By on February 19, 2009

GM CEO Rick Wagoner (courtesy orbitcast.com)

[Editor's Note: This is the second of a four-part series by Dr. Rob Kleinbaum. Read the first part here.]

The scholars Lawrence Harrison, Samuel Huntington and their colleagues have addressed the fundamental question of whether culture “matters” in how societies develop and make a compelling case that it matters a great deal.  They have also outlined the specific traits that lead a society to progress or prevent it from doing so and their work provides a rigorous way to think about culture that is based on substantial evidence. These traits seem applicable to a private enterprise, especially one that is larger and older than many countries.

Progressive cultures emphasize the future; static cultures emphasize the present or past. GM, unfortunately, lives in its past glory, as there were always better times in days gone by. Like the UK before Thatcherism, there is a deep sense that their value is their heritage, not what they are going to do tomorrow. While there have been pockets that have looked forward, and serious investments in fuel cells, there is little belief that the future is theirs to make.

Work is central to the good life in progressive cultures but a burden in static cultures. This is a mixed story for GM as there is generally a very strong work ethic but it is confined to the elites more than the rank and file, whether union or company. For the white- and blue-collar workers, there is much more emphasis on leisure and “the good life” than the value of hard work. So you will find certain groups working 70 hour weeks routinely but others who will get angry if you even suggest working over a weekend or a vacation. And somewhat perversely, the groups that do work very long hours are driven to it by a few leaders who think that it is a constant requirement with the consequence that work becomes inefficient and fills the required time rather than being driven by sensible needs to do whatever it takes to win.

Frugality and investment are valued in progressive societies but seen as a threat in static cultures. GM seems to have redefined the notion of investment as cost cutting. For some reason, time after time, the company believes it can reduce its capital investment in products whenever times get bad without having to pay for it in consequences of compromised characteristics and lower share and price. The company also seems willing to save $1 in capital even if it costs $100 in incentives. For a company run by finance people, they seem to have lost all notion of what investment means, in product or people. Further, when they have made investments that were different and quite successful, such as NUMMI, Saturn, and then later OnStar and Hummer, they were made reluctantly and never really embraced by the organization, but seen as threats or outsiders. GMDAT, its Korean joint venture, has been a tremendous and unanticipated success, but is viewed with condescension and even deeply resented by many.

Education is critically important to progressive cultures, but only marginally important in static ones, except to elites. GM is squarely in the static camp. It talks about all the training it does, but in fact it is almost all peripheral; GM University, which was launched with soaring rhetoric, is of little to no importance, unlike Crottonville for GE.  Sure, the managers all have MBA’s and the standard path is still an undergraduate engineering degree from GMI and a Harvard MBA, but there is little emphasis placed on ongoing education and most of the programs that were in existence were among the first casualties of “structural cost reductions.”

In progressive societies, merit is central to advancement but in static ones it is family and connections. On this point, GM probably gets mixed to negative reviews. The sense is that one must be part of the club to advance, which usually means the right degree from the right school, the right path, and knowing the top guys, who are your mentors. Twenty years ago, GM would have been completely in the static dimension on this attribute, but there has been substantial progress in reaching out to groups that had been excluded in the past and advancing them on their merits. Unfortunately, this has been much truer for GM’s operations outside of North America and Western Europe than for these two core regions. In North America, the tradition is to pick high IQ people with the right background at an early age and then to rotate them through a series of “developmental” assignments. The consequence is that the people who rise to the very top are very smart with broad experience, but they are almost never people who have truly accomplished anything; who have built something from scratch or grown a business from small to large or turned around a losing operation into a profitable one.

In progressive cultures, people identify with groups well beyond the family and into society at large. GM falls directly into the static side. Despite substantial effort to create “one company”, GM is still surprisingly full of provincialism, based on both function and geography. Very few GM employees see themselves as truly belonging to the global enterprise; almost all identify themselves with their function and then the local business unit; viewing others as ignorant meddlers and sometimes outright adversaries. While many companies have embraced the notion of the “extended enterprise” and successfully manage complex alliance relationships, GM’s investments in major alliances; Fuji, Suzuki, Isuzu, and Fiat; were all great disappointments and had little if any return.

Of all GM’s cultural problems, this might be the most crippling as it perpetuates an inward focus that is largely responsible for its hostile relations with its dealers and suppliers and, most troubling, with consumers. As a consequence of its insularity, the company has repeatedly displayed behavior that shows it to be tone deaf to society at large and much of the external world has written off the company.

Ethical codes are more important in progressive cultures. Here GM gets high marks. There have been few corruption scandals, sexual harassment is not permitted, there is strict adherence to the Foreign Corrupt Practices Act, and the company will not let itself be associated with “shady” characters or businesses.  While any company of its size and scope will have incidents, the ethical codes at GM are high and enforced.

