On June 8, 2009, General Motors filed for reorganization under the provisions of Chapter 11, Title 11, United States Code. On July 10, 2009, after negotiations for a huge help with the US government, General Motors emerged from reorganization. After a new IPO on 2010, the shares were still losing value: General Motors has not regain the trust of the market yet. Indeed, bankruptcy has raised the problem of the competitiveness of the firm. According to many surveys that have been done on the firm, it is due to structural problems that implied a lack of reactivity, and therefore, an inability to follow the trend of the market.
So we can raise the question: how can General Motors rebuild its organization performance to regain competitiveness on the market? It implies a huge involvement of the leaders of the firm to maximize motivation of the employees in this restructuring context, in order to bring back the company at the top of the innovation in the car market. 2 Introduction to General Motors 3 McKinsey OHI Model 4 Problem Analysis based on the OHI Model In the following, a detailed analysis of General Motors’ operations is conducted in order to identify strengths and weaknesses as basis for the strategic recommendations. The organizational performance is measured with regard to the 9 outcomes of the OHI Model: Leadership, Direction, Environment and Values, Accountability, Coordination and Control, Capabilities, Motivation, External Orientation, as well as Innovation and Learning.
4.1 Leadership The leadership situation of GM has been unstable, causing an uncertain work environment for employees and thus jeopardizing their trust in the future. Within 18 months including the bankruptcy period, GM engaged four different CEOs: Wagnor 06/00 – 03/09, Henderson 04/09 – 12/09, Whitacre 12/09 – 09/10, and Akerson 09/10 – present. Consequently, the employees had to adapt to changes and to be convinced to follow a new head every 8 month, leading to confusion and mistrust in the management. The changes stimulated by the new CEO never had the chance to be implemented properly. Especially in uncertain times like a bankruptcy, a clear structure and a leader guiding the way can help employees not to lose their faith and trust in the company (Ciulla, 2009).
Instead of choosing a visionary CEO knowledgeable in the field of automotive as a fresh start, the Executive Board of GM placed former executives in the CEO position, who continued the work of their predecessor and thus didn’t inspire a new way of thinking and managing. After the ineffective mismanagement by Wagnor leading into insolvency in 2009, Henderson was named as his successor, who inherited the management style from Wagnor and hence did not initiate change. The drop in market share from 60% to 22% over the last decades has been ignored by the management, illustrating their ignorance towards change. Strategic actions taken like creating start-ups (Saturn), Joint-Ventures (NUMMI with Toyota) and acquisitions (EDS) failed, but the management didn’t learn from it and changed little from the past (Galbraith, 2009).
Since GM struggled with high costs and low profitability, the CEOs have been “Finance Guys”, meaning graduates from Ivy schools majoring in finance instead of visionary “Car Guys”, for instance engineers having experience in the automotive industry. They focus on cost-cutting and short-term profits instead of long-term investments in technology and therefore missed the trend of more environmental friendly cars (green development). Successful companies in the automotive industry are, however, driven by new, market-leading innovations according to customers’ needs and market environment (Galbraith, 2009).
The new CEO in place since September 2010, Dan Akerson, was appointed by the US Treasury Department to stimulate the transformation of GM. Although he also has no automotive background, he has experiences in top management execution and military service. His aim is to quit the old “GM work morale” of the employees and inspire a new work ethic with stronger commitment. However, he seems foster this change process without sensitivity and to put too much pressure taking into consideration the employees’ uncertainty. During his time at GM, he brought fast changes in operations and management, for instance he promoted a new CFO, Chief Technology Officer and Head of Marketing. By cutting costs and driving sales with rebates and incentives, Akerson pushed short-term profits but failed to implement long-term improvement so far, which are more difficult to catch up the competitors (Welch, 2011).
4.2 Direction Based on the confusion created by the alternating management, the employees must have lost the track which management way to follow. GM suffers under a lack of communication which is especially important in difficult times like a bankruptcy to create trust in the future among the employees. With the entrance and the strict management of Den Akerson, however, the employees seem to be aligned with the new vision of GM (Keith, 2009).
4.3 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 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.