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.
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.
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.
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). kenly85’s blog, Just another Worldpress.com. Retrieved on 2nd August 2011 from http://kenly85.wordpress.com/2009/08/04/blog-1-organizational-change-%E2%80%93- general-motors-gm/
Spector, B. (2010). Implementing organizational change: Theory into practice, (2nd Ed). ND