Why do organizations get “stuck?” The standard answer is “resistance to change,” a tautology, relabeling without explaining. A more interesting answer, one which has enough bite to only apply in some situations, is chain-link-systems. In my forthcoming book, Good Strategy/Bad Strategy, I explore the importance of chain-link systems in competitive strategy, for they both inhibit change and protect excellence.
Here, in this series (Chains of Excellence) I want to describe how I came to see this connection and something of its technical underpinnings. This first entry sets of up the problem, the second describes the sudden lizard I experienced while watching climbers. The third delves into some of the technical analysis of chain-link systems.
INSEAD is an international school of management in Fontainebleau, about 50 kilometers from Paris. Nestled in a grand forest, the school offers an expensive and short (11-month) MBA program. This clever differentiation pays off. The high fee and short program attracts students who would rather pay a premium than lose an extra nine months of income and experience. Unlike laid-back UCLA, the atmosphere is urgent. In 1993 I left California and spent the next three years on the INSEAD faculty, a mid-life stir to life’s stew.
Today’s class in INSEAD’s strategy course is about General Motors. But, more generally, it is about excellence. Not that General Motors could be considered excellent in 1994. The sad truth was that the company that had been Peter Drucker’s exemplar of excellence in the 1950s had become moribund, lagging ever farther behind upstart Toyota and a revived Ford and Chrysler. No, today we are in Zen mode, looking for excellence by studying its absence. What was keeping GM from learning from its Fremont joint-venture with Toyota? Or extending the important lessons of Saturn to other divisions? Or simply cutting its design cycle time below four years? Or even making automobiles whose fit and finish were up to international standards?
As part of the preparation for today’s discussion, students have read a number of reports, articles, and histories of the company. Best of all, we have a flesh-and-blood GM executive with us. The executive, Alan, was the father of an INSEAD student and was visiting Fontainebleau on the day of the General Motors discussion.
Alan describes the General Motors situation with grim precision. Like a pathologist identifying the signs of a terminal disease, he ticks off items on the fingers of his hand: honest analysis replaced by spin doctoring, rampant careerism, insufferable bureaucracy, lack of trust together with its twin, checks and rechecks on every plan. “There are a lot of talented people,” he concludes, “but it feels as if all their energy is directed inward, dealing with each other, rather than outward, dealing with the marketplace.”
Alan had brought with him a copy of Maryann Keller’s Rude Awakening. “This describes the situation in about 1982,” he said, and then reads aloud:
the employees were not prodded to be more efficient or more innovative. The structure of the company and the corporate culture which valued conformity more than creativity prevented that from happening. The reward system functioned on automatic pilot. Put in the years, support the party line, and you’ll be protected from harm.1
Raising his eyes to the class, he concludes: “A decade later, the characters have changed, but the plot remains the same.”
Student comments are slow in coming; they are not sure how to deal with this message. Finally, a French product manager says “It’s the leadership. It’s senior management. Every manager takes their cue from the top about what is acceptable. If you have a dishonest culture of conformity, it comes from the top.”
In France, the educational system of Grand Écoles virtually guarantees leadership positions to those who excel in their studies, especially mathematics. The French students tend to see organizations as extensions of the leader. German students tend to focus on technical competence. Americans frequently emphasize the importance of incentives. True to the stereotype, an economics major from Michigan says “There is an old saying about the folly of rewarding A while hoping for B. If you reward conformity, it isn’t surprising that creativity is lacking. It seems to me that the problem is simply one of incentives. People do what they are rewarded for doing. If GM needs more creativity, it needs to reward risk-taking and bold new strokes.”
Other comments focus on bureaucracy and the lack of a clear set of guidelines for behavior. A British finance specialist says “General Motors is just too bloated. You can’t change an organization of that size. It has to break up into smaller pieces.”
I turn to Alan and ask for his reaction. Does he disagree with anything that has been said? Does he agree with anything? Alan’s response is daunting. Addressing the class, he says “It’s everything you have said. And more.”
The class is vaguely disappointed. They want a crisp resolution—If not an action plan, then at least a clear diagnosis. The problem can’t be “everything.” Surely there is a way to unravel the knot. There must be a point of leverage that, when pressed, will cause the various pieces of the puzzle to fall into place.
[i] Keller, Maryann. Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors. New York: HarperPerinnial, 1990, p. 107.
- Keller, Maryann. Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors. New York: HarperPerinnial, 1990, p. 107. [↩]
Via Email
I was in your INSEAD class that year and I remember the discussion. You said GM would go down the tubes within a decade and you just about called it.