A brief comparison on GM and Toyota would be helpful in discussing the four principles of purposeful action.
GM: After World War II there was big demand for each and every product that was introduced in the market. There is reason for this was rationing of product usage came to a halt. Two of the major industries emerged out of this boom one is housing and automotive. GM took advantage of this market. In order to be the competition GM focused on producing cars at the least cost. The concept of manufacturing cars at least cost helped GM to evolve into a mass manufacturing company. In mass manufacturing system of production raw materials are purchased at the lowest price. The raw materials and finished products will have high inventory. Whether a car has demand in the market or not still the inventory of the car will be high. It is the job of the marketing team to come with ideas to sell it. In this business model GM quickly transformed from visionary to a goal oriented company. The only goal of GM was to be the largest producer and seller of cars, which sacrificed its vision and mission. Every action taken inside the company had no purpose to benefit the society. There was no ethical balance in the form of producing cars that consumed lot of gas without any forecast for environmental impact at later stage. Executives and leaders were happy as for as the goals were accomplished. The desire that motivated these goal oriented action were in the form of: financial numbers, bonus package and salaries for the executives. The company gave the least importance on the desire to serve the welfare of the employees, society and environment. Hence company lost to listen the voice of internal and external customers, which resulted in low quality cars, low employment morale, lack of visionary leadership and motivation and poor financial planning. The only thing that was helping GM these days is that customers were enticed by emotional market strategy as “GM is the car built by Americans for Americans” and selling to rental car companies. Even rental car market share fell to other Japanese and Korean car manufacturers in the millennium years. On the whole GM got locked in the ego and arrogant pride as the largest car producers and lost the humbleness in its action.
Toyota on the contrary: After World War II Japan economy was in shambles. The quality of all the industrial products developed in Japan was not up to the international market. Toyota was producing car that was least desired by consumers around the world. Moreover the company was in deep financial shambles. Most of the financial institution did not want to give any kind of financial support to the company. In this crisis, there was one company that provided financial support to Toyota with a stipulated condition. The stipulation was that Toyota can only borrow when it sells a car and the amount must equal to the selling price of the car. This means if Toyota sells one car the company can borrow the money equal to the selling price of that particular car. Toyota accepted this challenge. The management was looking for ideas to produce and sell the car. This created the leaders in Toyota to develop the concept Kaizen meaning continuous improvement (Phase III of Purposeful Action), which later became Toyota production system. Kaizen was applied at every level of the company from the top leadership to the bottom management, from shop floor to dealership place. This became the vision of the company. Every action applied by the employee had to evaluate how it continuously improves the process. This led to employment empowerment. There was open communication at all levels. Toyota saw the company as integrated system not separate entity from the environment, which was not in the case of GM. Every action taken inside company was customer focused. The company sent its executives to see how other companies around the world were manufacturing their products. The executives went to developed nations in the west from Germany to USA. They were open-minded to benchmark companies from other than companies that were producing cars. The benchmarking process did not lose customer focus. Toyota developed the concept called quality circles which gather information to improve the overall quality for each and every process of the company from both its internal and external end user. In this process the company paid every attention to the welfare of the employee. This boosted the morale and motivation of the employees. One important thing was Toyota maintained high ethics of commitment. It never layoffs employees to cut cost instead every aspect was focused on improving the quality of the product without losing its vision on customer focus. Toyota maintained product line was customer wanted for its needs and necessities. Also made sure the cost of maintenance of the car was at the least cost related to were and tear of the vehicle due to operation.
One the whole Toyota’s action had a purpose at every aspect of its business; ethics to stick to its commitment and were not driven by financial goals; desire to serve the customers, employees and society better.
Sources from www.businessweek.com
For example Toyota-General Motors sold 9.37 million vehicles worldwide in 2007 and lost $38.7 billion. Toyota sold 9.37 million vehicles in 2007 and made $17.1 billion. That was the second best sales total in GM’s 100-year history and the biggest loss ever for any automaker in the world. For Toyota, that was roughly $1,800 in profit for every vehicle sold. For GM, it was an average loss of $4,100 for every vehicle sold.
2. What kind of a leadership is required for the present scenario of GM.? Please provide your views, with justification.
As mentioned in the first question on the comparative analysis of GM and Toyota. GM should focus applying purposeful actions in their operations. The company should develop and implement Kaizens at all levels. Eliminate bureaucracy in the management and involve everyone to seek better solution for both welfare of the company and society. In the recent years GM has improved its quality of cars both in design and performance. It is time for the executives to listen to both internal and external customers. The company should develop health welfare programs for its employees to boast and improve the well being of its employees. One way is to help its employees to eliminate unhealthy practices like smoking and consuming alcohol. Providing incentives for people improving their health which will indirectly reduce the health care cost. The reason for this is the number of employees working for GM is more than 100,000.
