Change_in_General_Motors

Change in General Motors MGT435 - Organizational Change Professor Benjamin Zuckerman 10/17/2011   Change In General Motors Founded in 1902 and producing over 450 million vehicles globally, General Motors Corporation has always been a leader in the automobile industry. Since their inception, GM has enjoyed rapidly escalating sales and revenues and operates in nearly every country in the world. The recent downturn in the market has challenged their ability to capture and uphold their market share while adding to their bottom line. In times of economic crisis, corporations have no choice but to make decision that are significant and enable their corporations to carry on. GM needed to initiate change in all functions of the company, including structure, management style, branding, marketing, wages, and technology. The automobile industry employs nearly ten percent, or one out of ten, of the nation’s labor force. GM is one of the largest purchasers of U.S. steel, iron, aluminum, copper, plastics, rubber, electronics, and computer chips. So, in essence, the survival of many other American businesses relies on the survival of GM. If GM doesn’t make some essential changes to start realizing profits, many of their suppliers will suffer the same inevitable fate. According to the Auto Interiors Conference, U.S. auto sales for all foreign and domestic manufacturers have declined by more than 30%, which is the largest decline in over 50 years. (Mayne, 2010) One of today’s top concerns in the business/political environment is the necessity of changing our energy dependencies and become more “green.” GM needed to be more proactive and implement changes in the company that would make them more environmentally friendly. Their ideas were to offer a more streamlined brand that meets the highest fuel efficiency standards without sacrificing any of the quality. Innovation was the key to GM’s successful transition and showed that the company needed to have a vision for the future that would not only regain the success they had experienced in the past, but pave the way for a more stable organization. Many changes were needed to take place within the GM organization that would eliminate some of the brands that were sacrificing in quality. The discontinuance of the Pontiac line was the first step for GM to drop the brands that were lacking in demand, design, quality, and potential for profitability. They needed to focus on the remaining brands that could be engineered to be more cost effective and product the highest return on their investment. One GM executive claims that “over the next five years, GM will be focusing on the restructuring of our brand while focusing on our core business. Chevrolet, Cadillac, and Buick will remain at the core of our business. Other brands such as Saab, Saturn, and Hummer will either be sold or closed.” (Heller, 2008) The remaining brands will need to be monitored closely and continually evaluated for improvement if GM wants to remain proactive with future trends. Technology is another area where GM decided to focus some of their company-wide changes. There has been a massive burden put on automobile manufacturers to engineer vehicles that will replace our current fossil fuel based models with ones that use renewable resources for energy. This burden forced GM to be innovative in the way they engineer their vehicles and the power sources they use. A GM executive commented that “Hummer doesn’t fit with GM’s strategy of fuel efficiency and sustainability, but accentuates a lifestyle of excess that doesn’t promote the green initiative. Although the brand is still profitable today, its viability for the future is in question.” (Norton, 2010) Scientific research on the effects of global warming and green technology pushed industries in all areas of business to become more environmentally friendly with the products they manufacture as well as their business practices. GM has answered the demands by introducing new product lines that offer more fuel efficient choices for consumers including hybrid, electric, and FLEX fueled automobiles. They have also begun offering incentives, such as rebates or discounted finance rates, to entice consumers to purchase these new eco-friendly vehicles. GM will no doubt need to remain vigilant with their pursuit of alternative energy vehicles to counteract the issues of rising oil prices and consumer demands for cleaner and cheaper options. Another factor that has hindered the growth of some companies is the rising cost of human resources. According to Annenberg Political FactCheck, the average salary for an automobile assembly line worker, including benefits and incentives, is roughly seventy dollars an hour. (Miller, 2008) Some of GM’s solutions for reducing these costs were to automate as much of the manufacturing process as possible to reduce the number of man hours needed per vehicle. Wages are about 90% lower overseas, where many of GM’s largest competitors manufacture their vehicles. That fact alone, forces GM to search for as many alternative that will lower their cost of production without sacrificing the quality of workmanship. GM’s use of robotics to aid in the manufacture of their vehicles has greatly reduced the number of staff and allowing them to increase their return on investment. The other factor that is complementary to cost is the amount of deficiencies in their operation, running rejects. The products that don’t meet the quality control benchmark are turned back to production to be tweaked and refined if even salvageable; this means nothing other than excessive and avoidable cost. A good model GM embraced was one similar to the TPS (Toyota Production System). The Japanese engineering of vehicles has statistically proven to break down less. To the market and consumers this translates to added value and reliability for the money spent, value driven thought processes are going to be essential and critical to gaining a competitive edge and adding to the core values of General Motors. The importance of producing a quality long lasting product is more important now than ever. The cost of a vehicle isn’t exactly cheap, so the consumers are very cautious where and how they spend their hard earned dollars. If two vehicles are comparable on the scale of appeal but incomparable on the scale of dependability, one being more dependable (Toyota) and the other being less dependable (GM) which one do you buy' I think it’s a no brainer; you buy the one that will deliver more value for the money spent. In the convenience store business three things are important to survival: location, location, location. In the production of products three things are as well important to survival: quality, quality, and quality. As a manufacturer, GM can’t compromise the quality of their vehicles with the fierce competition in their industry. The next area of concern for GM was the recruiting of new and diversified talent. I can’t stress enough the importance and benefits that are sought from diversifying your workforce. The natural talents that flow into an organization are what makes for a win or fail in terms of survival. With GM operating nearly all over the globe they