Conflict, Decision Making, and Organizational Design at General Motors - Case Study Example

Running Head: CONFLICT, DECISION MAKING, AND ORGANIZATIONAL DESIGN Conflict, Decision Making, and Organizational Design A General Motors’ Perspective[Name] [Course] [Professor’s name] [Date] In 1992, the board of directors of the General Motors (GM) Company raised its voice against the GM Chairman and Chief Executive Officer Robert Stempel. The board was frustrated by the horrifying performance of GM incurring a loss of $4.5 Billion. The board removed Stempel’s hand-picked team of top managers and appointed John Smith and William Hoagland as the Chief Operating Officer and Chief Financial Officer respectively. In October 1992 Stempel fell ill and was forced to retire. Jack Smith became the new CEO. With this change in the high command, the management team moved quickly to change the middle and lower managements (Jones & Mathew, 2007, p. 432). The real problem was that GM had developed too many levels of management. The number of corporate stuff was huge. So the decision making was slow and cumbersome, and, therefore, change was difficult. So the major challenge the new management faced was to eliminate the hierarchical levels and reduce the total number of managers. The top management expected that such a move will reduce operating cost, improve communication, and encourage innovation. Some analysts estimated a termination of 20,000 managers. The task was enormous (Jones & Mathew, 2007, p. 432). The board was of the belief that the shareholders’ interest can be served only by taking tough organizational design decisions. In 1993, GM announced its intention to cut 50,000 hourly and 24,000 salaried jobs and to close or consolidate 21 parts and assembly plants by 1995 to save money. The revolt by the board was an important mile stone in GM’s history. From that point on, GM’s performance improved every year (Jones & Mathew, 2007, p. 432). Conflict Management and Negotiation Strategies Conflict is not all about war, violence, and loss of life. By definition, a conflict is simply a disagreement among people on an issue. Conflicts can be small, as among two persons, or they can be large and complex, as among two or more countries. Conflict is a natural and normal part of human life and interaction. When communication to settle a conflict is constructive, the conflict is beneficial. Constructive approach stimulates new understandings and more socially just solution with stronger relationship. In case of a communication breakdown, conflict can lead to separation and hostility (Sughru, 2009, pp.7-8). While analyzing conflicts, it is better to break down the issue into five variables (Sughru, 2009, p. 10). First and foremost we need a complete picture of the actors and understand their direct or indirect role. In other cases, an actor may not be a single person, but a group or a part of the group. In case of groups, cooperation and conflict are complementary processes. Cooperation may be reified by positive exchanges between members. Cooperation and conflict both contribute to the evolution of groups and their outcomes. Positive evaluation can increase satisfaction and participation in groups, but excessive positive evaluation in the absence of adequate negative evaluation can lead to danger (Troyer & Youngreen, 2009, p. 2). After identifying the actors, we need to figure out the root causes of the conflict, scope, and stages of the conflict. Every side of the conflict has some resources and capabilities. These resources should be clearly understood. Finally, one has to look for historical instances of such conflicts among other parties and check out the past relationship history of current parties of the conflict (Sughru, 2009, p. 10). Conflict negotiation is a back-and-forth communication process. It has been designed to anticipate, contain, and resolve disputes. The purpose is to reach mutually acceptable solutions. Conflict negotiation refers to a voluntary, two-way communication in which parties involved control both the process and the outcome (Novak & Hall, p. 1). Conflict is not uncommon during reform efforts, and developing skills to negotiate sound agreements, even in the presence of heated emotion, will be valuable in helping further reform. The rewards of conflict negotiations are multidimensional. Important issues would surface and clarified. At the same time, new information and creative solutions will be found. Moreover, working relationship would improve as the both parties honestly and respectfully negotiate their differences (Novak & Hall, p. 5). Conflict negotiation style can be collaborative, competitive, compromising, accommodating, or avoiding. There is no right style in that sense. Each style has certain situations and consequences. Collaborative negotiation tries to identify the real problems and find solutions that truly help the conflicting parties. A competitive style of negotiation is appropriate when quick, decisive action is vital. A competitive negotiation style is primarily interest-driven, with the goal of winning. Compromise is like that of collaborative, but is very mild in its approach. Generally, temporary solutions to complex issues involve compromise. Accommodating is purely relation based and places more emphasis on the opponents concerns and interests. Avoidance generally solves nothing. But at times avoidance is useful when the issue is trivial or no interest can be derived by negotiation. It may happen that the situation may get worse as a result of intervention. In such a case, avoidance is advisable (Novak and Hall, n.d., p. 8). Evidence Based Management Managers in an organization can be seen as doctors curing organizational illness. So like the concept ‘evidence based medicine’, the concept ‘evidence based management’ came to the surface. Managers generally get their companies into trouble by importing performance management and measurement practices from their past job experiences. So the decision making field is full of dogmas and believes (Pfeffer & Sutton, 2006, p.1-2). Evidence based management tries to advocate the understanding that the management decisions should be taken on the basis of best available scientific evidence. This style of decision making is already there in medicine and education. In the case of GM, it was clear that the organizational hierarchy resembled that of the government. In such an organization, it is very difficult to implement any policy, as the communication gets jammed. So what the new management