The Change Process at General Motors - Case Study Example

Managing Corporate Change Table of Contents 4 Introduction 5 The change process at General Motors 6 The situation, organisation and context for change 6 Strengths of General Motors 6 Weaknesses of General Motors 6 Organisation of General Motors 7 General Motors Context for Change 7 External forces 7 Internal forces 8 Diagnosis for the change 8 Vision for the change 9 The extent to which the change was envisioned 10 First order: Adaptive Change in General Motors 10 Second order: Transformational change in General Motors 11 Transformational versus incremental approach 11 Organisational change 12 Benefits of changes in organization structrure and processes 12 The methods for implementing change 13 Generic Model: Deming’s PCDS Model: Plan-Do-Check-Act 14 Adopting the appropriate change model 14 Unfreeze stage 14 Moving 15 Unfreeze stage 15 Managing resistance 15 Integrative model of planned change (Bullock and Batten) 16 The image of the type of change held by the change agents 17 The culture setting and the role of culture played in the change 18 How change was communicated 18 Overall evaluation 19 Recommendation 19 Bibliography 20 Abstract The change process is an ongoing task in many organisations. It involves identification or need for change, planning and implementation of these plans to achieve ultimate corporate change altogether. In this paper, I will analyse the change process using General Motors Company, which nearly faced closure during the recession period in 2009. The company through leadership of efficient and skilled change agents underwent through different stages of transformation leading it back to the original position (SALEEM, 2010). The leading manufacturer of vehicles in the whole world with revolutionary Motor vehicle brands such as Cadillac, Chevrolet, and other world class cars. To achieve this goal, I have organised the paper in four main sections, with subsections throughout the paper. The first section provides background information defining corporate change. And background information about General Motors. In the second section, I provided situation, organisation and context for change. In the third section, I provided detailed analysis of the change process as experienced by General Motors. Beginning with diagnosis for change, vision for the change, methods for implementing change, image and type of change held by the change agent, the role of culture played in the change, and finally how the communication was communicated. In the fourth section, I presented the overall evaluation and finally the conclusion along with a recommendation for future change. Keywords: Corporate change, corporate change process, General Motors Introduction Change is a long process that takes a lot of time to be achieved. For a change process to be successful, it involves considerate planning and following strict implementation. The change should have to be achievable, measurable and realistic. Organisational change can be termed as the process by which an organisation transforms its formation, strategies, operation methods, organisation culture or technologies to effect change within the organisation. The change process has to go through a chain of phases that, in total, by and large require a considerable span of time. To get satisfying results all the steps should be followed carefully and no single step should be skipped. Skipping a step could lead to the organisation not achieving change all together. Above all, consultation and involvement of all the stakeholders should be constant in the process of change (SALEEM, 2010). For conventional organisation change, training and development should be included on all the participants. However, training and development alone will not make the change process complete. Companies which finally become successful in the change process have the following characteristics; they gauged their efforts in terms of results, strictly followed the change process and allowed the process to flex itself according to circumstances. There are different types of change such as; strategic change, structural change, people oriented change or even process oriented (NIEUWENHUIZEN & ROSSOUW, 2008). However, in this paper, I am going to discuss substantially the corporate change process for General Motors. I will present how General Motors managed their change process. My paper will substantially cover the background history of the company, show the situation, reasons and contexts of the change. I have researched on General Motors obtaining information and data from secondary sources to enable me to come up with this paper tackling on the change process. The change process at General Motors The General Motors was founded in the year 1908. Then, the company was the only dealer in Michigan. The company achieved a tremendous success during the time Alfred Salon was the CEO, He was able to influence the company to producing new design and style of a car every year. General Motors produced beautiful cars such as a Salon, Cadillac, Pontiac, Chevrolet and Buick. The company was enjoying monopoly but with emergence of Japan automakers the company felt threatened. These new companies such as Toyota Japan led to a decline in General motors profits. In the year 2001, General Motors requested a loan from the American and Canadian Government to help the company in that crisis period (SLOAN, 2015). The situation, organisation