General Motors:Its Changing Organizations Design

the trials and tribulations of General Motors (GM) during the 1980s and 199os mirror those of organizations in the United States and around the world. GM's position of market leader in automobile production and sales began to falter in the early 1980s along with market leaders in other industries. Competitive forces throughout the world were forcing US firms to rethink their strategies and their organization designs. As more and more competitors from Asia and Europe challenged GM's market supremacy and as technological developments in manufacturing and information processing challenged GM's production advantages, GM's management responded by implementing changes in its organization design that continue into the second half of the 90s.

The first signs of problems began to appear in 1981 when the company reported its first loss since 1921. This report coincided with the appointment of Roger Smith as CEO. the sixth GM CEO since Alfred P Sloan, Jr.. who served from 1937 to 1956. Sloan created the modern version of GM through the development of the divisional organizational structure.which consisted of five inde pendent divisions Chevrolet, Pontiac, Oldsmobile, Buick.and Cadillac and the compe ting product strategy The competins product strategy encouraged each division to compete for customers by delegating complete authority to eachh division to design, produce, market, and sell its own particular line of cars. The only limitation placed on the division was the overall corporate strategy of encouraging car buuyers to think of "'tra ding up" as each year's new models hit the show floors. Thus, the Chevrolet Division produced the starter cars, relatively inexpensive and within the price range of the first time car buyer. But with increases in income the car buyer would be encouraged through promotion and selling efforts to consider the more expensive Pontiac and Oldsmobile vehicles, and ultimately the Buick and Cadiflac.

This traditional divisional design was in place throughout the post World War it eriod when General Motors grew into the lareest manufacturing organization in

the worid. But something happened along the way. The divisional structure as it evolved over time began to be identified as an impediment to progress and market response. One of the outgrowths of the structure was the development of massive corporate support staff, which when created was supposed to provide expert advice and consultation to the divisions. But over time these staff members began to take over me decision making of the line units, and the decision making began to grind to a halt in endless discussions in endless committee meetings at corporate headquarters. As these corporate staff units increased their influence through the provision of valued information, they sought and received formal authority over many of the day-to-day decisions.

Thus, when Roger Smith took the reins in 1981, he began the process that continues even to this day: redesigning GM's organizational structure with the spe cific purpose of pushing decision making down into the operating divisions and reducing the number of staff at corporate headquarters. In 1984, he announced his first move: the creation of two autonomous groups, BOC and CPC. BOC consisted of what had been the Buick, Oldsmobile, and 'Cadillac divisions, and CPC consisted of what had been Chevrolet. Pontiac, and GM of Canada. Smith delegated complete authority to each of the groups to organize in whatever way the managers thought was necessary to get GM back on track to regain its compe titive, growing. and profitable status

BOC decided to organize around four completely autonomous product groups strategic business units (SBUs). Each product group would operate as Sloan had envisioned his divisional structure would operate, exercising complete authority to design, produce, and sell cars. By contrast. CPC organized around functional lines with centralized authority. but with a matrix overlay to facilitate communication across functional lines.

When 1993 rolled around, GM had replaced Robert Stempel, who had replaced Roger Smith, with Jack Smith. Stempel had been in office bare ly two years, yet the board of directors was unhappy with his deliberate management style. He simply

was moving too slowly in carrying out the turnaround that Roger Smith had begun. The new CEO responded to the news that GM's market share had dropped to its lowest point in 23 years, 29 percent, by creating a single operating division, North American Operations (NAO); paring corporate staff from 13,500 to 2,500; reducing the number of car models from 62 to 54; combining 27 different purchasing departments into one; and eliminating nearly 16,500 hourly jobs by offering early retirement. These seemingly harsh measures were necessary according to Jack Smith to assure GM's very survival as an automaker.

The organizational design that GM now counts on to enable it to survive and compete identifies the five traditional divisions-Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac-as marketing units. But all production, product design, and purchasing will be done in one separate unit. The story of GM's reorganization efforts remains unfinished. In fact, what progress the company makes will depend upon'; Jack Smith's success at eliminating the remaining vestiges of bureaucracy that persist even in the midst of massive efforts to make the company more responsive to market conditions" and technological developments. Centrali zation or Decentralization? Which is the appropriate response: centralize some functions, such as purchasing and production, and decentralize other functions such as marketing?

Despite all the efforts of its CEOs from Roger Smith to Jack Smith, GM continues its long slide down the profitability curve. The efforts to reverse this slide through organization redesign and other measures seem to have yielded little gain. If General Motors cannot cope with the rigors of global competition, can the country?

1.Identify the environmental forces that have driven General Mntors to change its organizational design.

2. Have the changes in structure been in the appropriate direction? Have they been misguided? Explain your answer and your reasoning.

3. General Motors has a collaboration with Hindustan Motors-makers of iconicAmbassador.However,they are also trying to independently establish own set up.what changes may happen to their parent organization structure?.

4. Discuss the possibility that redesigning the organizational structure is actually an irrelevant response: to what ails General Motors.