General Motors Organizational Structure Case Study

But industry-watchers are increasingly convinced that the departure of Mr. Perot last week is just the beginning of wrenching changes ahead, as G.M. struggle to lower its horizons and make profits again, with a smaller market share.

General Motors' fortunes have been on a roller coaster ride since Mr. Smith took over as chairman in early 1981, just as G.M. was about to announce a $763 million annual loss, its first since the 1920's.

Concessions wrung from the United Automobile Workers union in 1982 and improving car sales turned the company profitable again, and by 1984 G.M. earnings hit a record $4.5 billion.

Emboldened by the financial turnaround, Mr. Smith began to transform the corporation. To react more quickly to the market, he continued an internal restructuring under which Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac were not run as separate car companies but combined into two ''supergroups'' - one for large cars, one for small.

He also paid $2.5 billion to acquire the Electronic Data Systems Corporation from Mr. Perot, in part to buy computer expertise for G.M. And in 1985, he announced that $5 billion would be spent to establish a separate internal corporation, Saturn, intended to build small cars with the same quality and cost as the Japanese using some of their innovative management techniques.

Later that year, he paid $5 billion for the Hughes Aircraft Company and its technological skills. He also invested billions in high-tech, robot-heavy ''factories of the future.''

Mr. Smith was widely hailed for the innovative spirit behind these moves, until the results started coming in. For the last two years, G.M. has consistently produced more cars than the American public wanted to buy. Each time that dealers' lots became clogged with unsold cars, G.M. came out with sweeping financing-incentive campaigns that other carmakers grudgingly adopted.

The climax came this fall, when G.M. offered loans with interest rates as low as 2.9 percent, about one-third the commercial car-loan rate. The campaign sold cars, but it was so costly that it caused G.M. to post its third-quarter loss.

The losses and the reduction in market share have caused a reassessment of Mr. Smith's management and strategies.

Analysts point out that despite the expensive new factories that bristle with robots and that promised low-cost production, it still costs G.M. more to build a car than it costs either Ford or Chrysler. And despite the new supergroups and the billions that have gone into design, look-alike styling has made it difficult for buyers to differentiate between Oldsmobiles and Cadillacs - and sales of both have declined.

When it lowered G.M.'s credit rating recently, Standard & Poor's, the rating agency, noted that the company ''no longer dominates the market, having lost both styling and quality leadership.'' Indeed, sales of a new line of luxury cars - the Oldsmobile Toronado, Buick Riviera and Cadillac Eldorado and Seville - have been so poor that one analyst has estimated that G.M. will earn $750 million less on those models than it did on the cars they replace.

The line at G.M. is that the costly investments in new factories, acquisitions and reorganization had to be ''frontloaded'' and that the payoff -in both reduced costs and diverse styling - will be visible soon.

''There's no question in my mind that we've turned around from the bottom,'' said F. James McDonald, the president of G.M. in an interview last week. ''We know that internally, and we'll prove it to the public.''

In a shift in strategy, company officials now say they will cut production to match sales, rather than resort to costly incentives.

A round of recent layoffs appears to underscore that determination. Last week, G.M. announced that 4,500 workers would be indefinitely laid off from its luxury-car plants. Two weeks ago, it announced layoffs in some smaller-car plants. And the company is also beginning an effort to cut its white-collar work force by 25 percent.

Mr. McDonald also said that G.M. is evaluating its components operations - the company is more vertically integrated than any of its domestic rivals - and is prepared to get rid of those that cannot match outside suppliers on cost or quality. ''Whatever penalty we suffered in the past for our high integration will fall off,'' he said.

But as Mr. Perot is fond of pointing out, even movement in the right direction is not enough if the pace is too slow. Below, some advice from outsiders familiar with the industry: MARYANN N. KELLER Auto analyst, Furman Selz Mager Dietz & Birney Inc.

TODAY, G.M.'s biggest problem isn't costs or acquisitions or over-reliance on gee-whiz technology. It's in the dealer showrooms.

G.M. has a product problem. Their cars aren't selling, and they are losing market share. They forgot they are in the consumer products business and got overly concerned with the details of how to put a car together. People don't care if it is manufactured by robots or if the dealer can order it directly from a factory computer.

I know financial analysts are supposed to be concerned with costs and numbers, but I see the revenue line. If they were selling more cars, their revenues would increase and that would help with costs.

What Roger Smith needs to do is get some people together who have good market know-how and have them figure out how to make the cars in the showrooms today more attractive. He can't wait until 1990 or 1991 for new designs to come out of the G.M. Technical Center. The problem is now.

