Leading and Learning: Where Did General Motors Go Awry?

When I started at General Motors (GM) in the 1960s, we were the biggest and best company in the United States and most of the world. As a matter of fact, I believe that only a couple of state industries in Russia surpassed the number of people that GM employed. Many of us, observing the poor quality of work done in the factories as we first entered them, found it hard to believe that GM could be so good. One of my friends and colleagues, Mark Horvath, captured the situation insightfully: "We [GM] can depend on the stupidity of our competition."

As time went on and we became more a part of the GM culture, we began to think of Mark’s observation in a different way. We began to unconsciously believe that the reason we were so large, powerful, and successful was that we really were smart. As a matter of fact, in those days, one of the criteria we used for making decisions was "Will this enhance our market position so much that the antitrust guys will try to break us up?" We thought we had to be careful not to be too good. So what happened to this most omnipotent company?

Many industry insiders simply think that its downfall was caused by the recent worldwide economic collapse. Other insiders tend to think it was the legacy costs because of all the baby boomers starting to retire. Others think that GM's products didn’t keep pace with customer demand. Still others talk about the influx of overseas competition. And, of course, many others simply blame the union. Although I think there may be some truth to all of those causes, I think we can simplify say that the world changed while GM didn’t.

Let’s explore this a little more deeply using a set of functions I am proposing for a new generation of managers: "Listen, Lead, and Learn."

General Motors was listening in the 1920s. Ford had revolutionized the auto industry in 1908 by introducing the Model T, a "sturdy, powerful, and inexpensive" new car, as Paul S. Boyer wrote in the "Automotive Industry" article from The Oxford Companion to United States History (Oxford University Press, 2001). Ford made the automobile affordable for many Americans who previously couldn't consider buying a car. He made price the name of the game. By the late 1920s, GM had noticed that consumers wanted more. They were looking for style and prestige. General Motors listened and gave it to them.

By the early 1930s, GM had taken the leadership role in the industry. They introduced styling, features, and choice. Alfred Sloan, president, CEO, and chairman of GM in those days was considered by many a management genius. He led, for example, the introduction of separate car divisions, each targeted to a unique consumer segment, annual styling changes, and financial management of those divisions from the corporate perspective. Those changes and others helped GM overtake Ford as the industry leader by the early 1930s. General Motors held that position for the next 70 years. That’s the company I entered in 1962. We were the leader and we knew it. Let’s move on to learning.

Listening and leading are really two basic steps of learning. Learning, in a more complete way, is:

• Asking the right questions
• Gathering the expected and unexpected data
• Analyzing all the data
• Responding to the analysis

Sometimes we lead as a result of the analysis. Other times, perhaps more frequently, we just try to keep up. GM was an example of learning at its best in its early years, but the quality of its learning waned.

There is a myth about those of us in higher education that is too often true. We tend to teach rather than encourage learning, and we tend to be learned rather than learning. When you are learned, it is difficult to learn. When you are the best, it is hard to see anyone who is challenging that leadership.

One game change that GM was slow to see was quality. By the late 1970s, a few Japanese automakers were seriously challenging the domestic auto industry based on the superior quality of their products. I was at Ford’s corporate quality office at the time. I don’t know what was going on at GM, but at Ford, we already had the fundamental data, but we weren’t looking at it because GM wasn’t looking at it. We, too, knew that GM was the leader. Because we at Ford were getting so close to bankruptcy in those days, we began to look seriously at the data, ask even more questions, and play catch up in the new game of quality. Because I still had many friends at GM, I know that it took GM a little longer to feel the pain and, therefore, a little longer to begin playing this new game. When you’re the best, it’s more difficult to learn.

Even though late to the game, GM conducted a couple of potentially excellent experiments. They created NUMMI, a partnership with Toyota in California, and Saturn, a new division allowed to stray from the traditional GM rules and regulations. Both experiments were successful, but the learning that occurred at both was not embraced by GM’s core.

Interestingly, Saturn is currently on the sales block... it doesn’t fit the GM culture. Culture is hard to change. When you have a 70-year history of being the best, it is hard to see data that tells you that cultural change is essential.

As I write this, I have come to believe that, perhaps, Peter Senge got it right when he articulated the idea of a "learning organization" in The Fifth Discipline (Doubleday Business, 1994). Maybe GM just forgot to keep learning.

Having spent most of my adult life in and around the auto industry and considering the importance of that industry to the well-being of our country and the world, I would really encourage your comments. I’m at support@pqsystems.com. Please be sure to leave your comments in the "comments" section below, as well, so that others can share.

About The Author

David Schwinn

David Schwinn is a full-time professor of management at Lansing Community College and a part-time consultant in the college’s Small Business and Technology Development Center. He is also a consultant in systems and organizational development with InGenius and INTERACT Associates, and an associate of PQ Systems (www.pqsystems.com).

Schwinn worked at Ford’s corporate quality office and worked with Dr. W. Edwards Deming beginning in the early 1980’s until Deming’s death.  Schwinn is a professional engineer with an MBA from Wright State University. You can reach him at support@pqsystems.com.