Leading and learning: Where did GM go awry?

by David Schwinn
Guest Author

Bankruptcy? General Motors? Are you kidding?

When I started at General Motors in the 1960s, we were the biggest and best company in the United States and most of the world. As a matter of fact, I believe that only a couple of state industries in Russia surpassed the number of people GM employed. Many of us, observing the poor quality of work done in the factories as we first entered them, found it hard to believe that GM could be so good. One of my friends and colleagues, Mark Horvath, captured the situation insightfully: “We (GM) can depend on the stupidity of our competition.”

As time went on and we became more a part of the GM culture, we began to think of Mark’s observation in a different way. We began to unconsciously believe that the reason we were so large, powerful, and successful was that we really were smart. As a matter of fact, in those days, one of the criteria we used for making decisions was “Will this enhance our market position so much that the anti-trust guys will try to break us up?” We thought we had to be careful not to be too good. So what happened to this most omnipotent company?

Many industry insiders simply think that its downfall was caused by the recent worldwide economic collapse. Other insiders tend to think it was the legacy costs because of all the baby boomers starting to retire. Others think that their products didn’t keep pace with customer demand. Still others talk about the influx of overseas competition. And, of course, many others simply blame the union. Although I think there may be some truth to all of those causes, I think we can simplify it to the fact that the world changed while GM didn’t quite keep up. Let’s explore this a little more deeply using a set of functions I am proposing for a new generation of managers, Listen, Lead, and Learn©.

General Motors was listening in the 1920s. Ford had revolutionized the auto industry in 1908 by introducing the Model T, a “sturdy, powerful, and inexpensive” new car (Paul S. Boyer. “Automotive Industry.” The Oxford Companion to United States History. Oxford University Press. 14 June 2009. 2001). Ford made the automobile affordable for many Americans who previously could not consider buying a car. He made the name of the game price. By the late 1920s, General Motors had noticed that consumers wanted more. They were looking for style and prestige. General Motors listened and gave it to them.

By the early 1930s, General Motors had taken the leadership role in the industry. They introduced styling, features, and choice. Alfred Sloan, president, CEO, and chairman of GM in those days was considered by many a management genius. He led, for example, the introduction of separate car divisions, each targeted to a unique consumer segment, annual styling changes, and financial management of those divisions from the corporate perspective. Those changes and others helped GM overtake Ford as the industry leader by the early 1930s. General Motors held that position for the next 70 years. That’s the company I entered in 1962. We were the leader and we knew it. Let’s move on to learning.

Listening and leading are really two basic steps of learning. Learning, in a more complete way, is:

  • Asking the right questions
  • Gathering the expected and unexpected data
  • Analyzing all the data
  • Responding to the analysis

Sometimes we lead as a result of the analysis. Many other times, perhaps more frequently, we just try to keep up. GM was an example of learning at its best in its early years, but, I think, the quality of its learning after that period waned.

There is a myth about those of us in higher education that, I think, is too often true. We tend to teach rather than encourage learning and we tend to be learned rather than learning. When you are learned, it is difficult to learn. When you are the best, it is hard to see anyone who is challenging that leadership.

One game change that GM was slow to see was quality. By the late 1970s, a few Japanese auto makers were seriously challenging the domestic auto industry based on the superior quality of their products. I was at Ford’s Corporate Quality Office at the time. I don’t know what was going on at GM, but at Ford, we already had the fundamental data, but we weren’t looking at it because GM wasn’t looking at it. We, too, knew that GM was the leader. Because we at Ford were getting so close to bankruptcy in those days, we began to look seriously at the data, ask even more questions, and play catch up in the new game of quality. Because I still had many friends at GM, I know that it took GM a little longer to feel the pain and, therefore, a little longer to begin playing this new game. When you’re the best, it’s more difficult to learn.

Even though late to the game, General Motors did conduct a couple of potentially excellent experiments. They created NUMMI, a partnership with Toyota in California, and Saturn, a new division allowed to stray from the traditional GM rules and regulations. Both experiments were successful, but the learning that occurred at both was not embraced by GM’s core. Interestingly, Saturn is currently on the sales block… it doesn’t fit the GM culture. Culture is hard to change. When you have a 70-year history of being the best, it is hard to see data that tells you that cultural change is essential.

As I write this, I have come to believe that, perhaps, Peter Senge got it right when he articulated the idea of a “learning organization” (Peter M. Senge, The Fifth Discipline (New York: Doubleday, 1990). Maybe General Motors just forgot to keep learning.

Having spent most of my adult life in and around the auto industry and considering the importance of that industry to the wellbeing of our country and the world, I would really encourage your comments.

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I’ve received a number of comments via e-mail about this article. Here are some of them. Please post any comments you may have in the reply box located at the bottom of the page.

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I found your article interesting but even more so, you hit on a key point, voice of the customer. Many times in projects, we dictate what we will deliver and forget what the customer expects or wants according to the requirements.  One of my initiatives is to push the need for initiation meetings for PMs who are the receivers of information from sales.  Many times, the information is not detailed enough to provide requirements – all PM should be looking back into the documentation, meeting with the customer and validating that the requirements against the scope.  Then they can go and develop plans, make resource allocations etc.  But a PM should always listen to the customer so that expectations can be fulfilled thus improve customer satisfaction

– Pam Bush

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This is a great article. Insightful. Thanks. I am already sharing It with my friends and customers.

