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Hi! managers: How 'culture' crippled General Motors



Beyond a cumbersome organisation structure, GM's close brush with bankruptcy late last year can be partly traced to a staid corporate culture, which plagued its operations for decades and prevented it from adapting to a changing world.

Back in 1984, I was working as a management consultant in the US.  My client was General Motors.  I was part of a project team to help restructure GM's North American automobile and parts operations. The challenge was to design an organisation structure capable of maximising the sales of numerous car brands to different market segments.

At the time, GM was struggling with differentiation. Many of its car brands shared the same manufacturing platforms and body parts, so it was difficult to tell them apart. Consumers were baffled, for example, why different car brands looked alike, but were priced differently.

While having the right organisation structure enables the successful execution of strategy, I observed GM's culture also played an important role. There were four issues related to culture that seemed to impede GM's

success:

nLack of integration and single-mindedness. 

GM ran its business as a federation of successful decentralised profit centres. But this created a fragmented management mind-set. With so many autonomous fiefdoms, it was difficult to gain agreement and mobilise behind one single idea. As a result, many strategies and car designs were diluted or overly complex - the result of compromises between divisions.

nStifling bureaucracy. 

With so many management levels and a top-down, seniority-based management style, it was tough to make timely, effective decisions.  There were simply "too many cooks who spoiled the broth".  Political correctness trumped going against the grain and challenging authority to meet consumer needs.

Limited external focus.  While the world changed around them, GM was focused internally.  Granted, there were legitimate internal concerns that needed to be addressed, such as union negotiations, supply chain management, gaining economies of scale, but these eclipsed the need to stay close to the consumer. So when consumer preferences changed, GM was caught behind the eight ball.

nNo sense of urgency for change. 

When you are the world biggest automobile company, there is a reluctance to deviate from what made you successful.  A certain air of complacency and aversion to risk prevails.  But past success means nothing if the game changes. GM's problems didn't happen overnight. It was a slow erosion of market share that management thought would never amount to much, until it did.

These culture-related issues are not endemic to General Motors. They exist to varying degrees in most large organisations. Often they go unnoticed because "corporate culture" is intangible and its effects are

manifested over a long period of time.  But unless organisations learn that culture issues must be managed in a deliberate way, they can bring even the biggest, most successful enterprises down to their knees.

Larry Chao is managing director of Chao Group Limited, an organisation and training consultancy located in New York and Bangkok (www.chaogroup.com). Follow his article every first Monday of the month.

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