On Management – Why GM Needs New People

by Peter Sorgenfrei

Running a car company (or any company for that matter) is not easy. Add a board with strong personalities who seek to solidify their legacy and government oversight and you have the makings of a perfect storm. In the case of GM, it was more like a category 5 hurricane.

Fritz Henderson was not the right man for the job from the start it seemed. He has had great experience, is known as the ‘turn-around expert’ at GM, but was too ingrained in the culture of GM that caused the problems they are in now.  At the time he was tapped the board did not have that many choices and I doubt many outsiders would have taken a look at the job so Fritz got the gig.

Now what happens? Ed Whitacre certainly does not mind being in charge, and the search for an outsider is likely to take a while. With the pay restrictions in place, the board composition and the government oversight, our bet is the right candidates are not interested.

We say right candidates because there are probably a fair amount of people who want the job – the chance to attempt revival of one of the largest companies in the world is alluring, but the person who will succeed in this job is already sitting in another CEO chair, being well compensated and with less tape to deal with. Why would she/he take the position?

The person the board is likely to get under the current circumstances will not have the gravitas required to drive the kind of change needed at GM. And it is not just about the CEO’s office, several layers deep in the organization change (as in personnel change) has to happen.

Someone at the board level (and as incoming CEO) has to say. Enough! The only way this company will be able to repay the government(s) is to completely revamp the system. And unfortunately that involves human change. We as humans don’t really change. We might want to change, but fundamentally we like habits and stick to what we know (which is what we have done in the past).

It is not about consultants coming in and showing the team matrix after matrix of what needs to be done. It is about a group of people (CEO through Directors) that are completely focused on taking care of the customer and the company. It is also about a corporate culture that rewards risks, does not punish strong personalities and constantly reinforces the focus on product and customer.

The combination of management and corporate culture is not in place at GM today.  GM has dedicated, intelligent and passionate employees for sure but if you lived in a state with 15% unemployment and had children to support, would you stand up and rock the boat?  Probably not.

GM will get a new CEO but in order to get the right person for the job, they need to attract someone that is adept in corporate cultural change as well as financial management.

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2 thoughts on “On Management – Why GM Needs New People

  1. Dan Sherman says:

    Great article Peter. You mention Michigan as being a part of the problem…

    “GM has dedicated, intelligent and passionate employees for sure but if you lived in a state with 15% unemployment and had children to support, would you stand up and rock the boat?”

    Do you think that moving their HQ out of Detroit would help? Clearly with its deep-seated historical roots in Michigan this wouldn’t be as simple as Nissan moving from LA to Nashville, but isn’t the decline of Detroit part of the problem?

  2. sorgenfrei says:

    That’s an excellent question. I think the decline of a city or state is part of the problem, but then again, Detroit would not be in the state it is in, where it not for the decline of autos. The expense associated with picking up and moving a large complex organization like GM is too big to probably even consider. With all the suppliers (to HQ, not just to the factories) having set up shop nearby, the overall shock to the system if GM moved would be too great.

    I do think that with the right people (new leaders and a changes further down in the org chart), the right freedom for these people and an acceptance of declining market share as a fact, GM could turn/stem the tide and help revitalize Detroit. It is just a long ugly road to get there.

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