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  • General Motors and Organization Design

    Posted by David Foster on May 3rd, 2005 (All posts by )

    I picked up an old copy of Fortune (12/13/04) to read on the plane…among other interesting stuff, it had an article on the reintegration of Saturn–which was once run almost as a separate company–back into General Motors. I was particularly struck by this paragraph:

    Another thing buyers will notice about the new models is that the plastic body panels are gone. Saturn used to promote the panels heavily because it had little else to sell, featuring them in commercials that showed them fending off dents from trash cans and bicycles. Some had argued that they were integral to Saturn’s brand identity, but there was no room for them in GM’s complex global product development system.

    Now, I don’t know if the plastic body panels are a good idea or not. Such a decision would involve many factors: cost, maintainability, and consumer preference/branding issues, among others. Probably in the scheme of things, it doesn’t matter all that much one way or another. But there’s a broader issue here.

    Sooner or later, there will be something that one of the product line groups wants to do that does matter a great deal in the scheme of things–and that will turn out to matter for the overall future of GM, not just for the brand. What if that proposal doesn’t fit “GM’s complex global product development system”?

    Were GM a more decentralized company, then the loop between the product change proponent and the ultimate decision-maker would be a shorter one. An individual executive could make the decision on behalf of his business unit, and develop product/process/technology approaches that would later–if they succeeded-turn out to be beneficial to the entire company.

    Yes, there are clearly cost benefits in the centralization of manufacturing and product design. And, yes, part of the problem with Saturn in the first place seems to have been that as an individual brand it didn’t have sufficient scale to carry its own infrastructure. And in times of stress, there seems to be a natural human instinct toward centralization.

    But when dealing with change, centralization can impose some serious limitations on flexibility and agility…and in today’s world, those can be devastating.

     

    4 Responses to “General Motors and Organization Design”

    1. Bob Says:

      I liked the plastic body panels, but that’s just me. They are expensive to make though espicially in mass compared to steel.

      On the independance of Saturn, GM, in the past has suffered from great redundance between divisions in such things as engine design (witness the seperate Cadillac, Chevrolet, Pontiac, and Olds V-8 families) So…I would there is a bit of backlash from that going on.

      Central control is not an absolute evil in a well run large corporation (GE, and some of the larger pharmaceutical firms come to mind). Its sort of like

    2. David Foster Says:

      GE is not a model of central control at all, quite the opposite. The individual strategic business units (aircraft engine, appliance, power generation, financial services, etc) have tremendous autonomy. This has been somewhat reduced under the Welch regime from what it was before in the sense that interdivisional cooperation (viz, turbine business helps appliance with compressors) has been pushed, but is still much greater than in most companies. In addition, there is considerable decentralization *within* some of the business units.

      I’m speaking about of operational and strategic control…legal and internal-financial matters are more centralized in order to insure integrity.

      Of course, this kind of “federal decentralization” (Drucker’s term) is easier to achieve in a multiproduct/multimarket business than in something like an auto company.

    3. j.scott barnard Says:

      Plastic doesn’t seem to hold the paint well. Perhaps it’s just my perception, but if you look at old Saturns notice how many of them seem faded.

    4. Lead and Gold Says:

      Size does matter

      There is a post over at Chicago Boyz–“GM and Organizational Design”– that illustrates how diseconomies of scale can work.