The modern global automotive industry is encompassing the principal manufacturers, General Motors, Ford, Toyota, Honda, Volkswagen, and DaimlerChrylser, all of which operate in a global competitive marketplace. It is also supposed that the automotive industry globalization has greatly accelerated during the last half of the 1990's mainly because of the construction of important overseas facilities and establishment of mergers between giant multinational automakers.
The increase in global trade has enabled the growth in commercial distribution systems worldwide which has expanded global competition amongst all of the automobile manufacturers. In the recent years the rapid increase in oil prices has lead the automotive industry to experience a combination of pricing pressures from raw material costs and changes in consumer buying habits. The industry has also encompassed the increase in external competition from the public transport sector, as consumers re-evaluate their private vehicle usage.
General Motors is the world's largest manufacturer of cars and trucks and the majority of its business is derived from the automotive industry. The problems faced by the General Motors and the automotive industry are identified as the high Pension and Healthcare Costs and lack of Competitiveness. (Davis, Lucas, & Marcotte, 1998)
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GM continues to rapidly increase in size but not in sales. It is also claimed that some of GM's brands have become obsolete. Some critics also argued that the claim of high pension cost made by GM as an attempt to shift focus away from its lack of competitive and differentiated products.
Currently GM and the entire auto industry are challenged with the perfect storm of change. The auto industry is being hit by a weak global economy, rising fuel prices, and social and political environmental concerns and issues. To overcome these potential threat, GM considered mass producing a range of alternative fueled vehicles. Couple this issue with social and political concerns regarding global warming, and the ever increasing state regulations regarding emissions, will create a potential huge customer demand for these alternative vehicles. (Langlois, 2009)
The main challenges faced by General motors, are declining U.S. automobile market share, high pension costs, rising fuel prices, lack of differentiated products, inability to generate revenues from its core activity, over dependence on its financing division and its
inefficient use of assets. General Motors adopted several strategies and tactics to overcome internal weaknesses and external threats including the introduction of self managed creative work teams to improve and speed- up product development of new technologies in emerging markets, the reduction in dependence on GMC and focus resources on core products, by cutting costs by dropping unsuccessful product lines and introducing cars that accommodate the needs of the car-buying public, by shifting major operations to lucrative European and Asian markets in order to avoid high operating costs, and through the reduction in threat of lower priced products by introducing a flexible product line and trimming the inefficient ones. (Slywotzky, Adrian, & Richard, 2003)
The changes also required to make General Motors more competitive by a change in the organizational structure. GM should redirect development and marketing costs from gas fueled vehicles to alternative vehicles at a minimum of 50% of overall cost. The dramatic decline in sales and stock market activity of the General motors' was largely due to a variety of both internal and external factors affecting it as rising energy prices and consumer resistance. As a result of changing fuel prices, many consumers are purchasing smaller, more fuel efficient automobiles consistent with current market trends. Another factor causing the decline of General Motors is related to a deteriorating internal structure on both the management and supply chain levels. (Gibson, 2009)
GM's Organizational Structure Evaluation
General motors' at its inception had the traditional organizational structure that consist of a hierarchical structure with a president at the top, followed by vice presidents and/or senior managers, then additional layers of management below, and with the majority of the employees on the bottom. The jobs in that hierarchy of general motors' were grouped by function into departments as GM was divided into different independent automakers and each of independent automaker was operated differently and competing with each other. The competition among its own independent automakers and lack of centralization was costly. (Taylor, 2004)
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Then General motors' felt a need to bring a change into its organizational structure by transforming its organizational model more centralized and unified in which a team versus several individuals working towards common goals. With a transformed organizational model, GM run in a more streamlined manner and that is a more cost effective manner. The change was made as when the General Motors's CEO, saw an opportunity for change. Many CEOs like Mr. Smith and his successor like Rick Wagnor spent several years for the transformation of General Motors in to a more centralized organization using the transformed organizational model which drastically changed the diverse workforce at General Motors. (Hansen, 2004)
As the organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed and its goals can be met similarly the organizational structure of GM also contributed a lot in its success and bringing about changes in the organization needed to meet the worldwide competition. The GM purely is based upon the traditional bureaucratic organizational structure with a tendency to increase task specialization as it grew larger. The departmentalization was not only based upon the type of jobs allocated but on the basis of products. The authority is also distributed for the proper control with the decisions to be made at the higher level of management to follow the centralization in the organization. (Shuit, 2004)
The traditional bureaucratic model of organizational structure in GM is thus characterized by high job specialization, functional departments, narrow spans of control, and centralized authority. Such a structure has been referred to as traditional, classical, bureaucratic, formal, mechanistic, or command and control.
