General Motors (GM) shutting five factories and cutting 14,000 jobs reflects poorly on a legacy approach to managing. Big shots making transactional decisions — buy or sell this, open or close that, hire or fire them.
What is required is a dynamic approach of building capabilities to be agile and resilient, learning quickly how to bring value into the marketplace with speed and responsiveness.
CEO Mary Barra’s announcement set off a firestorm of criticism and praise. President TrumpDonald TrumpGraham says he hopes that Trump runs again Trump says Stacey Abrams 'might be better than existing governor' Kemp Executive privilege fight poses hurdles for Trump MORE led the barrage, saying the company was making a “big mistake” and that GM “ought to stop making cars in China and make them here.”
Furthermore, he took Barra to task, saying he was “disappointed” in her. Similar outrage was voiced by those advocating for the clock-punching working class.
But other commentators praised her “hard decisions” in the face of declining demand. The stock market agreed, with GM’s shares rising 7 percent.
Apparently, if you’re do something poorly and you promise to do less, then your valuation increases. It’s like relatives who are lousy cooks. If they say, “I’m not preparing the next holiday meal," you cheer.
Of course, this is opposite the ideal of leaders introducing outstanding products, expanding facilities and providing stability to the associates they employee and the communities in which they operate. Imagine the reaction if Tim Cook, Jeff Bezos or Satya Nadella made similar announcements to GM’s.
For companies doing well, markets want them to do even more, not less. It’s like relatives who are great cooks. When they promise more pie, you pull out the plate and fork.
To be fair, Mary Barra didn’t get joy from putting coal lumps in Christmas stockings. She’s a career "GM-er," as was her dad. She assumed a legacy of failed management from generations of GM leaders, making this just the latest “hard decision” about closing plants, idling workers and discontinuing products.
She was forced to make these "hard decisions" because GM was selling products the buyers did not value. GM didn’t know how to be innovative enough to replace lackluster models. Furthermore, GM didn’t know how to operate plants with sufficient flexibility to shift among products as demand gyrated.
Rather than being agile, the company was stuck with an old school view of what managers do — making “resource allocation" decisions — about what to introduce or discontinue, what to open or close, whom to hire and fire, based on a steady flow of aggregated data that periodically forces a choice. It’s management work as a series of transactions with everything and everyone commoditized.
This is far from the responsibility managers should have: creating, energizing and harnessing the discovery capabilities of people. Equipped with such capability, the enterprise can have an up-to-date appreciation of what the market needs and will reward, back by a stream of alternatives to meet those needs.
This only happens with a workforce that is regularly recognizing new problems and opportunities and developing new ideas in a self-generated process of constant rejuvenation.
This depends on viewing people not as disposable commodities or variable costs to be taken on and shed but as people that are distinctly capable of solving problems — micro to macro, local and systemic.
There’s a pairwise comparison. The Volt, GM’s attempt at hybrid power, was discontinued. That’s reasonable given sales of only 160,000 in a decade. In contrast, Toyota used its initial hybrid, the Prius, as a platform.
Having cultivated capabilities to relentlessly reinterpret market needs, high-speed engineering capacity to generate a range of appealing designs to be ready for a range of market circumstances and with manufacturing facilities and associates having the creativity to be capable, flexible and agile, Toyota has sold about 1.5 million hybrids in 2017 alone, with the total so far approaching 12 million.
These numbers are a credit to Toyota not keeping its system just on the Prius, as GM did on the Volt. It propagated it to some two dozen models. So, as Prius sales soften with cheaper gas, sales of hybrid Camrys are still great for taxi fleets, and sales of hybrid Lexus are up 28 percent, year-to-year, because of the performance they offer.
It’s easy to heap blame on Barra for failures in agilely understanding market needs, designing new products and advancing manufacturing that left GM with unpopular cars and inflexible industrial capability.
To be fair, she’s been responsible for this gigantic enterprise for five years, but her inheritance is generations of corrosive value destroying management that culminated in 2009’s bankruptcy.
So, what can she do to get GM righted? Undoubtedly, there are more structural changes to be made, realignments of priorities, assignments, chains of command and spans of control, more “hard decisions” to merely stabilize the enterprise. But to grow, the basic operating dynamic needs energizing.
The challenge of any organization is to understand what problems they are being rewarded for solving. Part of Barra’s work should be quizzing her direct reports about what customers embrace and scorn.
She can similarly model and coach such inquisitive behavior in design, getting engineers to more quickly generate designs and test them aggressively to find out what is pleasing to the buyer. The same approach works in production, teaching managers how to see the problems that impair people’s best efforts.
Investors and management gurus regularly celebrate the dynamic of “knowledge work” in robotics, pharma, biotech and the like.
Great new products invented by curious people regularly seeking and solving problems, inventing and deploying new ideas are lauded. In order to regain relevance in this hyper-driven 21st-century economy, GM must learn to do the same.
Steve Spear is a senior lecturer at the Sloan School of Management at MIT, principal of the advisory firm HVE LLC, and author of "The High Velocity Edge." He can be reached at SSpear@MIT.edu or Steve@HVELLC.com.