Managing the change within GM Essay Example

Managing the change within GM Essay Managing the change within GM Name: Course: Date: We will write a custom essay sample on Managing the change within GM specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Managing the change within GM specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Managing the change within GM specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Managing the change within GM Introduction General Motors is a multinational automotive corporation based in America. It is also the largest automaker in the world. The corporation has its headquarters in Detroit, Michigan. The company was established in 1908 as the holding company for Buick, which was based in Michigan. During the period of the 1920s, the sales of the company surpassed those of Ford to set the corporation as the largest manufacturer of automobiles. Most of the success of GM had been attributed to the management style. This style integrated concepts like planned obsolescence whereby a car’s style would be changed on a regular basis. In addition, they also used a tiered structure for pricing of different brands. This would be invaluable towards setting the brands to reach different niches in order to limit their competition. The rise of Japanese automakers in the 1980s threatened the dominance of GM. The boom of SUVs (Sports Utility Vehicle) countered this threat in the North American Market (Freeland, 2001: 98). However, after 2001 the sales began to decline. Toyota surpassed the organization in 2007 as the globes largest vehicle maker in terms of sales. GM was given loans from the Canadian and US governments in order to stay afloat. However, the organization was forced to file for Bankruptcy in mid 2009. The bankruptcy deal also entailed a requirement to discontinue or sell off several brands such as the Hummer brand. Accordingly, GM would focus on restructuring and continue with its business activities. The organization would focus on the four core brands in the United States; Buick, GMC, Cadillac and Chevrolet. The process of managing change can be challenging for any organization. Change management means the process of getting the corporate to accept the change, have an understanding of the elements of change and proper execution of the change. The benefits of this change include improvement in the organizational structure, good corporate relationships and saving on costs (Schermerhorn, et al., 2000: 102). GM has to make radical changes within the organization in order to deal with the crisis that has built over time. In addition, the process of change should be continuous in order to make the actual change effective (Burnes, 2009: 85). Forces for change The circumstances that bedeviled GM create the need for change. External forces Competition In 2008, GM sold close to 2.9 million cars in America ahead of Toyotas 2.2 million. GM still leads in the American Market. However, the market share has been on a steady decline from the 30 percent in 1999 a total of 5 million vehicles to 22 percent in the year 2008. Toyota has posed as a major competition for GM. Competition is a chief driving force for the acquisition of majority market share (Ball, 2010: 78). In comparison with competitors such as Toyota, GM vehicles were not as fuel-efficient. This caused losses to the organization because of the rise in fuel prices. This was to the advantage of Toyota leading to losses for GM. Toyotas demand for cars also increased over time to become higher than that of GM. This became the driving force towards change in GM (Hayes, 2010: 56). Financial crisis The global economic downturn affected leading companies including GM. The global financial crisis affected GMs financial standing. This in combination with other factors led the corporation to bankruptcy. Internal forces Financial constraints GM was ravaged by financial problems since 2006. The financial problems were primarily caused by poor financial policies. GM made limits to the $6 billion in car operating losses because of the $2.2 billion it had made to finance the vehicles. The organization therefore had liabilities that exceeded the assets. The condition worsened over time leading to a bankruptcy declaration in 2009. Poor financial policies can lead an organization to bankruptcy (Rugman, 2010: 96). These financial constraints therefore created the need for change. Management The management at GM had a lax mentality towards their competition. This is because they had established themselves as the market leaders. The culture within the system also caused a hindrance to modernized approaches towards change. Culture The culture at GM is described as one that is set in the traditional system since its inception in the 1900s. Culture refers to the enduring ideas, attitudes, behavior, traditions and attitudes that are shared by a large section of people to be transmitted from one generation to another. On the other hand, organizational culture can be described as an organization’s personality. Organizational culture offers guidance on the feelings and activities of employees. GM has an organization that is mainly centralized and bureaucratic. Therefore, the structure created the need to have top-down systems of control. They aimed at removing the unnecessary and redundant procedures. The corporate consolidated the purchasing offices from the initial 25 in the US to a single purchase office. Therefore, the organization became more bureaucratic. Organizations such as GM that have the centralized system make it compulsory for management to be composed of many people. The leadership style of man agement also plays a key role in the definition of the culture of the organization (Alvesson, 2002: 56). Cost GM spent more money on the production and manufacturing its cars. Compared to the main competitor Toyota, GM spent more money on manufacturing. Toyota built more vehicles at a lower cost. The company was manufacturing at a rate of 7 percent faster than GM. Therefore, Toyota would benefit from between $300 and $500 per car cost advantage. In 2005, Toyota operated at full capacity. Therefore, the company earned an average profit of $1488 per car I profit and GM lost $2300. Therefore, GM had increased costs leading to losses (Crumm, 2010: 56). Leadership GM had a vertical system of leadership. The high levels of management made key decisions on the requirements of the subordinates. Therefore, it was a one-way street. CEOs, top executives and CFOs, were in charge of key decisions from middle management to individual dealerships. The executives also made decisions on the desires of customers without their feedback. This management style also contributed to the failure (Griffin, 2011: 64). Changing the culture at GM Change management entails a holistic process of planning, consultations and effective implementation. The changes to be made at GM must be realistic, measurable and achievable. Responsibility for the process of change lies on the executives and management. They are tasked with the role of facilitating and enabling change within GM. The culture and systems at GM create the need for change. The rate of change within organizations such as GM is not constant (Senior Fleming, 2006: 78). The conditions at GM however require continuous change in order to