general motors decline
1. INTRODUCTION
General Motors is a motor vehicle company in the United States that started manufacturing in 1915. The purpose of this report is to examine the decisions that were made within the company, in the lead up to their financial crisis in 1991. In the years preceding this downfall, the CEO Robert Smith made several decisions that contributed to the declining financial status of General Motors. Consequently, when Smith retired, the Black Swan Event of America’s recession left the next leader unable to rectify the situation. Following the analysis of the decisions and issues, the author will make recommendations for changes to the decision making process at General Motors, with the intention to avoid a similar situation reoccurring.
2. ANALYSIS
The first decision that influenced General Motors to fall into financial crisis was the merger of the companies General Motors and Electronic Data Systems. This decision caused many problems as Smith (CEO of General Motors) and Perrot (CEO of Electronic Data Systems) both wanted to maintain their leadership and power over their companies. The deal combined them but Electronic Data Systems continued to run as a separate company within General Motors. In the merger, Smith and Perrot had incongruent values around how to appropriately compensate their employees. Smith valued reliable, committed workers who were rewarded with yearly pay raises and a predictable career ladder climb. Perrot however, believed in a different motivation strategy, which entailed great monetary benefits for hard work and success (Monks & Minow, 2011; Robbins & Judge, 2011a). This argument surrounding the distributive justice of compensation continued to cause conflict between the two CEO’s (McShane, Olekalns, & Travaglione, 2013).
The guarantee that General Motors gave to Electronic Data Systems that stock would reach one hundred and twenty five dollars in seven years, (otherwise they would make up the difference), was an example
General Motors is a motor vehicle company in the United States that started manufacturing in 1915. The purpose of this report is to examine the decisions that were made within the company, in the lead up to their financial crisis in 1991. In the years preceding this downfall, the CEO Robert Smith made several decisions that contributed to the declining financial status of General Motors. Consequently, when Smith retired, the Black Swan Event of America’s recession left the next leader unable to rectify the situation. Following the analysis of the decisions and issues, the author will make recommendations for changes to the decision making process at General Motors, with the intention to avoid a similar situation reoccurring.
2. ANALYSIS
The first decision that influenced General Motors to fall into financial crisis was the merger of the companies General Motors and Electronic Data Systems. This decision caused many problems as Smith (CEO of General Motors) and Perrot (CEO of Electronic Data Systems) both wanted to maintain their leadership and power over their companies. The deal combined them but Electronic Data Systems continued to run as a separate company within General Motors. In the merger, Smith and Perrot had incongruent values around how to appropriately compensate their employees. Smith valued reliable, committed workers who were rewarded with yearly pay raises and a predictable career ladder climb. Perrot however, believed in a different motivation strategy, which entailed great monetary benefits for hard work and success (Monks & Minow, 2011; Robbins & Judge, 2011a). This argument surrounding the distributive justice of compensation continued to cause conflict between the two CEO’s (McShane, Olekalns, & Travaglione, 2013).
The guarantee that General Motors gave to Electronic Data Systems that stock would reach one hundred and twenty five dollars in seven years, (otherwise they would make up the difference), was an example