Bureaucracy is the administration of large organizations through the establishment of hierarchical or pyramidal relations between its members and the implementation of rigid and fixed rules and procedures to govern the operations of the organization as it is supposed to be about scientific management. (MISES, 1946)
The strengths and limitations of bureaucracy is rooted to the rise of opposing theories on bureaucracy persisting today leading to the evolution of the concept into different meanings.
Strengths of Bureaucracy
In short the summary of strengths of bureaucracy is the division of labor into spheres of influence, the definite hierarchy of official offices, clear norms and rules, selection to office isÂ by technical qualification, promotion by seniority, disciplinary control over the incumbent of each office and better than feudal/traditional forms where people got appointed by favoritism or bribes.
However, Max Weber provided a positive perspective of bureaucracy through his ideal description of the administrative system as a rational and efficient type of organization based upon his perspective, a bureaucratic organization revolves around several principles as the conduct of official business on a continuous basis, the conduct of official business in strict accordance with the duty of every member, chosen through impersonal criteria to perform designated tasks subject to strict rules of practice, the organizations structuring into a vertical hierarchy to be governed by the rights to supervision and appeal, the non-ownership of resources necessary in performing tasks but with accountability for the manner of resource use, the rigid separation of official and personal interests and income and the non-appropriation of offices or positions. Seventh is documentation of every official business. (Guglielmi, 2005)
The principles by adhering to, the organization expects to achieve rational systematic and structural coherence due to the designation of positions and delegation of tasks. Due to adherence to the strict rules on position qualifications, code of conduct and procedural rules, the organization achieves efficiency in both the downward and upward as well as the horizontal flow of information within the organization.
Weaknesses of Bureaucracy
But the bureaucracy has some of weaknesses in its practical implementation like it becomes an Iron Cage of Control (as per Weber), the Red Tape from all the rules and sign offs, hard to change this form of structure, divisions of labor compartmentalize attention and response, hierarchy can mean silos and certain irrationalities result. (Rafferty & Stoll, 2007)
Limitations of Bureaucracy
Although a positive and idealist picture of bureaucracy was painted out but Weber also recognized that in actual implementation of the said ideals might be subject to abuse as there are certain limitations also arises due to the bureaucratic style implementation. The capitalist trade and commerce might be one. The industrial revolution radically changed bureaucracy because this created class and economic power schisms domestically and in international relations. The world was divided into developed, developing and underdeveloped countries with the corresponding exploitative relations that sipped through to domestic governance. The technological consequence of mass production, where labor became automated and a high premium was given to technological skills resulting to the term technocracy. (Wilson, 1989)
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Bureaucratic organizations are often appropriate in stable environments and for routine tasks and technologies. Bureaucratic structures have clear, well-defined, centralized, vertical hierarchies of command, authority, and control. Efficiency and predictability are emphasized through specialization, standardization, and formalization.
GM's Organizational Structure
As it is clear that the GM has been following the Bureaucratic form of organizational structure which is appropriate in stable environments and for routine tasks and technologies with clear, well-defined, centralized, vertical hierarchies of command, authority, and control and the efficiency and predictability are emphasized through specialization, standardization, and formalization.
Alternative forms of Organizational Development
Organizational development is a planned intervention and can be the plans or programs comprised of specific activities designed to effect change in some facet of an organization. Numerous interventions have been developed over the years to address different problems or create various results. Generally, GM with a wish to achieve a high degree of organizational change can employ a full range of interventions, including those designed to transform individual and group behavior and attitudes. Typically, organization development programs will simultaneously integrate more than one of these interventions. The many available organizational development interventions can be in the form of a planned change through many specific interventions that may include a variety of specific practices which are usually highly integrated into action plans. The practices may include the team building, conflict management, training, coaching, facilitating, organizational analysis, organizational restructuring. (Mosan, 2001)
The various types of interventions as compared to the bureaucratic style of organizational structure can be the human process through the T-groups, Process consultation, Team building or the large-scale intervention. It may be the techno structural through the implementation of work/job design, quality circles, TQM and Restructuring. The other intervention may be done by the Human resource management by employing the Performance management, Employee wellness, Reward systems and Diversity management. The other forms of interventions may be the strategic, Process consultation, intergroup team building, and/or the structural interventions.
That can be done through the Sensitivity training with a purpose to sensitize people to the perceptions & behavior related aspects of themselves & others in which Feedback helps the member to know about themselves while improves listening skills, Â add openness, helps to accept individual differences with a usage to reduce interpersonal conflict by enhancing group cohesiveness & improves organizational productivity & efficiency and the facilitator plays important role by moderating the discussion & by providing constructive feedback.