Other companies have done it. Ford's Mustang is an old car. But Ford has kept it fresh by putting in a bigger engine and offering a convertible version and doing a lot of smaller things. Chrysler showed you can build a whole product line from one platform with a little imagination. You have to pay attention to what the customer wants and give it an an affordable price.

Where is the Lee Iacocca of G.M.? PHILIP CALDWELL Former chairman of Ford, now managing director, Shearson Lehman Brothers

DEALING with the fundamentals is most important - offer what the customers need and want, produce the highest possible quality product, produce at low cost. If you follow the fundamentals, you can have your cake and eat it too.

I don't want to give unsolicited advice; I can only talk about my experience at Ford. You don't need to be a hotshot engineer or salesman to be an effective leader. You need somebody who can bring together a team, create the vision, know where he would like to take the company and explain to people why it is important.

You also need the capacity that fits the market share that you're likely to get, and you shouldn't delude yourself about it. And you have to involve the entire work force, or you squander the most important resource you have. Get initiative and ideas flowing freely, and instill a genuine feeling of ownership throughout the work force.

This formula has been in use at the Ford Motor Company since 1979 and it brought about one of the most successful turnarounds in American industry. I know of no better formula for G.M. or any other business, and I presume G.M. is undertaking that sort of program.

The most important thing is to get the products right. Ford developed a product line where the shape of the cars was developed out of the quest for significant improvement in fuel economy. Attractiveness came second. The concept was not to have a gimmicky new shape.

Next, you have to be able to sell your product based on low costs. Any business must decide whether it can make a profit based on how small it believes the market might be. If the market turns out to be larger, all the factors will be working in your favor. You may not be able to take advantage of the last inch of potential, but you will have less exposure on the downside.

And you have to be patient. At Ford, our turnaround effort started in 1980, we saw no change for two years. We kept asking why, and nobody could see what we were doing wrong. Then it was almost like the tides of the Bay of Fundy when the break came in 1982. It was like a flood. DOUGLAS FRASER Retired president of the United Automobile Workers

GENERAL MOTORS' main problem is that its cars are not attractive to the American public. Look at what they've done, or haven't done, to the Cadillac. Cadillac used to be part of the American vocabulary, the American standard of the best. They downsized it; it's not distinctive enough. All the cars look alike. I hope they're on the way to designing cars that are distinctive and have greater appeal.

They have also tried to do too much at one time. They thought they could put up new assembly plants with state-of-the-art technology and that all their problems would disappear. They miscalculated how quickly they could bring new technology on line.

The buyout of Ross Perot was very bad for their image. But I hold no brief for Ross Perot. He says we should listen to the workers and let them express themselves. Yet E.D.S. is run like a Marine boot camp. There's a dress code, women can't wear slacks, men can't have beards. When the U.A.W. tried to organize E.D.S., they came at us like savages.

About the recent layoffs, there were no surprises there, at least not for anyone who knows the industry. I resent how they did it, because they sent shock waves and raised the level of insecurity among workers. In making the announcement that way, they placated Wall Street, which thinks they really stepped up to cutting costs.

The huge inventory they now have is the result of a strategy that didn't work: Those guys are bean counters, and they know every car sold every day. They built up that inventory hoping to capture a larger share of the market by offering financing incentives. But Ford and Chrysler didn't just sit there; they were angry that G.M. cut the interest rates and they met the competition.

Now G.M. is saying, we won't do that again, we'll cut production instead. The 4,500 laid off are just at the assembly plants; it will spread to other G.M. plants.

G.M.'s got problems, but they have a lot of strengths too. Everyone likes to jump on a giant when he's down, that's the price of being big. But there's a lot of talent there. I'm not concerned about G.M.; I'm worried about G.M. workers. RALPH NADER Consumer advocate and founder of Center for Study of Responsive Law

THE first thing G.M. should do is retire Roger Smith. He's a finance man who doesn't know how to focus on improving the quality of the product.

G.M.'s cars must be safer, more durable, more fuel-efficient and more quality assured. Instead, the company has been going the other way. They think if they automate their factories, that will pull them ahead. But if people don't perceive the cars to be good, they won't buy them.

G.M. should work on product defects and stop being insensitive in dealing with complaints. They give customers the runaround, and their customers have been forming G.M. lemon groups.

The company is also behind in technology. Why should they be behind Ford in anti-lock braking devices? G.M. is going toward electronic gadgetry - it's the modern-day substitute for the styling mania of some years ago. The Japanese broke into the U.S. market because they had quality and fuel efficiency instead.

What G.M. needs is a more diverse board of directors instead of a bunch of industrial reactionaries and yes-men. They couldn't even stand Ross Perot.

