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)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. 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. 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).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”.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.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.
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.