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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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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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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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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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 have to

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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 2nd 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/ju
l2008/gm-j08.shtml

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Appendix 1

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Appendix 2

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