As long as Roger Smith is there, they will not change. His great frontier is robotics. The guy who can turn G.M. around, guaranteed, is John Nevin, chairman of Firestone. He was at Ford; he was head of Zenith, a real quality-control company. Then he took on a crumbling company known as Firestone. He has the right attitude toward consumer complaints. He knows how to improve labor productivity. And he would know how to improve the product. He has said he's never heard of a product recall that was labor's fault, it was all management. He's a believer in air bags. There's the guy. JOHN J. NEVIN Chairman, Firestone Tire, and a former Ford executive

THE company's problems are similar in both nature and degree to the problems that have characterized many of the nation's smokestack industries.

To be successful in the future, G.M. will have to define its strengths and focus its resources on those parts of its business. It's going to involve some very painful restructuring. I'm sure there are a lot of people at G.M. who are making critical judgments as to whether its long-term interest is served by doing a lot of things by itself, as it has, or by tapping resources of suppliers.

There have been many instances in the auto industry where companies decided that a supplier that specializes in a particular technology or a particular component can do it more efficiently than the end-user company can do it itself. Throughout the auto industry, decisions are being made to buy engines or radios or even the design of products from outside companies.

Chief executives anywhere, even at G.M., tend to get more of the credit than they deserve when things go well - and more of the blame when things go wrong. Right now, Roger Smith is on the down side of that equation. IRWIN KATZ President, Kayson Chevrolet, Croton-on-Hudson and past president, Greater New York Automobile Dealers Association

GENERAL MOTORS' main problem is its immense size. It takes an inordinate amount of time to get things turned around, even though eventually they do get on target as to what consumers want. It takes longer than with smaller companies and entrepreneurs. Ross Perot, whom I admire tremendously - the last time I admired someone so much was when Winston Churchill was alive - ran an entrepreneurial company, even though E.D.S. was big.

An example of this problem is G.M.'s sluggishness in making somewhat bigger cars now that gasoline has dropped below $1 a gallon and people want slightly larger vehicles.

Another problem is pricing. The consumer has become accustomed to periodic price rebates and interest subsidies. Sales are being adversely affected because G.M. does not now have a price-war, interest-subsidy program, except for the Cavalier model. As much as the G.M. finance committee does not want to get back into interest subsidies or price rebating, I am afraid the consumers will have their way. If no automobile manufacturers had the rebate programs, I'd be against them; they confuse the consumer, make aberrations in the market, causing prices to go up and down. But if the others offer them, G.M. had better get into the fight and produce an equal or superior program. DAVID E. DAVIS JR. Editor, Automobile Magazine

MORE than anything else right now, General Motors needs a home-run product. It needs to bring out a car like the 1955 Chevrolet or the Honda Civic, one that changes the game and makes other manufacturers play by the new rules.

The 1955 Chevrolet was light and fast and good-looking by the standards of the time. It forced Ford and Chrysler to change their approach to car design, just as the Civic did in a later era.

Roger Smith should identify the most creative minds in the company and turn them loose to develop a product that will blow everyone else out of the water. They have the capacity to do it if they want.

He should also realize that the market is becoming more and more fragmented. The companies making money today are those finding the niches in the market and satisfying them. Economies of scale don't count for as much as they once did; you have to be lighter on your feet to take advantage of shifts in the market -the way the Japanese do.

G.M. also needs to balance the lessons of the Poletown and Fremont assembly plants. The Fremont plant, which is managed by Toyota, is a demonstration of what can be done with highly motivated human beings and an indication that robots and computers aren't the answer to everything. At Poletown, which is a G.M. plant, the robots were more flawed than the humans they were supposed to replace. It shows that the old axiom is true: If the original idea isn't very good, all the computers in the world won't save it. JOHN Z. DELOREAN Former vice president, G.M., founder of DeLorean Motor; currently on trial on Federal racketeering charges.

IT'S not Roger's fault or anyone else's - it's that the American automobile industry has essentially had a monopoly for 70 years. It was really a Detroit monopoly, where G.M. took half, and Ford and Chrysler fought over the other half. That monopoly led to lavish overhead, including lavish union contracts and lavish salaries for management.

The biggest need is a dramatic reduction in the overhead of the companies . . . and the biggest part of that is there is too much management. On that, Roger's on the proper track, although I think you could eliminate 50 percent of the salaried workers.

They also have to have much less vertical integration. They make too much of what they sell. They've got to buy more of it on the outside. Foreign manufacturers, especially in Japan, get much more from independent suppliers than U.S. companies do.

