By on June 13, 2009

Click here to download the famous Elmer Johnson GM memo.

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28 Comments on “Download Elmer Johnson’s ’88 GM Memo Here...”


  • avatar
    VerbalKint

    Wow. Somebody should send this to B.O. and his DC minions. But they probably wouldn’t read it.

    So what happened to Elmer? Did this result in his getting canned?

  • avatar
    50merc

    Quite an analysis. Organizations pay consultants millions for that kind of advice.

    What happened–if anything–after he wrote the memo?

  • avatar
    ConspicuousLurker

    Sad.

    This is the man who should have run GM. If he had, who knows what the company would look like today?

    I suspect not terribly different. Yes, the management stunk, but by ’87, they were already too married to their bad labor obligations.

    I doubt even this guy would be able to change that.

  • avatar
    enderw88

    Clearly, GM read the line about not paying enough attention to trucks and took it to heart. That would be enough change from one memo.

  • avatar
    Rob Kleinbaum

    It was very sad. As I was writing my own memo, Retooling GM’s Culture, which Robert kindly posted here a few months ago, I found it and referred to it as “heart breakingly prophetic” and included a link to it. No one paid attention to his recommendations and he left GM shortly after writing it. In the category of “If only…”

  • avatar
    TheCaster

    Why the picture of David Brooks?

  • avatar
    Rob Kleinbaum

    TheCaster: Brooks cited both Elmer’s memo and mine in his column last week in the NY Times http://www.nytimes.com/2009/06/02/opinion/02brooks.html

  • avatar
    BuzzDog

    Something bothers me about this memo and many others like it: Despite its eloquence and its analysis of what is truly wrong with a Detroit automaker, the reason for change is almost always focused primarily on “we owe this to our employes, our stockholders and our dealers.”

    What about the poor schmucks who spend three- to six-months salary (or more) actually buying your damn products? (And yes, I see that Johnson mentions the delivery of value to customers in the next paragraph, but it almost comes across as an afterthought).

    Focus first on your customers, and the rest of the problems usually solve themselves.

  • avatar
    "scarey"

    Don’t know what happened to Johnson after this memo, but his obit says he left GM in 1988. Update- U.S. News & World Report article 7-4-88 sez he quit.

  • avatar
    bevo

    If you correctly treat your employees, then your management efforts will be a lot easier. In the automobile industry, the Japanese nameplates taught the American nameplates that lesson. Unfortunately, the Americans never really learned that lesson as an organization, and other American firms in other industries do not appear to grasp this fact.

  • avatar
    Dimwit

    Man: Even if half the thing that he expoused had come to pass, GM would be a monster. Sad, very sad. It looks like it got him fired too.

    I wonder what Karesh thinks of all this.

  • avatar
    cpu

    Here’s a link to a NYT piece dated ’87… before this memo. It is a good introduction to Elmer Johnson.

    http://www.nytimes.com/1987/10/04/business/corporate-facilitator-elmer-w-johnson-why-gm-s-rising-star-wants-shine-labor.html

    cpu

  • avatar
    zoneofdanger

    GM: what a waste. If they had only followed this sound advice and used their former massive financial resources intelligently, think of where they could be now.

  • avatar
    lw

    Reminds me of those “intervention” shows where the family pours every nickel they have and destroys their emotional well being to help a brother/uncle/sister that can’t break their addiction. Whole family ends up destroyed and the addict isn’t any better…

    Know when to hold em’… Know when to fold em’… Know when to walk away.. Know when to run… A great life lesson from Kenny R.

  • avatar
    commando1

    The quickest way to kill a good idea is to put it down on a memo.
    And there’s the problem. That’s all they did. Kick around memos and go to lunch.

  • avatar
    educatordan

    Shouldn’t Elmer’s grave be a MUST pilgrimage for true GM fans everywhere? Especially a lover of Oldsmobile like me, he discusses the B-O-P partnership as a blueprint for the future.

    OK Best And Brightest; Where is Elmer W. Johnson’s grave?

  • avatar
    Runfromcheney

    I would hope that this gets passed off to Obama. It will show that GM is not a victim of the financial crisis, but a company that has been dieing a slow death due to its own incompetence for 30 years.

