The contemporary business environment faces frequent adjustments in the mode of its operation because of technology, customer desires, the oscillating market, and other various transformations that force organizations to remain updated with the changes. Managers must have the proficiency to introduce and successfully implement changes in the organization. Changes are bound to occur in any institution. However, depending on how it is handled, it can build or destroy a company. Considering the importance of organizational change, this paper assesses how one of the most successful companies, namely General Motors (GM), initiated and implemented various organizational changes that saw its rise from rags to riches.
Assessment of Forces of Change in General Monitors
Established in 1908, GM has grown to become the largest company globally. Although the company has expanded, it still focuses on the manufacture and sale of automobiles. The company enjoys a huge labor force of over 300,000 workers. It has branches in more than 120 states. Despite being the largest company in the world, the company has faced stiff competition from other motor vehicle manufacturers in Japan and other southeast Asian companies. To keep up with the stiff competition that reduces its share in the market, the company introduced various changes at given intervals to regain its lost market share, stabilize its finances, and/or rebrand its image. Some of these changes were successful. The organizational changes comprised reforming the organizational culture to enhance its ability to acclimatize to the oscillating business environment. Nevertheless, as Bevan (2011) reveals, a number of the adjustments have been met with resistance largely because of poor communication and leadership issues.
Of particular interest are the organizational changes that were introduced by Fritz Henderson immediately after he was appointed the CEO of GM. His goal was to save the company from crumbling. In his efforts to restructure the company, Henderson sought financial assistance to prevent the company from becoming bankrupt. The change plan comprised streamlining the organization to limit bureaucracy and redundant bottlenecks to save cost and decision-making time. Furthermore, he intended to enhance competition by reducing the available brands. The change saw the company adjust its culture and the products so that they met the corporation’s customer desires (Cameron & Green, 2012).
GM is influenced by both internal and external forces that push it to change. The external forces comprise fierce competition from Japanese car manufacturers. The Toyota Company is a huge threat to GM’s market share, especially in North America where the company enjoys loyal customers. The last decade was marked by clients’ increasing interest in Toyota products. Hence, GM’s profitability was astoundingly decreasing. The financial crisis was also a major force that influenced organizational change for GM. The car manufacturing industry faced a major monetary turmoil between 2008 and 2010, with the American industry being the most affected. GM had focused on the manufacture and sale of sport utility vehicles (SUVs), as well as pickup trucks, due to the high demand for the products and their high returns. However, the persistence of the energy crisis in the years before 2008 increased the cost of maintaining SUVs and pickups, thus reducing their demand. To counter this change in demand, the company’s managers had to restructure the products to fit their current demands (Sorensen, 2009).
Furthermore, GM had internal forces such as the high cost of maintaining workers as compared to Toyota. For instance, Toyota spent $44 per hour whilst GM spent $74 hours. This gap increased the cost of input, which almost pushed the company to bankruptcy back in 2009. To avoid this issue, the company had to undergo an organizational change. The primary goal was to counter the witnessed competition to attract investors. During this time, Thalluri and Gonela (2009) assert that it was only receiving monetary support from the government.
The Primary Types of Needed Changes
Considering the internal and external forces that GM was facing, it had to go through various changes, which comprised cost changing, structural adjustment, product changes, as well as changes in its traditions. If the staff members cooperated with the management in effecting these changes, GM would be assured of regaining its lost share in the market by attracting more investors (Cawsey, Deszca & Ingols, 2011).
Henderson implemented the aforementioned changes. First, to attract more customers, Henderson opted to reduce the cost of most of the company’s automobile brands such as Hammer and Saturn. However, he was keen to ensure that the cost reduction did not significantly affect the company’s profit margins. Furthermore, in an attempt to maximize output while minimizing input, as well as countering its main rival Toyota, it reduced employee wages. Indeed, Henderson succeeded in introducing cost change. According to Cameron & Green (2012), recent statistical findings indicate that the company has saved up to $15billion since it implemented the changes. Conversely, to eliminate bureaucracies that derail the company’s decision-making processes, Henderson introduced cultural changes that saw the reduction of the number of members in various departmental boards. Moreover, this reduction was also meant to enhance accountability and transparency among employees (Bevan, 2011).
