Essay About Gm Case And Ceo Of Gm

Case Summary Executive Decision Making at General Motors
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Case Summary of Executive Decision Making at General Motors
“How does an organization achieve consistency, or fit, between the environment and its strategy,
structure, and decision-making processes? The GM case will allow us to discuss the question of
how to go about aligning an organization with a dynamic environment, and in so doing, ensuring
that it is also self-adapting. A last important theme of this case is the role of the CEO.”
Wagoner (Chairman and CEO of GM):
“How to balance the global effective system and local focus expertise? The matrix organization is
the key factor. It replaced the historic multi-divisional structure and its proliferation of vehicles,
architectures, and processes that had almost cause GMs demise”
~Case Context~
Alfred Sloans GM: Revving up (1920~1956)
* In 1908: Billy Durant
Created the first automotive conglomerate and first vertically integrated company in the industry.
− Challenge: Poor management decision because internal competition and duplication were
tolerated and often encouraged.
* In 1918: Alfred Sloan
Reorganized GMs structure and management processes to be in line with its strategies.
− Strategy: Three major strategies included an ingenuous marketing policy, a commitment to
innovation, and international diversification.
− Structure: Multi-divisional structure called “decentralization with coordinated control.”
− Policy and Decision-Making Processes: Coordinated control in the decentralized organization
came from Management Committee and the Policy Groups.
Management Committee:
Ultimately responsibility for decisions around resource allocation, spending authorities, and
planning for GMs future resided until 1992.
Policy Groups:
Met monthly to set standards and policies to provide recommendations to Management
Committee, while they had no funding authority.
− Result: Ranked #1 of Fortune 500 (in 1955) in both sales and net profits.
− Challenges: Innovation structure is unchanged until 1990; independence and decentralization
may not be able to respond the major changes quickly.
Coasting Toward Collision (1960s-1990s)
Increased competition and oil crisis in 1970s tested GMs prevailing strategy, structure, and
senior management process. However, GMs internal focus and its not invented here attitude
didnt help.
− Strategy: With focus on market share, the divisions compete with each other. Top managers
became more focused on cost than revenue.
− Structure: The effectiveness of decentralized organization began to break down as operational
complexity and internal competition increased. Each division and global region has its own
functions and lacked of the economics of scale.
− Policy and Decision-Making Processes: Slowed down decision-making by adding a new layer
of required review, and managers focused on lining up needed votes before meetings. The staff
kept executives from knowing what going on with customers and employees.
− Result: GM was branded a “dinosaur” by the early 1990.
Getting Back on a Common Track (1992 and Beyond)
In 1992, Jack Smith was in charge of CEO and Chairman. He eliminated Policy Group, abolished
the two vehicle groups, and replaced the Management Committee with Presidents Council.
− Strategy: Reduced overlapping product lines, developing common systems for product
development, focused on speeding up to decision-making process, and eliminating the
interdivisional competition.
− Structure:
1. In North America, GM consolidated automotive engineering, manufacturing, and purchasing
into one North America organization.
2. In 1998, GM established a single Automotive Strategy Board (ASB) chaired by Wagoner.
3. Also in 1998, GM was reorganized into matrix organization, or basketweave, including four
Region Presidents