Environment and Values (Culture)
Before its bankruptcy in 2009, General Motors appeared like a highly bureaucratic, hierarchical and top-down company with very strong and independent divisions not working in collaboration but parallel. It is only in the 80s that GM started to slowly implement a corporate governance and therefore to build a “GM culture” despite managers being highly reluctant to change. At that time, the decision-making process was slow due to unproductive meetings.
The file for bankruptcy forced GM’s top management to take decisions, to lead organizational changes and to accept cultural changes. The newly defined corporate culture focused on 4 principals:
- Speed
- Customer and Product Focus
- Accountability
- Risk-taking
The top of the organization underwent a restructuration and the role of HR in organizational change was redefined: supporting change but not driving it. A newly created operating model team was put in charge of dismantling the bureaucracy which was making it difficult to find who was accountable for taken decisions.
After organizational changes being implemented, a “culture team” was created to be in charge of building the new culture. This team launched the “Building the movement”. A new meritocratic performance management system replaced the former system where promotions were based on patronage. Education Series were led to explain the new culture and to explain what was expected from leaders. Both internal and external communication would be used to do so. The decision making process was to be democratized. Employees already embodying the new values of the company were identified and set as examples.
Accountability
Before 2009, GM based its employees’ accountability on ‘structure/role design’ and ‘consequence system’ practices. The expected performance on the job was expressed in detail, but the managers did not take the time to clearly explain the underlying responsibilities and objectives for each job. Furthermore, due to the several layers of management and committees, employees lost track to whom they are supposed to report to and who has the authority over their department. They used an intense system of 10 ways evaluation of employee performance every three months (instead of the quote an explanation: which provided too much information per employee which is impossible to manage due to information overflow) and as Terry Woychowski says ‘As soon as everything is important, nothing is important’*. Moreover they used tools like Balanced Scorecards and High Performance Work System to reward or penalize employees.
After 2009 and GM’s restructuration, the company changed its focus and moved towards a different approach of accountability using ‘Personal Obligation’ practices. From now on, instead of having detailed job descriptions without clear objectives, a one-pager was introduced clearly stating the employee’s individual responsibilities. Instead of four evaluations per year, employees had only one evaluation focusing on the achievement of the aforementioned goals. Along with the breakdown of hierarchy to a smaller group of people, managers tried to empower their employees by giving them more responsibility and authority and thus to engage them more and hold them more accountable. In addition to that, meetings with the lower hierarchical level of employees were frequently held to encourage emotional commitment to the company as well as to foster exchange of ideas and interaction between subordinates and their direct N+1 and N+2.
Coordination and Control
According to an internal study(1), the company’s organization followed a practice of deep reflexion on some strategic subjects such as car and truck design for a long time, creating too many multiple committees which focused on many details. This hindered the ability to adapt to changes quickly, causing a deficit in competitiveness for the General Motors brands, since the car market is fast moving.
As a response, 35 percent of its executives and 20 percent of the white-collar work force this year will be laid-off. However, GM's bureaucracy and top-down culture have created a risk-averse atmosphere “in which people are afraid to fail” (2). Henderson has to make deeper changing in the culture, otherwise, there is a huge risk for the problem to remain. (2nd half belongs to capabilities)
Capabilities
Over the last decades, GM has had problems in the areas of product reliability and quality perception for which reason customers switched to other brands. The problem results mainly in a poor R&D process in technology. Engineers focus too much on small details and forget the essential criteria for buying a car, namely reliability. GM can now produce reliable cars, but it is still too slow because there is a lack of talented people in the firm. (are you sure? How many people work in R&D? is it enough? are they skilled? do they have trainings? do they develop externally?)
Furthermore, consumers are lost with the brand positioning of GM, for many years, and the strategy department of the company has a problem of reactivity and realism with the brand portfolio analysis. They only started to give up Pontiac and Saturn recently, while this issue is a key step in the change. There won't have real competitive advantage without a clear brand portfolio. (weak to say the strategy department didn’t work well – does not address your task)
About strategic innovations and responsiveness to market trends, GM has to develop its reactivity since the world is changing and consumers too. The strategy team of GM didn't anticipate enough the new tendencies of the car industry. So as a result the offer didn't match the demand. There is a need to continue reducing GM vehicles size, but also to continue reducing the size of the engines because of today cost of energy; and to continue developing hybrid and electric vehicles.
Finally, another issue is the allocation of resources, GM needs more geographical diversification: in Europe and Asia for instance, where there are growth perspectives for the company. Currently this development can't be managed only from Detroit, where current American employees don't have enough experience and knowledge about those specific markets.