Biggest Challenges of the Change
As expected, the management faced resistance from employees who were reluctant to accept the changes. In particular, the cultural change faced much opposition from employees who claimed that their opinion was not sought because the company had used a top-down approach. The approach involves dictating to employees what is expected of them without seeking their views. To overcome this resistance, in cooperation with other top leaders in the company, Henderson reintroduced a down-top approach to allow the participation of all workers. Another challenge was witnessed in the cost-cutting plan. Initially, the company had made an agreement with trade unions that represented the employees not to reduce their wages or their numbers. When the management decided to cut their wages and the capacity of workers, it stirred conflict with the trade unions (Grossman, 2012).
The company succeeded in reducing the cost of managing workers. Initially, GM had a workforce of 206,000 workers. It reduced this number to around 100,000 workers. It also made efforts to reduce the number of salespersons in its outlets. It also adopted alternative modes of moving its products. In the case of cultural change, the newly implemented model of operation improved the accountability of its workers. The move increased the company’s productivity (Grossman, 2012).
Rate of Performance of Management
Henderson and his team utilized open communication to ascertain the implementation of the organizational changes. Daft (2010) confirms the effectiveness of teamwork in realizing the organizational agenda. Hence, Henderson’s teamwork strategy allowed the company to receive positive feedback because of the way it implemented ideas and/or how it handled challenges that employees faced concerning the new changes. Henderson was also flexible to input the ideas of the employees to make the changes more effective while avoiding resistance. From the onset, as Kezar (2011) observes, Henderson utilized the ‘unfreeze’ communication plan whereby he informed the workers concerning why the change was necessary and/or how it was going to be conducted. This strategy helped him to attract support from employees, as they could understand that the purpose of the change was to revive and enhance the performance of the company, which would eventually benefit them. His approach was successful. GM has regained control of its market share in North America. In fact, according to Bevan (2011), it is currently ranked one of the top companies in the world.
What could have been done Differently?
Although it is evident that the changes that GM introduced have helped it to grow into a very successful company, it needs to consider several other changes as listed below to stabilize its growth and its share in the global market:
With the current fuel charges, customers are more attracted to automobiles that require less fuel. Unfortunately, GM has been known to produce fuel guzzlers. It will be imperative for GM to change this perception and join other companies that are committed to producing fuel-efficient cars (Bevan, 2011).
Public Relations and CSR
GM should strive to create a better public image by improving customer service and the production of quality products. Moreover, it should also promote CSR. Analysts such as Cameron and Green (2012) have noted that customers are more attracted and appreciative of companies that give back to society. Therefore, GM should introduce programs that benefit society, particularly the underprivileged, students, and the destitute people.
Change is bound to happen in any organization, particularly because of the oscillating business environment. However, the implementation of organizational changes is usually strenuous to most managers, mostly because of resistance from workers. Managers must understand the most effective ways of introducing and executing changes. GM provides a good example of how changes can successfully be introduced through good leadership.
Bevan, R. (2011). Changemaking: Tactics and Resources for Managing Organizational Change. Washington, WA: Unit Press.
Cameron, E., & Green, M. (2012). Making Sense of Change Management: A Complete Guide to the Models Tools and Techniques of Organizational Change. Philadephia, PA: Kogan Page Publishers.
Cawsey, T., Deszca, G., & Ingols, G. (2011). Organizational Change: An Action-Oriented Toolkit. California, CA: SAGE.
Daft. R. (2010). Management. Mason, OH: South-Western Cengage Learning.
Grossman, J. (2012). Accelerating Change at GM. HR Magazine, 57(6), 58-64.
Kezar, J. (2011). Understanding and Facilitating Organizational Change in the 21st Century: Recent Research and Conceptualizations. New York, NY: John Wiley & Sons.
Sorensen, C. (2009). Racing To Rebuild GM. Maclean’s, 122(45), 34-36.
Thalluri, P., & Gonela, K. (2009). GM in US Files for Bankruptcy; GM in India Builds the Brand. IBSCDC Case Studies, 1(1), 1-27.