To compete at first, the U.S. companies may need to buy from Brazil or Mexico or Korea. Then they could come back to the U.S. later. For our country, in the short term that would probably reduce employment, but in the long term it would stabilize the industry and improve employment.

They also have to build the right products. For example, my brother is a Cadillac dealer. He told me the new Seville and Eldorado are not nearly as salable as the previous ones. I assume it was the look, but whatever the reason, they just aren't selling. Now that's not Roger Smith's fault, but somebody there didn't do the proper market research. There's no way that some guy making $600,000 or $700,000 or $2 million a year can have the proper perspective about what kind of cars to build for a guy who makes $20,000.

G.M. also should remember that its biggest asset isn't anything inside of G.M. It's the dealer organization. G.M. should try to maximize its profits through that structure. Those dealers have the best locations and the best salespeople, and if you give them the right product at the right price, there's no Toyota dealer or Honda dealer or any foreign dealer who can come close to them.

As for Perot's suggestion that G.M. needs to re-establish contact with its workers - to have them work together with management - that's easier to do in a young, growing company, as G.M. was years back. For G.M., that's going to take a dramatic change in management attitudes. AT A GLANCE: General Motors All dollar amounts in thousands, except per share data Three months ended Sept. 30 1986 1985 Revenues $22,800,000 $22,500,000 Net income 264,000 517,000 Earnings per share $0.56 $1.53 Year ended Dec. 31 1985 1984 Revenues $96,372,000 $83,890,000 Net income 3,999,000 4,516,000 Earnings per share $12.28 $14.22 Total assets, Dec. 31, 1985 $63,833,000 Current assets 24,256,000 Current liabilities 22,299,000 Long-term debt 2,867,000 Book value per share, Dec. 31, 1985 $73.78 Stock price, Dec. 5, 1986 N.Y.S.E. consolidated close 71 Stock price, 52-week range 88 5/8-65 7/8 Employees, Dec. 31, 1985 811,000 Headquarters Detroit

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The following thorough post is a combination of two priorguest posts to Switch & Shiftplus additional updates after Mary Barra’s second appearance before a House subcommittee.

The Background

The GM ignition switch recall tragedy led to at least 13 deaths and was the result of 11 years of failure on many levels.  It’s a live case study on a sad culture crisis we all can andmust learn fromsince culture is the most powerful force in organizations.  Rarely do we have a chance to pull back the covers and see a culture with some serious dysfunction from an organization that still accomplishes amazing work on a global scale in spite of it all.

Mary Barra’s initial appearance before House & Senate subcommittees

The first session kicked off with a strong proclamation that the Committee would be asking GM what they are doing to “not just fix a car but to fix a culture.” Unfortunately, only about five minutes of over four hours of testimony across the two days specifically zeroed in on the subject of culture.  Most of the discussion was about process and people which are only the surface of this issue and the GM culture.

There is no doubt in my mind GM possesses all the processes you could ever imagine to prevent this type of issue.  I personally experienced the relentless power of GM to drive quality when I was a VP of Quality at a major supplier of safety-critical products and GM was our largest customer.  A quality defect or potential recall could unleash work nearly around the clock for weeks on end with a “no excuses” mind-set.  I don’t believe for a second that this issue is about improving processes.  It is all about leadership and culture.

Mary Barra came across as highly competent and, to a great extent, culturally astute in her very limited discussion about cultureduring the testimony.  She made the following statements:

  • “We in the past had more of a cost culture and we are moving to more of a customer culture that focuses on safety and quality.” (So true about what’s needed at GM)
  • “We recognize culture change doesn’t happen in a year or two but we are well on that journey and we are dedicated to it and very clearly want to have the safest vehicles on the road.” (She better build momentum fast even though it’s a long journey)
  • “We’ve also rolled out new values (including) the customer is our compass, relationship matter, and individual excellence.” (Wow, a CEO even mentioning values in a crisis)
  • “Most importantly it’s leadership at the top. It’s the leadership of how we behave, of how we demonstrate when we make decisions.” (Love the personal accountability)

She assumed personal accountability for the situation and the culture change effort.  She repeatedly made reference to the “new General Motors,” which was an extremely gutsy move with all the baggage from the past.