Motivation
As a result of the bankruptcy which created newspaper headlines for months, many employees have lost their trust in a historical symbolic firm in the United States. Moreover, the eleven plants closing and the further cuts in medical benefits for workers covered by the Union’s own trust tend to exacerbate the tenses among the employees (3).
The main issue at stake here lies in the GM’s leaders ability to build a new mutual trust with the whole workforce. This will go along with a renewed corporate image, based on innovation skills.
External Orientation
In the past and especially after the bankruptcy period, GM was not being a very reliable buyer. The relationships with its suppliers were not the best as it was not respecting its volume forecasts. Because of this suppliers qualified GM as a non reliable buyer. The policy is now quite changing since GM is implementing new policies to fight against this type of issues. GM is trying to be more upfront about its product plans so suppliers are better able to offer innovations early in the new-vehicle development process. CEO Dan Akerson reported that GM is willing to set up new basis of trust with suppliers especially after this rough period they went through. Supplier’s surveys show that GM is regaining credibility a little more every day (“The percentage that rated GM “poor” or “very poor” dropped from 78% to 52% between 2009 and 2010)
During its dark period, GM had lost all the notoriety it had. The perception of the company by the customers was mediocre. The car manufacturer now rebuilds its brands by rebuilding the trust customers used to have. The fight will be hard but GM has edited a goal and not the least: within two years the board plans to have the best customer service in the whole car industry. GM wants to get closer from the end user by understanding their needs. The ideas are there but now they have to walk the talk.
2006 can be counted among the worst year for the US car industry as it was the first time since 1929 that it was beaten by another country regarding the worldwide sales: Japan through Toyota. Ever since, the fight has been tough as the competition was always fiercer. GM makes incessantly reports or surveys to know all what competition is about. What are their worldwide implementations? What they offer? What technology? What strategy? So that they can act accordingly with if possible one step in advance.
GM has always had a very close relationship with its government as it one of the jewels of US economy. The US government has set up many actions to help, to advice or even finance the car manufacturer. Thus the US power has played the most significant role in bringing GM back to life after its bankruptcy. The close collaboration is nowadays even more justified as US government owns 27% stake in GM’s capital (Canadian Government still owns a 12% stake as well).
Innovation and Learning
In today’s world, innovation is without doubts one of the key success factors for car manufacturers if they want to keep on increasing their market shares. But still, innovation needs to be lead in the right direction. That’s what GM has been discovering lately. It is starting to innovate on the right technology and the right brands, for instance, Chevrolet. Thus, it is acting as the Apple’s innovation strategy: creating products that really matter to today’s consumer and products driving values through flexibility. Furthermore, the bankruptcy enabled GM to get rid of some brands considered as not performing or too old fashioned so that it could concentrate on the few left. The main idea is to build high performing cars, fuel efficient hence eco-friendly. GM introduced in 2010 the “Chevy Volt” an electric vehicle with backup generators. It became the best-selling GM car in December 2010. GM decided to split R&D at every Business Unit levels (corresponding to its brands). Thus, for each area such as northern America, Europe or Asia for instance, each GM brands is adapted to the local population. For example in Europe, the best-selling car is the “Spark”, a small fuel efficient, cheap and nice designed car. Unfortunately, GM still is behind the manufacturing groups which have been taking some steps in advance… like Toyota. Probably, those have understood right away how to manage the flows ideas generated “at an international level”.
Focus of Problem Solving
After having analyzed GM’s operational performance with the aid of the OHI model, we decided to focus on the main four problems leadership, culture, motivation and innovation. Although GM slowly starts to recover from its crisis in 2009, it is still in an unstable position today for which reasons we recommend to concentrate on the current weaknesses instead of enhancing their existing strengths. On the one hand, the four problems we focus on are more difficult to solve and thus are costly and time consuming, but on the other hand, they are essential for the future development of GM to regain its competitive power. Advantageous about our selection is, that these 4 elements are linked to each other for which reason their improvements will have spill-over effects on each other and thus increase the positive impact on GM.
Strategic Recommendations
In the following, we make strategic recommendations …..
Leadership
The bankruptcy and the alternating CEOs over the last 3 years caused uncertainness within the work environment and mistrust in the management among the employees. In order to re-establish trust, the strategic recommendation (practice) with regard to leadership is designed in two phases: firstly, keeping the “patriarchal leader” Dan Akerson for the next 3 years and secondly, afterwards selecting a new “community leader” experienced in the automotive industry.
