Change Management of General Motors - Case Study Example

Change Management Introduction    General Motors is chiefly engaged in automotive production, promotion, funding and insurance functions. General Motors devises, manufactures and markets vehicles throughout the globe. It s largest firm carries out its function in North America. Novelty serves as GM's central competency and has been employed in service and know-how by GM to safeguard its position in the automobile industry. However, several internal and external threats involved in this industry have given GM a hard time in the past. To overcome these shortcomings, General Motors implemented an organizational change procedure that had significant implications to its customers, senior management, staff and the government as well. GM was recently rescued from going down by the US government, at a time when it was at the verge of bankruptcy. Organizational Structure In July 2009, NGMCO Inc bought ongoing General Motors Corporation’s operations and brands. As part of the plan, over 20,000 employees were to lose their jobs due to fiscal reasons. During this changeover, there was a shift from a conventional organizational model to a transformed organizational model (Dunn 2009). This new organizational model had significant effects on GM's employees, its client base and the communities neighboring General Motors factories. This transition also involved the implementation of new support systems to ensure that the changeover would be victorious. Conventional organizational models usually consist of a structure that is arranged in a pecking order with an executive or president at the top then followed by senior managers or deputy presidents, then other supervision personnel below and then a mainstream of junior staff below them (Cheung, Rowlinson & Jefferies 2009). Job positions and roles are then grouped into departments in this type of organizational structure; General Motors was a good example of this type of structure before the transition took place. General Motors was split into autonomous automobile makers which included Chevrolet, Cadillac, Buick, Oldsmobile and Pontiac. Each of the separate manufacturers functioned independently therefore contending with other GM factories. Due to competition from within, this kind of structure was highly detrimental to the progress of General Motors in the automobile industry. Johnson and Cain (2010) claim that the transformed organizational model is federal and cohesive in its operations and consists of a team against persons working towards similar goals. In this kind of organization, conglomerates are run in a more aerodynamic and cost effective manner. A transformed model will never have several departments that differ in terms of their requirements and responsibilities. In the transformed organizational model, General Motors had an option to induce change in this great corporation by changing its traditional structure and running the corporation in a different way. The exercise of transforming General Motors from a conventional organizational model into a transformed organizational model was however not an easy task; it took several years to centralize GM's operations. This changeover significantly changed GM's labor force. Junior employees and senior management personnel had to acquaint themselves with a host of certain centralized skills. Before the transformation, each and every GM's manufacturing plant utilized computer software that is tailored to its needs and therefore inter-communication within the umbrella company had become difficult and intricate. All the employees in General Motors including those in other GM offices in other parts of the world had to attain skills on how to use a central software program. This was not an easy activity; however communication became more fruitful and simpler. Moreover, General Motors designers had to study each other's design, planning and manufacturing procedures. The new system required that employees learn how to employ teamwork when communicating and performing their various duties. Successful implementation of these changes was among GM's top priorities; support systems were put in place to guarantee all the stakeholders of an efficient changeover. For instance, to keep the chief executive officer at tabs with the happenings of the corporation a management committee called the Automotive Strategy Board was founded. Meetings whose attendance was obligatory were held every month; members in offices in other parts of the world were allowed to participate in these conferences via phone. All the leaders at regional level saw these meetings as good chances to keep the chief executive officer abreast with the regional operations concerning the corporation. As a feature of the transformed organizational model, all employees were on the same page and worked towards identical goals. External and Internal Threats At this time General Motors was on the verge of bankruptcy; various factors seemed to be bringing the once leading automobile corporation to its knees. One major factor was the shift in demand and the tentative energy policy. The dramatic rise of fuel prices had a considerable effect on GM’s earnings. The shift in demand from trucks which were more profitable to smaller cars that usually bring in less profit was a big blow to General Motors as well. Global recessions also had unfavorable effects on General Motors. The automobile industry is dependent on financial lending and leases and hence in times of recessions automobiles suffer greatly due to decreased accessibility (Smith 2009). Legacy costs were also a great issue; the cost of providing healthcare and retirement funds to scores of retired workers