Managing in Challenging Environments: General Motors Analysis

This report presents a comprehensive analysis of the management processes and challenges encountered by General Motors (GM). It begins by examining GM's management through the lens of Fayol's management functions: planning, organizing, staffing, and directing, highlighting the company's shortcomings in each area. The report then delves into the internal and external challenges GM faced, including high labor costs, declining vehicle quality, poor productivity, and ineffective management practices. The analysis underscores how these factors contributed to GM's struggles in the automobile industry. The report emphasizes the importance of effective management, strategic planning, and adaptation to overcome challenges and achieve organizational success. The report is divided into two sections: one focusing on management processes and the second concentrating on internal and external challenges, providing a detailed overview of GM's management practices and their impact on the company's performance.

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MANAGING IN CHALLENGING ENVIRONMENT
Name
Institution Affiliation
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Managing in Challenging Environment
Introduction
Management is normally a hard task that needs a lot of skills. Without proper management skills
application, an organization or company can decline in its performance. That can be
demonstrated by the case of General Motors. Being an automobile giant in America, General
Motors’s performance was later challenged by the Japanese competitors. The analysis below
demonstrates how General Motors’ came to be overtaken by the Japanese automobile companies
in its own country through the lense of management processes and how they tackled internal and
external issues.
Critical Analysis of Management Processes
The management processes that will be used in the analysis of General Motors is Fayol’s
Planning, Organizing, Staffing and directing. General Motors manages its employees but has a
lot of pitfalls. One of the main reasons GM has had a series of issues with its performance boils
down to a complex web of management processes loopholes as explained below.
Planning
After General Motors discovered that it was struggling to stay afloat in the highly
competitive automobile industry, the top management opted to have a plan to copy the Japanese
automobile companies. Henry Fayol recognizes the need for planning in the efforts of
management (Bryson 2017). As a transformation step for the company, General Motors saw the
need to form a partnership with Toyota, called the New United Motor Manufacturing, Inc.
Through this partnership, General Motors was planning to have access to the techniques of
Toyota. In as much as the company tried to create a plan that would copy the success of Toyota,
it was not successful and it ended up failing to follow the footprints of Toyota. The reason for

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GM’s failure in its plans was that it planned poorly. For instance, it copied the blueprint of
Toyota which by its nature, was not viable to copy directly. It also took a very long time for
General Motors to implement the changes it had observed in Toyota. The failure of GM to
succeed in the implementation of the changes was as a result of poor managerial planning to
clearly evaluate what it had to copy and what was unnecessary to copy (Chang and Lin 2015). It
ended up spending and wasting most of its time trying to figure out the best way of copying
Toyota’s techniques. Trying to catch up later, what was to be copied had been surpassed by time
and had since been obsolete. That led to a situation where the company failed to reach the pace
of Toyota because of its tardiness.
Organizing
The organization is another component of Henry Fayol’s management functions. General
Motors had a poor organization of its operations. That is evidenced by the fact that employees
were disgruntled and dissatisfied. It is also seen through the situation where employees had to
plan for the working activities themselves, trying to work less by failing the systems to get some
free time. They also had to keep their work processes and techniques secret so that they would
not have their jobs merged. That situation demonstrated the fact that the work processes in GM
were not well organized. There was also a poor organization of the company’s mission and
vision. The reason for that is that General Motors failed to have its own organization of ideas to
the extent of trying to borrow ideas from Toyota, Japanese companies. Even after attempting to
get the ideas from Toyota, it lacked the proper organization to implement the ideas to its full
benefit. Companies and organizations need to have the ability to organize their ideas to reach
their short, medium and long term goals (Bharati, Zhang and Chaudhury 2015). Organizations
must bear a highly organized system of operations, activities, and tasks from the place where

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workers interact with the level of management actions. All the organizations of the company
must harmoniously bear a high organization. That is because one action determines the results
that will either mark progress or otherwise. Therefore, the organization is a great need for
companies to realize success.
Staffing
Staffing is a very important function in any organization. It determines not only the
manner in which workers in an organization are arranged but the way they are treated. Through
the examination of General Motors, it is clear that the company faces a lot of issues with staffing,
although the employees enjoy a higher perk as compared to other automobile industries (Arias,
Hernandez and Pérez-Uribe 2018). The huge amount of money spent on employees attracts the
best employees but the problem is that GM lacks the know-how of managing the highly skilled
employees it attracts. That provides the reason why employees in General motors have not
demonstrated a high level of skills. When employees start complaining about the way they are
treated by the top management, it is evident that the company is not doing well in as far as
staffing is concerned (Van der Voet and Vermeeren 2017). For General Motors, in particular, it
is evident that that poor staffing is one of the reasons consumers complained of the poor quality
of cars produced by General Motors. Consumers complained that American cars had defects of
poor quality as demonstrated by the ride quality and the noises they made. That can be tracked to
the workers’ poor relationship with the top management (Kirchoff, Tate and Mollenkopf 2016).
The top management at General Motors used a highly bureaucratic fashion relating to workers.
The GM employees were strictly meant to do as their bosses told them and not to question
anything. In that case, it was difficult for employees to exercise their innovations and apply new
ideas.