reestablish the company as the global leader over its competitors. Change incorporates a three-step process that is sequential. Unfreezing of the forces of restraint that cause maintenance of the status quo Movement of the organization towards a new status Refreezing of the organization in order to consolidate the changes The process of change in GM One of the changes that can be implemented at GM is complete decentralization of the system. A decentralized system refers to a system whereby management places significant decision-making authority to local and frontline managers instead of reserving all authority in decision making at the top. This will reduce the constraints of the bureaucratic system at GM. In addition, GM had adopted this system in earlier years, and it proved to be a success. However, the change to a centralized system in the 1990s led to its downward trend. One of the major benefits of a decentralized structure is the high level of flexibility towards problem solving and quick and effective solutions. It also allows the requirements of consumers to be met. The failure of GM to manufacture products that saved on fuel cost during the increase in fuel prices was an indicator that the organization lacked contact with the consumers. However, because of the challenges of a decentralized system, the management must maintain open communication lines with management at the grass root level in order to keep focus on the common mission and vision of the organization (Robbins Coulter, 2005: 121). Decentralization for GM will be beneficial in order to spread responsibilities within the organization and increase the capabilities of leadership of the additional managerial ranks. The organization must also integrate innovation and technology within the system in order to achieve maximum results. Cost cutting GM has to formulate a strategy that will reduce the overall cost of production. The process of cost cutting requires an effective strategy. Strategy formulation should also consider all the factors that affect the financial aspect of the organization. The company also has to set targets towards cutting overall costs. However, the process of cutting cost should not affect the quality of output. GM has already undertaken some strategies to reduce costs such as the offloading of some of its Marques like the Hummer and Saturn. This has caused it to focus on the main products in the US. However, the overseas holdings of Daewoo and Opel are still maintained. These cost-cutting processes will help the organization to save on costs and reduce losses. Challenges affecting the change process at GM Management may want to maintain the status quo at the corporation. GM has maintained a long history of a decentralized approach of management. The top-down approach limits the mediums of effective communication between employees and management. In addition, the employees have maintained poor communication with their leaders because of this system. However, management may want to maintain the current conditions with the fear of losing power and authority. Therefore, changing the system to a decentralized one may prove difficult for the executives that are accustomed to the vertical style of management. In addition, the employees under this system may not be empowered toward using the decentralized system. This is because the management under a centralized system did not place enough trust in them. Therefore, for change to be successful, GM has to empower its workforce. The employees will therefore play an active role towards the implementation of the change program (Yuki, 2002: 62). Cost cutting measures may face numerous challenges particularly from the United Auto Workers (UAW) union. This prevents the organization from lowering the wages up to a certain level. The organization also has to keep plants in operation at minimal capacity. Lack of consultations and involvement of the employees might lead to poor choices and derail the process of change (Barger Kirby, 2006: 51). Change sustainability Sustaining change refers to the involvement of refreezing behavior at new levels as long as it benefits the organization. Sustaining change at GM will be essential towards reorganization and increasing profits. It is also crucial to recognize that not all the changes may work for the company. The main aspects of sustaining change include stickability and spreadability. Stickability refers to the extent to which the gains that are achieved in sections of the organization are maintained and built (Carnall, 2008: 54). Spreadability refers to the extent to which new processes and methods that lead to gains can be applied in other areas. It is therefore essential for GM to consider these aspects in the process of change. Management plays a crucial role towards ensuring that the advantages accrued from changes in cost and decentralization. Management can also reduce the restraining forces in order to achieve commitment and reduce restraint. In addition, the employees will increase their level of commitment. A strong implementation climate will also foster sustainability. Management can empower the members of staff to implement the changes (Storey, 2004: 83). Conclusion General Motors faces numerous challenges in efforts towards reestablishing its corporate image. The company has undertaken various processes towards changing its bureaucratic system and reducing costs. However, these processes have been relatively ineffective. The implementation of the above changes and management system will be beneficial towards redeeming the level of profitability of the organization. If GM maintains these momentums of change, the benefits will be accrued in the long-term. Management of this change will also affect the process of implementation and actualization of the changes. References Alvesson, M 2002, Understanding organizational culture, SAGE, London. Ball, D 2010, International business: the challenge of global competition, McGraw-Hill Irwin, Boston. Barger, N, Kirby, L 2006, The challenge of change in organizations: helping employees thrive in the new frontier, Davies-Black Publishing, Mountain View, Calif. Burnes, B 2009, Managing change a strategic approach to organisational dynamics, FT Prentice Hall, Harlow. Carnall, C 2008, Managing change in organizations, Financial Times Prentice Hall, Harlow. Crumm, T 2010, What is good for General Motors? solving America’s industrial conundrum, Algora Pub, New York. Freeland, R 2001, The struggle for control of the modern corporation: organizational change at General Motors, 1924-1970, Cambridge University Press, Cambridge. Ukgriffin, R 2011, Management, South-Western/Cengage Learning, Australia. Hayes, J 2010, The theory and practice of change management, Palgrave Macmillan, Basingstoke. Robbins, S Coulter, M 2005 Management, Pearson Prentice Hall Upper Saddle River, NJ. Rugman, A 2010, The Oxford handbook of international business, Oxford University Press, Oxford. Schermerhorn, J, Osborn, R, Hunt, J 2000, Organizational behavior, Wiley, New York. Senior, B, Fleming, J 2006, Organizational change, Prentice Hall/Financial Times, Harlow, England. Storey, J 2004, Leadership in organizations: current issues and key trend, Routledge, London. Yukl, G 2002, Leadership in organizations, Prentice Hall, Upper Saddle River, NJ.