Let’s look at some other points about Mary Barra and her beliefs:

  • The GM description of“Our Company”now starts with: “At the new General Motors, we are passionate about designing, building, and selling the world’s best vehicles.  This vision unites us as a team each and every day and is the hallmark of our customer-driven culture.”  Building clarity around a shared purpose and vision is absolutely critical and it appears like she is off to a good start.
  • She referenced values being revised but I could not find them on their website or in the16 page Code of Conductthey released earlier this year.  The Code of Conduct included some good content but it ended with a typical corporate warning about disciplinary action, termination of employment, etc.  It did open with a great letter from Mary Barra where she highlighted her belief that “culture can become a competitive advantage” and she also wrote: “One message should jump off the pages: We cannot cut corners in the pursuit of growth and profit. To do so would sully our reputation and undermine everything we are trying to accomplish as a team.”  How prophetic her words ended up being.
  • There is an interesting videoon the GM Careers site of her being interviewed before she took the CEO job.  She talked about the focus on culture change coming out of the bankruptcy, reducing policies, slashing bureaucracy and said: “if we win the hearts and minds of employees, we’re going to have better business success.”  She talked extensively about involving employees so the key will be making sure they are involved in the right areas and in the right way.

It obviously was not the first time the subject of culture change has been publicized at GM.  A thorough article highlighted some specific points that are quite relevant to the latest culture crisis.  It also led me to conclude that Mary Barra likely has a very clear understanding of what it will take to transform the GM culture.  Experience makes a tremendous difference with culture change efforts because we learn from success and failure.  This article summarizedwork related to the culture Fritz Henderson was drivingafter they emerged from the bankruptcy:

  • “Henderson distilled his vision of the new GM’s culture to four precepts: risk-taking, accountability, speed and, at the heart of it all, customer and product focus.”  It’s interesting how different this vision is from the “new GM.”
  • There was a 12-member culture transformation team that met regularly and the HR representative was, you guessed it, Mary Barra.
  • They brought in culture expert Jon Katzenbach from Booz & Company to help advise them.  He is one of the absolute top thought leaders in this space.  She knows what they implemented from his advice and what they did not.  She also knows the results and likely how to change things this time around.  She speaks with confidence about workplace culture and this is extremely rare in business today, especially from a CEO that knows how massive this change effort must be.  She must understand the culture fundamentals.

What GM must do to begin transforming the culture

I initially outlined a series of improvements GM would need to make over the next 12-24 months for the transformation to take hold:

  • This specific safety issue should be used as a cornerstone for improvement on many different fronts.  She is writing her own story on this one and I can’t wait to see how things unfold. It’s a tragic problem but it’s a clear issue where behavior was specifically in conflict with the purpose and values she has communicated.
  • Mary Barra should implement a “keystone habit” related to the communication of certain types of serious safety issues directly to her and it will set the tone for the behavior they need (refer to the bookThe Power of Habit and Paul O’Neill’s focus on safety and a related keystone habit as a foundation for a turnaround at Alcoa).
  • GM will need to provide totalclarity with their purpose, values, expected behaviors and why the new culture will drive the performance (results) they need. Mary Barra must focus the effort on a few very specific behaviors if there will ever be the chance of building momentum.
  • She will need to teach her organization in regular communication activities about the strategies, goals, and measures that support safety and the related behavior that must exist.  Employees will learn from this one specific area about how the broader “new GM” will operate.
  • She will need to reach deep in her organization to confirm there is meaningful behavior change.  Feedback and prioritization should be used to refine improvement plans so employees feel a part of the effort.  There should be specific approaches with long service employees to confirm meaningful change is taking place and new employees to confirm there is total clarity around expected behaviors and reinforcement from day one.
  • Reward and recognition systems should be refined to specifically emphasize the behaviors GM must shift or build.  It will be important to encourage practicing the new behaviors and connecting that practice to formal and informal reward and recognition systems.  Feedback from others should be used to confirm the new behaviors are being exhibited at all levels.
  • All employees should be involved in coaching training in some form so they know how to interact with each other effectively to support the behavior and results they need.  This is not top-down coaching but “collegial coaching” that moves in all directions (up, down and across the organization).
  • Leadership development and succession development programs should be overhauled to focus on expected behaviors and 360 degree feedback to confirm expected behaviors are being exhibited.
  • Their stated effort to build transparency and remove bureaucracy should specifically emphasizedriving out fearand people “acting on what they know” (the hallmark of an effective culture).  Countless systems and processes are inhibiting this behavior now so there MUST be a focus on behavior that cuts through whatever systems, reviews, meetings and other habits are leading to this fear.
  • Leaders that do not support the behaviors of the “new GM” should be visibly removed.  I hope specific engineers are not scapegoats for this effort but the action is focused on leaders that reinforce or exhibit toxic behavior.

I initially predicted Mary Barra would lead the greatest culture transformation of all time.  I expected her to build on her positive initial response and cover at least some of the recommendations I outlined since they are based on many culture fundamentals I thought she understood.  I watched all major communications from GM expecting to see more detail on their plans but the follow-up appeared to be completely focused on structure and process changes without clear effort to engage her organization in deeper, more meaningful change.  Two months passed before the independent investigation was completed and a thorough report was released.