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Directing
Directing refers to the process of overseeing, guiding and instructing workers’
performance for purposes of achieving predetermined goals. After the formulation of the plans
for achieving predetermined goals, organizations should prepare an organizational structure and
look for appropriate personnel designated for the accomplishment of the goals (Adams, Smart
and Huff 2017). Therefore, to achieve success, organizations should find the best and the most
efficient ways of carrying out directing roles. General Motors failed to have its customers well
managed. That is because the number of hours that was used to assemble a vehicle was higher
than that of its Japanese competitors. For the workers to undertake an assembly operation, the
total amount of time spent by General Motors was way higher than that of Toyota. That is an
indication of poor direction on the side of the management (Annarelli and Nonino 2016). The
long hours cannot even be attributed to the high quality of cars produced because GM had issues
with the quality of cars that it produced. The question that arises then is, ‘what was GM doing in
all those additional hours if it was not able to produce high-quality cars?’ the best answer for that
is the poor direction of employees to work efficiently (Vasu Stewart and Garson 2017). A link to
the answer exists with the fact that the workers in GM had to buy time in their daily operations
because they were not supervised properly. Employees set the pace of working by determining
how they worked at the absence of their bosses. Therefore, that is a huge indication of poor
direction.
Conclusion
A system where communication is only top down is retrogressive to the development of
the organization. That is because bright ideas mostly come from the people who are at the
practical level of manufacturing. The employees are actively involved in the day to day

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manufacturing processes. Owing to that, they stand the best chance of offering advice to the top
management on matters of decision making and introduction of new ways of operations. The top
managers will not have the full knowledge of how the manufacturing processes in the lowest
level occur. Therefore, the managers will not understand the practical implications of directives
and policies they make. Therefore, organizations must have a culture of sharing ideas from down
to the top and in the same levels of departments and across departments.
SECTION B
Introduction
General Motors faces both internal and external challenges in its operations despite being
an automobile giant in US. However, the company failed to properly contain the challenges
beforehand and it affected its overall performance tremendously. Some of the challenges it faces
include; overburdening its expenditure on a high labor cost, poor quality of vehicles and design,
less productivity, poor management and highly expensive and slow product development.
Critical Analysis of Internal and External Challenges
High labor cost put General Motors at a high-cost disadvantage. The high cost of labor
came about as a result of union contracts that were too generous. The company had labor costs
that were higher than those of its competitors like Toyota. Some of the features that led to the
increment of expenditure in GM include pensions and legacy healthcare. Because of that, GM’s
cost of labor reached a high of $73/hour the labor cost of GM’s competitors were as low as
$48/hour. Another expenditure outlet was the legacy cost of which general Motors was $1600
per car in 2005. The increment in expenditure had adverse effects on the general performance of
the company. It is important to note that if the cost labor increases, the workers will be motivated
to work harder. It will also help the company to attract as many highly qualified staff as possible.

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Those benefits were overrun by a declining market that is shown by the fact that the company
was facing a declining market share (Rotolo et al 2018). With a declining market, the company
struggled to sustain the high wage bill while at the same time struggling to maintain the profit
margin. That led to a situation of more outlets and less inlet of revenue.
Another challenge that General Motors faced is a declining quality of vehicles and their
design. Between the 80s and 90s, consumers complained that the vehicles from America had the
problems of vibration, harshness, noise and poor ride quality (Thong, Chau and Tam 2019). The
cars from Toyota nameplate had a higher command of 20 percent premium in the market, over
that of GM. In fact, all the cars from General Motors sold $3000 averagely less than Hondas and
Toyotas, in the year 2000. The reason for that is basically the poor quality of production that GM
suffered.
Another challenge for General Motors was that it was ideally less productive especially
in comparison with its rivals in every aspect of the operation. For instance, the late 80s was the
period where GM covered a total of 1.7 million adjusted hours of engineering for the
development of a $14,000 car. The competitors in the US, on the other hand, covered an average
of 3.2 million hours. Also, the assembly operations of General Motors, in a persistent way, were
less productive than its rivals’. GM took too much time for the assembly of a car I comparison
with its counterparts.
Another challenge of General Motors was that GM spent too little on the costs of direct
labor while spending too much on the purchasing parts. In essence, GM spent only 10 percent of
its total costs in direct labor while 70 percent were mainly spent on purchased parts. In addition
to that, the management of the supplier network of General Motors bore less effectiveness than
the Japanese rivals. During the period range of 1980 and 1985, General Motors spent money

