human resource management & general motors
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Azrul Azli Monash University
Table of Contents
Executive Summary…………………………………………………………………...2
1.0 Background to General Motors…………………………………………………...3
2.0 Objective ………………………………………………………………………….3
3.0 External Environment…………………………………………………………......4
4.0 Strategic Human Resource Management Theory………………………………….4
4.1 Balance Score Card………………………………………………………………..4
4.2 High Performance Work System…………………………………………………..7
5.0 Recommendation for Human Resource Activities………………………………...9
6.0 Conclusion………………………………………………………………………..10
Reference……………………………………………………………………………..11
Appendix 1…………………………………………………………………………...12
Appendix 2…………………………………………………………………………...13
MGW 2430 Human Resource Management Report
Executive Summary
This report is to investigate the cause of huge financial loss of General
Motors and the impact towards their Human Resource Management. Currently GM
has retrench thousands of workers and shut down several main production plants to
recover from their problem. This issue was assisted by several external environment,
such as the economic, competitors and world fuel price. The use of Strategic Human
Resource theory such as the Balance Score Card and High Performance Work System
(HPWS) is measures GM can take to solve their issue based on their changing
external environment. Balance Score Card can be used as a short and long term for
their financial and non financial performance measurement. The HPWS will give a
long term solution so that General Motors will be able to compete in the years to
come. Recommendations on Human Resource Activities are given that are relevant to
General Motors current position at the end of this report.
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MGW 2430 Human Resource Management Report
1.0 Background to General Motors
General Motors Corporation (GMC) is a car manufacturer establish in 1908 in
Flint, Michigan. According to New York Times (2008), based on global sales,
General Motors is the largest automaker in the world and an enormous 284,000
employees world wide They manufacture both car and truck under many brand
names. Those cars and trucks are “Buick, Cadillac, Chevrolet, GM Daewoo, GMC,
Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall which are sold in 35
different countries” (GM Website, 2008). General Motors have been the leader in the
automaker industry until late 2006. As they enter 2007, their financial has face
turmoil. Early 2008, “the company reported a loss of $38.7 billion, or $68.45 per
diluted share in 2007, compared to a reported loss of $2 billion, or $3.50 per diluted
share in 2006” (Autospies, 2008) (refer appendix 1). This in result has led to shut
down several manufacturing plants and caused thousands of employees to lose their
job. “GM announced it was closing plants by 2010 in Janesville, Wisconsin; Moraine,
Ohio; Oshawa, Ontario and Toluca, Mexico, eliminating more than 8,000 jobs”
(Walsh D. 2008).
2.0 Objective
This report seeks to investigate what are the factors that caused such a huge
amount of losses and the impact towards their human resource management.
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3.0 External Environment
There are three factors which had made General Motors in this situation.
Firstly, the United States economy is not progressing cost their U.S. sales projections
for 2008 have been too rosy. “GM had been expecting more than 16 million vehicles,
including trucks and buses, to be sold this year” (Taylor III 2008). Secondly, intense
competition from their global competitors such as Honda, Nissan, and Hyundai which
had produce better fuel efficient engines, stylish at a much lower price compared to
any GM brands. Thirdly, the world’s fuel price had increased to USD 120 per barrel
in the market had made consumers not to purchase vehicle and using public transport
or smaller vehicle. In the United States, “consumers want to abandon their less-fuel-
efficient vehicles for smaller cars, and that's illustrated by all sorts of trends, said
David Tompkins, executive director of industry solutions for Edmunds.com, parent of
Auto Observer” (Buss 2008) (refer appendix 2).
4.0 Strategic Human Resource Management Theory
4.1 Balance Score Card
Balance Score Card is a performance measurement indicator that can be used
to measure the financial and non financial situation in General Motors. There are four
parts; financial perspective, internal business perspective, customer’s perspective,
learning and growth perspective. Balance Score Card is like your cars dash board
where there is indicator on as you drive, you can look at the dashboard to obtain real-
time information such as how fuel, speed and the distance you’ve traveled or even any
faulty system etc. “It’s known to help companies and implement the changes required
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to meet their business goals” (Pangakar & Kirkwood, 2007). The balance score card
enables the companies to develop a more comprehensive view of their operations and
to better match all operating and investment activities to long- and short-term strategic
objectives (Punniyamoorthy & Murali, 2008).
