Chasing Cultural Transformation, CEO Whitacre Picks His Spots
By Bill Visnic June 14, 2010By the time Ed Whitacre took on the title of CEO at General Motors Co. last December, the draconian bankruptcy-and-bailout process had radically shrunk America's most iconic manufacturer.
To give GM another shot at long-term viability, the new chief decided that his most important task was to transform the culture of one of the most ossified large corporations in America.
The former AT&T CEO already has made a big impact on how his new company operates. Whitacre has shaken up the ranks of top management more than once. He has streamlined decision-making with a few bold strokes. He has set high goals and has frowned on excuse-making. And when it comes to GM's crucial product-development and manufacturing operations, Whitacre has left well enough basically alone.
But that is only a start toward a goal made more urgent because of how successful the other auto-industry outsider, Alan Mulally, has become in turning around GM's crosstown archrival, Ford Motor Co.
"GM is at a precipice where it still can go in either direction, and the direction they go is going to be based 100 percent upon the leadership that they have," said Dennis Zeleny, who has headed human resources for a number of Fortune 500 companies, currently Sunoco Oil. "They need to be change-oriented, have courage and make better decisions."
Fumbling the Start
Whitacre leaned into his new job with commendable gusto and delivered quick hits as a cultural-change agent by eliminating needless meetings, touring GM plants and chatting up the help. He also immediately began relieving top executives in historically important areas including finance and marketing, replacing them with industry tyros such as new CFO Christopher Liddell, an import from Microsoft.
But Whitacre's initial sure-footedness has broken down into some missteps. What initially seemed like a surgical revamp of leadership ranks has turned into distracting executive churn. After promising at the end of March that the big changes in GM's top management were over, in May he sacked the just-promoted Susan Docherty as vice president of U.S. marketing and replaced her with Joel Ewanick, the former CMO of Hyundai whom he'd been trying to recruit.
"They handled her in a way that male executives aren't handled," and thereby perpetuated the unfortunate notion that GM is an extremely tough place for female executives to rise and thrive, alleged Anne Doyle, a former Ford marketing manager who is writing a book about American women executives. "That's dysfunction."
David Cole, chairman of the Center for Automotive Research, warned that such moves could become corrosive. "When you start changing people like that, you begin to threaten people all throughout the organization," said the head of the auto-study group affiliated with the University of Michigan. "And people across the company start to think, 'How can I protect my tail?'"
The Crown Jewels
Fortunately, Whitacre has taken the opposite tack in dealing with the crucial product-development function within GM, known as its "crown jewels" and "much higher on the scale of complexity than HR, finance, sales and marketing," said Cole, whose father, Ed Cole, was president of GM in the '60s.
Whitacre just recently eased 78-year-old former Vice Chairman Robert Lutz into retirement, but not until after the legendary product guru had managed to liberate GM's styling and design studios from hawkish oversight by corporate financiers.
A string of a half-dozen new-product hits - including fresh versions of the Chevrolet Equinox and Cadillac SRX - are the direct fruits of Lutz's approach. "The products you see on the road now are products that we were working on for a few years," said Ken Morris, GM's executive director of global vehicle integration.
So Whitacre made Tom Stephens, a Lutz lieutenant, the new head of product development and elevated an engineer by training, Mark Reuss, to chief of GM's North American operations.
Such promotions are proof that Whitacre recognizes "there are rogue genes inside GM" as well as outsiders capable of advancing the culture, said Noel Tichy, a renowned management guru and former advisor to GM CEOs who now teaches at the University of Michigan. "He seems to be making some of the right choices and elevating the people who will help transform the company."
Looking Through the Fence
One promising program that has become ascendant along with Reuss is called "knothole rides," where top GM development executives spend a day personally piloting the company's future vehicles along with their keenest competition in a segment. In early May, for instance, they compared the 2011 Chevrolet Cruze with the 2010 Mazda 3, Toyota Corolla and Honda Civic in evaluation drives around Chelsea, Michigan.
"We've been doing these for four years, but now they're getting attention by leadership because they were Reuss' idea," Morris said. "That definitely raises the awareness and importance of these knothole sessions."
Still, Whitacre's complete lack of automotive experience before becoming GM's CEO means that knothole sessions remain basically an abstraction to him. Unfortunately, he has done things to underscore his lack of historical connectedness to the industry - and they've tended to undermine - rather than enhance - his culture-changing mission.
In early interviews, for instance, Whitacre would stress the importance for GM of increasing sales and market share - implying that it wasn't as hard as it looked. "Everyone he was in charge of knew that picking up market share in the auto business is far more difficult than changing cell-phone plans in the last industry he was a part of," said Maryann Keller, a veteran analyst of the car business.
Truth in Advertising
Similarly, Whitacre's recent TV ad touting GM's repayment of $8 billion in loans from the U.S. and Canadian governments made many of his employees wince because the CEO didn't acknowledge that American taxpayers have yet to see repayment on the majority of the $50-billion bailout of the company.
"Tone-setting at the top is crucial," Zeleny said. "Your employees know what's going on. And they're going to adhere to the same standard of truth-telling that the boss does. So it's important for the CEO in this situation to lead by example and communicate candidly."
Many other challenges besides "truth-telling" lie ahead for a man who wants to change what GM has always been. Another is to get the company's rank-and-file to truly embrace the distasteful notion that they were the problem -- as well as the perhaps paradoxical idea that they're also the solution.
"Can he provide the leadership to communicate that message?" asked Maryann Keller, a veteran observer and analyst of the industry. "It's difficult, but it's absolutely crucial."
Whitacre also will have to deal with unions feeling their oats again as the recovery takes hold in the economy and in GM's fortunes. The United Auto Workers union leadership has been largely quiescent over the last couple of years, cooperating in GM's painful cost-slashing exercises -- in exchange for significant ownership in the company today.
And, of course, there's the problem of trying to catch up with Mulally's cultural transformation of Ford, which has resulted in its own product renaissance and ever-rising market share - without a federal bailout.
"The goal of the Ford plan is to create profitability for all -- shareholders, dealers, suppliers and the company; if being No. 1 becomes a byproduct of the situation, great," said one Ford insider who worked at GM for many years. "But for some reason it's essential for GM to be No. 1, and look where it got them." -- Dale Buss, contributing writer
Photos by GM
1. Chairman and CEO Ed Whitacre at the 2010 Detroit Auto Show with Speaker of the House Nancy Pelosi.
2. In an un-GM-like move, new GM CFO Christopher Liddell was imported from Microsoft.
3. The Cadillac SRX, one of several newly developed models credited with helping GM regain the respect of consumers.
4. Whitacre at the controversial announcement of repaying loans to the U.S. and Canadian governments.
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