Organizational Change: Case Study of GM (General Motor)
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General Motors: Implementing Organizational Change Research Paper
We all know that for one to thrive in the business world, change is paramount. Management has to develop new initiatives and catch up with the rapid technological and socio-economic advancements in order to stay ahead of the competition.
There are various theories and models recommended to corporate managers on how they can handle organizational change. However, in implementing organizational change in practice, especially where a large-scale organization is involved, can be challenging and complex and if not handled properly, it can be disastrous to the whole organization.
This paper discusses practical implementation of organizational change in a large-scale business. General Motors Corporation will be analyzed by looking into the various changes it has undergone through and problems resolved as well as recommendations on new changes that could be carried out to enable it retain its competitive advantage in the industry. The GM adopted the overall structure organizational change model in implementing its changes.
Implementing organizational change
General motors corporation organizational changes.
The GM recently changed its traditional organizational model from being decentralized to a more centralized and unified one. The traditional model was characterized by a hierarchical structure of management and leadership. Jobs are arranged into independent functional departments. “GM was divided into different independent automakers…each independent automaker was operated differently and competing with each other,” (Kenly85 2009).
The new model, however, does not have independent departments but rather consists of a team and individual employees all focusing on a common organizational goal. This model was adopted to respond to problems such as harmonization of workers. The staff required to develop a central set of skills by learning from each other’s designs of work as well as improve communication amongst themselves so as to work as a team rather than as autonomous individuals.
The management revised its management to respond to the declined demand for medium and high-priced cars which had been created by the depression. A new management staff was put in place at the five-car division with the operational committee being dissolved and the executive committee eliminated.
“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). This resulted into reduced operation costs and streamlined management system.
Further, it was deemed necessary to reorganize the general office. The office was now empowered to oversee the operational and overall financial decisions. The top executive basically made all the major financial decisions in the organization. This is because financial decisions are very important to the future success of an entity through prospective policies and procedures.
This made it a requirement to include general executives with special knowledge in prospective policies in decision making concerning financial matters. Operational policies were therefore left to the administrative committee.
Later, the financial policy committee was created which was meant to authorize all financial decision matters. An operating committee was also formed and was mandated to oversee strategic planning and policies. The division managers no longer had legal authority. Its only role was to recommend policies for the operating policy committee to adopt. The president and chairman formed the CEO and had overall authority over the financial committee.
Division managers were later included in administrative committees but this did not relegate their power of having overall control over policy. Policy groups made up of general office men now formulated policies. The proposed policies were then handed over to the administration committee which were required to debate and ratify or modify the policies. The divisions only had power to revise or amend such policies.
Support systems were also formed to ensure organizational changes were effectively implemented. An Automotive Strategy Board together with a management committee were formed to keep the CEO updated on the happenings of the corporation. There were also monthly meetings whose attendance was compulsory globally.
The meetings were used by operation heads to monitor the progress of the organization so as to inform the CEO. It also ensured that the organization staff worked as a team towards the achievement of the organizational goal.
A Culture Transformation Team as well as an Operating Model Team were established. The Automotive Product Board and also Automotive Strategy Board were eliminated and replaced with one committee consisted of eight individuals. This was done to fasten the decision making process.
The committee reported to the CEO twice a week when they met to discuss product matters. The operation team, however, was composed of ten executives representing the various divisions in the globe. This increased bureaucracy even more and the decision-making was made even slower.
The government has also contributed to the GM change. The U.S. government eliminated certain vehicle brands such as Pontiac and Hummer and slashed headcount. It also reduced its debts and the obligated benefits and shuttered dealerships. The government now has a 60% shareholding in the company; therefore, we can say that the ownership and control of the organization has shifted to the government.
However, most of the government intervention in GM has been helpful to its growth as well as its changes. For example the New Deal Legislation in the past which was aimed at avoiding future depressions through relief, recovery and reform. It has somehow helped and the GM to recover from its bankruptcy through government funding and subsidies. The GM had to implement its organizational changes according to the Chapter 11 of the Bankruptcy act.
The government also funded the GM to the tune of $14 billion through the Emergency Economic Stabilization Act. The Troubled Asset relief Program (TARP) supported the funding. It was aimed at saving the free-market system that GM represented.