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worth $45 billion on automation and acquisitions. That amount was more than the combination
of the market value of Honda and Toyota.
Poor management is another explanation of the challenges that General Motors faced.
The poor management was evidenced by the failure of the management to invest in the small car
despite its wider market and demand that it was picking. Instead of venturing into that, the
management splashed a lot of money investing in high technology that brought little if not no
return for General Motors.
In a nutshell, the processes of product development in General Motors was very
expensive and slow. In addition to that, its design capabilities were very inferior with its
assembly operations and supplier network being very unproductive in comparison to those of its
rivals. Also, their output quality was much lower than those of its rivals. The series of problems
faced by General Motors were marked by persistence in that the problems lingered there for a
long time.
That can be explained by the fact that the problems above were as a result of lack of
motivation and perception (Uhl and Gollenia 2016). The management in General Motors failed
to recognize that change was inevitable that what works for the company now may not work
tomorrow. Therefore, General Motors management failed to develop an understanding of the
world is changing. The fact that GM was very successful does not provide it a leeway to expect
the world to revolve and operate according to its culture and rules. Instead, successful companies
should change according to how the world is changing (Greenwood et al., 2017). They should
anticipate and quickly respond to change in their manner of operations. The senior management
at GM had a track record of being the best in the industry. Therefore, the success of the firm
largely relied on the mental beliefs and models that worked for the company in the golden ages

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of success. The senior management was still holding on to the former ideals as the world around
them changed very fast with its rivals complying with the changes (Tuncdogan et al 2018). The
lack of motivation to change results from an environment where there is unwillingness for action
even when it is needed. It also arises from the senior management’s laxity to effect changes to
the company.
Another explanation of the General Motors challenges was that in the 50 and 60s, the
automobile company was not used to stiff competitions. That is because the American
automobile industry had enjoyed a long period of dominating the market in collusive oligopoly.
To their disadvantage, Toyota and other Japanese firms began to seriously venture into the
American market. The senior management at General Motors had little experience concerning
the intense market competition. Therefore, the Japanese firms brought in a great competition
right at GM’s market share. The Japanese automobile companies had a more attractive working
environment. The used lower labor costs and applied inferior working conditions. Also, their
small cars were of better quality in that they were completely viable and well designed (Stouten,
Rousseau and De Cremer 2018). Those qualities were alien to General Motors and since the
company had for a long time been used to market dominance, it did not know how to effectively
handle the stiff competition.
Another challenge that GM faced was the idea of directly copying NUMMI or any
advantage that Toyota had. It was a mistake to simply copy Toyota’s physical plant. That is
because of the fact that it took more than two decades to consistently imitate the practice of
Toyota. That was a very long time to take for such a company as GM considering the changing
nature of the automobile industry environment. The reason why it took so long for the company
to establish and undertake the changes is that it faced the problems of perception and motivation

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(Donada et al., 2017). Another reason why GM took a long time was that the practices of Toyota
were rooted in the deployment of relational contract agreements that were effective. The
deployment was on the basis of the measures of performance that were subjective. The
performance measures could not be specified beforehand nor be passed through verification after
facts. They were therefore enforced under the future’s shadow. Also, the organizational structure,
history and managerial practices of General Motors made it hard to maintain the agreements
between the firm and its suppliers or within the firm.
General Motors also had a huge problem in the manner in which it related to its
employees. There were a huge power distance and employees working on the basis of fear. The
managerial department was very authoritative and bullying. The rules of relationships between
the subordinate and the staff was that of fear and intimidation. The managers blackmailed the
workers to do as they dictated or else they would be fired. On the other hand, the workers
worked well only in times of supervision but badly when no one was watching. The rules of the
employees were to work slowly so that they get as much time to rest, as possible. Instead of
sharing insights and ideas, workers opted to remain silent and secretive of their skillets. The fear
was that the management would do emergency on their jobs and they might be fired. The poor
working relationship between the management and the workers serves as a perfect explanation
for the poor quality of GM cars that customers complained about (Pertusa-Ortega et al 2017).
The US practice of changing specifications had more serious implication as compared to
Japanese firms. For instance, in the US, changing specifications was equivalent to changing the
contract, legally. Owing to that, suppliers extracted high prices for any changes made from the
specifications. The Japanese automobile companies, on the other hand, were able to make
changes as part of the development process (Ocasio Rhee and Milner 2017). To them, changes

