Organizational Development and Change in General Motors - Case Study Example

Organizational Development and Change Name: Institutional affiliation: Plan for Organizational Development and Change in General Motors Section 1 Introduction The world is changing at a relatively faster rate due to rapid changes in technology, increased economic uncertainties, change in taste and preference of consumers, emerging trends in the market, and change in the behavior of employees (Byrd, 2014). The many changes in the world of business are now pushing organizations to come up with effective change and development in order to remain in business or gain a competitive advantage in the market (Khan & Hashim, 2014). Planning for change and development always start when an organization feels that its operations, management, administrative activities, employees, and the technology they are using are hindering it from achieving its objectives, then the stakeholders start to thing on ways that they can use to develop and change the organization for it to be efficient. The primary role of change and development in an organization is to ensure that the organization meets its objectives, which enable long-term sustainability ((Byrd, 2014). Therefore, organizational development refers to the strategic plans by and organization to enhance its efficiency for it to achieve its intended objectives (Tripon & Dodu, 2010). Organizational change, on the other hand, refers to the process of changing the structure, operational strategies, organizational culture, and the technology in order to initiate change in an organization ((Tripon & Dodu, 2010). The essay, therefore, is about, the plan for organizational development and change in the GM in order to make it successful after going for bankruptcy protection in 1st June, 2009 due to insolvency. An Overview of General Motors General Motors is considered to be one of the biggest players in the automotive industry. The company was founded by William Durand in the year 1908, which means that the automobile company is more that 100 years old. GM has its main headquarter in Detroit, but its sells it vehicles while at the same time offers automobile services in about 140 countries across the globe with about 234,500 employees worldwide (Sheppard et al., 2013). The company has a number of car brands like Chevrolet, Buick, Pontiack, and Hammer. The company performed well in the automobile industry in the 1900s, especially under the leadership of Alfred Salon who made GM to dominate automotive industry in the US and other parts of the world. By 2013, the company was commanding about 17.9% of global automotive market, which is considered to be the lowest since 1924. In addition, in the year 2013, the company sold 224,314 units in the US market, which was below its potential as one of the biggest automobile company ((Sheppard et al., 2013). The trends show that the company is losing its ground in the automobile market, as its financial report in 2012 showed that it made a loss of 1.8 billion in the European market alone. However, the dominance was threatened with the emergence of Japanese automobile companies like Toyota, which posed a significant threat to the profitability of GM in the America, especially in the automobile market in North America (Mellander & Svanberg, 2008). The emergence of Toyota in the American Automobile market, poor management strategies, and other internal organizational problems, GM has been facing myriad challenges that forced it to go for bankruptcy protection in 1st June, 2009 (Dreher et al., 2009). Organizational Structure (Dewankur, 2012) GM Mission The Mission of GM is to manufacture the best vehicles in the world by making sure that the best employees. The company values its work and it strives to make exceptional cars and to create a positive ownership experience to its esteemed customers globally. The company makes strong commitment to its customers and other stakeholders by ensuring that it meets its key principles that include safety, quality, creation of lifelong customers, innovation, and creating a positive difference (Sheppard et al., 2013). History of GM Bankruptcy Problem The bankruptcy that finally hit the GM in 2009 can be traced back almost a century ago. In 1920, its founder Durant purchased thirty new companies, which he managed as separate entities. The company narrowly escaped bankruptcy in 1923 due to the mismanagement of the separate entities. Alfred Sloan came up with tight financial controls that enabled the GM to pick up again and dominated the market (The Economist, 2009). The problem started emerging again in 1970s when the world was experiencing oil shock that negatively affected the automotive industry player, especially those that were manufacturing fuel guzzlers like the GM. The GM faced major challenge when it turned out that the Japanese automobile companies like Toyota that was making better cars efficiently. Consequently, the GM adopted lean manufacturing, which ended up affecting the quality of its cars (The Economist, 2009). As a result, Japanese companies like Toyota started dominating the market by their fuel efficient and cheap vehicles. Another challenge that the company was facing apart from the stiff completion and the price of fuel was its huge pension expenses. Therefore, it had to find better ways of financing pension for the retired worker and the only viable option was to make high production, large sales volume, and to create discounts and incentives to attract more customers and dealers (The Economist, 2009). However, the move came with negative impact because it interfered with residential values and GM brands. Organizational culture is also one of the reasons associated with the failure of GM, as some economists and managers argued that the company was being managed like an institution, which is characterized by risk-averse, resistant to change, and bureaucratic (The Economist, 2009). Due to unrealistic high confidence, the company produced insufficient number of cars, which did not reflect the demand from 2000 (Sheppard et al. 2013). They management assumed that the dominance of the GM was sustainable and long-term. Consequently, its production started stagnating internationally in 2000 after performing well in 1999. In addition, the misconception made the company to sell less even in its core market in America. The failure is also associated with the external factors, which GM could not control directly. Some of the external factors that led to the bankruptcy of GM included the collapse of American economy that led to recession, freezing of credits, and the stiff competition in the automotive industry in the globe due to high number of competitors (The Economist, 2009). Therefore, in summary, the factors that led to GM bankruptcy included high cost of labor, stiff competition in the automotive industry, high cost of fuel, the recession that affected American economy, and the freezing of the credit (Butler et al., 2011). They were both internal and external factors, which have been with the company many years. Section 2 Identification of the Problem The company is faced with two main internal problems that need to be solved in order to ensure that the company is efficient and in a better position to make profits by increasing its sales volume. The two problems include its organizational culture and high cost of operation, which needs cultural change and cost cutting to increase its efficiency