GM CEO Frustrated by Bureaucracy and Why He Is Not Alone
If there was any remaining doubt about the importance of culture to a company’s prospects one needs to look no further than a recent town hall meeting at GM where the CEO Dan Akerson told workers that while the company has made progress in shrinking the bureaucracy, the old sclerotic culture still exists and needs to be replaced with something more attuned to the 21st century.
August 16 2012 by ChiefExecutive.net
In an Associated Press report, Tom Krishner writes that “a frustrated but upbeat GM CEO told employees that he was working to wipeout fiefdoms that remain in the company.” Akerson went on to tell workers during a quarterly meeting that he wanted them to be leaders and to fix problems rather than wait to be told what to do. “You shouldn’t stand around waiting for somebody to tell you where we’re going to go,” said Akerson, according to the AP story. “We’ve got to get this company and the culture into the 21st Century.” Akerson was a former telecommunications with Nextel and XO communications and worked with the Carlisle Group, the well-connected private equity group.
Akerson, who told Fortune’s Geoff Colvin, that GM was “dancing as fast as it can,” seems to have not completely come to terms with the most basic element of any organizational transformation, i.e. getting the culture right. When A.G. Lafley took the reins at P&G, one of the earliest moves he made was to “promote a more courageous, more connected and collaborative culture.” When the company that eventually was called Yum Brands was spun-off from PepsiCo, David Novak, our 2012 Chief Executive of the Year, said that the most important thing he and his team did was to “create a culture of recognition.”
In short transformation begins with culture. The fact that the former Naval Academy graduate is still frustrated with the progress GM is making with its bureaucracy suggests that this basic concept has not been adequately addressed. Akerson’s message was eerily similar to what his predecessor, Ed Whitacre, told employees shortly after he became CEO in 2009 as the company emerged from bankruptcy protection. Whitacre implored workers to take risks, make decisions and be entrepreneurial.
It’s one thing to say this, but it’s another to get people to do it. It’s one reason why Ron Johnson, who was hired to turn JCPenney around is also having difficulty. The former Apple executive who created the first Apple store in 2001 as it CEO continues to struggle with cost-conscious consumers and online retail Recently JCPenney experienced a 21.7 percent drop in same store sales last quarter which was worse than the 18.9 percent drop in the previous quarter when his reforms were in place. Strategically Johnson is trying all the moves that Apple found so successful in its bricks and morter stores. But whether this can be fully replicated is not certain. JCPenney sales people are not Apple sales people. According to the Financial Times, Johnson “attributes Apple’s success to staff that are not focused on selling stuff but on ‘building relationships and trying to make people’s lives better.’”
This is why culture is important. By Akerson’s own reckoning GM is hurt by its complexity, saying it has too many parts compared with its competitors. For example, he said the company has 30 different door latches while rival Toyota has only five. “It’s a big deal,” he said. “That’s just the tip of the iceberg.”
Akerson, took control of GM in September 2010. Since, the auto industry has undergone major changes. Domestically, the industry is no longer the “Big Three” and is now the “Big Seven,” with GM, Ford, Toyota, Chrysler, Honda, Nissan and Hyundai. Yet despite less volume in previous years — 2011 auto sales were 13.0 million as compared to 17.4 million in 2005.
Globally, GM has grown its worldwide market share from 11.6% in 2009 to 11.9% in 2011, while maintaining profitability. Meanwhile, it earned net income of $4.7 billion and $7.6 billion in 2010 and 2011, respectively. GM is still 27 percent owned by the U.S. government, that is the taxpayers. The CEO admits that many car buyers will not buy a GM product as long as this continues. One supposes that Akerson can be thankful that as far as government bureaucracies go, GM isn’t as bad as, say, the GAO.