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were allowed and a mutual trust existed between the suppliers and the company such that any
changes were not considered illegal but part of the process of manufacturing.
The product development and design process in General Motors has a huge impact on its
performance. Before the year 1984, the product development in the company was under the
management of three separate organizations namely; a car division, Fisher body and GMAD, the
General Motors Assembly Division. The car division had the responsibility for the design of the
cars, the fisher body took care of the detailed engineering part as the GMAD modified equipment
and plants for the preparation of new models and assembling the cars. The three departments had
minimum interactions with the divisions reporting directly to the president who responsibly
arbitrated disputes (Noe et al., 2017). The minimum interactions between the three different
bodies of assembly reduced the effectiveness of sharing ideas and department to department
relationship. There was a huge stumbling block of bureaucracy in the process of interactions and
work between the three separate organizations. With bureaucracy, it is quite difficult to effect
changes as an employee serving in the lower carder (Namada 2018). At this level, General
Motors was informed by Max Weber’s bureaucracy with the essentials components of the
following directives; The governing power of laws and rules orders the official jurisdiction on all
areas, the recognition of an office hierarchy which is a system of super and subordination in the
there is a supervision of the higher offices to the lower ones. Weber’s bureaucracy is also
characterized by the basis of written rules preserved in their original form. The General motor’s
application of bureaucracy was based on misuse because of the fact that the top management
used blackmail to force employees to work according to their taste. Weber appreciated the
importance of bureaucracy in providing the most efficient way of management and avoidance of
wastage. Weber’s bureaucracy has faced the critique of the compromise with efficiency

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(Hammer 2015). That compromise has materialized in the General Motors management process
application in that the top management used bureaucracy as an advantage to blackmail workers
to do what they wanted. Frederick’s scientific theory that recognized the partnership of workers
with management was never applied. In that case, the mismatch that existed between the
management and the subordinate employees affected the performance of the company by
reducing the efficiency of carrying out work processes (Hornstein 2015). The neoclassical
perspective suggests that employees have psychological, economic and social needs for purposes
of motivating the completion of assigned tasks. General Motor’s style of management where
employees lack the psychological and social motivation created the inefficiencies that were
observed (Stead and Stead 2017). The inefficiencies greatly affected the way employees related
to each other especially across departments and across different cadres. The neoclassical
perspective suggests the need for employees to be given all the social and psychological support
they need in achieving their ambitions. Employees should not be treated like robots but as
humans who need emotional support and nurturing in the achievement of their daily tasks. The
failure of GM to invest into the psychological needs of the workers created a huge problem in the
quality of cars produced (Levine 2018). Employees also failed to work beyond what was
expected of them because after all their efforts would not be recognized. In that case, many
would fail to recognize and own the vision of the company as they carry out their daily tasks.
The failure of employees to own the vision of the company was retrogressive to the overall
performance (Tang 2017). Without a sense of direction and a sense of purpose, employees’
would work to only achieve the daily expectations of their supervisor as opposed to achieving
the overall goal of the company.

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General Motors management would have functioned better had it utilized the principle of
scientific management theory (Gond et al., 2016). This principle recognizes the cooperation
between managers and employees or workers for purposes of ensuring that principles are met
efficiently. Unfortunately, General Motors does not maximize on Frederick’s theory of
recognizing the working together of workers and managers for the realization of the company’s
success.
In the year of 1984, General Motors underwent a reorganization of two main divisions as
opposed to the former system of three structural divisions. The two divisions included the BOC,
composing of the Buick, Oldsmobile and Cadillac divisions. The CPC was composed of
Chevrolet, Pontiac, and General Motors Canada. The intention of effecting the changes was for
the purpose of integrating and streamlining the development of new products. However, the
reorganization brought about greater problems by creating a considerable amount of confusion
and failing to improve on performance. The events that then followed was that the informal
agreements that had been formed and the relational contracts that had been formed by the lower-
level General Motors managers had established with each other were broken up purposely.
However, the formal organization of General Motors was cumbersome to the extent that the
work processes progressed very slowly. The reason for that was that work proceeded slowly
because of the fact that managers did not know if they could have trust in their counterparts for
purposes of ignoring red tape. The two divisions relied on the coordinating mechanisms of the
light-weight project teams where the project manager made attempts to coordinating the multiple
functions’ work whose work was important to product design but lacking any real authority’s
benefit over the members of the team. Key decisions about the design of the products appear to
have had the driving force of the finance function as by the engineers and project leaders.

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Process designers have however had much focus on their own local organization’s health as the
design process strength.
Conclusion
General Motors had award winning directors and managers yet it still failed to perform to its
potential best and edge out its competitors. The answer to that as has been extrapolated in the
discussions above, is the ability to handle change. In as much as General Motors was the greatest
before the inception of similar automobile companies, it lost its grip on the market. That is
because it failed to anticipate and act on the basis of a changing economic and business
environment. Its management style also played a critical role in its defeat by the Japanese
counterparts like Toyota.

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