and effectiveness (Butler et al., 2011). Even though GM is also faced with external challenges like oil prices, American economy, and changing technologies, the problems are beyond its control and they affect all players in the industry equally. It can only deal with the internal problems that are within its direct controls. The organizational culture associated with GM includes risk averse, resistant to change, and bureaucracy, which negatively affected its bureaucracy. The company adopted top-down approach in handling its operations, as the decision is centralized at the top and employees are never involved in key activities and decision making (Butler et al., 2011). Consequently, employees are dissatisfied with their work and are not motivated. The risk averse culture and resistant to change have also made not to adapt to the changes in the automotive industry like efficient manufacturing used by Japanese automobile companies that have taken its place in the market. The high cost of operation also affected effectiveness and efficiency of GM in achieving its objectives. The company has been spending a lot in the cost of labor, insurance, pension and employees motivation program (The Economist, 2009). Reducing the cost has been a challenge since GM made an agreement with United Auto Workers (UAW) that it would not lower befits of workers. For instance, the average pay per hour is $28 that total to $58,240 annually. The company is also not efficient due to high cost of production. For instance, the GM takes 46 hours to manufacture a single car whereas Toyota and Ford take 29 and 38 hours respectively. Some of the brands also need high cost to manufacture like Hammer yet they are not performing well in the market. How to Approach the Development and Changes The first approach regarding the cultural problem in the organization, I would advise the top management of GM to decentralize their operations to increase employee participation in the decision and activities taking place in the company. I will also encourage the management to put system in place that ensures accountability of employees and other stakeholders, which require effective communication and smooth flow of information. The approach would require the restructuring of the company. The second approach will be based on the strategies GM can use to cut the cost especially that relates to labor. It should relook and negotiate another favorable terms with the UAW. I will also come up with ways in which some of its brands like Hammer and other hybrid cars can be manufactured at a cheaper cost and to enhance their performance in the automotive market that is very competitive. Ways of Intervention In order to change the current GM culture, it must first change its structure from mechanistic to organic to enhance employee participation, accountability, and performance. It should decentralize its operations to allow smooth flow of communication and open communication between the management and employees (Butler et al., 2011). The decentralization of GM will help in sharing of ideas; enhance accountability, and creation of favorable working environment that motivated workers, which will lead to increased performance. The top management should also empower its managers by giving them to make independent decisions to improve the efficiency and timely decision making (Cooley & Cooley, 2011). Empowering employees and managers by decentralizing GM will improve its performance and productivity. Cost cutting is the major intervention that will ensure that GM is back on truck after bankruptcy. The first intervention is to re-negotiate its contract with UAW in order to reduce the cost of labor. The new contact will ensure that GM cut some of the employee benefits like health and pension and reduce salaries and wages (Cooley & Cooley, 2011). In order to avoid conflict with its employees and UAW, GM will hold a forum with main stakeholders to iron out the possible conflicting issues. In addition, there are some of the brands that are not performing well and GM will reduce some of its brands that are not doing well like affiliate brands. The company will also be creative in developing some hybrid brands like eclectic and hydrogen cars. The hybrid cars are expensive and the company will embark on efficient production to reduce their cost. How to Create Readiness Even though there is a need to develop and change GM so that it becomes effective and efficient, the resistance to such those changes are inevitable. The change and development is a threat to GM employees and other stakeholders like UAW. Therefore, the readiness will be created carrying out intensive consultation with all the affected stakeholders to create a consensus and create a positive perception toward the GM development and change plan (Susanto, 2008). The consultation will also ensure that the organization develops mutual trust with all stakeholders. The mission and vision for the change will be stated clearly give the direction for change and development (Fallik, 2013). The management will also be required to fully support the change to enhance the acceptance of the change across also stakeholders. Evaluating the Change The development and change will be evaluated by looking at the general performance of GM. The evaluation will focus on the elements like the effectiveness of decision making, the performance of employees, the sales revenue and units, cost of production, and the performance of GM in the automotive industry. The GM records and documents like financial statements, ales record, number of units sold, and market performance will be used to carry out the evaluation (Mackness, 2008). Other evaluation instruments like questionnaires and interview will be used to evaluate the intangible elements like change in behavior of employees. The evaluation will be done by external individuals or firms for it to be objective and based on facts. Conclusion Organizational development and change is inevitable in the current business environment that is characterized with a lot of changes and emerging trends. The poor performance of GM that led to bankruptcy in 2009, therefore, makes the company to embark on change and development plan to enhance its effectiveness and efficiency. The factors that led to bankruptcy included high cost of operation, ineffective organizational culture, and external forces like the price of oil and poor economic performance. Therefore, there was need for cost cutting, reducing bureaucracy, and efficient manufacturing to save the company from total collapse. References Butler, D. D., Colley, M. C., & Fuller, T. S. (2011). General Motors’ Bankruptcy: The Impact on Griffin Motors. Journal of Case Research in Business and Economics, 3, 1. Byrd, K. E. (2014). Bankruptcy Prediction, Gold, and the Great Auto Bailout. Cooley, S. C., & Cooley, A. B. (2011). An examination of the situational crisis communication theory through the general motors’ bankruptcy. Journal of media and communication studies, 3(6), 203-2011. Dewankur, P. (2012). Introduction to Product management. Retrieved from http://www.slideshare.net/dewankur/1introduction-to-product-management Dreher, J., Lawler, M., Stewart, J., Strasorier, G., & Thorne, M. (2009). Metrics for Sustainable Manufacturing. Fallik, F. (2013). Managing organizational change. Routledge. Khan, M. A., & Hashim, M. (2014). Organizational Change: Case Study of General Motors. 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