and context for change For General Motors to begin, its change process was because of the situation the company found himself because of the external and internal forces within the company after the entry of Toyota Japan to the market. Based on SWOT analysis obtained from mba-lectures.com I identified the following strengths and weakness of General Motors during this year (GLOWIK & SMYCZEK, 2011, p. 84). Strengths of General Motors General Motors was ranked the biggest US automaker and second largest manufacturer after Toyota Japan. The company has increased its market share in China in 2008 increasing their revenue to 66.9% in 2009. The companies also build a research facility in Shanghai worth 250 million US dollars to help create hybrid cars and research on alternative fuel. Weaknesses of General Motors Competitors from China, Europe, Asia and also North America employed innovative market strategies using technology such as internet based advertisements winning customers from General Motors. The company at the moment was facing high labour cost as compared to Toyota Japan on of his biggest competitor (NIEUWENHUIZEN & ROSSOUW, 2008). General Motors was also facing Criticism on its corporate activities and cultures. General Motors employee Union went on a countrywide strike in 2007 making the company close two of its plants. Organisation of General Motors General Motors makes worldwide sales. Its headquarters is in Detroit at Renaissance Center. The company is run by a board of directors with Teodore Solso as the Chairman of the board of directors. The president is Daniel Ammann. The company is run by approximately 202,000 people across the world. General Motors Context for Change General Motors were motivated to change because of the underlying problems that led the company to bankruptcy and decline of revenue in the year 2009. It is by applying different strategies that helped General motors overcome External and internal pressures that put them in their dangerous situation. External forces The external forces that greatly affected General Motors were entry of new firms into the market, Competition, change in technology used to produce cars, changes in customer tastes and preferences regarding motor vehicles and also constant changes in social and cultural values of the people around the world. The entry of Toyota Japan and other China based companies reduced the market share of General Motors as the two different giant companies competed for customers (ROBBINS, et al, 2011, p. 373). Toyota Japan use of sophisticated technology made them has an edge over General Motors who produced their original brand, which was outdated. These competitors greatly affected the total profitability of General Motors (SALEEM, 2010). The changes in customers taste and preferences about cars are also a cause of concern for General Motors. General Motors kept producing its core brands. They stayed for a long time without introducing a new brand to the market. On the other hand, Toyota Japan kept producing new brands such as Toyota Hilux, Rav4, and Range Rover winning the hearts of many motor vehicle lovers. This made them win over the customers of their competitor General Motors (DAFT, 2011, p. 556). Internal forces Internal factors had forced the company towards corporate change. The cost of production in General Motors was higher as compared to their competitor Toyota Japan. Toyota Japan was paying their employees 44 US dollars per hour while General Motors was paying a higher wage of 74 US dollars per hour (BHATTACHARYYA, 2011). I am coming up with this analysis based on in-depth research I did digging into the company information from the sources I listed in the reference section. I collected the information and data I used to prepare this change process from secondary sources, including journals, financial reports and many other relevant materials that I felt relevant in bringing change to General Motors. Diagnosis for the change After conducting in-depth research I was able to gather a lot of information on the challenges faced by General Motors. For easy Understanding I presented the gathered information, Underlying problem and a specific goal Information gathered Underlying problem Specific goal High cost of production High payment of wages to employees per hour Reduce the cost of production by cost cutting Corporate culture A lot of criticism about the company corporate culture and corporate activities Change in corporate structure to speed up the day to day decision making process Stiff competition from other players in the industry Decline in sales and profit because of decrease in market share Increase marketing activities, publicity and change in advertisement techniques to enable the company to compete favorably against its competitors High company debt The company owed the government and financial institution a debt which was becoming a burden to the company Restructure the repayment method to make the payment manageable for the organisation Vision for the change From the diagnosis for change General Motors came up with a master plan strategy to bring change and ensure the company attains its right position in the market. To attain longevity and sustainability the company employed cost cutting strategy. Cost cutting: To reduce the high cost of production the company decided to cut the pay of the employees of the company. The company reduced the cost of production for some of its