How would you transform a large business?
Symptomatic of the times, in 2009, General Motors Company found itself in a situation as many other large companies. They were failing. Unable to compete because of an industrial culture, high cost and bloated process, from 2005 – 2009, General Motors Company lost 88 Billion dollars.
That same year, GM accepted a 50 Billion dollar bailout from the government and the presence of a non-executive chairman, a man by the name of Ed Whitacre. Having once led another traditional industry stalwart, Southwestern Bell, who acquired AT&T, before retiring, Whitacre remarked to a few GM dealers after taking the on the role,
Within three months of accepting that bailout, Whitacre recommended the firing of then current CEO Fritz Henderson and grabbed the reins himself. Fritz Henderson, the former CEO, who only logged 143 days as the head of GM, but had worked for GM for years, couldn’t be trusted to be the agent of change the company needed.
Whitacre took this large traditional company and started running it like a small business. He organized his company around moving and making decisions quickly. How did he do it?
1. Change the Culure – He fired more execs who also had worked for GM for years and replaced them with executives who worked for the likes of Microsoft. Some of which had never led organizations near its size prior. Why was this valuable? They were loyal, passionate and brought in to make change.
2. Accept Failure and Move Quickly – Many leaders can’t admit they were wrong. Immediately after becoming CEO, Whitacre reorganized Sales & Marketing and, after three months, realized that his program wasn’t working so he reorganized it again.
3. Focus the Message – He changed the message to be about the cars and not about pitchmen or imagery. GM also is leveraging social media to be open and transparent.
4. Scale back the product line – He sold Saab. He buried the Hummer. This allows the company to reinvest in the cars central to the historic brand, Buick, Chevrolet, Cadillac, and GMC.
5. Have Integrity and Be Accountable – In April, he paid back 8.4 billion that he owed to the US and Canada that was originally due in June. The US government still owns 2 Billion in preferred shares. Whitacre indicates that GM will buy the shares back and go public in 2011.
6. Develop Relationships – He visited the front lines where other GM CEOs never dared to go. He sought advice from everyone, no matter their level. He also held employees accountable. As one exec said, “It was always blaming the untion, the government, or the economy. What we were doing didn’t work. The time of providing for everybody, no matter what their performance, is gone.”
GM is seeing results. Car sales are up over 17%. There are still challenges. Competition remains fierce. The cycle to produce a new car is around three years. Other companies are crowdsourcing the design of new cars and shipping them within months. It remains to be seen if GM can really be successful in this radically evolving economy. If so, it would signify an incredible turnaround and signify that a large business can do what many leaders are afraid to do . . . transform their company for the purpose of saving it.
What mistakes are you seeing that large companies are making that thwarts their ability to transform?
