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John R. Ryan
Military/Administrative leader

John R. Ryan

John R. Ryan is president of the nonprofit Center for Creative Leadership, a top-ranked, global provider of executive education.

When culture eats strategy

Question: After a well-chronicled, 30-year decline into bankruptcy, General Motors is now profitable again and going public. What does it say about its former executives, directors and union leaders that such a large, complex organization could be revived in less than two years? What factor best explains why leaders don't take the hard but obvious decisions necessary to prevent an impending disaster?

There's a saying that culture eats strategy for breakfast--and GM's leadership culture nearly ate it alive. Especially in an organization as large and complex as GM, the example set by executives, directors and union leaders will be modeled by everyone else. Increasingly, GM's culture had three key weaknesses: complacency from previous success, too many silos and a very dangerous case of short-termitis.

Peter Drucker liked to say that the future is already here but not yet fully visible. Even as GM dominated the American car industry for decades, ominous changes in the market and global competition slowly bubbled up but went undetected because GM's position in the present seemed so strong. Success bred complacency, as it often does, and the discipline to stay focused wasn't there, as evidenced by the warring factions within GM. In a global economy, as IBM's recent survey of chief HR officers found, it's crucial for leaders to work across geographic, functional and other boundaries to spur growth and innovation. My colleague Chris Ernst reports the same thing in his new book, Boundary Spanning Leadership.

But at GM, in-house fiefdoms ruled the day for too long--resulting in the continuation of several unpopular car models and epic struggles between management and union members over pay and benefits. The company's own men and women, on both sides of that fence, lost track of the fact that their real competition wasn't with each other; it was with car makers from Asia, Europe and elsewhere. They needed to span their own internal boundaries to stay competitive but were not able to do it prior to bankruptcy.

Over many years, GM's leaders compromised the long term for the sake of the short term. They focused more on how to keep themselves and their people happy from quarter to quarter, instead of making the tough choices required to put the long-term needs of their customers and investors at the forefront. Management finally got serious about making quality cars, but it didn't deal effectively with the legacy costs that had built up over decades. They needed to tackle both challenges--on the global stage, it's not enough to get it just 50 percent right. Union leaders, meanwhile, impeded change by insisting on retaining Cadillac health insurance and other retirement benefits when their competition in other countries worked just as hard or harder for less compensation. It's obvious that not enough people, in management or the work force, were looking out five years or more and thinking strategically about changes in competition, markets and the overall economy. The mentality was one of renters rather than that of owners--and leaders are obligated to adopt an ownership mentality. That's how organizations sustain themselves.

There's a tendency in struggling organizations to focus on fixing systems and processes, as if structural repairs are all that stands between current problems and success. Certainly, GM did plenty of tinkering over the years, but it wasn't enough. That's because often it's the organizational culture--the day-to-day behaviors and beliefs and attitudes of employees at all levels--that needs changing. Without a new mindset, all the structural changes in the world won't help. GM's new leadership has figured that out and its work force has bought in for now. And that, along with the benefit of timely taxpayer assistance, explains why a company that lagged for so long could improve its fortunes so quickly. GM will need engaged, boundary spanning leaders at every level of the organization to sustain the current momentum and again make GM world class.

By John R. Ryan

 |  November 17, 2010; 2:35 PM ET
Category:  Accomplishing Goals , Corporate leadership , Crisis leadership , Failures , Leadership weaknesses , Making mistakes , Organizational Culture Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: How to save a company from demise | Next: 'Rapid' turnarounds can be years in the making

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Question: Has GM's "culture" really changed ? Or is it that they've just been downsized to meet demand. For all need be done to answer this question is to compare the cars and trucks that they sell today to those that were sold two years ago. Which is why I ask.

Posted by: jralger | November 17, 2010 8:58 PM
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