Authority tends to be horizontal and decentralized in progressive cultures and centralized and vertical in static cultures. Authority at GM is centralized and probably becoming more so as the company “globalizes” by creating strong, centrally controlled global functions which further weakens regional autonomy. While there are regional and functional strategy boards that have the appearance of dispersing authority, in fact they are all controlled by the same few people. One of the perverse outcomes of globalizing functions is that authority is becoming “horizontal” and strongly centralized, as global functions that are all run from Detroit become the main lines of authority and undercut the business units.

Progressive cultures are secular, with limited influence of religious culture and a high degree of tolerance of heterodoxy and dissent. GM scores fairly low on this attribute. There is little tolerance of strong dissent from the prevailing opinion, although there is substantial subversion and passive-aggressive resistance.  In discussions about setting direction, much more attention is given to wondering what the senior leadership will think than to figuring out the right path and trying to make it happen. The very senior people are often spoken of in tones of reverence and are seldom debated in any meaningful way.

Altogether, this is a fairly depressing picture. GM’s has been explicit about its cultural priorities; “One Company, Stretch, Sense of Urgency, and Product and Customer Focus”; but there has been little attention to making these real beyond re-iterating them at quarterly meetings.

[End of Part Two. To be continued . . . .]

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15 Comments on “Guest Editorial: Retooling GM’s Culture, Part Two...”


  • avatar
    Brian E

    Thank you! I am looking forward to parts 3 and 4. So far what you are covering reminds me a lot of another failing company I’m very familiar with (Motorola).

  • avatar
    slateslate

    ***Progressive cultures emphasize the future; static cultures emphasize the present or past. ***

    Thank you! This is America and I thought that America looks forward.

    I’ve always been annoyed by the retro design themes….redesigned Camaro, Mustang, T-bird, Challenger, etc.

    Trying to relive the muscle car era is like Al Bundy constantly harping about how he scored four touchdowns in a single game. Yes, we understand old man, you were great in the past….but what have you done for me lately?

  • avatar
    PeteMoran

    @ Rob Kleinbaum

    I’m sure I read that Harrison had tired of constantly being asked how the essays of “Culture Matters” could be applied to business.

    Of the many attempts I’ve read, this is the only one I can say that works!

    With the current goings on, it might be worth visiting the follow-on book “The Central Liberal Truth: How Politics Can Change a Culture and Save It from Itself”.

  • avatar
    bluecon

    This is all true of the US and not just confined to GM. And many of the real problems will not be discussed since they are not politically correct.

  • avatar

    Based on my own experience within GM, GM’s product shortcomings can be traced to the combination of two of the above factors:

    1. Centralized hierarchy

    2. Use of frequent job rotation to fill the top positions in this hierarchy.

    You end up with decision makers who lack the general experience and specific knowledge needed to make good product decisions.

    Executive summary of the report I submitted to GM in 2001:

    http://www.truedelta.com/execsum.php

    GM is far from unusual in this regard. I’ve been told by many people that my description of GM applies to the company they work for. This is a key reason changing GM will prove difficult: they feel the need to compete for talent with other companies that have similar cultures and systems.

    GM’s problem: the weaknesses of American business culture don’t affect companies with simpler products to the same extent they affect the development of cars.

    What must be asked, in the end: is a new culture capable of producing great cars viable within the American context? More broadly: can America produce great cars?

    As was pointed out in teh CTS-V comments: the success of PVO suggests that such a culture is even viable within GM.

  • avatar

    bluecon: If by “politically correct” you mean what is usually meant by this term, then that’s not relevant here.

    If you mean that the current GM political system would reject fundamental change, because it would mean changing the game that placed the current people at the top at the top, then that’s certainly true.

  • avatar
    geeber

    Great editorial.

    It would be interesting to get an insider’s perspective on Ford’s culture, and ask whether its new leadership has really made a difference in this area.

    Then we could contrast Ford to GM, to determine whether Ford really does have a better long-term chance for success.

  • avatar
    Kurt.

    “…and the company will not let itself be associated with “shady” characters or businesses.”

    (cough)UAW(cough)
    (cough)Cerebus [through GMAC](cough)

    …and since I am hacking up a lung here…

    (cough)Congress(cough)(cough)(cough)

  • avatar

    Kurt:

    And once you’re coughing, there have been some plenty shady dealings between GM and their Russian comrades, including the murder of one of GM’s plant managers.

  • avatar
    50merc

    “investments that were different and quite successful, such as NUMMI, Saturn, and then later OnStar and Hummer”

    That seems to be a rather elastic definition of “quite successful.”

  • avatar
    tech98

    And somewhat perversely, the groups that do work very long hours are driven to it by a few leaders who think that it is a constant requirement with the consequence that work becomes inefficient and fills the required time rather than being driven by sensible needs to do whatever it takes to win.

    I see this all the time in corporate America.
    Some idiot managers think they’re ‘high performers’ by forcing employees to work long hours for their own sake, not in order to accomplish viable goals but because it feeds their ego and makes them superficially look good to their bosses.

    It’s the mentality of a bully and intimidator, and it drives away good people in favor of shallow careerists who like to play the same kind of games.

