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General Electric Co.'s (GE
) legendary reputation in talent management owes much to one man: William J. Conaty. In his 40 years at GE, including 13 as head of human resources, he helped to shape the modern face of HR. "The guy is spectacular," says former Chief Executive and Businessweek columnist Jack Welch. "He has enormous trust at every level. The union guys respect him as much as the senior managers."
Conaty took a department that's often treated as a support function and turned it into a high-level business partner, fostering a deep bench of talent and focusing attention on the need for continuous leadership development. Among other things, he helped manage the seamless transition from Welch to Jeffrey R. Immelt in 2001 and was critical in shaping a new vision of global leadership that emphasizes such traits as imagination and inclusiveness. At 61, Conaty is now easing into retirement, having passed the top job over to longtime HR colleague John Lynch earlier this year while agreeing to stay on to handle GE's labor union negotiations this summer. As he winds up affairs at GE, Conaty shared his advice for nurturing leaders.DARE TO DIFFERENTIATERelentlessly assessing and grading employees build organizational vitality and foster a true meritocracy, in Conaty's view. Employees must be constantly judged, ranked, and rewarded or punished for their performance. Welch famously talked about cutting the bottom 10% of employees. Immelt doesn't like to fixate on hard targets. But Conaty insists that differentiation "is what still drives this company." There's nothing like a bit of anxiety and the knowledge that you're being measured against peers to boost performance. "We want to create angst in the system," he says. "We have evolved from being anal about what percent have to fall into each category. But you have to know who are the least effective people on your team—and then you have to do something about them."CONSTANTLY RAISE THE BARLeaders continually seek to improve performance, both their own and their team members'. "The one reason executives fail at GE is they stop learning," says Conaty. "The job grows, the accountability grows, and the people don't grow with it." Continuous learning is so valued that GE training courses are considered high-profile rewards. Getting tapped to go to Crotonville, the 53-acre executive training center in New York's Hudson River Valley, is a signal that someone is poised to go to the next level. "Crotonville is one of the best tools we have in our arsenal," says Conaty. The company's extensive training programs are a powerful recruitment tool and help to stimulate midcareer employees. Moreover, GE uses Crotonville and other training centers worldwide as a way to recognize valued customers and business partners. DON'T BE FRIENDS WITH THE BOSSToo often, says Conaty, HR executives make the mistake of focusing on the priorities and needs of the CEO. That diminishes the powerful role of being an employee advocate. "If you just get closer to the CEO, you're dead," says Conaty. "The HR leader locks in with the CEO, and the rest of the organization thinks the HR leader isn't trustworthy and can't be a confidant."
Conaty tries to counteract that risk by distancing himself from Immelt in public settings. While few people spend more time with Immelt than Conaty, he deliberately socializes with other colleagues at functions. Moreover, Conaty says he is the one to "purposely throw the daggers at Jeff that the other guys don't dare do. He knows what I'm doing. I need to be independent. I need to be credible." He also makes a point of being candid with leaders in private. As Immelt recently remarked: "I call Bill the 'first friend'...the guy that could walk in my office and kick my butt when it needed to be."BECOME EASY TO REPLACEGreat leaders develop great succession plans. Insecure leaders are intimidated by them. "I can go business by business and tell you where we're strongest and weakest on succession. It all comes down to having an executive who doesn't want to admit someone else could do their job," says Conaty. "If they kill two or three viable successors along the way, you have to start looking at the person who's doing the killing." At GE, leaders are judged on the strength of their team and are rewarded for mentoring people throughout the organization. Conaty, for one, takes pride in the fact that his own successor is someone that he helped develop within the HR function at GE.BE INCLUSIVEWithin every organization, there's a tendency to favor people you know. That can undermine success. Conaty winces at the memory of GE's acquisition of Borg-Warner's chemical business in 1988. "We figured that their sales force didn't look quite as spiffy and energized as our ge team," he says. The top management jobs went to GE folks, marginalizing the existing team. "We ended up losing most of their sales force, and lost the business with it."
Now, GE rigorously assesses the talent within companies before they're even acquired. It's a critical form of due diligence. "We find there are generally half a dozen people that we've got to have on the team of that company, and we need them there for a few years," he says. "Now we make special provisions to make them feel financially welcome--as well as emotionally welcome. Our GE people can't be the victors in these deals."FREE UP OTHERS TO DO THEIR JOBSWhen it comes to the CEO, says Conaty, "one of my jobs is to take things off his desk, not put things on his desk." Ram Charan, a management consultant who has worked with GE executives, says Conaty "has the intensity to look at the nuances of issues and take these things off the CEO plate. He solves things and goes forward."
That attitude extends to giving people the tools and permission to work on their own terms, and even ge has become much better about letting people step off the track for a while. "That used to be the kiss of death," says Conaty. He points to someone like Sharon R. Daley, a senior HR executive who turned down a promotion to spend more time with her kids. GE kept her in a part-time job until she was ready to take on new challenges. Today she's a company officer and the top HR person in the energy business. Conaty does draw limits. "I'm still cynical about seeing 'WFH' [working from home] on a calendar, especially on a Friday," he notes. "But we're much more open and flexible because you see the payoff."KEEP IT SIMPLEMost organizations require simple, focused, and disciplined communications. "You can't move 325,000 people with mixed messaging and thousands of initiatives," notes Conaty. Leaders succeed by being consistent and straight forward about a handful of core messages. And the best don't get derailed when times turn tough. "I'd say 70% of our leaders handle adversity well, and 30% let it overwhelm them," says Conaty. "If you can't take a punch and you don't have a sense of humor, you don't belong in this company. Everyone experiences failure now and then. It's how you handle it that matters." By Diane Brady