Effects of the organizational changes
There were both positive and negative effects of the transition. Positively, the organizational change was able to muster teamwork amongst its workers. Streamlining of production and general operations cut down operational costs. By cutting costs, the organization was able to operate efficiently and maintain its solvency.
Further, a good communication system was established from the teamwork. Good communication increases the motivation of workers through recognition and the ability to voice their grievances. It also helps in reducing resistance to change by engaging employees in the change program.
This ensures that everyone knows what is going to be achieved and they are all willing to contribute towards the same. It will also give management an opportunity to clarify on the need for change and the intended results to ease out employee’s uncertainty and fear of the unknown on the outcomes of the change process such as retrenchments and layoffs.
Much as these changes were meant to add to the development of the corporation, this was not the case. Instead, this transition affected the two most important stakeholders i.e. the customers and the surrounding community. Due to the discontinuation with some of the brands, it became hard for customers of some models to service or upgrade their vehicles. Consequently, GM did not only lose its customer base but also its reputation was affected.
During the transition, however, GM had to close some of its factories aimed at streamlining production. Consequently, other entities “such as restaurants, gas stations, the real-estate market and the grocery stores suffered financially,” (Kenly852009). Therefore, the community’s financial well-being was disturbed.
Of course, this had an impact on the money circulation chain in the market creating unemployment, downsizing in some public departments and generally lower standards of living. “Due to downsizing, people tend to move out of the town resulting to start of the cycle all over again,” (Dawson, 2003).
The transformation of management system also had great effects on the workforce. This is because they were required to learn a new set of skills and also learn central software being used in all the organizations’ offices in the globe. This in turn impaired the communication system. Training and development of staff also became a major problem. This occurred because with the traditional model, the independent departments existing were using different softwares each.
Recommendations for Future Organizational Changes
The organization needs to adopt a new organizational culture which, according to Fitz Henderson, should consist of accountability, focus more on the customer and the product as the main subjects and also one that was ready to take risks. Also, it should be faster in decision making process.
In the past, the organization was restructured where the Human Resource was given the responsibility of supporting culture change rather than drive it. Leaders came up with a new performance management standard and conducted an informative education system to communicate the new organizational culture and it’s values to all the workers.
Those cultures were aimed at incorporating a culture into the organization’s highly bureaucratic system to ensure that its independent departments, regions as well as brands became self-governing and competitive within the organization.
In order to retain its competitive advantage in the industry therefore, GM requires to make new changes to its organizational structure. For instance, it needs to come up with new organizational culture. There should be a way of making the executive body accountable for its performance standards.
Employees should be exposed on how other organizations and, in general, other industries operate. The various staff should be promoted based on their performance as opposed to how much they have invested in the organization or how many years they have been on the job.
Further, the organization should change its bureaucratic nature and adopt a more democratic decision making process to include even the employees in the process. This will bring the employees closer to the product, the problem as well as the customer themselves. In return, he will be able to respond quickly to the rapidly changing and divergent needs of customers as well as the highly unpredictable market conditions. Also, a company that is highly bureaucratic takes long in making decisions thus resulting into slow decisions.
The organization should make changes to its production system into a Just-in-Time production system. This reduces costs since production is only done when the products are needed and therefore storage costs are minimized. Also, they should concentrate on producing environmental friendly cars as opposed to the guzzlers.
This will not only ensure a clean environment but will also increase demand since that is what customers are going for nowadays. Further, they should make more connections with suppliers globally to increase their distribution channels. Also, focus on getting low-cost suppliers by using competitive bidding.
By keeping up with the consumer needs and general economic trends, the organization will be able to change as the market changes and produce products that will satisfy the consumers. It will also be able to adapt to current early enough to technological developments to avoid being outdated. In a world where technology is becoming the in thing, failure to adapt to new technology on time will have disastrous results to the whole organization driving it to bankruptcy.
The General Motors has taken various steps to change its organizational design in order to retain its competitive nature in the industry. This organizational change has helped it achieve some of its objectives such as teamwork and cutting operational costs. On the other hand, those changes have brought about several negative effects by affecting the customers, the community as well as the staff themselves. Its bureaucratic system has also contributed negatively to its failures.