  • avatar

    ethical? how about Fiat? Joint Funds? Off Balance sheet acounting? Delphi? Investment Banking fees? GMAC? c’mon.

  • avatar
    Martin B

    Elmer Johnson’s memo identified many of the same traits in GM’s culture way back in 1988 already:

    Progressive cultures emphasize the future; static cultures emphasize the present or past.

    the car division managers are mainly merchandisers and dealer relations experts. … Thus, those who are closest to market and in the best position to influence future product development … and to design quality and efficiency into the product and process, and insure GM’s responsiveness and timeliness in sorting out emerging technologies and appraising their customer appeal, have little or no power and responsibility to do so.

    Work is central to the good life in progressive cultures but a burden in static cultures.

    The meetings of our many committees and policy groups have become little more than time-consuming formalities. The outcomes are almost never in doubt. The important decisions have almost always been reached behind the scenes before the time of the meeting. Accordingly, there is a dearth of discussion, and almost never anything amounting to lively consideration.

    Frugality and investment are valued in progressive societies but seen as a threat in static cultures.

    Management responsibility has become terribly fragmented and diffuse. Our executives do not make, and are not expected to make the difficult trade-offs involving market, technology and cost considerations. This fragmentation of responsibility in GM has had serious consequences. First, the executives in the vehicle groups have not been encouraged to develop real cost sensitivity, nor have they been empowered to control the variables which determine bottom line results.

    Education is critically important to progressive cultures, but only marginally important in static ones, except to elites.

    Very few of the top 500 executives are strictly professionals, i.e. executives paid and positioned chiefly on the basis of their judgment and expertise in such areas of technology as engines, transmissions, brakes, suspensions, process engineering, or overall product engineering. Rather young professional experts — our best brains in the areas of expertise that are critical to GM’s future — are usually forced by their mid-30′s to become managers if they wish to keep climbing the corporate ladder. Then after five years as managers, they lose their edge as professionals.

    In progressive societies, merit is central to advancement but in static ones it is family and connections.

    many top executives have tended to develop, like the rest of the work force, notions of entitlement, cradle-to-grave security, regular raises, — in short the club mentality: “I now belong to the club; if I don’t rock the boat and if I keep my nose clean, my remaining years will be quite comfortable”.

    In progressive cultures, people identify with groups well beyond the family and into society at large.

    we have articulated the need for a new global strategy: in terms of the allocation of capital, the sourcing of materials and manpower, and the marketing of our products. Yet, we still conduct ourselves primarily as a North American motor vehicle company with loose appendages in various parts of the world.

    Ethical codes are more important in progressive cultures.

    Most managers do not have the backbone to confront under-performers with the truth and take appropriate action, and even when they do muster the will, the system sets up near-insuperable obstacles. Over the last five years, we have averaged only about 100 involuntary terminations of salaried personnel per year based on low performance, or less than 1/10 of 1% of the salaried work force each year. By reason of this and the other aspects of our culture noted above, we find it increasingly difficult to attract, nurture and retain the very best talent coining out of the best schools.

    Authority tends to be horizontal and decentralized in progressive cultures and centralized and vertical in static cultures.

    Most of the top 500 executives in GM, until late in their careers, have typically changed jobs every two years or so, without regard to long-term project responsibility. In some ways they have come to resemble elected or appointed top officials in the federal bureaucracy. They come and go and have little impact on operations. It is the civil service personnel below them who actually run the place. More seriously, rapid rotation means that no individual is ever responsible or accountable for the success or failure of a project.

    Progressive cultures are secular, with limited influence of religious culture and a high degree of tolerance of heterodoxy and dissent.

    Our culture discourages open, frank debate among GM executives in the pursuit of problem resolution. There exists a clear perception amongst the rank and file of GM personnel that management does not receive bad news well. GM executives sometimes react to the presentation of a problem with visible anger and exasperation.

  • avatar
    GS650G

    This is all good and academic but they still can’t make a decent small hybrid car we can live with.

  • avatar
    blowfish

    Modern days car makers have to decide whether to build them to last long time or good time but not long time.

    Last too long nobody will buy another one real soon. Then more often cars were designed for good times but not long time.
    Another issues added to the equation is Japs car makers seem to have mix long time and good time together, so suddenly the big 3 started to look inadequate.
    Now with more electronic Gremlins, it didnt help them to last long at all.
    Excessive heat under hood also kill the electrical insulations.
    Seems to be a norm for 4 cyls build by Big3s have weak head gaskets.

    A fnd has a 90s Pontiac Sunbird, it needs oil &amp water pump , engine & trans mounts, shocks. newer Parts he found on the junk yards were much inferior to the ones on his car.
    One thing u know the bean counters are very good at costs cutting.
    While a mid or early 80s Jap or German car can still be functioning without great deal of parts replacement and break down.
    The Big 3s had been digging their own graves for very long time, finally it has reach the bottom now.

    So as mercedes build cars after mid 90s, they greatly water down the quality parts, and end up with a lot of repairs, recalls, died on the road.
    Lately they kind of saw the deep spiral trend kind of bothersome too.


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