was very high compared to other motor companies. General Motors had also made a big mistake by focusing on the idea of computerizing workers out of car factories; other motor companies such as Toyota focused on enhancement of their production techniques and as a result produced high quality cars than GM. In this occasion a lot of customers were lost and getting those customers back required a lot of effort. Being a large corporation that operates in more than 40 nations worldwide, when this changeover took effect a variety of groups of people were touched. Firstly, the changeover had considerable external effects; the two main stakeholders who were affected considerably include clients and the community neighboring General Motors' autonomous plants. Upgrading and servicing of certain vehicle brands became tricky for customers since some of the brands had to be suspended during the changeover. Consumers conventionally trust particular products and feel betrayed when their brands of preference are out phased or replaced with other new ones. Therefore, discontinuation of some brands cost General Motors quite a number of customers worldwide. Many communities develop and grow around great employers and the closure of various individual plants was a big blow to neighboring communities. General Motors' reason to close some factories was to make production more efficient. When large corporations close their manufacturing plants, enterprises such as fueling stations, real estate companies, restaurants and grocery stores go through hard economic times and GM's case was not an exception. The end result in case of such occurrences is a recession in the community's welfare; every aspect of business is affected with levies on property and sales suffering as well. This recession leads into a sequence of reactions in the community; a smaller amount of money comes in the community and as a result, unemployment levels increase, various public utilities are downscaled and large budget cuts are experienced. The closure of GM plants in some areas led to recessions and as a result many people moved out of these towns. The changeover from the traditional organizational model in General Motors had its pros and cons. Some communities were affected terribly during this changeover; some employees were sacked, some businesses run insolvent, people lost possession of their homes and towns became economically unproductive. On the other hand, General Motors became a company in which employees work together, operational overheads decreased since functions and operations became more effective and valuable communication channels were founded. Negative and positive effects are inherent features of change and the changeover in General Motors was therefore like a two-sided coin. According to Palmer, Dunford and Akin (2006) cost reduction does not warrant thriving competition. Therefore, for clients to see a sense of value in a changeover product differentiation should be given due attention during the transformation. For a strategy to be successful it must consider the needs and trends of the local market; strategies that work well in one nation may fail terribly in other parts of the world due to disparities in needs of various regions. Therefore, for GM to effectively compete internationally it should employ strategies tailored to specific regions; in this way, various markers can bring about returns that are above average and improve GM's ability to compete even in future. Change Alternatives To implement these changes, GM had several alternatives that would work in its favor. The first alternative that GM had was to maintain all the brands but differentiate efficiently. In this alternative one of the moves could have been to reduce replica collections of each brand. This alternative would have seen the corporation come up with an organizational change structure that is elastic and one that chooses the right product for the right market. This alternative usually reduces inter-brand competition and tells apart the various GM brands at the same time. In this way, promoting each product becomes easier and customer loyalty can be utilized. Each brand would in such a case have a more customized market trend and it would therefore be easier to forecast demand for that particular product. Another option that was available is to begin by devolving the organization but maintaining the aim of realizing an overall more articulate organization through the pursuit of a related controlled strategy. In this alternative, key options such as marketing, human resources, R&D, and merchandising should be centralized to attain constancy. However, management personnel for specific brands would require more power while various factories would require better control and harmonization with other plants. This alternative ensures differentiation by increasing brand independence in fields such as marketing and brand development (Aggarwal, Venkatesh & Vaidyanathan 2009). Therefore, GM must relocate itself as a ground-breaking worldwide competitor in order to survive. The company has been incessantly beleaguered by a host of issues including lacking internal cost control and unendingly short-range strategies. The company must predominantly close the gap between the acuity of its product dependability and the actual quality and novelty of its vehicles. This involves a sharp, devoted focus on product fineness throughout the whole organization rather than slow, bureaucratic decision-making (Brown 1989). GM must also consolidate its brands to reinforce its brand portfolio. It is essential that the company also initiate competitive joint ventures, especially with other innovators such as computer