In order to provide stability and consistency for employees in this uncertain time and to avoid further readjustment to a new leadership style, we recommend to keep Akerson as CEO for the next 3 years to rebuild the company. With his military background, he is familiar with motivating and leading people as well as with his executive experience and external perspective, he identified weaknesses of GM and started to implement counter-measurement. Instead of a technological orientation, Akerson changed the GM culture to a customer-driven approach and therefore arrived at the best sales figures since his 6 predecessors. He encouraged the development of smaller GM cars which were highly demanded by the market based on the ecological awareness, cautious consumption after the crisis and the increase in petrol prices. Furthermore, Akerson realized that he did a mistake at the beginning by increasing the market share with high discounts and thus changed his focus towards profitability. This shows his acceptance to failures and willingness to learn from them, a behaviour his predecessors did not present. In addition, since the car industry is R&D driven, we suggest to engage the heads of the regional engineer centres as Vice Presidents of Akerson, directly reporting to him to combine R&D and closeness to market knowledge.
After a 6-month familiarization phase by Akerson, we recommend GM to hire a “Car Guy” as CEO for the second leadership phase. His profile should include not only an educational engineering background, because a general understanding for technology can foster innovation, but also experiences in the automotive sector on an executive level to encourage further customer orientation of GM with the provision of market knowledge. Compared to the previous 6 CEOs in the history of GM who focused on cost controlling, the new CEO should get more involved with the R&D departments in his daily operations, to turn GM to a customer-oriented company with innovative products. In addition, our recommendation would incorporate the selection of an external candidate to encourage a change in the way of thinking among all firm levels. In former times, the CEOs of GM grew within the company and inherited the way of thinking of their predecessor, leading to reluctance to change. The internal promotion system was not only based on performance but also contacts and internal alliances, missing to encourage important potentials without networks. An external candidate could break up this culture by being independent.
The new CEO’s characteristics should include being charismatic and visionary to inspire not only employees but also customers and the media to create a positive image after the damages caused by the bankruptcy and former mismanagement. Moreover, change management skills to create a new corporate culture and to implement the previously mentioned “new way of thinking” are necessary. As a community leader, he is able to delegate and willing to empower his employees at all levels. As basis herefore, he needs to formulate shared goals and a vision which provides a clear direction and hence trust for every employee. Setting up a new Code of Conduct is our recommended measure to implement empowerment. This written document can include among others: firstly, the assignment of more responsibility to lower firm levels; secondly, the easement of the decision processes by assigning more participation and voting rights to lower levels as well as the need for consensus; and thirdly, suggestions for time frames in which the teams have to come to a solution.
Culture
In todays’ environment, organizations are expected to evolve at fast-pace, to stay alert on technological changes which could potentially make their products obsolete. They are also expected to increasingly share information within the organization itself as well as with its stakeholders. The accelerating rate of change results in complex and changing requirements both for people as well as for organizational systems. To this extent General Motors bureaucratic, hierarchical and top-down approach to decisions making has contributed in creating a corporate culture disconnected with today’s market reality. Therefore, flexible organization, flattened hierarchy, employees’ empowerment and cross-functional integration are the new components of today’s corporate organization around which General Motors should be developing its new corporate environment and values.
A common response to the above mentioned challenges consists in shifting the former obsolete and rigid GM culture towards the installment of a collaborative organization.
The implementation of web 2.0 solutions like chat, forum, online surveys, polls, virtual communities and collaborative tools enables to increase the speed of information sharing within the organization as well as to build more accurate solutions to raised issues. Indeed Forum discussions engage the whole organization and favor the exchange of ideas between all employees regardless of their expertise or division while fostering innovation and increasing the quality of the solution to the raised problem. Conducting online surveys and asking for employees’ opinion also contributes to employees’ empowerment as their opinion is being taken into account. Simultaneously, these tools also allow GM Top-management to pinpoint issues, dissatisfaction and therefore to take the relevant measures to prevent group actions against the organization.
While these measures ensure a more fluid flow of information, collaborative tools also allow to increase transparency. The latter can be reinforced by sharing decisions taken at the Top Management Level with all employees. Similarly to a luxury hotel chain, GM could use these virtual platforms and the walls of its corridors to hang memos summing up positive or negative results or recently taken decisions at the highest level of the organization.
Collaboration is also required within teams. This can be fostered by gathering teams together in open spaces in order to encourage exchange of ideas and support on a daily basis. Moreover, the performance management systems should be redesigned. They shall no longer focus exclusively on individual objectives but shall include common team objectives. The implementation of 360° feedback and evaluation processes in each team and across level will remove barriers among teams, encourage free discussions and therefore increase team performance.