The Volukas Report = A Sad Culture Story

The Volukas Report read like a novel with many characters, potential villains, a Wisconsin State Patrol report that surfaced the specific problem, an Indiana University study that identified the issue, countless committees, and legal case after legal case.  Unfortunately, the hero never emerged in this story. Engineers even identified the problem when they reviewed a crashed vehicle in a junkyard and “dispatched an investigator to buy a fish scale from a local bait and tackle shop” to measure how easy it was to move the ignition switch out of the “run” position.  It was shocking just how often this problem was specifically highlighted without resolution but it was “regarded as an issue of customer convenience rather than safety.”

The GM culture is the problem 

After pouring through the325 page investigation reportand the transcript of Mary Barra’s response in a Town Hall Meeting with employees, it’s clear that both the investigator and GM are not adequately addressing the root cause of this issue – The GM Culture.  I stand by that conclusion, as would the vast majority of workplace culture experts I know, even though the report included the following point: “whether ‘general’ culture issues are to blame is difficult to ascertain.” It is not “difficult to ascertain” at all.

This story screams “culture problem” like no other and it will not end with firings, countless policy and procedure changes, and a host of other top-down changes.  Mary Barra started on the right path in the Town Hall meeting by showing respect for the victims and no excuses when sharing the report findings:

“To give you a sense of the thoroughness and forcefulness of the investigation, I want to paraphrase a few of the key conclusions:

  • GM personnel’s inability to address the ignition switch problem, which persisted for more than 11 years, represents a history of failures.
  • While everybody who was engaged on the ignition switch issue had the responsibility to fix it, nobody took responsibility.
  • Throughout the entire 11-year history, there was no demonstrated sense of urgency, right to the very end.
  • The ignition switch issue was touched by numerous parties at GM – engineers, investigators, lawyers – but nobody raised the problem to the highest levels of the company.
  • Overall, the report concludes that from start to finish the Cobalt saga was riddled with failures, which led totragic results for many.”

After reading the report from the independent investigator, the only point I disagree with is the point about it not being raised to the highest levels of the company.  Yes, it did not reach the top leadership team and the report confirmed Mary Barra did not know about the issue until December, 2013. Her response was clear when she did hear: “Get the right data; then do the right thing.”  Unfortunately, many senior executives did know about the problem including a Vehicle Line Executive, a Chief Engineer, and three “senior managers” that were asked to “champion” the investigation.

Obvious culture issues in the Volukas Report

She stopped short of sharing some of the points from the report that provide a clear picture of some undesirable aspects of the GM culture.

  • Reluctance to Raise Issues or Problems: “Some witnesses said that there was reluctance to raise issues or concerns in the GM culture.”
  • The GM Salute: “One witness described the GM phenomenon of avoiding responsibility as the ‘GM Salute,’ a crossing of arms and pointing towards others, indicating that the responsibility belongs to someone else, not me.”
  • The GM Nod: “Mary Barra described a phenomenon known as the ‘GM Nod’…when everyone nods agreement to a proposed plan of action, but then leaves the room with no intention to follow through, and the nod is an empty gesture.”
  • A Proliferation of Committees: The issue passed through “an astonishing number of committees.  We repeatedly heard from witnesses that flagged the issue, proposed a solution, and the solution died in committee or with some other ad hoc group exploring the issue.  But determining the identity of any actual decision-maker was impenetrable.  No single person owned any decision.  Indeed it was often difficult to determine who sat on the committees or what was considered, as there are rarely minutes of meetings.
  • Conflicting Messages from Top Management: two clear messages were consistently emphasized from the top: 1) “When safety is at issue, cost is irrelevant” and 2) “Cost is everything.” One engineer said that the emphasis on cost control at GM “permeates the fabric of the whole culture.”
  • No sense of urgency: “One engineer wrote: this issue has been around since man first lumbered out of [the] sea and stood on two feet.”  The processes seemed designed to only accelerate corrective action when safety or cost was a driving factor.

I found myself in total shock as Mary Barra took the “accountability bait” and explained the inappropriate behavior of a select number of employees.

Fifteen individuals, who we determined to have acted inappropriately, are no longer with the company.  Some were removed because of what we consider misconduct or incompetence. Others have been relieved because they simply didn’t do enough: They didn’t take responsibility; didn’t act with any sense of urgency.