Sources from websites: www.businessweek.com and yahoo.com:
Health care, pensions and other benefits -General Motors isn’t bankrupt, but the once-great firm is on the rocks, having lost nearly $4 billion last year alone through September, recently announcing 30,000 layoffs. And at first glance, its long decline would seem to be GM’s fault. Consider perhaps its foremost headache: Its hulking health insurance costs for which workers pay nothing out of pocket, and retirees very little. They have about 145,000 employees, active employees, and we have health care coverage for 1.1 million retirees, independents and family members. Last year we spent $5.2 billion on health care coverage for all of our employees in the U.S. basically. It equates to about $1,500 a car.
That’s more than the steel in an average car and $1,500 that GM’s foreign rivals, with government health insurance, that don’t pay. GM’s got another cost disadvantage as well: full pensions after only 30 years of service, regardless of age. To pay for this largesse, tack on another $1,000 per car.
The lushest benefit of all, however, may be GM’s jobs bank. Workers whose plant closes can transfer elsewhere in the company or, if they choose not to, take classes, do community service, continue to get full pay and never retire. So in Baltimore, when a GM plant closed recently, the jobless weren’t exactly distraught.
When you add the jobs bank to the pensions and health care tab, GM has a total cost disadvantage, compared to non-U.S. rivals, of $2,500 or more per car — before it even starts making one.
Questions and background information for this case study discussion were prepared by Chandrika, Discussion Leader.
This discussion will continue for the next three weeks, through midnight on April 21. Each student will discuss in depth the two questions posted above, applying the specific principles assigned to each student. Assignments of principles will be posted under Assignments in Blackboard. Posts should be based upon research, with appropriate references and links.
This discussion will carry more weight with respect to course grade than a weekly discussion.
Good luck.
The writing on the wall of GM’s pending bankruptcy was written long ago. In a Dec. 2005 article “What If GM Did Go Bankrupt… “ highlights the trouble company failed management decisions. Richard Wagoner stated that bankruptcy was “contrary to the interests of our employees, stock- and bondholders, dealers, and our suppliers and customers.” If filing for bankruptcy was unthinkable in 2005, Wagoner failed to make the necessary restructuring of the company to keep it afloat. The reality of a bankrupt GM may be to only way to savage the company at the expense of taxpayers, workers, retirees, suppliers, investors and customers.
http://www.businessweek.com/magazine/content/05_50/b3963114.htm
I present my findings of Brookmaster analysis for Rick Wagoner below.
Brookmaster’s assessment of Rick Wagoner’s dominant archetype
The bars reflect your raw score, within the bars is the raw score : percentage.
Professional Archetype Profile
Leader 27 : 15%
Entrepreneur 37 : 21%
Manager 33 : 19%
Trustee 12 : 7%
Intellectual 33 : 19%
Consultant 27 : 15%
Grand Archetype Profile
Giver 10 : 33%
Taker 20 : 66%
They are ancient. In markets that function properly, focus, planning, and commitment make the difference. The automobile industry may be the most transparent in the world. Everyone knows the prices, it’s easy to compare and shop; information on product quality and performance is abundant; buyers spend an enormous amount of effort on purchasing decisions.
http://www.davidbruceallen.com/strategyoped/2006/09/general_motors_.html
What GM is missing what the article saying above. First principle act with purpose, which gives focus and make the difference.
Everyone knows the prices and able to compare; fourth principle of purposeful action is to relate with others.
Again again we can see that GM missing the these principles.
Awful management. Awful management that manufactures mediocre cars. The verdict is in: the American cars that General Motors and Ford make in America are mediocre. In Consumer Reports’ list of the best cars for 2005, in all 10 categories the winner is a Japanese car. Not one U.S. car made it. Not one! The bottom line is that Japanese cars are better. To that we can add that European cars are more stylish, and Korean cars are less expensive.
http://www.davidbruceallen.com/strategyoped/2006/09/general_motors_.html
Leadership not providing good guidance is more like a blind person walking into a new town.
Secondly, based on the fourth principle GM not connect with consumers.
During the current times General Motors requires a leader that is adaptive to change and able to overcome the many obstacles the corporation must overcome to remain alive in this market. All leaders must act with purpose, however in this situation a leader must ensure all of their actions have an ultimate purpose in order not to be wasteful.
During these situations an individual who does not carry out purposeful actions can create destructive consequences toward an organization. At this time General Motors must remain competitive yet careful in their actions within their own organization and outside of the organization.
The company must direct their actions on their own without the influence of others and realize what the markets are missing. New leaders of General Motors must find what the current auto market is missing and how to meet these voids.
The company is already producing environmentally green pick up trucks, one step in a positive direction to where the auto industry could possibly be heading.
http://www.cbc.ca/canada/story/2008/06/21/gm-pickups.html
Information like above shows that automakers are going to have to remain competitive with each other but also within their own companies. Even though these automakers must develop their own niche markets, these markets must have a purpose and be thoroughly researched before applying any decisions.
A leader must realize the overhead currently associated with general motors including inefficient operations, insurance costs, and retirement costs and how these costs must be managed in order to benefit the corporation.
http://seekingalpha.com/article/85437-gm-slashes-benefits-one-bad-decision-after-another
At this time general motors requires a leader archetype, with some entrepreneurship skills to move the corporation into new and undeveloped markets.