brands such as Hammer and Saturn in order to increase the profit level. The company got a score in achieving this target by reducing the company cost up to 15million in the year 2010. Currently the company is concentrating on sales rather than furthering cut off the cost (ROBBINS, et al, 2011, p. 374). To increase its cost saving the organisation the company decided to reduce the workforce of the organisation industry from 60,000 to 40,000. To attain a socially responsible team with corporate citizenship the company came up with a plan to produce quality products to meet customer expectation and also provide durable and serviceability vehicles. General Motors improved and started employing advanced technologies to create world best vehicles. The company’s corporate culture is built on innovation principle to deliver innovative products. The new management embraces change and incessantly explores new opportunities to give the clients great experience behind the wheel of any General Motor brand (BHATTACHARYYA, 2011). The result is that the employees are now becoming aware of the responsibility and accountability. The employees are also motivated to give better productivity. With this the clients are becoming more and more satisfied with the innovative products produced by General Motors (KAWAMURA, 2009, p. 104). This has enabled the company to win their customers back and also get new customers. The market share of the company in the recent years has grown by 17 percent indicating a positive change. The extent to which the change was envisioned First order: Adaptive Change in General Motors Adaptive change involves alteration in processes, systems or structures, but does not involve a fundamental change in the core values, strategy or corporate identity. First order changes help to maintain and develop the organization (CCPS, 2011). In its first order stage General Motors used Remedial versus development change approach to reducing the high cost of production by cutting down on the production process and reducing the number of employees in the organisation. To help the company to recover from the sudden surprise which occurred after it was declared bankrupt, the company employed unplanned change by cutting down massively on the cost of workers from 74 US dollars to less than 45 US dollars on the employees. These incremental changes help to ensure that there was organisation continuity in General Motors considering the harsh conditions they were at the moment (DAFT, 2011, p. 560). Second order: Transformational change in General Motors After the company has survived from being closed General Motors started to apply transformational change. Transformational change which is also a discontinuous change may be termed as a transformational and a radical change which fundamentally alters the organisation at its core. It involves transforming the nature of the company. Some of the changes that can be referred as transformational include Restructuring, reengineering and downsizing (FRENSCH, 2007). To enable General Motors to attain transformation the company employed some of the following approaches to changing the nature of their organisation. Transformational versus incremental approach General Motors transformed their organisation by changing its culture. It reduced the traditional top down structure which was hierarchical to a large amount of self-directing units. To achieve this General Motors removed the original automotive board and restructured to an 8 man board represent the organisation and also be the leaders for different self directing teams. The 8 men responsible were answerable directly to the CEO of General Motors (SLOAN, 2015, p. 485). By employing incremental change the organisation the company developed their brand by improving its quality and increases its production units. To ensure quality and quantity the company also improved management process. This improvement was achieved by implementing the use of computer aided management to help the company become more efficient when it comes to management. Organisational change To enable the company to thrive during the recession period during the year 2009 the company was sold to China based company. This enables the organisation to transform itself into a better motor producing company (NIEUWENHUIZEN & ROSSOUW, 2008). It also opened a research centre in Shanghai to help in developing and researching on hybrid cars. Benefits of changes in organization structrure and processes New Organisational Changes Organisation structure Benefit Delayering- reduction in the number of levels in an organizations hierarchy. General Motors reduced their large management down to a team of 5 managers. It helped in enhancing information flows and the response speed. Most importantly, it enabled General Motors to remove expensive middle management and therefore reducing the organisation expenses. Decentralization- transfer of desicision making power and giving authority to individuals at different levels and units even those far from the head quarters. It encouraged cross-functional teams in General Motors and also reduce concentration of power at the top of the management. Hence,enhance improving the overall viability of the organization Project based structures It made General Motors flexible Operation strategy Operation strategy enabled the organisation to harness knowledge and hence increase their overall profitability Organisational boundaries