Thursday, June 18, 2009

General Motors, Bankruptcy, And Lean

This is a very interesting article at the new challenges at GM. During my two weeks at the University of Tennessee Center For Executive Education we spent a lot of time talking about many of these issues and how continuous process improvement and developing a lean strategy can counteract many of these issues.

The article talks about how there is a culture of fear and bureaucracy. I can relate as I see many of the same issues in the bureaucracy known as the US Air Force. Lean can help to break the culture of fear as it empowers teams to make rapid change and engage in a culture that is focused on creative problem solving instead of the ‘status quo’ approach.

In the meantime, Henderson is tackling GM's glacial decision-making process. A couple of four-hour meetings have been cut in half. Gone are the "premeetings," when the agenda for the real meeting was set. "I don't have time for that," Henderson says. Delegation, never GM's strong suit, is now an imperative. In early April, just after Treasury made him CEO, Henderson and several executives were discussing whether to add some pricey features to a future Buick model. Some wanted to save a few bucks while others figured they needed to step out and show consumers that the brand is truly upscale. After some debate, Henderson turned to Buick-GMC boss Susan Docherty. "You're the vice-president of Buick," Docherty recalls him saying. "Make the call." She opted to spend the money, and that was fine with the CEO. "Fritz is creating a culture where we don't need 17 meetings," Docherty says. "In the old GM, we would have to hear from everybody."

In the AF we have meeting after meeting to prepare for a meeting that is a month away. It gets pretty ridiculous. Part of our class at U of T was centered around applying lean to business and administrative processes. Many companies and organizations disconnect their administrative inefficiencies from their company’s bottom line and in this case manufacturing throughput. They are inextricably linked in all cases. It is easy to point to labor and other cost cutting techniques as a solution to your problems but where does that lead. You can only cut costs a finite amount. Read my lean as a growth strategy rant here for more on cost cutting versus a throughput strategy.

Henderson has been careful not to criticize Wagoner. But he has begun dismantling some of his mentor's initiatives. Wagoner was a data geek who used nearly 10 metrics to measure his executives' performance. Not all were particularly relevant. Henderson says he has boiled those down to the five most vital for each department, with a much bigger emphasis on sales and profits. Under Wagoner, people were focused on minute details that meant more to their own departments than the overall company. "We got a little crazy with metrics," says Chris Oster, GM's organizational czar.

This paragraph is encouraging. So many times we optimize functional silos at the expense of the whole organization. If GM is looking at steering wheel metrics and sees that the steering wheel department is manufacturing wheels at 95% utilization and is pumping out 1000 a day what does that mean? Well I can tell you what it doesn’t mean. It doesn’t mean that the company has the capability to produce any more cars. It is that fractioned way of thinking that leads so many large companies down a path that opens the door for creative destruction. The different departments must be aligned to the company’s strategy.

The feds want Henderson and Whitacre to lure the kind of talent that will help GM reach consumers the way it did when legendary Chairman Alfred P. Sloan Jr. turned the company into one of the best carmakers in the world.

I think this quote illustrates a fundamental flaw in the government way of thinking. They want GM to make cars that people want and to do so profitably. However Sloan was famous for his quote "A car for every purse and purpose". A quote that is less applicable now to GM than it has ever been. Given the problems discussed above and their lack of a problem solving lean culture, trying to be everything to everyone is a strategy that is doomed to fail. I am not trying to infer that there is an easy answer all of GM's problems because there is not, and there will likely be many job casualties along the way regardless of how many people/interest groups try to fight it. I am just saying that there is an obvious culture shift that must take place and thinking that bankruptcy is going to solve all that is crazy. Toyota has been going down a journey of continuous improvement and lean problem solving techniques for half a century or more and they are the best in the world at doing it, and they still struggle with it every day. A bankruptcy, a new CEO, and a few years are not likely to turn GM around very quickly, although they do have one hell of a burning platform.

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