General Motors - Research Paper Example

Introduction General Motors Company, normally abbreviated as GM, is a United s multinational automobile company headquartered in Detroit, Michigan (Smircich, 2010). The company is among the globe’s prime automakers in vehicle unit sales. It holds almost 202,000 employees, and it does business in around 157 nations (McNally, 2008). The company is split into five business divisions: GM North America, GM Europe, GM South America, GM International Operations and GM Financial. The firm produces trucks and cars in 37 countries, and services and sells the automobiles through the following brands: Buick, Chevrolet, Cadillac, GMC, Baojun, Isuzu, Holden, Jie Fang, Vauxhall, Opel and Wuling (Davidson & Matusz, 2011). The company acts in a majority of nations outside the United States through direct subordinates. However, in China, the firm has 10 joint ventures. The company’s OnStar subsidiary grants vehicle security, safety and information services. GM, in 2009, shed numerous brands, closing Pontiac and Saturn. The company, in 2010, made a primary public offering, which was one of the globe’s top five biggest IPOs to date. The firm, as a result of that, returned to productivity in 2010. On to the thesis, General Motors (GM) compensation and benefits system considers the executives’ salaries based on their performance, as well as the company’s performance (Davidson & Matusz, 2011). As a result, a huge fraction of individual executive compensation is in jeopardy because this compensation is connected to achieving certain quantifiable results aimed at generating worth for shareholders on both a temporary and long term basis. General Motors institutes its intended compensation for the executives annually by taking into account the compensations paid to executives in related internal and external positions, the performance of the company and the challenges being faced. It offers benefits to all employees, together with the executives by considering by and large the package offered by other employees in the same position. They also have additional benefits for executives as part of their compensation and benefits package that is in line with the labor market. This paper will examine General Motors, an organization that is experiencing challenges with its compensation and benefits systems. A brief history of General Motors will be given before assessing the current challenges it is facing. It will also review other organizations that have been in a similar situation. The paper will seek to draw from the strategy that those organizations have devised to address the issue of compensation and benefits. The paper will show theories and strategies that should be contemplated in addressing the situation. Finally, the paper will give recommendations to the GM management on how to address and resolve the situation. Review of the Literature An Assessment of GM’s Current Challenge General Motors financial crisis started in 2005 when the company posted a loss of US$10.6 billion (Martocchio, 2010). This was enhanced further when they tried to get United States’ government financial support, in 2006, for its pension liabilities, but they were not successful. Their loses, in 2007, were US$ 38.7 billion followed by a drop on sales, in 2008, of 45% and its reports indicated that it would be out of money by the middle of 2009 excluding the amalgamation of the government funding, a merger or sales of assets. At a Congressional hearing, in Washington DC, General Motors representatives and executives stated that they were in dire need of financial assistance, but unfortunately they did not succeed in their endeavor to get legislation to sanction the U.S.s’ government assistance. Instead, they were advised to come up with a new action plan to sustain the company. It eventually submitted its restructuring plan to the U.S. Senate committee in charge of banking and the House of Representative committee in charge of financial services, but Congress refused to act on it. Fortunately, the government came to their rescue by agreeing to provide a bridge loan on condition that they provide a revised business plan. General Motors had requested for $18 billion, but they urgently required $4.6 billion in loans and another $12 billion in financial support to avoid bankruptcy. They declared in early 2009 that their hard cash reserves had gone down to $14 billion by the end of 2008 and that they had lost $30.9 billion in 2008, and they had spent $19.3 billion of its hard cash reserves (Gomez-Mejia, 2010). They stated that they were not able to survive any longer it the government did not grant them additional loans. The government refused to grant financial assistance to General Motors and instead demanded credible plans, asserting that the company’s proposals had evade taking tough decisions resulting in the resignation of the company’s chairman and Chief Executive Officer (Gomez-Mejia, 2010). In June, 2009, General Motors filed for bankruptcy protection as part of the plan to re-organize agreed upon with the U.S. government and the company’s union in order to reduce its debt burden (Kotter, 2010). After filing for bankruptcy, General Motors decided to cut the health care benefits of unionized retirees in order to reduce its workforce from 88,000 to 68,000 by the end of 2009, and a new Board of Directors was appointed (Davidson & Matusz, 2011). The company was also forced to sell off some of its brands like Saab, Saturn and Hummer and also do away with Pontiac and Goodwrench brands, hence restructuring its brand, and, as a result, adopting a new corporate image. It also cut its dealership from 6000 to 36000, closed down fourteen plants and had to retain only four of its main brands. This totally changed the company from its high class brand status to just an ordinary brand. Implications of the Literature Review of Other Organizations Who Had A Similar Situation and the Strategy They Devised to Address the Issue Other organizations that face the same challenges in compensation and benefits system are Delphi and United Auto Workers, which terminated these benefits to their employees (Davidson & Matusz, 2011). Experts in the automobile industry reckon that Delphi’s bankruptcy case though being significant did not come as a surprise at all. The challenges in compensation and benefits facing General Motors, Delphi and United Auto Workers highlight the extent to which globalization has affected the salaries and benefits given to U.S. employees and retirees. General Motors and Delphi are the same in all respects because the companies are to blame for this. The case of General Motors and Delphi goes on to show that the fate of benefits pension plans is at stake. Gone are the days when retirees were guaranteed to get a fixed monthly payment for the years they put in work. This is because many companies are under pressure to generate profits. It is worth noting that these payments are fundamental for workers of all ages who are yet to reconcile themselves with the shift in the pension and healthcare compensation benefits. Many organizations are trying to devise ways of cutting down on healthcare expenses, pension payments and retirement costs (Davidson & Matusz, 2011). Upon filing for bankruptcy, Adelphi’s chairman and chief executive officer declared a reduction in their North American operations and in their 51000 workforce. He also sorts concessions that would cut down on employees’ compensation and benefits package. Nonetheless, according to John Paul MacDuffie, a management professor at Wharton, Delphi’s and General Motors’ predicament did not arise completely from high expenditure and salaries that the workers had received (Fleurbacy, 2009). The problem, MacDuffie said, was Delphi’s dependency on a weakened General Motors for the supply of their automobile parts, something he feels could have been averted early enough. Fortunately, Delphi’s was able to make constructive changes in the type of automobile parts that would ensure that they were still competitive in the global market MacDuffie contends. Delphi also came up with a new production approach to make more efficient their dealings with suppliers. They decided to employ executives from Americas Honda and Japans Toyota. It also embarked on a global manufacturing path which saw it open branches internationally. MacDuffie adds that one of Delphi’s main objectives after the challenges it had faced was to enhance it sales to various companies something that greatly helped it improve its predicament (Fleurbacy, 2009). Experts say that Delphi found itself in a predicament that bedevils many companies in the automobile industry. When labor turns into a fixed expenditure, since you must pay employees whether they are working or not, it requires a substantial amount of capital (Davidson & Matusz, 2011). As a result, Delphi encountered the same strategic decisions, similar to General Motors, where they had to ensure that their sales were increased due to the high cost of compensating their unionized employees. With the strategic plans that Delphi is putting into implementing, it is going to come out stronger and more competitive though they cannot evade the issue of salary cuts within the organization (Gomez-Mejia, 2010). Delphi can also engage in major cuts in their health care expenditure coupled with selling some of their assets to enable the company and the union come to an agreement on salary cuts that would not affect them immensely. Recommendations to Management on How to Address/Resolve the Situation Organizations need to implement several steps to evaluate the integrity of their compensation and benefits systems to avoid challenges such as those discussed in this paper with regard to General Motors it is also important to instill safeguards in the systems from the onset that are crucial to the acceptance and long term viability of performance that is based on wage systems. One of the safeguards can be ensuring that there is employee/union involvement in the process. The company can get input from people who know the work best, and also by consulting their in-house experts at the beginning of the process (Davidson & Matusz, 2011). This collaboration will enable the organization to benefit greatly from the perspectives of people who are most affected by the new compensation and benefits systems. This will also guarantee that all levels are involved from the start instead of trying to bring them on board after the plan has been completed. This involvement will initiate participation in future assessments, amendments and other measures needed to improve the compensation and benefits systems (Davidson & Matusz, 2011). The second safeguard is the supervisors’ role in the performance assessment process (Bossert & Marc, 2010). While a balanced and efficient performance process is significant in sustaining the integrity of a wage, for performance compensation and benefits system, this process will be futile minus capable supervisors who are competent and eager to assess performance properly. It is sad to note that most supervisors are not prepared for the demands that come with supervisions especially those relating to performance assessment. This is so because a few supervisors are selected for their technical ability rather than their supervisory skills, thus are not properly trained for significant components of their new role as performance supervisors (Bossert & Marc, 2010). Worse still, the matter is aggravated further because some of these supervisors concentrate only on what they do best, that is working as technical experts, and; hence, have no time for the crucial responsibility of adequately managing their employees. The third safeguard measure is supervisor and employee training. Though training is most of the time overlooked on most organizations, as a step of any transition process of implementing wage for performance compensation and benefits systems, it is equally of utmost value. Supervisors and employees ought to be trained in the procedures of the new wage performance process in order for them to comprehend what the organization is trying to accomplish with regard to the compensation and benefits systems. Another thing the organization can do is have an ongoing assessment of the compensation and benefits systems. It is vital that these systems operate as required by the organization carrying out data analysis to assess their impact. 1. Conclusion From the information discussed, it is apparent that there is no particular model for devising, executing and managing a wage performance compensation and benefits system (Bernardin & Russel, 2007). Though companies can learn from the challenges of other companies, in the final analysis, each organization should consider matters carefully so as adequately to make decisions concerning their own unique situations. Organizations need to adapt compensation and benefit systems that take into consideration the company’s mission and environment. In order for these systems to be successful, organizations must meet certain requirements (Bernardin & Russel, 2007). These include a culture which supports wage performance systems, a thorough performance assessment system, an effective and fair supervisors and employees, adequate funding, a scheme that ensures there are checks and balances that ensure fairness, and constant assessment systems. References Bernardin, H. J., & Russel, J. A. (2007). Human Resource Management: An Experimental Approach (2nd ed.). New Jersey: Irwin/Mcgraw-Hill. Bossert, W., & Marc, F. (2010). Redistribution and compensation, social choice and welfare. New York: Oxford University Press. Davidson, C., & Matusz, S. (2011). Trade liberalization and compensation, international economic review. Automobile, 47(3), 45-49. Fleurbacy, M. (2009). Three solutions for the compensation problem. Journal of Economic Theory, 65(5), 67-73. Gomez-Mejia, R. (2010). Compensation Strategies, business policy, and firm performance. Cincinnati: South-Western Press. Kotter, J. (2010). Corporate culture and performance. San Francisco: Jossey-Bass Publishers. Martocchio, J. (2010). Strategic compensation: A human resource approach (6th ed.). Upper Saddle River, NJ: Prentice Hall. McNally, K. (2008). Compensation as a Strategic tool. Human Resource Magazine, 3(6), 14-15. Smircich, L. (2010). Leadership: The management of meaning. Journal of Applied Behavioral Science, 18(3), 67-70. Read More