How Not to End Up Like General Motors
by Stephen Hawley Martin

Back in the early 1920s, when Ford had 60 percent of U.S. auto sales, General Motors put a plan into effect that snatched much of it away. Henry Ford had made the mistake of holding on too long to the business model that had led his company to success: Provide everyman with dependable, affordable transportation in the form of a Model-T. His competitor, Alfred Sloan at GM recognized used car sales would now fill much of that need and that many American consumers wanted more. So he positioned Chevrolet as his entry-level brand directly against Ford. Pontiac became the brand for those ready to move up to something more snazzy, Oldsmobile was positioned for the solid, middle-America family man, Buick for the successful individual who wanted luxury without being overly showy, and Cadillac for the established, moneyed set who didn't mind letting the world know who was on top of the heap and planned to stay there.

The plan worked so well that by the 1960s, General Motors market share stood at nearly 60 percent. But as the years rolled by General Motors fell victim to the same disease that earlier had caused Ford's problems. It failed to keep its finger on the pulse of the consumer and to adjust what it offered accordingly. It kept making behemoth automobiles, for example, when smaller cars became popular. It continued turning out vehicles that required multiple return trips to the dealer to "get the bugs out" when Toyota and others turned out hassle-free vehicles using new, lean manufacturing techniques. The result was that by 2004 General Motors share had dropped to a little more than 25 percent.

What made General Motors so myopic? The same bureaucratic structure that enabled Sloan to build a company large enough to handle 60 percent of the U.S. market. Aside from out-thinking Henry Ford, Alfred Sloan had to fashion a huge industrial enterprise that wouldn't collapse under the weight of its own complexity. When he was doing this, it wasn't obvious how companies would marry the efficiencies of mass production with the potential inefficiencies of distributing and marketing more and more products. Sloan built a company that worked well for a while by decentralizing operations such as production and distribution by setting up separate divisions while centralizing policy matters and administrative functions such as personnel and finance at the top. This became a model for many U.S. companies. It also placed the policy-makers in an ivory tower far from the customers they served and the daily revelations apparent to those slugging it out in the trenches. Unwittingly, the bureaucratic pyramid Sloan built became choked with overconfidence and red tape.

The time is long past for GM to change. Plants are now being closed and workers laid off. That company's woes should be a warning to any that cling to the old way. These days being world class means the hierarchy must go so decisions can be made on the spot and opportunities in the marketplace acted upon with lightning speed. Waste must be removed, quality must be of the highest quality (Six Sigma), and customers must be able to get the product they want, configured the way they want it, when they want it. Businesses that have achieved this, such as Dell Computers, have done so by adopting the Toyota Production System, also called "lean manufacturing," and they operate through interlocking, empowered teams whose members have a championship mentality. Everyone pulls his own weight, shares a sense of urgency and accountability, and information flows freely up, down, and across the organization.

How can this be achieved?

Executives who want to transform their companies from mass manufacturers like General Motors into lean manufacturers like Toyota and Dell have a number of places to turn. Many books exist on the subject including the highly popular Lean Transformation: How to Change Your Business into a Lean Enterprise by Bruce A. Henderson and Jorge L. Larco. This book is literally required reading for those seeking certification as lean experts from the Society of Manufacturing Engineers. In addition, two organizations that can be called upon for help are the Association for Manufacturing Excellence (AME) and the Lean Enterprise Institute.

Those wishing to move from a traditional hierarchal pyramid to interlocking, empowered teams might start by reading my new book, Lean Enterprise Leader: How to Get Things Done without Doing It All Yourself. First, I attempt to explain how to transition to interlocking, empowered teams using a participatory approach that involves as many employees as possible based on the theory that people who have a hand in deciding a course of action are likely to do their best to make it work.

Second, I counsel newly-selected team leaders concerning how to transition from "command and control" managers into coaches who work to bring out the best performances possible from their team members. A system is also outlined that when put in place aligns a team's objectives with management's objectives and provides a tracking mechanism.

Read these two books and decide for yourself if it makes sense for you to transform your operation. They may open your eyes and could be what steers you away from the road traveled by General Motors.

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