alliances Building alliances enabled General motors to increase their access to organisation to external skills and competencies. Down scoping It helped increase the strategic flexibility of General motors and hence increase their greater focus. Organisational Processes Use of IT It enabled General Motors to increase their interaction with different stakeholders in the new economy. This helped in increasing their market shares through technological advertisement Horizontal Networking Networking helps to improve the communication between different department and also cross-boundary career paths in the organisation The methods for implementing change If human recourses, policies and practice are not supported, then change may not become successful (MATHIS & JACKSON, 2009). Therefore, HR policies should be followed in the recruitment, training, reward and retention so that change can be successful. Generic Model: Deming’s PCDS Model: Plan-Do-Check-Act General Motors uses the PDCA cycle to improve their brand of vehicle, year in year out. For instance, the Cadillac is among the first brands manufactured in 1908. The company carries out tests on small scale to check if it can work. They then check and review the test, analysing the results. If the new technology fits their brand they take action by incorporating the new change. However, if the change does not apply to the brand the company starts the PDCA cycle all over again. Adopting the appropriate change model The most important issue when a change has to take place is how best the organisation can manage the change. In order for the change to be successful the organisation must understand why the change is taking place (SALEEM, 2010). Lewins developed a model involving three steps to achieve a total change for an individual or an organisation. Unfreeze stage In this stage the organisation should be prepared to accept that change is necessary. It involves breaking down the existing status quo before developing a new method of working. General Motors developed this stage well by framing the issues, which were affecting their organisation negatively. The loss they got during 2009 and being announced bankrupt was enough reason to start the process of change (KAWAMURA, 2009, p. 128). General Motors announced the shocking news to his employees that it was going to cut down their pay despite the trade union agreement. This bold move received a varied reaction with many employees reacting negatively (KERZNER & LEARNING, 2010). They ended up demonstrating against the company’s wish to cut their pay. Moving After the uncertainty created during the unfreezing stage, the moving stage where people accept the will of change and beginning to look for new ways of doing things in the organisation. General Motors began restructuring their company to enable them to start getting profits as well as compete favourably after it was announced bankrupt. The employees start to believe in the change and start to act in a manner to support the new direction. General Motors started to develop new ways of producing their motor vehicles and the employees embraced and accepted to work in the new direction. But all in all the moving stage requires a great deal of time, effort and experience skills of the management in deciding the best approach to change (WEISS, 2009, p. 117). Unfreeze stage The organisation will be ready to refreeze when the changes are taking place and people have embraced the new way of doing things. This stage needs to help the people participating in the change and the organisation to be able to internalize the new changes. By 2013, General Motors was in this stage. The organization was in a path of making profit and the employees have accepted the changes in the organization. The new methods of production had enabled the organization to increase efficiency and reduce the cost of production. To mark the end of the unfreezing process the organisation should celebrate the success of the change (DRUCKER, 2009). This will help the people in the organisation to define the end of the change. Managing resistance During the change process resistance tends to occur in every organisation. This arises from the old employees of the organisation. When change strategies are being implemented by the organisation employees quickly respond by voicing complaints, threatening to go on strike, engaging in work slowdown. The management should find ways to manage the complaints and overcome the resistance. When General Motors announced that it was going to cut down on wages, it received resistance from the employees. The employees reacted negatively and end up going for strike. Some of the workers engaged in slow work down. This resistance led to closure of one of General Motors production plant. Change resistance comes in two ways: Resistance from individual sources: this arises because of job security, habits, fear of the unknown and also economic factors. Resistance from organisation: sources of this resistance include factors such as threats to expertise, structural inertia, and threat to resource allocation and also limited focus to change (ANDERSON & ACKERMAN-ANDERSON, 2010).. In order to deal with this resistance General Motors applied the following general steps. 1. Get the people who are resisting to get involved by participating in the change process 2. Understand the fundamental reason underlying this form of resistance 3. Eradicate on blind spots and attitudes which results in the change leader’s preoccupying themselves with technical aspect of new ideas. 