  • avatar
    Gardiner Westbound

    GM went to great lengths to ensure conformity and that no one capable of original thought penetrated the corporation.

    Around 1970 I applied for a GM management position. I was required to complete the Minnesota Multiphasic Personality Inventory (MMPI), a psychological test that supposedly identifies personality structure and psychopathology. I would be offered a position if my scores coincided with the original scores of then current GM executives.

    Now everybody knows how that worked out for them.

  • avatar
    afabbro

    Every large (Fortune 500) business organization I’ve worked in has similar problems.

    – the best and brightest among the engineering (or sales, technical, whatever) troops are forced into radically different world of management to avoid a glass ceiling. Peter principle applies.

    – reviews and compensation are a bunch of HR nonsense. Everyone gets pretty much the same raises, and worse there is a loyalty penalty for people who’ve been there the longest vs. those that come in fresh at market rates. Compensation has little bearing on actual performance. There are so many rules in big companies that everything tends towards the median – raises, reviews, scores, etc.

    – the top layer becomes an old boys/old girls club and since 99% of MBAs are not really that bright anyway, they tend to make safe choices that are politically correct.

    – management periodically comes along with bold visions but they’re rehashed nonsense and platitudes…New Culture, Total Quality, Lean, Balanced Scorecard, etc. or homegrown stuff that is the same. Everyone pays lip service but knows how things really work.

    – people genuinely desiring the change things up and make positive change write bold ideas (like this one), but are worn down by the quagmire of actually getting everything done. They get frustrated that they can’t light a fire and so they leave. Guess who stays? The people whose main interest is doing as little as possible to maintain their jobs.

    I’ve seen this situation at a half-dozen Fortune 500 companies and heard similar stories elsewhere. It’s just typical. Some of these companies make excellent products and do very well, by the way – I can think of several giant manufacturing companies (Fortune 50) that I would label as having sclerotic cultures but still turn out good products. GM just has this culture PLUS other problems.

    I would guess Elmer went off to a small company or struck out as an entrepreneur – that’s usually what happens to those who get frustrated that they can’t rock the boat.

  • avatar
    VerbalKint

    Attributable to Rick Wagoner, GM chairman and chief executive officer

    Elmer Johnson served in a variety of posts at GM from 1983 to 1988, including as executive vice president, general counsel and a director of the corporation. During his five years at GM, Johnson’s management responsibilities grew to include all staff operations other than finance and research.

    He was a remarkable person and brought his keen insight and intellect to many innovative situations in which the corporation was involved, including the acquisitions of EDS in 1984 and Hughes in 1985.

    In Detroit and in his home town of Chicago, Johnson was known for both his legal work and for his commitment to charitable and civic organizations. His integrity and dedication will remain an inspiration to everyone who knew and worked with him.

    (Note: Johnson died Tuesday, February 19 th, in Arizona. He is survived by his wife of over 50 years, Connie, two daughters, one son and four grandchildren. He was 75 years old. Memorial services are pending.)

    Here’s an ’87 NY Times article w/ a little background on his labor relations activities:
    http://www.nytimes.com/1987/10/04/business/corporate-facilitator-elmer-w-johnson-why-gm-s-rising-star-wants-shine-labor.html

  • avatar
    CapVandal

    Great memo.

    I particularly liked the reference to Alfred Sloan. He was relentless concerning return on capital. You also centralize where it makes sense, but decentralize the divisions — each with their own, bona fide P&L. As I recall from Sloans book, My Years at General Motors — initially the various makes were run by car guys who were clueless about finance. Capital allocations were made at the corporate level.

    I can see how this structure would tend to break down without exceptional leadership. That is, integration of increasing large parts of the organization seems like “low hanging fruit” and optimistic projections of savings look great. However, the costs of integration are never easily measurable and become more and more significant.

    Quickly instead of having the best of all worlds, you have the worst of all worlds.

    I think the fiasco with the Olds Rocket 88 engines in 1977 (substituting a Chevy engine) should have become a “New Coke” moment and the executives should have realized the brand equity that they were tossing away.

    Once you admit that the engines are equivalent, there is no real rationale for brand loyalty.

