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GM Is Bankrupt: Does That Mean GM Managers Are Bad Managers?

John Shook
6/30/2009
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I suppose, by one definition, the answer to that question would have to be yes.

But, in my experience, GM managers have usually been very good managers, frequently outstanding ones.

Their reputation today, however, is as something of a laughing stock, with ousted Chairman Rick Wagoner the global poster boy for American exec ineptitude.

In this column you've met my friend Lou Farinola. You will probably never meet a more capable manager. Lou likes to have – as he puts it – a "lot on his plate." He could capably manage a huge amount of work being performed by people all around him as he managed down, sideways, and even up.

What's the "truth" about GM managers in general – good managers or bad? Somewhere in between? I suppose you could think if it that way. But, "somewhere in between" is not a very satisfying conclusion. Rather, no doubt both views express truth (that's not the same as "somewhere in between"). They are simply looking at it from different angles, at times seeing different aspects, interpreting similar aspects in different ways in others. Certainly, the question begs the more basic question of, what is a "good manager?"

One valid observation is that GM managers are outstanding executers. They may be less than outstanding at setting strategic direction.

It could be that setting strategic direction in the auto industry hasn't been a core competency since Henry set the industry in one direction and Sloan – building on Henry’s foundation – came along and trumped him later. Toyota then trumped Sloan, but I don't know that their strategic direction was so exemplary – it was just better, and their ability to execute even better than that.

I only met Wagoner once, briefly and had no personal conversation with him. I had a chance to spend a great day visiting suppliers (touring in the corporate Gulfstream) with his predecessor Jack Smith. I think it's hard to fault the direction Jack Smith set during his tenure at a critical time in GM's history. I suppose you could say he should have been more radical, should have tossed more hand grenades into the bureaucratic morass that was GM HQ. More shock therapy to get unstuck. But, the changes he set in motion were directionally correct.

It's much easier to criticize Jack's predecessor Roger Smith. Though, it may have been less a matter of him personally than it was the times. Roger Smith was – evidently – a very smart and capable GM executive. A finance guy, as most of GM CEOs have been. (Why must publically held American companies always insist on installing finance people to run companies that are operational in nature??) And he saw that GM was in trouble. And he tried to do something about it. He tried several "experiments." The problem was, GM – as most companies – didn't know what to do with the experiments. The experiments either completely failed (reorganization, excessive investment in unproven automation) or succeeded in the narrow sense but failed in the sense that the company didn't know what to do with the success (NUMMI, Saturn).

Back to Wagoner, who was by most accounts a very smart and capable manager, well-respected to this day by almost everyone who worked with him (not as idolized as Jack Smith, but respected). My biggest problem with him was that he always, always stated that the course was correct and all the company has to do was stay the course. When he took over as CEO, the company was so very clearly in trouble (despite the progress Jack Smith had brought), yet his very first statement as CEO was that, "the company is doing great, we have a great plan, everything is great – we will stay the course ... "

To the end of his tenure, that was his line. To some extent, I suppose, a chief exec has to speak the party line. But, as chief exec, he must not only speak the party line himself, but determine the line that others must speak. Not just toe the line but also lay the line that others will tow.

Long ago, I set 1971 as GM's peak year. Metric-wise, 1977 was the peak year in production and sales. Steady decline since then. But, I believe 1971 was the real peak of GM as the industry leader. That year marked the beginning of the end. Momentum carried it through another five years of growth, but the long decline had started.

Brian Miller (lead translator of Birth of Lean) and I share a fondness for British historian Arnold Toynbee’s observation that the Egyptian empire was in decline for 4000 years. 4000 years of decline means there were still plenty of good times to be had, even after the decline had started.

In GM's case, 40 years of decline.

What about Toyota? Has their decline started? Will they be able to regain what they had? (See: What’s Your Challenge, and You Forgot about Overproduction)

I've seen, we've all seen, GM make lots of bad major decisions over the stretch of the past three or four decades. I’m suggesting that those poor decisions – made by senior managers – should not brand all GM managers (or engineers or anyone else) as incompetent.

Recently, two of the horrible decisions from GM’s not-so-distant past threatened déjà vu. Detroit newspapers and radio have been up in arms that GM may:

- Move from the Renaissance Center, after moving in just a few years ago at a cost of over half a billion dollars.

- Partner with Fiat again, after just a very few years ago losing between two and three billion dollars.

Those kinds of things happened with regularity around declining GM. Bad decisions on top of crazy ones.

And now bankruptcy.

But, as I travel around and visit companies that have taken on mid-career GM managers, those ex-GM (or Delphi) managers are – almost without exception – stars in their adopted environments. The companies that hired them are happy. And the ex-GM people themselves are giddy, having a blast being turned loose to use their talents to tackle fresh challenges.

And I recall well the observations of the senior Toyota managers back at the time of the NUMMI start-up 25 years ago. Toyota managers worked alongside GM managers to make the project a success, or negotiated against them across the table. Either way, in many instances, my Toyota seniors would remark to me after meetings that, "I don't get it. GM managers are incredibly capable", an observation that would always be followed by a question, "Why is it that GM as a company has so many problems?"

I couldn't answer that question back then. I would shrug and say, "good question…" And while there are many devils in the details, one observation I can make regarding the question today is that sometime, somewhere along the way, GM's management system became poisoned. Poisoned with narrow-thinking, narrow focus on functional silos, narrowly defined ROI and focus on results.

In a bad management system, even good managers will make bad decisions.

John

John Shook
Senior Advisor
Lean Enterprise Institute, Inc.
4 Comments | Post a Comment
Brian July 6, 2009
Ten years ago, I worked for a company that had great technical people and some good managers. However, the company did not know what to do with the product we were developing and lost their status as the #1 company in the industry. As is, the moral of the story is that putting together a group of exceptional individuals does not necessarily result in a great team. The 2002 and 2004 US National Men's Basketball Teams are great examples of this.
Rajiv Bahl July 9, 2009
When organisations meditate on Perfection and not the Cause, thats when this happens. LEAN in its present form fails to recognise this and that is why Toyota the mother of LEAN is failing before Hyundai today :)
Anonymous September 14, 2009
Its just matter of years Toyota will have problems.How many years the customer will buy the same boring cars.Toyota turned their employess into machines by making them just to stick with process and create the same car each time with the same quality.There should be new innovations which unfortunately Toyota is lacking now.
sfunk October 1, 2009
You rightly point out that GM is loaded with some of the top management talent in the country. What you fail to acknowledge is the effects of the socio-economic-political environment. GM went bankrupt because the Fed and/or the Treasury deparment forced divestiture of GMAC, the main source of GM cash for many years. GMAC was in trouble because they were following government guidelines. As in most engineering problems, the "boundary conditions" are all important.