The loss of USD38.7 billion is a huge financial loss which in fact will affect
the internal business process, the customer, and growth of GM. The huge loss was
largely contributed from deferred tax charges and drop in sales. Currently, the
organization financial perspective appears to the share holder is in a decline where
“GM shares fell nearly 5 percent, or USD1.67, to USD34.48” (Bunkley N. 2008).
Thus to manage this losses, thousands of workers are laid off from duty. This will
affect their internal business process and may lead to dissatisfied customers. For
example, usually General Motors takes 1 week to deliver a car to a customer. When
they decided to retrench workers they will lose their competitive advantage where
now it takes 2 weeks to deliver a car. This will cause dissatisfaction to consumers
because they have to wait an extra week to obtain their vehicle. In the end, the
learning and growth perspective cant’ be achieved because the lack of resources will
disable them to compete in the turbulent environment result to decline in sales.
To ensure that General Motors can effectively achieve its balance score card in
the future, they must handle their external environment issue concisely. They have to
improve thru their internal process and learning and growth to overcome their
competition issue. General Motors have to come out with new design and technology
to increase the product line. Research and Development expenditure have to be spent
so that they could create better vehicle then their competitors. How to create better
vehicle than the competitors? This can be accomplished by purchasing the technology
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MGW 2430 Human Resource Management Report
from their competitors or similar industry. For example Proton had acquire Lotus in
the year 1996 had made them competitive at that point of time. When this happen,
employees will have to be train thus it can increase the knowledge of the workers. In
certain cases, workers will be sent oversea for such training to acquire technology.
Workers will be more effective and consequently increase productivity in General
Motors.
Like a well oiled machine, every part in the organization performs best when
all of them work towards a common goal. All of the four perspectives in the balances
score card works hand in hand thru their substantial objectives, measures and
initiatives. As mentioned above, to make sure that General Motors can make profit to
cover the huge amount of losses they must increase productivity, more expenditure on
research and development etc. In General Motor’s case, financial perspective is the
key strategy for the other three perspectives. For General Motors, the learning
perspective can work together with the sales department to train and coach the sales
staff or even developing new efficient production, training equipment. To improve on
the customer scorecard they could do research by surveys from their existing
customers on how to improve customer relationships. Customer retention is important
factor ignite buyers to increase sales. It ensures repeat purchase, increase positive
word of mouth and reduce cost to find new customers.
Balance Score Card will “ensure human capital development, improving
employee satisfaction and increasing employee motivation” (Kaplan & Norton, 1992)
in General Motors.
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MGW 2430 Human Resource Management Report
Link of each perspective in the Balance Score Card (BCS)
4.2 High Performance Work System
High performance work system (HPWS) is also another method to explain the
situation in General Motors. Autonomous work teams, open systems and
performance-based pay are known collectively as high-performance work systems
(Rouse, 2000). HPWS have also “come to be known as high involvement work
systems, flexible work systems and high commitment work systems” (Aghazadeh &
Seyedian, 2004) In other words, they are simply work practice that can be deliberately
introduced in order to improved organizational performance The main focus of HPWS
is organizing work so that the employees participate in decisions that affect the
everyday operations of an organization. There are three potential factors that can
affect high performance work system in General Motors; retrenchment of workers,
technology used and layout design.
A worker is the key success to any organization. Retrenchment will cause
General Motors to lose talented workers subsequently lose competitive edge. To
survive in the changing environment, a company must rely on their workers creativity,
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MGW 2430 Human Resource Management Report
ingenuity problem solving ability and strong team work. Workers are able to make
their own decision on the best way to accomplish their work. The knowledge and skill
shared will create a high performance work system. For example, an engineer in
General Motors is developing a fuel efficient engine. Engineer A may need assistants
from Engineer B, however when GM decided to retrench workers, Engineer A will
face difficulty in developing the engine. Performance of employee can be boost thru
team works. A study by Thompson, Baughan and Motwani indicates that company
such as General Electricity, Proctor & Gamble, Xerox Corporation had huge increase
productivity as high as 250 percent and double their profit (1998).
The use of technology is another feature in High Performance Work System.
All managers in every department of General Motors must be able to identify the
technology they use in their organization. The application of Human Resource
Information System that can store information on workers that can assist managers in
deciding which employee is performing and which is not. The use of technology
without human operating it is also meaningless. Managers in General Motor must
identify whether the qualified workers are able to operate the tools or not.