4. Develop steps to help deal positively with the staff attitudes 5. Discussing change with staff and groups during their meetings by checking on details that leads to this resistance Integrative model of planned change (Bullock and Batten) Bullock and Batten integrative model of planned change assumes that the change can be defined and moved towards achieving it in a planned way. In this approach the change in isolating a single part of the organisation and acting on it. The model is divided into four stages; exploration, planning, action, integration. The exploration phase involves identifying the need for change. Getting the necessary recourses required for the change process. After the company realized a loss and announced bankrupt, General Motors realized the need for change. They acquired the necessary recourses to help in the change procces. Planning is the process of setting up the actual process of change. Creating strategies to be involved, it was done by the management of General Motors. They come up with change strategies to be followed by the organisation. The action stage involves starting the change process by involving all the stakeholders and implementing the strategies set in the planning process (KEW & STREDWICK, 2005) The image of the type of change held by the change agents The change agents for General Motors are the Executive Committee who includes: Theodore M.Solso (Non-Executive chairman), Mary Teresa Barra (Chief Executive Officer and Director), Stephen j. Cirsky (Director), and many others. These are individual with vision for change. They have varied skills which enables them to seek collaboration, build consensus and uses different leadership styles to work better with the clients. These individuals have the following characteristics: Ability to work independently; good effective collaboration with different individuals enabling them to compete in way that enhance co-operation; ability to develop high trust relationships based on high ethical standards and have self confidence with humility. These individuals are professional who are impartial with integrity, high IQ, and empathetic with problem solving skills (Cummings & Worley, 2014). The culture setting and the role of culture played in the change Organizational culture can be termed as behavious and values that contribute to the unique social and emotional environment of an organization . It broadly addresses on issues of expectations, philosophy, experiences and values that hold the organization together. It is potrayed as individuals self-image, inner feelings and future expectation. Values and beliefs of the individuals in the organization has impact on how they will respond to change. Resistance to change can reduce the output due to slow work down or increase number of individuals quitting jobs or just sullen hostility. These forms of resistance can be troublesome. In order to deal with this resistance General Motors applied the following general steps. 6. Get the people who are resisting to get involved by participating in the change process 7. Understand the fundamental reason underlying this form of resistance 8. Eradicate on blind spots and attitudes which results in the change leader’s preoccupying themselves with technical aspect of new ideas. 9. Develop steps to help deal positively with the staff attitudes 10. Discussing change with staff and groups during their meetings by checking on details that leads to this resistance How change was communicated Change was communicated using downward flow (Benn, Dunphy, & Griffiths, 2014, p. 21). Sloping from the top management in General Motors to the management committee, department and finally to the employees who work in the industries. Overall evaluation After General Motors facing stiff competition and bankruptcy in the year 2009 the change agent have done a good job in bringing corporate change in the organisation. Currently General Motors have revived and its company activities improved. It is still the globe largest motor vehicle manufacturer. These corporate changes have improved the working condition of the company, but the company should not celebrate but should constantly watch out for weaknesses and the company’s reputation should be up-hold in order to increase sales and the market share for the organization (SAMSON & BEVINGTON, 2012, P. 87). Recommendation The changes that General Motors has achieved so far has helped to increase sales volume, maintain market share and enable smooth running of the business, however it is still no enough changes (KEW & STREDWICK, 2005). The company should put more attention into the change process and adopt more scope for change to help them maintain their reputation and have an edge over the competitors in the international market. The following are some of the recommendations: Production of fuel efficient automobiles; most brands of General Motors consume a lot of fuel. There is a lot of criticism that these vehicles are not fuel efficient. With the increase in the price of oil the company’s sale might reduce because people will prefer fuel efficient vehicles Improve on public Image: The Company must improve the public perception by improving more on the quality of their products and customer services. In so doing, the company will win public confidence. 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