (Plan, Do, Check, Act – A tool used in problem solving in TPS) enables the employees to learn continuously.
Another core element in the Toyota culture is that it expects all its managers to be teachers.
The long term commitment Toyota has made to develop its human talent is evident from the first principle of the 14 guiding principles defined in the Toyota Way. The Toyota Way is considered as the authoritative guide to TPS to all outsiders of Toyota.
Their employees learn and develop the skills required to practice various elements of the TPS. They are the ultimate drivers of the TPS and the teachers to the next generation of employees.
General Electric
Similar to Toyota, General Electric too makes a strong emphasis on the importance of having a high performance workforce to drive GE’s high performance business model.
As Jack Welch, the legendary former Chairman and CEO of GE said in his first address to the Wall Street analysts in 1981, he wanted GE to become “the most competitive enterprise on earth”, “where people dare to try new things, where people feel assured in knowing that only the limits of their creativity and drive, their own standards of personal excellence, will be the ceiling on how far and how fast they move.”
How GE harnesses its human resources to be one of the most competitive enterprises on Earth can be broadly divided into two areas.
First of these areas is the “Training and development” of GE’s talent. Generally GE attracts the brightest of talent for their entry levels rolls. However GE has rarely hired from outside for their top or senior level positions. Therefore GE has a very good system in place for training, developing and grooming their people to grow with the organization. These employees will eventually fill the senior ranks of GE and they will ensure the sustainability of GE as a high performance organization.
The second area in GEs process of harnessing its HR is the stringent performance management system.
The performance management process at GE consists of a forced ranking system of its employees to groupings of 20:70:10. These groups are categorized as the “Top 20”, “Vital 70” and the “Bottom 10”.
In this “Vitality Curve” as it was called by Jack Welch, the top 20 are the top performing employees of the organization and they are generally earmarked for further development and to rise up the leadership ladder. Vital 70 are the competent performers who continue to perform at the required level. The bottom 10 consists of the poor performers of the group and generally they were shown the door.
Comparison of Toyota and GE HR processes
We can see a number of similarities as well as contrasts between Toyota’s and GE’s processes of managing their human resources to drive each organizations’ high performance business models
In Toyota’s approach to harnessing their HR, the following main characteristics can be seen.
1. Toyota is focused on relentlessly developing the individual talent to meet the organizational needs. This is a continuous process and in our view this is in line with Kaizen’s other concepts in the Toyota Production System. This is a vital element in the organizational culture of Toyota.
2. Focus on collaborative work rather than individual glory. The managers and the peers are part of the organization-wide teaching and learning culture. Therefore there is no room for individual performance requirements to clash with team performance requirements. This helps to foster team work among the employees. We believe this characteristic of Toyota’s process stems from the Asian cultural roots of Toyota.
3. There is no categorizing and branding of non performers. Toyota’s culture drives all employees to learn, develop and perform. Perpetual non performers who fail to uplift their performance levels even after training and development opportunities will eventually leave the organization.
In GE’s approach to harnessing their HR, the following key elements can be identified.
1. GE places great importance on hiring, training and development in order to ensure that their employees are the best performing lot in the market. GE views high performance of employees as a vital element that gives GE a competitive advantage in the market.
2. GE has a stringent policy of “weeding out” non performers. However in our opinion this policy has its own pros and cons.
The pros would be: (A) Faster route to creating high performance teams by removing the weak links rather than spending time and resources on developing these week links to be better performers, (B) Pressure created by this process on employees, forces them to improve their performances to match the GE requirements without any managerial involvement, (C) Creating opportunity for new blood to come into the teams through the openings created.
The negatives are: (A) Unhealthy competition would be created among the team members due to the requirement to maintain a good ranking for their individual performances. This can lead to a situation where individual goals can undermine the overall team and organizational requirements, (B) Distrust can be created among the employees regarding how the individual rankings were determined, thus exposing the organization to legal issues and litigations.
Develop your own high performance workforce
As we saw in Toyota’s and GE’s models, one of the main drivers of a high performance business model is the people of the organization. Therefore one of the main requirements is to have effective HR management policies and processes to harness the best out of the HR an organization has.
Although there are many differences among the HR strategies of today’s global high performance organizations, there are key elements or best practice that any aspiring high performance organization can adapt as their own,
Therefore a few key elements in this area would be:
1. Having a strong learning culture in the organization, where all ranks of employees teach and learn using all available opportunities. These opportunities could vary from formal class room type training programmes to learning from events in the shop floor.
2. Stringent performance measurement and review processes linked to ranking employees according to their performances. However unlike in the GE processes, all employees should be given a fair opportunity to improve their performances. Only the repeated poor performers will be asked to leave the organization.
3. Rewards and growth opportunities for the top performers that will stimulate the need to learn and perform among the employees.
Using the above, organizations can tailor-made HR management strategies to harness HR to drive their own organizations towards high performance business models. So who wants to be the next Toyota or GE?
(The writer is currently reading for his MBA and this is one of his research papers) |
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