Layout of General Motors production plants and office be required to properly
design in order for them to increase workers performance and productivity. This
involves careful job designing by HR managers. According to Aghazadeh and
Seyedian, layout plays a role to ensure success by using space, people and equipment
effectively, increasing the flow of information and materials, boost employee’s
morale and utterly encourage flexibility (2004). Managers in General Motors may
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have to come out with proposals to change the existing layout to a improved,
sustainable working layout.
If all of the three factors are taken into account, General Motors can recover
from their huge financial losses just and can avoid retrenchment of employees.
Although to implement HPWS is costly, uncertain success and time consuming but in
the long run this can benefit General Motors.
5.0 Recommendation for Human Resource Activities
1. Training and development programs should be given to employees to ensure
increase in productivity. Offshore training in Japan car manufacturers to learn
various methods to make better cars.
2. Mangers are required to make research and human resource planning on the
best methods to do a particular task.
3. General Motors would have to find a partner to form a strategic alliance to
recover from the huge financial loss. From this alliance, both companies are
potential to learn from each other on the technology and trade secrets.
4. Develop a module which to help retrench workers to find a new job. This will
avoid them from paying more money for their compensation of retrenchments
5. Outsource to countries like China or India. Cheap labors will benefit
companies to recover them from financial loss.
6. Create a reward programme where employees are rewarded by their managers
based on their ability to work in a group
7. Create a talk to all employees at least once in 3 months to explain the
company’s vision, strategy and objective. This will make employees feel a
sense of belonging and may be able to work extra for the company.
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6.0 Conclusion
In conclusion in order for General Motor to stay in business, managers must change
the direction by adapting to the current issue and environment. By using both Balance
Score Card and High Performance Work System they may succeed from keep losing
their market share. Retrenchment and shutting down plants will just make situations
even worst despite it is necessity to create space and time to recover. Until General
Motors can make cars that appeal to buyers they will continue to loose money and
their market. Human Resource managers must act quickly and effectively to
overcome this issue in General Motors.
.
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Reference:
Aghazadeh S.M. and Seyedian M. (2004). The high-performance work system: is it worth using? Journal of Team Performance Management 10 (3/4), pp. 60-64.
Autospies Website (2008, February 12). GM Report Losses Of $38.7 BILLION in 2007! Retrieved September 2nd 2008 from http://www.autospies.com/news/GM-Report-Losses-Of-38-7-BILLION-in-2007-26439
Bunkley N. (2008, April 12). G.M. Says Toyota Has Lead in Global Sales Race. Retrieved August 30th 2008 from http://www.nytimes.com/2008/04/24/Business/worldbusiness/24auto.html?_r=1&ref=business&oref=slogin
Buss D. (2008, June 17). Desperate To Downsize: American Consumers Dash to Cheaper Fuel Sippers. Retrieved September 4th 2008 from http://www.autoobserver.com/2008/06/Desperate-to-downsize-american-consumers-dash-to-cheaper-fuel-sippers.html
General Motors Website (2008). General Motors Corporate Information- About. Retrieved August 30th 2008 from http://www.gm.com/corporate/about/
Kaplan R. and Norton D. (1992).The Balanced Scorecard—Measures That Drive Performance. Harvard Business Review, pp 71-79.
Pangakar M. and Kirkwood T. (2007). Linking Learning Strategy to the Balanced Score Card. Journal of Strategic Management, 297(5), pp 38-52.
Punniyamoorthy M. and Murali R. (2008). Balanced score for the balanced scorecard: a benchmarking tool. Benchmarking: An International Journal, 15 (4), pp. 420-443
Rouse, D. (2000). Manufacturing advantage: why high performance work systems pay off. Journal of Team Performance Management, 96(5), p. 1420
Taylor III A. (2008, April 30). Facing reality at GM. Retrieved September 2 nd 2008 from http://money.cnn.com/2008/04/30/news/companies/gm.fortune/index.htm
Thompson F., Baughan D. and Motwani J. (1998) .A case of innovative integration of high- performance work teams. Journal of Workplace Learning, 10(3), pp. 157–164.
Walsh D. (2008, July 8). Facing bankruptcy threat, General Motors to slash thousands more jobs. Retrieved September 2nd 2008 from http://www.wsws.org/articles/2008/jul2008/gm-j08.shtml
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Appendix 1
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Appendix 2
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