GM CASSES
CASE FOR ANALYSIS
The Shake-Up in GM’s Hierarchy
On April 6, 1992, the normally quiescent board of directors of General Motors, under the leadership of outside director John G. Smale, instituted a revolt against the company's top management team. Horrified by GM's recent $4.5 billion loss and angry at the slow pace of change instituted by GM chairman and chief executive officer Robert Stempel, the board decided to teach GM's top management a lesson.
Stampel lost his leadership of the board’s executive committee (GM’s top policy-making committee) to Smale, who effectively became his overseer. The board then dismantled Stempel’s handpicked team of top managers and replaced them with managers in whom the board had more confidence: John F. (“Jack”) Smith, who became president and chief operating officer (COO); and William E. Hoagland, who became the new chief financial officer (CFO). In making these changes, the board effectively told Stampel that if he could not quickly turn around the company’s disappointing performance, the board would replace him with Smith and Hoagland. Both men had extensive experience in reducing costs and instituting a turnaround. Jack Smith, for example, had dramatically increased the performance of GM’s European operations.
In October 1992, Stempel fell ill, and the board decided to act immediately to finish the changes it had begun in GM’s top management. Stampel was forced to retire. Jack Smith became the new CEO. Smale became the new chairman of the board. Hoagland became Smith’s right-hand man as GM’s new president. With these changes complete, the new top management team moved quickly to change the rest of GM’s chain of command.
The problem, in the opinion of car industry analysts, was that GM had become too tall-that is, it had developed too many levels of management. Because the corporate staff was huge, decision-making was slow and cumbersome and change difficult to introduce. The task facing GM’s new top management team was to
The Shake-Up in GM’s Hierarchy
On April 6, 1992, the normally quiescent board of directors of General Motors, under the leadership of outside director John G. Smale, instituted a revolt against the company's top management team. Horrified by GM's recent $4.5 billion loss and angry at the slow pace of change instituted by GM chairman and chief executive officer Robert Stempel, the board decided to teach GM's top management a lesson.
Stampel lost his leadership of the board’s executive committee (GM’s top policy-making committee) to Smale, who effectively became his overseer. The board then dismantled Stempel’s handpicked team of top managers and replaced them with managers in whom the board had more confidence: John F. (“Jack”) Smith, who became president and chief operating officer (COO); and William E. Hoagland, who became the new chief financial officer (CFO). In making these changes, the board effectively told Stampel that if he could not quickly turn around the company’s disappointing performance, the board would replace him with Smith and Hoagland. Both men had extensive experience in reducing costs and instituting a turnaround. Jack Smith, for example, had dramatically increased the performance of GM’s European operations.
In October 1992, Stempel fell ill, and the board decided to act immediately to finish the changes it had begun in GM’s top management. Stampel was forced to retire. Jack Smith became the new CEO. Smale became the new chairman of the board. Hoagland became Smith’s right-hand man as GM’s new president. With these changes complete, the new top management team moved quickly to change the rest of GM’s chain of command.
The problem, in the opinion of car industry analysts, was that GM had become too tall-that is, it had developed too many levels of management. Because the corporate staff was huge, decision-making was slow and cumbersome and change difficult to introduce. The task facing GM’s new top management team was to