Discuss GM on the basis of the 2nd and 3rd principles of purposeful action: (ii) ethical balance and (iii) desires that motivate action.
General Motors, as it stands today, is in dire straits and the cause is quite simply failed leadership. I would like to touch on these leadership failures in the context of the second and third principles of purposeful action. Perhaps what comes to mind immediately when discussing GM is the profound level of greed that seems to be inherent in their operations. But the issue goes much deeper than that and is much broader – in order to fully grasp just how far reaching this “greed” is it may help to take a step back and take into consideration the auto industry itself along with it’s consumers. A large majority of American live with the mindset of instant gratification and this mindset follows through into the auto sector. A recent study indicates that roughly two-thirds of all new vehicle purchases are financed with debt [2]. Greed is a powerful force and can easily sway both individuals and companies to shift their core value focus from positive to negative.
Although GM’s most recent CEO, Rick Wagoner, is most associated with their recent downfall they in fact do have a legacy of leadership failure. This legacy comes in the form of very large array of indistinct brands such as Pontiac, Hummer, Buick, Saturn, and Saab, just to name a few and all in the name of market share (i.e. power, status, and wealth – representing the first two levels of desire) [2]. Maintaining production on all these various brands requires a very loyal and large workforce and to that end GM has overwhelmed itself with its responsibilities to its unionized workforce. GM negotiated the initial deals with the auto unions in an effort to keep up production and maintain its status. This could’ve been interpreted as an act of service on GM’s part, wanting to ensure the happiness and safety of their employees, but GM had it’s eye on the dollar throughout the negotiations. Again, GM chose to act on the first two levels of desire.
[1]http://www.freep.com/article/20090330/BUSINESS01/903300329/
[2]http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20090330_10026_10026
What kind of a leadership is required for the present scenario of GM.? Please provide your views, with justification.
If GM is to survive it must place a great deal of focus on putting into place a leadership structure focused on service. It is also necessary that GM realize that survival means a very distinct transformation and will involve a great deal of sacrifice. It has already been established that their existing leadership had led them down a path of destruction as a result of failing to abide by and focus on the positive core values, which in turn influenced the company’s desires, thus creating a vicious cycle of self-destruction.
GM must eliminate the vast majority of its brands in an effort to not only cut costs but also as a means to remove any distractions and possible temptations. By removing these other brands GM can focus on restructuring its core brands in such a way as to promote a greater concern for both the environment and the consumer. Many of it’s non-core brands produced very large, gas-guzzling, expensive SUV’s and trucks so by eliminating these brands GM can start projecting an image of greater environmental concern. Perhaps more important, though, is that by eliminating these brands GM is in many ways removing the temptation of greater profits that these brands represent. Hummer, for example, has long been associated with wealth, status, and power. It is time that GM moves away from this kind of marketing and instead aligns itself with a focus on the average consumer.
It is also very important that the leadership structure that GM implements form this point forward address the corporate culture issues that seem to permeate the company. A new book by former GM employee and consultant Rob Kleinbaum states that “…very few GM employees see themselves as truly belonging to the global enterprise; almost all identify themselves with their function and then the local business unit; viewing others as ignorant meddlers and sometimes outright adversaries … of all GM’s cultural problems, this might be the most crippling.” [1] Clearly the next leader must work very hard to attract and convert a loyal following from within. This can only be achieved if the focus is on leadership that emphasizes service, both to the consumer and the employee.
[1]http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20090330_10026_10026
You are correct, GM must come up with a plan to support the present potential buys. Why buy a GM product if they will not be around to service it?
What kind of a leadership is required for the present scenario of GM.? Please provide your views, with justification.
A few of the ways I have seen and heard of businesses trying to releive bad situations is to either bring in a well known successful executive or revert back to formerly successful executives at least for “cleanup” type purposes.
I suppose President Obama might have been taking a similar approach to the first of these two methods when he was pushing the whole “car czar” idea, even though that didn’t apply to GM alone.
Perhaps another solution would be to try to recruit expertise from successful car companies such as Toyota who could contribute to lean activities and help GM eliminate some of the waste that is has been dragging it down for years. At minimum, such expertise could help GM benchmark. Ultimately, the next executive will need to be lean minded.
I have attached a link to an article that discusses successful executives.
http://ezinearticles.com/?6-Shared-Factors-of-Successful-Executives&id=42067
Everyone keeps bringing up Toyota as the example for GM to follow.
While Toyota has taken over first place in cars sales (someone has to be at the top) Toyota has had to put a factory that was being built in MS (the plant Chattanooga competed for) on hold because of sales.
So, Toyota does not have all the answers either
I do agree with your simple first statement that the cause is quite simply failed leadership. Simply a failed leadership.
Joshua good article.
I agree with your comments Josh, GM has falied with regard to the four principles of purposeful action.i came to a conclusion after reviewing this blog with all posts and reviews, the GM did not follow these principles and they have not implemented .