15 employees?  Seriously? I just don’t get it after reading the report since it was very clear this is a serious culture problem.  Countless people came and went without dealing with the issue in any different manner than those that came before them, further reinforcing why this is a culture problem.  I am all for accountability and dealing with misconduct or incompetence.  I get the need to show some accountability and tough action.  I totally agree with the changes if these people consistently showed incompetent or toxic behavior that was clearly in conflict with important GM values that top leadership consistently supported.  This “tone” of inappropriate behavior may have been evident with a few people in the report, not 15!

Mary Barra went on to recap some of the actions they have taken:

  1. “We named Jeff Boyer Vice President of Safety for the company, elevating and integrating our safety processes under a single leader.  Jeff reports directly to Mark Reuss, and Jeff and I meet regularly.
  2. We added 35 safety investigators that will allow us to identify and address issues much more quickly.  And we have already seen the positive results of their work.
  3. We instituted our Speak Up for Safety program encouraging employees to report potential safety issues quickly.  And we are going to recognize them for doing so.
  4. We announced the creation of, and have implemented, a new Global Product Integrity organization that will enhance our overall safety and quality performance.
  5. Finally – and this is an incredibly important one – we restructured the safety decision-making process to raise it to the highest levels of the company.  Senior management is now going to be at the center of these issues.”

She then talked about the Volukas Report and committed to implementing the recommendations “on an expedited timetable.”

Culture recommendations from the Volukas Report

I was still trying to get over the perplexing emphasis in the Town Hall Meeting on firing 15 people when I reached the recommendations in the investigator’s report “to ensure that a commitment to consumer safety is a prominent part of the Company’s culture and is embedded within the fabric of the organizations.”  This was it.  This was the part I have been waiting to see for months.  The “culture” recommendations were covered in the second of nine areas.  The first area was organizational structure recommendations that weren’t bad so I read on with anticipation.  You judge for yourself from some of these “culture recommendation” highlights:

  • “Implement regular communications with employees to raise awareness about safety and reinforce the tone at the top.”
  • “We recommend GM promote the [Speak Up For Safety] program through visible communications, such as posters on employee bulletin boards.  Bulletins or newsletters could include features recognizing employees who have raised safety issues.”
  • “Visibly promote and rigorously enforce the non-retaliation policy.”
  • “Regularly communicate to suppliers the importance of safety and GM’s expectation that suppliers will promptly and accurately identify any potential safety issues.”
  • “Explicitly communicate to employees that they should not be reluctant to classify issues as safety issues or potential safety issues.”
  • “Develop protocols for escalating potential safety issues to appropriate levels of management.”
  • “Continue to review and strengthen the process for expeditious reporting by employees of potential or actual safety issues and non-compliance.”

These and the many recommended policy and procedure changes in the report are not near enough to address the subject of culture. They may look fine on the surface and be suitable to make it through the government investigations.  They are not near enough to evolve the GM culture.  Not even close.

It’s about culture and leadership

What important words were completely missing from the transcript of Mary Barra’s Town Hall Meeting? 1) Culture, and 2) Leadership. Yes, not one reference.  There were likely plenty of PR and communication experts involved in helping to prepare the message but she missed an incredible opportunity for a clear and memorable turning point in GM’s culture journey.

It was a perfect time for leadership to take ownership for allowing this culture to persist and to begin building the trust and transparency needed to unite the workforce in support of their customers.  Unfortunately, the headlines around the world are focused on the disciplinary actions, for example:GM Axes 15 over Botched Recall(CNN Money), GM Fires 15 in Wake of “Deeply Troubling” Recall Report (FOX News)

A mistaken prediction

It was completely clear at this point that Mary Barra would not lead the greatest culture transformation of all time as I predicted.  I was wrong since culture and leadership inexplicably disappeared from the communication landscape.

Mary Barra showed genuine concern for the victims and it is commendable.  I wanted to see that same genuine concern for her 200,000 employees and for her to talk about how the GM leadership let them down. A question she should have pondered was: how many of her employees would have made the same decisions as some of the 15 released if they were in the exact same situation? I don’t know the details behind the scene on these 15 former employees but her remarks showed no acknowledgment of the power of culture in shaping behavior and the role of top leadership in this saga.

Second appearance in front of a House subcommittee

I was still holding out hope that more details about the potential culture transformation would emerge.  Mary Barra’s initialstatement included the following:

Finally, Mr. Chairman and Members of the Committee, I know some of you are wondering about my commitment to solve the deep underlying cultural problems uncovered in this report. The answer is I will not rest until these problems are resolved. As I told our employees, I am not afraid of the truth.
And I am not going to accept business as usual at GM. It’s time — in fact, it’s past time — to insist on total accountability and make sure that vital information is shared across all functions in our company… so we can unleash the full power of our 200,000 employees, our 21,000 dealers and our 23,000 suppliers

Mara Barra was questionedabout what she was specifically doing to change the culture and her response primarily focused on the “speak up for safety” program.  I was glad to see this program because it did cover one of the recommendations I had previously highlighted. It was very clear from her explanation the focus was on process and structure without engagement, accelerate leadership development, or other improvements necessary to deal with the deeper cultural issues.