have at their fingertips the convenience of covering geographical barriers that most other companies would struggle and render extreme cost to overcome. GM has promoted and recruited talent from all ages, all sectors that are relevant to their operations, all statuses, all nationalities, in essence the best complexion for the corporation to take would be one of a melting pot where all types come together and pursue a common purpose. If GM would focus on strategically placing employees in the right positions and spend the time and money required to diversify, they would notice an exponential flow of information and variety of ideas flowing into the organization to better enable management to address the issues being faced. Another added benefit of diversifying is the ability to obtain knowledge from all different cultures. This gives insight to management about trends in other nations and opens up ideas for how to construct products specifically catered to their needs. In addition to all the other moving parts of reconstructing a goliath organization such as GM, the main and most important factor to change and master first is an effective style of management. I think the only way a company can be successful with any type of change is to implement and embrace a style of management that will allow their personnel to open up and feel comfortable with their leadership. Effective change starts from the top and flows down the hierarchy. General Motors has put together a structure that will focus more on task groups and teams to pursue their functional goals. GM has tried to flatten their structure and create a more nimble and less mechanistic organization. According to a GM executive, GM is in the process of changing their structure to better suit the business environment. He states that “General Motors is undoing the corporate structure it followed for the last 90 years. GM Chairman Jack Smith announced the company is eliminating vertical integration, changing traditional manufacturing plants, and abolishing independent car divisions”. (Heller, 2010). Again, I think this is a step in the right direction to rid the company of the pitfalls and burdens it has been trying to carry for so long. However, all of the changes that need to take place will only be effective if management is creating a sense of unity within the organization and leading in an employee oriented manner. This brings me to my next area of focus for change, marketing. This function of business is the engine for decision making. Marketing serves as the means by which the new vehicles coming off GM’s production line are delivered to the market as a value proposition. General Motors has beefed up their marketing department by adding and implementing a diverse set of minds to their payroll. In changing their current practices of marketing they have found it crucial to pursuing untapped growing markets and claim their piece of the market share while it’s still growing. There is much opportunity around the globe that hasn’t yet reached its time for harvest, and when the opportunity emerges GM needs to be there offering their with the finest marketing staff possible offering irresistible products. GM has to be careful not to stay in their current practices; they have constructed a plan to recreate themselves in both their products and talent that is being recruited. The auto market as a whole spends enormous amounts of capital to brand themselves and their products. With GM’s current loss of trust among their markets the need for a sound and creative marketing department is higher than their competitors. The reason being is because not only are they trying to engineer new vehicles and sell them, they are also trying to project to the consumers that they are a sound company that produces safe, reliable, and up to the standard vehicles. Tied into marketing is the science of statistics, the marketing function of an organization the size of General Motors should resort to using the relevant sciences to solving problems. For example, in order for GM to manufacture vehicles with a high probability of sale they first need to know the market as a whole. Statistics show that the youth demographic is growing and over three billion people will be between the ages of fifteen and forty-four by the year 2020 (Census Bureau, 2010). Once they know the market they can then segment it in whichever way they see fit. Once they have a comprehensive view of which their customers are they can start designing and engineering vehicles that will appeal to their target markets. Absent of a sound understanding and application of basic marketing skills GM will find themselves in a position where they are producing vehicles that have little to no demand. My hope for GM’s future is for them to be open-minded about the changes in their environment. They need to look at the current crisis in a positive opportunistic view and not as just another barrier to overcome. The changes that will be required in the near future can be an opportunity for the company to show they have what it takes to remain a competitor in the twenty-first century auto industry. None of their competitors have a golden book with all the answers in it, if they did there would be no competition. In retrospect, General Motors has been in business for a century and has managed to overcome extreme hardships through their journey. The need for the manufacturer to change and recreate has shown to be urgent in the midst of all other concerns. GM has the ability to survive and prosper if they will make the necessary changes in how they operate. The goliath corporation is making steps in the right direction and hopefully they will persevere and make a turn around. All aspects of their operation could stand a fine tooth comb to be run through it to seek out the deficiencies and redundant processes that are hampering the company’s performance. Management has got to step up to the plate and accept the fact their business environment has changed. Once they have embraced the idea that change is their number one goal I think the results being sought by their many stakeholders will start to become a reality. References Heller, R. (2008, May 2nd). General Motors Managers. Retrieved May 10th, 2010, from Thinking Managers. http://www.thinkingmanagers.com/companies/general-motors.php Mayne, E. (2010, May 14). Ward's Auto Interiors Conference. Retrieved February 12, 2011, from Ward'sauto.com: http://wardsauto.com/ Anonymous. (1999, June 8). Population Estimates. Retrieved February 12, 2011, from U.S. Census Bureau: http://www.census.gov/popest/research.html Miller, J. (2008, December 11). Labor Costs Aren't the Same as Wages Earned. Retrieved February 12, 2011, from FactCheck: www.FactCheck.org Norton, M. (n.d.). General Motors Business Strategy. Retrieved February 12, 2011, from General Motors Business Plan: http://myweb.wit.edu/nortonm/coursework/GM_Business_Plan.pdf McGhie, Tom (2010, March 10). The driving force behind the survival of Vauxhall; From Mission Impossible To An Electricfuture-Nick Reilly’s Big Turnround. Retrieved February 12, 2011. from http://proquest.umi.com/pqdweb'did=1995858631&sid=5&Fmt=3&cl ientId=74379&RQT=309&VName=PQD