Righting GM’s ship will take more than plant closures – Steve Spear

Steve Spear, Senior Lecturer, MIT Sloan School of Management and Engineering Systems Division

From The Hill

General Motors (GM) shutting five factories and cutting 14,000 jobs reflects poorly on a legacy approach to managing. Big shots making transactional decisions — buy or sell this, open or close that, hire or fire them.

What is required is a dynamic approach of building capabilities to be agile and resilient, learning quickly how to bring value into the marketplace with speed and responsiveness.

CEO Mary Barra’s announcement set off a firestorm of criticism and praise. President Trump led the barrage, saying the company was making a “big mistake” and that GM “ought to stop making cars in China and make them here.”

Furthermore, he took Barra to task, saying he was “disappointed” in her. Similar outrage was voiced by those advocating for the clock-punching working class.

But other commentators praised her “hard decisions” in the face of declining demand. The stock market agreed, with GM’s shares rising 7 percent.

Apparently, if you’re do something poorly and you promise to do less, then your valuation increases. It’s like relatives who are lousy cooks. If they say, “I’m not preparing the next holiday meal,” you cheer.

Of course, this is opposite the ideal of leaders introducing outstanding products, expanding facilities and providing stability to the associates they employee and the communities in which they operate. Imagine the reaction if Tim Cook, Jeff Bezos or Satya Nadella made similar announcements to GM’s.

For companies doing well, markets want them to do even more, not less. It’s like relatives who are great cooks. When they promise more pie, you pull out the plate and fork.

To be fair, Mary Barra didn’t get joy from putting coal lumps in Christmas stockings. She’s a career “GM-er,” as was her dad. She assumed a legacy of failed management from generations of GM leaders, making this just the latest “hard decision” about closing plants, idling workers and discontinuing products.

She was forced to make these “hard decisions” because GM was selling products the buyers did not value. GM didn’t know how to be innovative enough to replace lackluster models. Furthermore, GM didn’t know how to operate plants with sufficient flexibility to shift among products as demand gyrated.

Rather than being agile, the company was stuck with an old school view of what managers do — making “resource allocation” decisions — about what to introduce or discontinue, what to open or close, whom to hire and fire, based on a steady flow of aggregated data that periodically forces a choice. It’s management work as a series of transactions with everything and everyone commoditized.

This is far from the responsibility managers should have: creating, energizing and harnessing the discovery capabilities of people. Equipped with such capability, the enterprise can have an up-to-date appreciation of what the market needs and will reward, back by a stream of alternatives to meet those needs.

This only happens with a workforce that is regularly recognizing new problems and opportunities and developing new ideas in a self-generated process of constant rejuvenation.

This depends on viewing people not as disposable commodities or variable costs to be taken on and shed but as people that are distinctly capable of solving problems — micro to macro, local and systemic.

There’s a pairwise comparison. The Volt, GM’s attempt at hybrid power, was discontinued. That’s reasonable given sales of only 160,000 in a decade. In contrast, Toyota used its initial hybrid, the Prius, as a platform.

Having cultivated capabilities to relentlessly reinterpret market needs, high-speed engineering capacity to generate a range of appealing designs to be ready for a range of market circumstances and with manufacturing facilities and associates having the creativity to be capable, flexible and agile, Toyota has sold about 1.5 million hybrids in 2017 alone, with the total so far approaching 12 million.

Read the full post at The Hill

Steve Spear is a Senior Lecturer at the MIT Sloan School of Management and at the Engineering Systems Division at MIT. 

Leave a Reply

Your email address will not be published. Required fields are marked *