But GM’s organizational change has shown that bankruptcy can also be used as an opportunity to take that crucial step to implement major organizational changes that will see a company fly up and start flourishing once again. Therefore, companies should not fear making that big step and making holistic organizational changes.
Dawson, P. (2003). Reshaping Change: A Processual Perspective . Routledge.
Kenly85. (2009). Blog 1: Organizational Change- General Motors (GM) . Web.
Spector, B. (2010). Implementing organizational change: Theory into practice, (2 nd Ed). ND.
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ORGANIZATIONAL CHANGE(GENERAL MOTOR) Harvard Case Solution & Analysis
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ORGANIZATIONAL CHANGE(GENERAL MOTOR) Case Solution
1 st -step: Unfreeze
Due to continuously working in one way, people in the organization become used to of doing just routine work and it is difficult to make someone unlearn, what he/she is doing on day to day basis. These habits become a major cause or reason of inefficiencies in the organization. So by unfreezing the environment, organization culture must be made ready to change by asses the needs for change. Which in this case was, people usually became used to of the daily tasks, so changing the way of performing the tasks becomes necessary to be introduced in organization.
The second step is of implementing the required change, which might take some time but it is always worthwhile in the long-run. In the case of General Motors, bringing the change to decrease the operating costs and to remain competitive with other International firms in the organization was very important. This stage is very crucial because the change happens at this stage and very high level of control is required at this stage. During the change process, if anything goes wrong then it can affect the whole process and its future impacts.
3 rd -step: Freeze
The last step is to freeze or make it stick to the change. This enables the company to gain the organizational effectiveness, which further helps the company to build its good brand image. Because now its employees will become its major strength, which will help company to survive in the long-run. So, by freezing change, change agents will continue their efforts to continue the implementation, until it becomes the habit of the employees and becomes a constant norm of the organization.
Vision of the Change
As change management process is the need of the time, so GM’s vision in adopting the change was to cut its operating costs and to bring the modification in the culture.
As cost was the major concern of the GM’s management, so the company decided to cut its cost of some brands such as Saturn and Hammer to make company avoid making operating losses. Then, company decided to make some layoffs by removing few teams and then also cut the pay of employees to decrease pressure on its operating costs , around $15 billion was saved by the company in recent years through this strategy.
In order to change the culture of the company, General Motors (GM) removed its automotive product board, which was directly reporting to the C.E.O. Total members of the board were around 8 members. This helped GM is speeding up its day to day decision making process Moreover, the company created the culture where each person was accountable for his performance and contribution. So, this was a major change in the organization, as now everyone was feeling the sense of responsibility towards his actions or contributions in the company and this helped in improving the efficiency of the employees.
How the Change was communicated
Management of General Motors (GM) adopted the top down approach in communication of the change, which was the reason that, employees were totally ignored in the decision making process as compared to the other companies. This also raised the question on management style, where some top management officials took the decision without taking rest of the employees in confidence.
Overall the company took the decision in haste, which was also the need of time.
Quality of the Change Agent’s Approach
In adopting the change in the General Motors, change agents used a top down approach in communicating the change. Which was the reason that, employees were totally ignored in decision making in comparison to the other companies. This also raised the question on the management style, where some top management officials took the decision without taking rest of the employees in confidence. So, in future management should take care of the employees by involving them in major decision making, because this will give the employees sense of privilege and ownership of the company
Outcome from process and its prospective
As due to the changes adopted by the company in the year 2009, the results were very favorable in terms of both cost cutting and cultural change. The results are described as follows:
Results from cost cutting
The results of cost cutting can be seen by looking at the number of employees of General Motors in 1998 and 2009, which decreased from 226,000 workers to 101,000 workers respectively. This helped the company to focus more on its sales rather than cost cutting. In addition, the number of factory workers dropped from 60,000 to 40,000, which reduced the significant amount of labor cost of the company. So if we analyze the impact of this strategy, we can say that GM had been successful in adopting this strategy and which contributed to the success of the company.
Results from cultural change
The General Motors attained very good results from cultural change, as now employees were more aware about their roles and responsibilities and their accountability in the company. Moreover, this provided the employees sense of responsibility which in result improved the overall productivity and efficiency of the employees.