manufacturers. Finally, GM must capitalize on its plant capacity, reining in its internal costs and realigning its production and actual demand. Defined concentration on the core competencies that represent the General Motors Corporation while changing its strategies will ensure that GM remains a feasible contender in the unpredictable auto industry. Stakeholder Concept Both the first and second alternatives have their pros and cons. Changeovers affect various stakeholders including the government, local communities, senior management personnel, trade unions and customers. For the government the areas of interest are income taxes, duties and value added taxes. Management is affected in terms of salaries, performance targets and working conditions. The local community is affected through loss of jobs, environmental issues and business premises that are dependent on the corporation undergoing transformation. Differentiation as manifested in the first alternative would have utilized the 8 brands to capture customer loyalty.  This alternative would also assist the various brands to focus on definite market positions and allow for attainment of economies of scale and scope throughout the entire corporation. Another advantage of this alternative is that no far-reaching re-organization is needed in this kind of approach. However, this alternative has a series of demerits; a good deal of time is required before any efforts can be recognized. As the market demand changes and individual markets are exploited or eradicated, products cam start competing with each other again. It was certainly difficult for General Motors to monitor all its brands consistently. Such a strategy that results into inconsistency is referred to as less flexible in organizational structure. As a substitute to this strategy, it was necessary that GM to change the company's structure and divest some brands so as to allow each one of them to be autonomous. The second alternative of having an organization structure that is devolved had various advantages and disadvantages too; resources would be focused on fewer brands. Such a system would also create distinct markets which delineates brand equity. Decision making is also faster in a system where brands are independent (Brand, Pawlikowski & Markowitsch 2009). Lastly, such a structure allows investment of more capital in R&D for individual brands. However, this alternative would see several plants closed and employees lose their jobs. This approach would also see GM lose some of its customers who prefer specific brands. Another demerit would be the use of extensive resources to settle distribution contracts. A likely preliminary decrease in sales and profits can also affect shareholder value of the corporation significantly. Opinion on GM changes After being bailed out by the government, it appears that General Motors is being faced by a big challenge to restore the big name that it had built and maintained for years. The changes that involve a change of organizational structure might also be challenging to implement since the employees and other company stakeholders will have to take their time before they can get used to new tactics of business. Though the reduction in number of brands might lead to a further sacking of employees and hence reduce the operational costs of the company, this move may not be the solution to GM’s slowly deteriorating market share. However, it is a new era and all the stakeholders associated with General Motors will have to get themselves accustomed to the new organizational structure if at all the refurbished automaker is to succeed. Shaped by the auction of most of its old assets out of insolvency, the new GM will also be one of a kind among businesses in the United States since the government will have the greatest ownership. Even though the company is geared towards recovering all the taxpayers’ money that has been spent on it, the company’s stock will have to increase extraordinarily for the United States to acknowledge that the investment in General Motors was worthwhile.  In the sense that these changes are meant to increase GM’s profitability and competitiveness in the automakers’ market, the changes in General Motors are justifiable. Whether a company operates in high risk business such the automaker industry or under a low risk, its main goal should be making a profit. Even though GM’s move may have adverse effects on the economy, General Motors cannot respond positively to such claims to its own detriment. Even if it did so, consequent failure would still lead to the same adverse effects that it is claimed to have caused as a result of these changes. Therefore, General Motors should consistently inform the public, the government and other stakeholders on the strategies it is implementing to prove its strategies worthwhile and restore the value of the company. Conclusion The main problems that were faced by General Motors were declining US automobile market stake, rocketing fuel costs, high retirement fund costs, lack of differentiated products and lack of ability to generate income from its main activity which is manufacturing of cars. In response to these problems, GM decided to change its organizational structure form a conventional organizational structure to a transformed organizational structure without success. Bankruptcy came looming and the organization was purchased by NGMCO Inc. implemented various changes. This changeover had various merits and demerits; the reason as to why some researchers oppose the transformation while others supports it. Albeit GM adopted an effective organizational structure and became a more cohesive corporation; many employees lost their jobs and neighboring communities