Representative Diana DeGette mentioned that her sources gave feedback the firing of the 15 “have only created more paranoia that people are going to lose their job.” That is absolutely no surprise to me and it shouldn’t be to anyone in GM. Demanding accountability of others without leaders looking in the mirror is a real problem. It’s a real shame.  The emphasis on “total accountability” and confirming “vital information is shared” barely touches the surface of the deeply entrenched cultural dynamics that impacted this problem for over a decade. 

Beat the accountability drum all you want. The culture will not change that way. The new systems may be enough to stop an obvious safety problem that involves as many people as this one did.  Unfortunately, many borderline issues will still be sucked up by the current culture and no whistle-blower inspired system will fix it. The environment of over-sensitivity to safety will not emerge in a culture where people do not proactively “act on what they know” in so many other areas. If it’s not happening when lives are on the line, think about all the other areas where people do not proactively surface ideas, issues, etc. Those other areas may not directly impact safety but they are the key to transforming a culture steeped in command and control structure with limited employee engagement.  GM needs a general “speak up” campaign and not just for safety.  Leaders need a “listen” campaign and  they might be surprised by the value of what they hear.

There was no indication whatsoever that Mary Barra or her team met with groups across GM to genuinely listen and work together to design meaningful improvements that would transform GM.

The bottom line – a missed opportunity for GM and us all

A huge opportunity is being missed by GM on this one and it doesn’t appear like a single person at the top of GM or Congress has reached out to anyone with deep experience in the culture field. Everyone is perplexed by how this could happen but welcome to the power of culture and the lack of leadership to cover many of the areas that would be necessary to shift behavior in any meaningful way.  

As a Detroit-metro resident, I am rooting for GM and Mary Barra to successfully tackle this culture issue with clarity and speed. They clearly need the advice of some culture experts to zero in on meaningful change since we are still at the surface of this problem after 11 years, 13 deaths, a 325 page independent investigator report, and two appearances before House subcommittees.  As Edgar Schein, arguably the #1 culture expert in the world, said: “Culture is not this surface phenomenon but it is our very core.  We live in a culture, we display a culture, we’re always driven by our culture.”

Leaders across the world could have learned about meaningful change as part of this live case study. Unfortunately, it will now be used as a case study in bureaucratic, top-down change that will fall far short of impacting the GM nod, GM salute, and other widespread cultural dynamics that contributed to this tragedy.

What did you think of Mary Barra’s corrective actions? Is GM on the right track?

Editor’s Note: read Tim’s most popular CultureU post: 8 Culture Change Secrets Most Leaders Don’t Understand

Need some help getting started with culture and performance improvement?Learn about the 90 Day Culture and Performance Quick Start Program

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Tim Kuppler

Tim Kuppler is the founder of CultureUniversity.com and Director of Culture and Organization Development for Human Synergistics, a 40+ year pioneer in the workplace culture field with the mission of Changing the World—One Organization at a Time®. He leads collaboration and partnering efforts with culture experts, consulting firms, industry organizations and other groups interested in making a meaningful difference in their organization, those they support, and, ultimately, society.

Human Synergistics is home of the Organizational Culture Inventory, the most widely used and thoroughly researched culture assessment in the world, the 90 Day Ultimate Culture and Performance Quick Start Program, and the Annual Ultimate Culture Conference, the premier organizational culture event.

He authored Build the Culture Advantage, Deliver Sustainable Performance with Clarity and Speed which was endorsed as the "go-to" resource for building a performance culture. He previously led major culture transformations as a senior executive with case studies featured as part of the 2012 best-selling book – Leading Culture Change in Global Organizations. He was also President of Denison Consulting, a culture assessment and consulting firm. He is an accomplished speaker and recognized as a Top 100 leadership conferences speaker on Inc.com.

His 20 years of culture and performance improvement experience includes the rare mix of executive leadership, coaching, and consulting knowledge necessary to help leaders quickly improve team effectiveness and results as they focus on their top performance priorities, challenges, and/or goals. He networks extensively in the workplace culture field in order to learn and apply the latest insights from many experts. Email him to learn more about options to help you understand and evolve your culture with a direct and sustainable impact on performance.

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