Organizational Change
Introduction
It is critical for managers and leaders to be successful at organizational change. Organizational changes occur when an organization alters its overall success strategy, removes a major section or practice and when it wants to change the nature by which it operates. The changes also occur when an organization evolves through several life cycles. It is evident that for an organization to develop, it has to go through significant changes at various points in their development. An organizational change agent has to have a clear understanding of the structures and basic systems of an organization in order to implement organization changes. This paper will analyze major organizational changes in General Motors organization. In order to make progress, change has to take place.
Overview of General Motors
General Motors Company is an American automaker whose headquarter is in Detroit, Michigan. The Company was established in 1908 and it is the second largest automaker globally. GM has approximately 205,000 employees in different regions of the world and does business in almost 157 countries. The cars and trucks produced by GM are sold and serviced through brand such as Chevrolet, Buick, Cadillac and GMC. The largest market for GM Company is the People’s Republic of China, followed by the U.S.A., Germany, Brazil, Canada, United Kingdom and Italy. General Motors Corporation transformed from a traditional organization model to a transformed organization model. This change had a great impact on company’s customer base, workforce and the local communities that surrounded General Motors factories. Several support systems were put in place to ensure that the organizational change was successful.
General Motors organizational change
A traditional organization model is characterized by a hierarchical structure where the executive or the president is at the top, followed by senior managers or vice presidents and then the management team. Majority of employees are often at the bottom level. The grouping of jobs in a traditional organization model is based on departmental functions. This type of organization model was present in General Motors. The Company had several divisions of independent automakers for instance Oldsmobile, Cadillac, Buick, Pontiac and Chevrolet. There was a different operation plan for each independent automaker and hence, the automakers competed with each other. The competition among the company’s own independent automakers and lack of decentralization proved to be extremely costly (Mills, Dye and Mills, 2008).
Contrary to the traditional organizational model, a transformed organizational model is unified and centralized. The model consists of a team and several individual working towards achieving a common goal. Under a transformed organizational model, corporations are managed in a cost effective and more streamlined manner. There are only a few departments performing different tasks with different needs. Jack Smith, the then General Motors CEO saw a great opportunity to implement change in GM Corporation. Mr. Smith and his successor, Rick Wagnor spent a number of years changing GM from traditional to a more centralized organization through the use of the transformed organizational model (Mills, 2008).
The first step towards achieving a centralized administration occurred between September and December, 1933. A new set of managers was established and took over at the five car divisions. There was also dissolving of the operational committee and elimination of the executive committee. The GM strategic strategy was revised. Depression had created an extreme decline in demand for the medium and high-priced cars. Hence, GM could no longer afford to five car divisions that operated in separate price classes. A decision was therefore made and four of GM’s divisions were to compete with each other in the low-priced market. In order to cut costs, the divisions had to share frames, chassis and other parts. This meant that productions and designing cars would entail cooperation and coordination among the four divisions (Spector, 2010).
The general office also underwent reorganization. The office was given a formal control over operating and financial decisions. GM CEO felt that financial decisions required intense assessment of prospective policies. To effect this, general executives who had better knowledge of prospective policies had to be included in financial decision making process. The financial and executive committees were replaced with the policy and administrative committees respectively. The policy committee was given total authority over operating and financial decisions. The administration committee on the other hand would oversee operating policy. This reorganization led to creation of a structure in which top executives were involved in making virtually all the key financial and operating decisions. This is an attribute associated with transformed organizational model (Spector, 2010).
In January 1942, GM was converted to defense production. This conversion returned the corporation to a participative decentralization state. The administration committee took the responsibility of running the corporation. Division managers were included in the administrative committee. This arrangement however did not result to giving of the divisions’ uncontested control over policy. There was formulation of perspective policies in functionally defined policy groups that were composed of general office men. The groups presented the proposed policies to the administration committee for debate, ratification and modification. This arrangement gave divisions the power to revise, amend and veto policies (Taylor, 2004).
In 1946, a financial policy committee of GM owners and general executives was formed. The committee was to aver authority over financial policies. An operating policy committee was also formed and its sole responsibility was to oversee strategic planning. The administration committee still included division managers but it had no legal authority. It had the responsibility of making policy recommendations to the operating policy committee. In this new organization the president and not the chairman served as GM CEO and were given authority over the financial staff.
The transformation had a great impact on the GM diverse workforce. The staff, including the management had to learn a new set of skills. The staff has to learn about a central software program which included all the offices of GM globally. This is due to the fact that in the traditional model, each independent automaker was using different computer software. This made the communication process difficult and at times impossible. Training staff members was a challenging task that eventually became productive and much easy. The engineers of GM also had to centralize and learn new methods of engineering and design. The staff had to learn how to communicate and work as a team and not as individual persons completing a given piece of puzzle (Taylor, 2004).
Several support systems were put in place in order to make sure that the organizational changes were successfully implemented. A management committee and an Automotive Strategy Board were established so that they could keep GM’s CEO informed about the on goings of the corporation. Monthly meetings were also established and attendance was compulsory. Global offices attended the monthly meetings by use of phones. Moreover, the regional operations heads utilized the meetings so that they could inform the CEO about the progress of the organizational change. These monthly meetings ensured that GM staff was working as a team towards achieving a common goal. This is one of the attributes of the transformed organizational model (Taylor, 2004).