were adversely affected. References Aggarwal, P, Venkatesh, A & Vaidyanathan, R 2009, ‘Using lexical semantic analysis to derive online brand positions: an application to retail marketing research’, Journal of Retailing, vol. 85, no. 2, 145-158. Brand, M, Laier, C, Pawlikowski, M & Markowitsch, HJ 2009, ‘Decision making with and without feedback: the role of intelligence, strategies, executive functions and cognitive styles’, Journal of Clinical and Experimental Neuropsychology, vol. 31, no. 8, 984-998. Brown, RH 1989, Social science as civic discourse: essays on the invention, legitimization, and uses of social theory, University of Chicago Press. Cheung, YK, Rowlinson, S & Jefferies, M 2009, ‘A critical review of the organizational structure, culture and commitment in the Australian construction industry’, Construction Management and Economics, vol. 18, no. 7, 819-832. Dunn, JA 2009, ‘Automobiles in international trade: regime or persistence?’, International Organization, vol. 41, no. 1, 225-252. Johnson, KA & Cain, W 2010, ‘Adaptation and application of federal capabilities-based planning models to individual states: State of Colorado Case Study’, Journal of Homeland Security and Emergency Management, vol. 7, no. 1, 1547-1610. Palmer, I, Dunford, R and Akin, G 2006, Managing Organisational Change – A multiple perspectives approach, McGraw Hill, Boston. Smith, AD 2009, ‘Financial sustainability through contingency planning: multi-case study’, International Journal of Sustainable Economy, vol. 1, no. 4, 317-334. Appendices Appendix I: Cheung, YK, Rowlinson, S & Jefferies, M 2009, ‘A critical review of the organizational structure, culture and commitment in the Australian construction industry’, Construction Management and Economics, vol. 18, no. 7, 819-832. A critical review of the organisational structure, culture and commitment in the Australian construction industry Cheung, Yan Ki Fiona and Rowlinson, Steve and Jefferies, Marcus (2005) A critical review of the organisational structure, culture and commitment in the Australian construction industry. In: International Symposium of CIB W92/TG23/W107 on the Impact of Cultural Differences and Systems on Construction Performance, 8-10 February 2005, Las Vegas, Nevada, USA. Abstract This paper reports the findings of a survey undertaken with a government department in Queensland, Australia and it focuses on the perceptions of professional personnel. A mismatch is found in both the organisational structure and organisational culture developed in the department. The level of commitment was also found to be low in three dimensions – normative, continuous and affective. The findings of the survey are discussed and explored with reference to Hofstede’s culture concepts. Emerging lessons which result from the findings of the survey and subsequent interviews, are also supported by the case studies. Appendix II: Johnson, KA & Cain, W 2010, ‘Adaptation and application of federal capabilities-based planning models to individual states: State of Colorado Case Study’, Journal of Homeland Security and Emergency Management, vol. 7, no. 1, 1547-1610. Adaptation and Application of Federal Capabilities-Based Planning Models to Individual States: State of Colorado Case Study Kurt A. Johnson, University of Colorado at Colorado Springs William Cain, Colorado Technical University - Colorado Springs Abstract This article utilizes the State of Colorado as a case study in how individual states are adapting and applying federal capabilities-based planning models to their homeland security programs. The article reviews the corrective change in direction taken by Colorado in implementation of homeland security organizational strategies, structures, policies and procedures. The authors' findings lead to conclusions about Colorado's beginning phase of transforming deficient homeland security strategy, incoherent organization, and fragmented planning processes into sound strategy, focused structure, and organized methods. In November 2008, the Center for Homeland Security (CHS) at the University of Colorado at Colorado Springs began a research and mutual support effort with the Colorado Governor's Office of Homeland Security for the purpose of immersing in the state's revitalized homeland security planning cycle. The intent was to gain insight into the state's creation of a new homeland security organization, the application of a new homeland security strategy, and the efficacy of implementing federal capabilities-based planning processes from a strategic and operational perspective, rather than a federal grant application focus. Colorado's shift to a capabilities-based planning process was largely in response to criticism from both the Department of Homeland Security and Colorado state auditors on the use of federal homeland security funds. Audits described the state's strategy as disorganized and its homeland security structure as fractured with poor accountability and little meaningful oversight. This article examines the initial findings of the CHS immersion experience. Appendix III: Aggarwal, P, Venkatesh, A & Vaidyanathan, R 2009, ‘Using lexical semantic analysis to derive online brand positions: an application to retail marketing research’, Journal of Retailing, vol. 85, no. 2, 145-158. Using Lexical Semantic Analysis to Derive Online Brand Positions: An Application to Retail Marketing Research References and further reading may be available for this article. To view references and further reading you must purchase this article. Praveen Aggarwal, Rajiv Vaidyanathan, and Alladi Venkatesh Labovitz School of Business & Economics, University of Minnesota Duluth, 385A LSBE, 1318 Kirby Drive, Duluth, MN 55812, United