As we analyzed the change in the company and the change GM has adopted to make the company stable in long-run along with keeping the sales growth smooth over time, which is necessary to remain competitive in the market and to increase the market share of the company. The followings are some suggestion and recommendation for the company, which have the potential to bring the effectiveness in the operations of the company and ensure the future success and increase in the market share.
- As the company used a top down approach in changing its culture, which ignored all the middle and lower level of employees, therefore, this decision bypassed the view of majority of employees. Company should have involved all the employees while taking such decisions.
- General Motors should focus on producing fuel efficient automobiles to remain competitive in the market in future. As companies like Toyota are investing heavily in the innovation and have lowered the operating costs than GM. In addition, the company should also work to improve the quality and safety of the vehicles, this will maintain the sales growth of the company along with keeping the employees motivated. This will be beneficial for the company in the long-run, as the employees are the core strength of the company to cope with the future challenges.
- In addition, General Motors should invest in improving the public perception of its brand. This can be done by providing quality services to the customers and by owning their customers, because after all the sale services are very important in keeping the customer loyal and customer’s loyalty will further improve the company’s image as the positive word of mouth will circulate in the public.
- Moreover, the company should take its employees into the confidence before taking any strategic decision, which will impact the nature of work in the organization as it will also give its employees a sense of ownership and responsibility towards the company. Only then, they will own the company and put their maximum effort to make the company successful, which will ultimately increase the productivity of employees and the company as a whole................
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ORGANIZATIONAL CHANGE(GENERAL MOTOR) Case Solution & Answer
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ORGANIZATIONAL CHANGE(GENERAL MOTOR)Â Case Study Solution
General Motors Company, commonly known as (GM) is one of the worldâ€™s leading manufacturer and distributor of vehicles around the world, which was established in 1908 and is still operating. It is primarily an American company, which has its headquarters in Detroit. Its core operation are designing, manufacturing and distribution of vehicles for more a century. Moreover, it envision the future of automobiles as zero crashes, zero emission and zero congestion. GM is aiming to launch at least 20 new electric vehicles by 2023 under his vision of making all vehicles emission free.
But, itâ€™s not easy for a company to attain long-term stability, unless it focuses on its organizational environment and become proactive in dealing with the factors effecting the organization by prompting adopting required organizational change. As, there are many external and internal factors which forces organizations to change, where external factors include political, social, technological and economic stimulus and internal factors are organizationâ€™s policies, management styles, existing procedures and employees attitude.
All these factors now impact companies very quickly because of fast changing technology and innovations, especially in automobile industry, where with growing concerns due to carbon emission of vehicles and introduction of electric vehicles. Companies now are more vulnerable to risks associated with organizational change.
There are many external and internal factors effecting General Motors. Some of the external factors were, at that time General Motors was greatly affected by the Japanese automobile manufacturer Toyota and other China based companies. Where during the initial years of 21 st century, GM took from Government of America and Canada to come out the difficult times, whereas Toyota captured significant part of the market. Then, in 2009 during one of the worst financial crisis, General motors faced bankruptcy due to increasing costs and declining cash flows, which forced the company to close several operations. So, restructuring and making change in the company become inevitable, so the company underwent huge restructuring and organizational change and then reopened the manufacturing of its core brands like Chevrolet, GMC, Buick and Cadillac. In regard to internal factors, General Motors paying high wages to its employees, which was building pressure on it operating costs in the times when sales were diminishing i.e. company was paying $74 per hour as compare to $44 per hour by Toyota because of being in agreement with the trade unions. (Muhammad Aliuddin Khan, 2014)
So, all these factors were the reason, which forced General Motors to bring change in its organization. So company bring changes in its Structure, cost, process and culture.
So, now we will analyze the change adopted by General Motors in detail and will also discuss the change undertaken by the company:
Image of the type of change
As company has decided to undergo Structural change, cost change, change in process and cultural Change. General Motors has reduced its cost of some brands to avoid putting whole company in to huge loses like Saturn and Hammer to make the company overall profitable. Then, the company has started to remove some teams such as automotive product board and automotive strategy team to cut operating costs. Then, company has adopted a top down approach to bring changing in the culture.