    Some very large firms have managed to avoid or minimize the the problems in the memo.

    However, the description of the problems makes me think that the problems were insurmountable by the 1980’s. Probably Ross Perot was their last chance. I don’t really know. If you look at US based integrated steel companies, there was nothing that could be done. The industry was doomed. Same with US textile manufacturing.

  • avatar
    menno

    Possibly, CapVandal, Ross Perot could also have been Amerika’s last chance, too.

    But this is an excellent piece, and if there is one thing I love it is a good counterfactual! In other words, “what if” stories. This could be the seed for several, re: GM, of course. A GM which perhaps aged gracefully and also was function enough to actually change with the times, allowing survival and continued flourishing. It’s not like NUMMI hadn’t been right there in their faces, ready to teach the corporate bigwigs how to actually do cars right. I’ve read many times, that GM lifers would go back to the borg-mother ship-GM from NUMMI all excited and ready to teach – to be shoved aside. Every time.

    I’ve been writing “what if” stories just for enjoyment and amusement, about the greatest and latest US automotive dynasty to die out, for quite awhile. Periodically I go back to them and have several scattered about inside my computer.

    I’m referencing Studebaker-Packard.

  • avatar
    fincar1

    Menno, your mention of Studebaker-Packard seems quite appropriate. Those last two years of “Packards”, the 1957 and 1958 models, while they were certainly very upscale Studebakers, weren’t really Packards at all. It’ll be interesting to see what kind of Fiatslers are offered to us in the coming years.

    GM’s mismanagement of the Chevrolet-engines-in-Oldsmobiles fiasco tells a lot too. Certainly it was a money saver for the corporation as a whole, and if they had done a public relations push along the lines of “Our small-block Chevy engine that’s become justly famous for its power and dependability will soon become available in certain select Oldsmobiles etc.” they may well have done okay.

    And of course one always wonders what would have happened if the government had felt it necessary to step in to prevent Studebaker from going under. The only thing that’s certain to me about that is that there would still not be a Studebaker now.

  • avatar
    BuzzDog

    It’s ironic how, in the 1960s and 1970s, GM went to great lengths integrating all platform development, manufacturing and assembly operations under the guise of creating economies of scale. In fact, the real reason was to prevent anti-trust action from breaking up GM into multiple entities, as was done with Standard Oil and the Bell System. In the end we got a bloated, giant bureaucracy of undifferentiated brands and internal competition that was often cannibalistic.

    The punchline to this story is that the two major companies that were forced to break up under anti-trust action (Standard and Bell) have both thrived, and in the case of Bell have somewhat re-merged under the AT&T umbrella.

    It’s difficult to say if the outcome would have been different, but imagine how things might look today if GM had been broken into two separate entities at some point around 1970.

  • avatar
    Dimwit

    The “what if’s” contain a large dose of irony. If GM had followed up on *any* initiatives to make itself more efficient and responsive to a market, any market, then that would’ve killed one of the others just that much faster. Probably Ford.

    Back in the early ’90s the MSM were running all those apocalyptical scenarios where there were only going to be something like 9 companies worldwide left because of the extreme over capacity of the industry. Detroit did its part by buying up some of the weak sisters like the Swedes and the Brits but even good companies like Honda were rumoured to fail because they were “too small”. Nobody thought that any of the big 3 were part of the “consolidation”. Look at it now. The pundits were probably right, but GM should *never* have been part of the process with any sort of responsible oversite. Sad.

  • avatar
    gzuckier

    hmm…if i print this out, with a little whiteout and changing some of the details, i can send it to the people who “manage” my employer.

  • avatar
    midelectric

    So we’re supposed to believe that a lawyer from the outside with no experience in the automotive industry knew what GM needed to turn itself around? In that case, GM should be rising from the ashes any time now!

    If it was around back then, I wonder what TTAC would have to say about Smith hiring an automotive noob corporate lawyer at $500k to be part of his executive team.

  • avatar
    BostonDuce

    Hey this said it was a memo not a novel–most upper management types get glassy-eyed after the first page.

    Nobody would have been able to afford one of Mr. Johnson’s GM products under his vision. It would have been Goverment Motors 10 years ago.

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