States Labovitz School of Business & Economics, University of Minnesota Duluth, 385B LSBE, 1318 Kirby Drive, Duluth, MN 55812, United States CRITO (Center for Research on Information Technology and Organizations) at the University of California, Irvine, CA 92697, United States Abstract This paper provides an innovative approach to brand tracking in the context of online retail shopping by deriving meaning from the vast amount of information stored in online search engine databases. The method draws upon research in lexical text analysis and computational linguistics to gain insights into the structural schema of online brand positions. The paper proposes a simple-to-use method that managers can utilize to assess their brand's positioning relative to that of their competitors’ in the online environment. Keywords: User-generated content; Lexical semantics; Brand personality; Positioning Appendix IV: Brand, M, Laier, C, Pawlikowski, M & Markowitsch, HJ 2009, ‘Decision making with and without feedback: the role of intelligence, strategies, executive functions and cognitive styles’, Journal of Clinical and Experimental Neuropsychology, vol. 31, no. 8, 984-998. Decision making with and without feedback: The role of intelligence, strategies, executive functions, and cognitive styles  Authors: Matthias Brand; Christian Laier; Mirko Pawlikowski; Hans J. Markowitsch Published in: Journal of Clinical and Experimental Neuropsychology, Volume 31, Issue 8 November 2009 , pages 984 - 998 Abstract We investigated the effects of intelligence, decision-making strategies, and general cognitive styles on the role of feedback in making decisions under risk. A total of 100 healthy volunteers were assessed with the Game of Dice Task (GDT). A total of 50 participants performed the original GDT, and 50 participants performed a modified GDT in which no feedback was provided. A neuropsychological test battery and questionnaires assessing strategy application and cognitive styles were administered to all participants. Participants who performed the original GDT had higher net scores than those who performed the modified GDT. The benefit of feedback was moderated by participants' intelligence and strategy application. Keywords: Game of Dice Task; Logical thinking; Deliberation; Intuition; Feedback Appendix V: Dunn, JA 2009, ‘Automobiles in international trade: regime or persistence?’, International Organization, vol. 41, no. 1, 225-252. Automobiles in international trade: regime change or persistence? James A. Dunn Jr Associate Professor of Political Science at Rutgers University, Camden. Abstract The concept of a “regime” is frequently used to describe and explain behavior in international political economy. Peter Cowhey and Edward Long, attempting to test theories of surplus capacity and hegemonic decline, advanced a version of a regime governing international trade in automobiles which was fundamentally liberal from 1966 to 1975, but then collapsed into protectionism. Their diagnosis is mistaken, however, because the trade regime for autos was neither as liberal as they assert during the 1950s and 1960s, nor as protectionist as they believe it has become in the 1980s. The discussion focuses on a new definition of the auto trade regime based on four fundamental rules that have persisted since the 1950s. By examining data on auto imports since 1955 on a region-by-region basis, it becomes clear that the trade expansion of the postwar years was not based on a global liberalization of the trade regime, but on carefully managed regional arrangements that favored imports within the region, or extra-regional imports that did not threaten domestic producers. The flurry of restraints on Japanese imports in recent years is not a collapse into protectionism, but a reinforcement of the fundamental regime rules. The auto industry case illustrates the tendency of analysts to underestimate protectionist elements in industry trade regimes and to overestimate the amount of changes that take place in their fundamental rules. Appendix VI: Smith, AD 2009, ‘Financial sustainability through contingency planning: multi-case study’, International Journal of Sustainable Economy, vol. 1, no. 4, 317-334. International Journal of Sustainable Economy   Issue:  Volume 1, Number 4 / 2009   Pages:  317 - 334   Financial sustainability through contingency planning: multi-case study Alan D. Smith Department of Management and Marketing, Robert Morris University, Pittsburgh, PA 15219 3099, USA Abstract: As the discipline of strategic management grows from the lessons to be learned from the current financial crisis, it is important to take strategic perspectives at how industries, represented by specific companies, could be affected by such economic disasters, both in terms of internal and external stakeholders. As companies establish strategies for financially sustainability, this article looks at three major companies representing this respective industries with successful and disastrous results. Outlined are strategies and concepts that can be helpful for managers and executives to navigate in today's chaotic marketplace, citing that innovative management is necessary for businesses to survive long-term recessions and depressions and to prove the framework for long-term financial sustainability. The basic lessons to be learned are for firms not to panic due to corporate fear and greed; stay the course and recommit to their core values and competencies; and selectively cut costs. Keywords: case studies, contingency planning, customer behaviour, financial sustainability, strategic planning, strategic thinking, strategic management, economic disasters, innovative management, recessions, depressions Read More