did was to break this road block. They shed a lot of managers from the system and focused on their core activities. In the years to come, GM will be in a situation to compete against Ford and Toyota (Jones & Mathew, 2007, p. 432). Creative Decision Making There are few stages of decision making. The first is establishing the decision context. Each decision situation addresses specific issues and has its own boundaries. We call this the decision context. The context determines the set of alternatives that should be considered (Clemen & Gregory, 1995, pp. 4-6). In case of GM, the context was how to make a comeback for the company. There could be many alternative decisions. But the new management took the decision to restructure the whole organization. In the next point, we are going to understand the basis of such a decision. The second step is identifying the values. Values are vital, as they explain what we as decision makers desire to accomplish. In many ways, knowing our values is a subject of introspection, thinking watchfully about what is significant to us. The spotlight of this kind of thinking clearly is within our minds and hearts (Clemen & Gregory, 1995, p. 8). In GM’s case, the value is primarily based on a shareholder’s value creation. The third stage is about understanding the uncertainty related to the decisions. Many key decisions have to be made without recognizing precisely what will take place in the future or knowing what the final conclusion of today’s decision will be (Clemen & Gregory, 1995, p. 7). In GM’s case, the decision was to downsize the managerial hierarchy. The immediate uncertainty was a breakdown of the existing business relations. The next step is structuring the consequence using some technical approach like decision trees, and this should be supplemented by information. The decision makers have to first recognize likely resources of information, review the quality and usefulness of the information, and, lastly, make a decision whether to obtain the information (Clemen & Gregory, 1995, p. 7). This system is very similar to evident based management. If the existing system does not derive any conclusion, than we have to find out more alternatives. These alternatives can be found based on our values and objective. One of the troubles we frequently have is that we come across at our list of aims and notice clearly that they conflict. This places us in a mind-set that is not helpful to creativity; instead, we have a tendency to limit our thoughts to look for options that provide only one or maybe two goals that appear to clash (Clemen & Gregory, 1995, p. 42). In the next step, we need to make value tradeoffs. Tradeoffs are difficult to make. In GM’s case, there was a tradeoff while making the decision to close or consolidate 21 parts and assembly plants. There are various tradeoffs, like individual versus group, personal versus societal, intuitive versus rational, etc. Time also influences our tradeoffs (Clemen & Gregory, 1995, p. 47). In our case, the consolidation should have been completed by 1995. The decision making process ends with a successful negotiation. At the same time, decision making needs to be ethical. Creative thinking skills will be positively related to ethical decision-making (Mumford et al., 2010, p. 76). Factors Affecting Organizational Design There are two basic factors that affect the organizational design. A firm’s strategy helps determine its organization structure. Strategy is the end, structure is the means. The second factor is the environment, which should be taken into account while framing strategies. From the strategic point of view, a firm can be a reactor, a defender, a prospector, or an analyzer (Burton et al., 2011, pp. 23-37). In our case, GM is in the position of a defender. Plans are being devised to maintain the survival of the organization. This is done through the efficient use of company’s resources. At that time, GM was in a stiff competitive environment due to the activity of Japanese and European car makers. The market was stagnant. So GM had to make the organizational structure more precise, communicative, and efficient. The mass layoffs were the natural consequences. As a part of the improving efficiency, the company improvised on techniques just in time, though such approaches would bring serious labor disputes in the future (Herod, 2000, p. 1). Conclusion Every organization goes through a series of rough patches. These are the times of creative decisions which lead to change. Change causes a lot of conflicts. Conflicts are best solved though collaborative approach. These approaches influence the strategies of a firm, and strategies are implemented through making necessary changes in the organizational structures. This has also been the case for General Motors. References Burton, R.M., Obel, B., & DeSanctis, G. (2011). Organizational design: A step-by-step approach. UK: Cambridge University Press. Clemen, R.T. & Gregory, R. (1995). Creative decision making: A handbook for active decision maker. Decision Research Institute. Retrieved on April 14, 2012 from: http://faculty.fuqua.duke.edu/~clemen/bio/Handbook.pdf Herod, A. (2000). Implications of just-in-time production for union strategy: Lessons from the 1998 General Motors - United Auto Workers Dispute, ANNALS- ASSOCIATION OF AMERICAN GEOGRAPHERS, 90(3), pp. 521-547 Jones, G.R. & Mathew, M. (2007). Organizational Theory, Design, and Change. India: Pearson Education Mumford, M.D., Waples, E.P., Alison L. Antes, Ryan P. Brown, Shane Connelly, Stephen T. Murphy, & Lynn D. Devenport (2010). Creativity and ethics: The relationship of creative and ethical problem-solving. CREATIVITY RESEARCH JOURNAL, 22(1), pp.74-89. Novak, K., & Hall, C. (n.d.). Conflict Negotiation Guidelines. Retrieved on April 14, 2012 from http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CGYQFjAB&url=http%3A%2F%2Fwww.healthsystems2020.org%2Ffiles%2F1007_file_lacpolicytoolkitforHSR_EN4.pdf&ei=li6JT_unEYjwrQfG_t2nCw&usg=AFQjCNEiUPbK4JdCJnnAggCqJwJIh3ZMuA Pfeffer, J. & Sutton, R.I. (January 2006). Evidenced Based Management. Harvard Business Review. Retrieved from http://hbr.org/2006/01/evidence-based-management/ar/1 Sughru, N. (2009). Conflict management and negotiation strategies. PILDAT. Retrieved on: April 14, 2012 from http://www.pildat.org/Publications/publication/Conflict_Management/CONFLICTMANAGEMENT&NegotiationStrategies.pdf Troyer, L., & Youngreen, R. (2009). Conflict and creativity in groups. Journal of Social Issues, 65(2), pp. 409-427. Read More