Culture of the setting and Role of Culture in Change
As the role of culture in organizational change is very crucial, as according to results of culture and change management survey of 2013, 84% of more than 2200 worldwide participants, culture is very crucial in the success of any organization (Aguirre, 2013). Moreover, when a company decides to change, the existing culture plays very important role in the pace and quality of the change. Therefore, in case of General Motors, there was a culture that was very important.
So, there are several controls for analyzing the role of culture in change, following are some of them:
First and foremost step in assessing the role of culture is to know about the companyâ€™s strengths and weaknesses, this helps in setting the pace of the change to attained desired results.
The â€œCritical fewâ€ behaviours Companiesâ€™ initiatives to set some small and realistic goals for behavioral change. This helps in communicating to employees of the company about the expectation from them, this further helps in making employees and know about the feedback of employees about the change.
Employee Pride and commitment:
In order to make the employees to come to an agreement and to make them motivated for the change, it is very crucial that companies should show them, the larger benefit of that change like customer benefit or satisfaction of achieving a benchmark.
Informal peer network and motivators:
Normally the plans are made at the top level, but the reinforcement of the change at every level is very necessary. As reinforcement by a peer by telling benefits of change is very effective then an executive or senior level manger telling employees about the benefit of change.
For the company to achieve the target of change, stories which answers the questions of the employees prevail in the organizations, Â which are usually about the ability of the leader and historic moments of the company, where he gets success even though odds were high. These stories are very vital for motivating employees and they make the employees feel positive about the change, because this gives them the sense of pride.
Diagnosis of the change
As during the time, change was inevitable for the General Motors because of increasing competition from the competitors, which was hindering the companyâ€™s ability to generate sales and decrease its operating costs. As in China and Japan, there was a very low wage rate than America, so this forced General Motors to adopt the change which was painful form one angle and inevitable from the other.
As there was no other option left than taking important decisions regarding cost cutting through layoffs and closing down some divisions of the company. Which was the prime necessity and adding fuel to the fire was the financial crisis, which hindered the ability of the customers to spend on luxury goods such as Vehicles, which was major reasons for the decrease in sales.
Type of Change
As there are various types of change, major four types of change are adaption, reconstruction, evolution and revolution.
This is the type of change which is less fundamental and usually needs time for its implementation. Therefore this type of change takes place slowly in the organizations, where, its nature is incremental but the end result is change in the way of doing tasks but vision and missions remains the same.
It is the type of transformational change, which is again implemented gradually in different stages. This is usually to bring incremental change over the time but is intended to transform the entire organization over the time.
This is also a type of transformational change, which occurs simultaneously at different fronts in very small span of time. This form change becomes the need of time, when the company is competing in a competitive environment and instant transformational change is evitable for long-term existence of the company. Therefore, this is considered as both transformational and big bang in nature, as it transforms and changes the entire course of the company.
This type of change is undertaken to re-align the operations of the company to bring some modifications in order to achieve operational efficiency, but the nature of this type of change is considered as big bang, because it is instant and forced due to changing contexts of the environment. So the change which General Motors adopted was also reconstruction change, as the vision of mission of company remained the same, but to bring operational efficiency company enforced instant change in the organization to cope with the increasing competition in the industry due to Toyota and other Asian firms.
Methods for Implementing Change
There are various methods which are used in the implementation of the organizational change. Amongst which Kurt Lewinâ€™s three-step change Process (Burnes, 2014) is very crucial in implementing the change. As he divided the overall process of change in three steps, where first stage is make the ground for the change by communicating the importance of the change and its significance of its future benefits, Then the 2 nd stage is where change is adopted and at the last stage changes were enforced and evaluated for some time, until they become norm of the company and employees become accustomed to the changes that were made……………
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Organizational Change: Case Study of General Motors
— The main purpose of this article was to elaborate and bring to light the core concept of the organization change, how it works, diverse factors which moves organization to change, steps for change, resistance for change, change forces, change management approaches and last an example of General Motor (GM) has given that how change was taken place in the organization and what was the strategies for change management. Recommendations and conclusion forms the last part of the paper.
The main purpose of this article is to elaborate and bring to light the core concept of the organization change, how it works, different factors which moves organization to change, steps for change, resistance for change, change forces, change management approaches and last an example of General Motor (GM) has given that how change was taken place in the organization and what was the strategies for change management. Recommendations and conclusion forms the last part of the paper. .
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