Motivation
One of the most important aspects of GM’s transformation is the motivating of its employees who have been through a very rough period of uncertainty, constant changes of management, major cutbacks and the press all over the world criticizing the bailout and forecasting further downsizing. The goal is to retain the best talent because those people are the ones who are going to leave first when the future of the company is at stake. To work towards this goal, managers should be able to motivate their employees using various types of incentives (financials and non financial) but this is not enough. It is crucial that the employees feel emotionally tied to the company and its culture. Moving forward to actions that need to be implemented, the managers setting of goals for their employees should be a result of discussion between the two parties at least once per 6 months or one year. This implies that employees will feel like their goals are more realistic and adapted to their own vision of how their dream job would be and by setting smart objectives together and reviewing them on a yearly basis, every employee will have a sense of accomplishment and a relief from the tension of constant quarterly control, which is imperative to motivate them. Furthermore, those smart objectives should be tied to rewards but not only for individual work but for teamwork as well so that the new culture of ‘Working together towards common goals’ will come across faster and the employees will feel like they are part of a family and that the company will support them as long as their requests are reasonable. To develop more this idea, the executives should be closer to the lower levels of hierarchy so that the people feel that their needs are addressed and It would be a good idea to get feedback from each manager (maybe every 6 months) on the issues of employees and to address them individually, especially supporting the underperforming and acknowledging the work of the over performing with personal letters or meetings. Another important aspect of the motivating procedure is communication and reducing of uncertainty. The high executives should communicate the good results on a frequent basis as was said before but it is crucial that the bad results or any kind of issues (as long as it is not sensitive information) are communicated as well so that employees don’t learn about their company’s problems from the news. For that to happen, an action could be that every manager should make short presentation of the state of the company and the contribution of their division at least once every 6 months so as to enhance the feeling of achievement and the team spirit. Finally, team building activities at least once or twice a week should be set throughout the whole company to convey a more ‘family’ culture and for the team to get to know each other and create strong relationships between each other and GM as a whole.
Innovation
To survive within this fierce competition, GM definitely has to find new insights to increase its market shares. This means that, it needs to be efficient on every market it is implementing on. Nowadays, the new flows of innovative ideas come from the market and not necessarily from the company itself. By working along with local suppliers, GM will be able to detect the current top trends on the automobile industries for every area. External sourcing is extremely important. Innovation has to stem from market research and not only from the likes of engineers and researchers. This enables the new models and innovations to be more suitable to the public and it speeds up the procedure of decision making for the engineers since the market dictates them what to do. Success of an innovation should be judged on its applicability and market appeal. These flows of ideas could be then exchanged if very successful to be applied on similar structured markets. This is called efficient and intelligent knowledge management. There should be a significant change within the organization by turning from brand- based to region-based innovative activities.
Moreover, to talk a bit about GM brands portfolio, focus should be on even fewer models, but more distinct. These cars should be very different from each other so that people could not compare two cars from two different manufacturers which look a lot alike but priced differently. They should definitely consider centralizing the innovation efforts and figure out what is the main competitive advantage of each brand and focus on it and enhance it. Innovation has to respond to market needs: they should have strong link with marketing and/or market research & universities to analyze the future needs of consumers. Change from inwards focus to focus on the market are to be set up by leading continuous market surveys to find out what people want and goals of each department should be market oriented.
Team
We choose all the best consultants in to build a full skilled team
Jacques MOUIREN - Senior consultant, expert in change management
Romain RICARD - Senior consultant, financial Advisor
Andreas VERYKOKOS - Consultant, Coach, Trainer
Guillaume LEJEUNE - Consultant, specialized in HR
Budget
Reference List
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Galbraith, J. (2009). GM Desperately Needs New Leadership – But is Henderson it? Forbes. Retrieved Nov, 12th, 2011, from
Jeremy Smerd, “Can a new corporate culture save General Motors?”, Crains Detroit Business Journal, November 2009
Bill Vlasic, “G.M. Is Adapting to a New Culture, Chief Says”, New York Times Journal, 7 October 2009
Ed Brayton, “Former GM executive criticizes corporate culture”, The Michigan Messenger, 17 February 2009
Erik L. Olson and Hans Mathias Thjømøe, How bureaucrats and bean counters strangled General Motors by killing its brands, Journal of Product and Brand Management, Vol. 19, Issue 2, EMERALD, February 2010
Brown, Alan, “Under the Hood at GM”, Mechanical EngineeringVol 133, Issue 10, PROQUEST, October 2011
General Motors Company, Datamonitor, June 2011