These are some of the ideas, feelings, I would like to share, in my humble opinion.

The reader can learn many different things from this article:

  • If you are the leader, then lead. But, don´t forget to learn. Never stop learning.
  • Are really competitors THE thread? You better listen, really listen the customer.
  • If you are not the leader in the market, keep working, and if you are lucky enough, just wait until the actual leader becomes so arrogant to forget how important the customer is in its own learning and improvement processes, and then attack, and take a larger piece of the market.

Again, thanks for the article.

– Omar Mora

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I agree with your points in the article “Where did GM go awry?” Furthermore I do not see the current leadership of GM expressing the need to change. Through bankruptcy they have shed a lot of debt, but I do not see that they have reinvented themselves! In the 20/20 show from 7/10/09 it sounds like the folks at ABC think GM needs to seek to develop more exciting cars (most from new designs). They don’t seem to understand that the most prized cars today are the conservatively designed Camry and Avalon, to name two. Comfort and reliability are the 2 things that I think will win in the future (ageing baby boomers). Of course quality brings reliability, primarily. I have Toyotas and one is 9 years old and still has the original battery. This is the kind of thing that sells cars. At least, to me! Thank you for your article.

– David A. Pierce

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I found your article very interesting and certainly agree with you. My take on the domestic auto industry (I’m from Canada and we have the same issues with the “Feeble 3”) is that this crisis was coming for many years and the financial collapse only hastened the end. From what I could see, the Big 3 were artificially slowing down there steady loss of market share by their cash back incentives and employee pricing, etc.

Personally, over many years I saw the Fords, Chryslers, and GM products in my neighbourhood change to Hondas and Toyotas. I bought a new Plymouth van in 1996 because I wanted to keep jobs in North America and I believed the hype about them improving quality to the level of the Japanese autos. Well, the van was in the shop on warranty 30 times over the first 3 years of ownership, and once the warranty expired the transmission went.

Around the same time I bought a slightly used Ford Taurus, supposedly a vastly popular car and of course, “Quality was Job 1” at Ford. Well, the head gaskets went and I had to pay $1600.00 for the repair. This problem was known for years and before it actually happened I found out, on the internet, that this problem was widespread and there was also a common transmission problem plaguing Taurus owners over many years. I called Ford before my gaskets blew and they denied there was any problem. Luckily I came across Phil Edmonston and his Lemon-Aid site and I was successful in suing Ford for the repair. As Ford’s lawyer was making me sign a “gag” order prior to receiving my payment, he said “but Ford still values you as a customer.” I had to laugh. Again luck was with me and the Taurus was written-off in an accident. I bought a Honda Accord and I’ve never been happier.

Once the Plymouth Voyager finally gave out, I bought a Toyota Sienna and now I own a Toyota Highlander. Both vehicles have been fantastic.

My point is, that this is where the rubber hits the road, the customer experience. It’s going to take a heck of a lot to get me to try any of the domestics again. I’ve really had it with their contempt for the customer once we walk out the door. All of this has finally caught up with them and they have no one to blame but themselves. While the unions and management were dickering over how they would split up the once-lucrative profits, the customer slowly and quietly walked out the door and down the street to the nearest Honda or Toyota dealership. Not once did I hear them talk about the customer. They seemed to be living in their own fantasy land.

The really sad thing is it didn’t have to be that way if they would have looked and listened to what was happening around them and focused on the principles of quality and a learning organization.
Thanks for your article.

– Anthony (Tony) Esposito

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I have certainly enjoy the article. Most definitely, your article is by far most assertive. I, as quality practioner over the years have seen that exactly – in a lower scale.
The domestic auto industry somewhat grew arrogant; with that comes a big danger; overconfidence in the competition field is a disavantage factor; who would have thought in the early 70’s or even early 80’s that the “offshore manufacturers” will ever overthrow the American Giants.

Slowly but certain “offshore manufacturers had started to apply principles that were invented by our own domestic experts – if I may, Deming. You see Deming’s principles were thaught to the Japs in the 50’s (roughly). Ford, under struggles got a hold of Deming’s somewhere between 1979 -1982. Now let’s make a pause here to ponder… That is to say that the Japanese had at least 29 years of practise/embracing the principles of “improving quality will reduce expenses while increasing productivity and market share”. Thus, the Japanese had an opportunity to learn and apply what was taught by one of the best if not “the best” for quite a good chunk of time. By the looks, they truly have embraced “continuous improvement, even created their own philosophies all with a hint of Deming’s. But for the Auto industry here at home, I guess we wanted to re-invent the wheel rather than innovating on it. I guess we knew better.

If I may add, not only GM has gone down that road, several years ago, I worked for an organization that had somewhat that same attitude as GM, as you mentioned “we tend to be learned rather than learning”. The company goal was to meet delivery, quality became a requirement not an improvement method. The organization went through receivership (bankruptcy protection in Canada) lost a whole lot of customer orders, due to “We thought we had to be careful not to be too good”

All in all, continuous improvement should not only be applied to an organization as a whole, but to the individuals themselves. We could resolved that the simple fact that someone has ended a curricular degree does not imply the end of the learning cycle. Nor the institution who awards a degree will state such. On the contrary, the higher the degree the more research and experimenting.

Let us all continue to learn with confidence for the betterment not only of the organizations that we are part of but also the society that we live in.

– Baldomero G. Cuellar