Since GM is a large corporation, several people were affected by the organizational change. Examples of stakeholders that were affected are the local communities where GM factories were built and the GM customers. Some of the GM brands were discontinued and this made servicing or upgrading of some vehicle models difficult for customers. It is evident that majority of customers are loyal to particular vehicle brands. Hence, when those brands are discontinued the customers have to look for a new brand. Discontinuation of some vehicle brands resulted to GM losing some of its customer base (Taylor, 2004).
Majority of communities build and settle around large employers. During the transition process, some of the GM factories were closed with the aim of streamlining production. It is evident that when large corporations in towns close their factories, small businesses such as gas stations, restaurants, groceries and real-estate markets suffer financially. This in turn causes a downturn in the financial well-being of the community. Everything including the sale tax and property tax is affected. Financial suffering causes a series of events in the community for instance, less money coming into the community results to unemployment, budgets and downsizing of the fire and police departments. Due to downsizing, people tend to move out of the town resulting to starting of the cycle all over again (Dawson, 2003).
Hence, GM change from the traditional to the transformed organizational model resulted to both positive and negative effects. The transformation led to suffering in some communities in that families lost their jobs, people lost their homes and some businesses had to close or downsize. Moreover, some towns were forced to rethink of their existence. There were some positive aspects of the organizational change. First of all, GM became a corporation that worked as a team. Streamlining of functions and operations led to reduced operational cost. The other benefit is that the transformation resulted to establishment of effective methods of communication (Taylor, 2004).With the current intervention of the U.S. government, GM has eliminated vehicle brands, slashed headcount, reduced its debt and benefit obligations and shuttered dealerships. The company now operates with approximately 101,000 employees in N. America and out of these employees, approximately 27,000 are salaried workers. In 1998, GM employed 226, 000 employees in North America.
Fritz Henderson, who was once a CEO of GM, restructured the company’s organization. Henderson thought about a new culture for GM Company. He thought of culture priorities and the organizational design. According to Henderson, the vision of the new GM culture consisted of four percepts which were accountability, customer and product focus, risk-taking and speed. Henderson employed the percept of speed in the process of implementing organizational change.The major factor that contributed to the operational change in the new GM is bankruptcy. In July 1998, the top of GM organization was restructured and the role of Human Resource in organizational change was to support culture change and not drive it. The company leaders established a new performance management system, an education series to inform people about the new culture and a communication system to articulate the cultural values (Spector, 2010).
In the past, the company has implemented several culture change initiatives for instance GoFast, a program that was meant to reduce bureaucratic waste, GMS, the company’s version of lean production system that made Toyota and other descendants of Japanese manufacturers and finally Synchronous, a top-down process engineering program. In all the mentioned cases, GM was struggling to impose cultural change in the highly bureaucratic company in which departments, brands and regions operated in a form that they were self-governing and competing states within a corporation (Dawson, 2003).Bankruptcy in GM could be utilized as an opportunity for organizational change. Bankruptcy resulted and forced the company’s executives and the entire salaried workforce to change or leave the company. Bankruptcy led to decreased resistance to change. Hence, the company has been able to make organizational changes at great speeds. These changes were effected under the leadership of the CEO, Fritz Henderson and one of the GM’s culture guru, Oster.
Two teams were assembled, a culture transformation team and an operating model team. The company eliminated the automotive product board and automotive strategy board. The boards were replaced with a single committee consisting of eight people. The single committee was implemented in order to increase the decision making process. The committee was to report to the CEO and meet twice a week in order to discuss GM product issues. The operating team comprised of ten executives from various divisions worldwide. These executives overhauled the company’s decision-making process and bureaucracy at the top levels.
GM needs to implement cultural changes. Executives should be held accountable for performance and results, employee education should include exposure to how other industries and organizations operate. Moreover, promotions have to be on the basis of merit and not patronage. The goal of the change should be to democratize the act of decision-making so that employees closer to a product, problem or customer can act promptly and decisively to the turbulent market conditions. Rather than changing the culture directly, the management should work with the existing culture in order to transform the organization (Mills, 2008). From the GM motors case, it is evident that in order to make progress change has to take place.
Conclusion
General Motors is an example of a company that has to make several organizational changes in order to remain competitive in the general motor industry. Previous organizational changes did not prove to be very effective. Perhaps bankruptcy could be utilized as the best opportunity to implement constructive organizational changes that will lead to the company’s growth and development.
References
Dawson, P. (2003) Reshaping change: a processual perspective. Routledge.
Mills, J., Dye, K., & Mills, A. J. (2008) Understanding Organizational Change.
Taylor & Francis.
Spector, B. (2010) Implementing organizational change: Theory into practice (2nd Ed).
UpperSaddleRiver, Prentice Hall.
Taylor III. A. (2004, April 5) GM gets its act together: How America No. 1 Car Company changes its ways and started looking like…Toyota. Fortune, 149, 136-146.
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