Running Head: EFFECTS OF ORGANIZATIONAL CHANGE IN GENERAL MOTOR

Effects of Organizational Change in General Motor

Lizzeth Martinez
South Texas College
Dr. Ruben G. Flores
June 28, 2019
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Abstract
This paper examines through the exploration of some articles the effects that originated from the

organizational change that General Motors underwent during a time of crisis. Furthermore, it

examines the patterns derived by the organizational capacity for change and what type of effect it

has on the development of an organization. This paper will offer a background on General Motor

and the factors that contributed to the predicament stage, in where it had to start initiating the

capacity for change. Additionally, it will define what organizational capacity of change is and

how researchers have linked it to the development of an effective organization. Also, why

organizational capacity of change is important for organizations and the steps to take for

adaptation of employees to gain long-term results. Lastly it will determine if the provided

hypothesis was sustained or not based on the literature review and the research findings

compilation.

Keywords: long-term, organizational, capacity, change, development

Effect of Organizational Change in General Motors

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The purpose of this research is to observe the effects experienced by General Motors in

the recent years that it has gone through the process of organizational change. Furthermore, this

paper will determine if there is a relationship between organizational capacity for change and

effective organizational development. Also, if the patterns of the effects experienced are part of

the organizational capacity for change benefits. General Motors has its history of being known as

one of the top and most successful auto manufacture companies in the world. As a company

reflects success one can assume it is very well managed company. Nevertheless, according to

Helper and Henderson (2014) the year 2009 was the downfall of General Motors, when their

market share declined vigorously by 26% in the span of 29 years.

General Motors Company according to Britannica (2019) was founded in 1908 by the

year of 1929, it had exceeded Ford Motor and became the leading production company for

automobiles. General Motors developed alongside the American economy with leading

automobile sales (Britannica, 2019). Based from this you can conclude that thanks to the

contribution of General Motors sales the American economy was thriving with General Motors

being a great asset as an American auto manufacture. But with such success always come

competitiveness of different markets that interfere with the company’s success. For the

maintenance of such success a company always has to be aware of such critical factors.

According to Helper and Henderson (2014) GMC’s downfall was caused by the dereliction to

recognize what type of opposition they were dealing with and the incapability to retaliate

constructively after they were ensured. At this point we can recognize that General Motors

Company was not prepared for organizational capacity for change.

Literature Review
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Contributing Factors to the Demise of GMC

In the research done by Helper and Henderson (2014) they concluded that some of the

factors that contributed to the demise of GMC was due to the massive accomplishments they had

achieved, consequently this success directed the company to refute threats created by foreign

contenders throughout an estimated period of about ten years. The emergent endeavors in the

competing market of the Japanese auto manufacture GM posted as threat, particularly the

evolving of Toyota Japan, who consequently with an excessive degree interfered the productivity

of the GM (Goolsbee & Krueger, 2015). Moreover, other causative issues where the influence

patterns of managerial implementation that focus on complexity system of communication and

cooperative problem solving (Helper & Henderson, 2014).

Subsequently, difficulties with interdependent and data constraint might indicate that

resolving the application of these methods is susceptible to the informational restraints that

restrict the frequency of diffusion of any multifaceted innovative technology (Helper &

Henderson, 2014). These methods could not be applied due to lack of concurrent expansion of

operative interpersonal contracts, and General Motors had such evident complications

establishing those contracts. Another factor contributing to the demise was the excessive

recessive collapse that began in late 2007 consequently having a disastrous effect on the

automakers (Goolsbee & Krueger, 2015). As previously mention above the in the year 2009

according to Helper and Henderson (2014) market share declined vigorously by 26% and

General Motors Company had to file bankruptcy.

Organizational Capacity for Change

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Based on Judge and Blocker (2008) organization capacity for change is an innovative and

comparatively complete organizational concept evolving from the expedient of the perspective

construct that describes various organizational problems that tend to challenge strategic leaders

nowadays. Additionally, they define organization capacity for change as, a vital organizational

capability that empowers the company to habituate inherent competences to current threats and

prospects, furthermore, expanding their capacities by being able to generate additional aptitudes

(Judge & Blocker, 2008).

In today’s evolving world businesses need to be prepared for future challenges they face

and be prepared and capacitated to make the changes in order to maintain a level a success.

Judge and Blocker (2008) can advocate this because they believe that strategic leaders’

obligation is to perceive and prepare for ingenious technologies and emergent market prospects

onto a continuous period. In other words, complete organizational success entails companies to

be competently receptive to existing markets but at the same time constructively preparing for

latest markets on the scope. Organizational capacity for change is said to have resemblance to the

concepts of social capital according to (Shipton, Budhwar & Crawshaw, 2012) but advances past

an emphasis on common capability to incorporate what can conceivably be a pinnacle

explanation for cultural orientation concerning directness, pliability, and compliance.

Developing Capacity for Change

The capability to handle intensely changing circumstantial forces has propelled in

becoming a vital factor of competitive lead and organizational endurance (Meyer & Stensaker,

2006). All organizations are different in the way they react to change which result in different

approach to change, but then again it might similarly be founded on dissimilar capacities within

organizations to accept change. Meyer and Stensaker (2006) believe that change capacity for an
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organization happens when they have the ability of executing significant changes without

hindering regular operations or successive change developments. Extensive changes have a

tendency to entail a considerable amount of devotion and extract emphasis from other

organizational affairs making it sometimes difficult for an organization to build the capacity.

According to Guillen (2001) a major first concept to consider when wanting to develop a

capacity for change is that organizations and people must recognize the validation for change and

trust it will be advantageous, they have to fully understands these concepts before they support it.

Shipton et al. (2012) says that organization capacity for change is not solitary correlated

to organizational performance evaluated in viability or efficiency relations, besides it

subsequently outlines the scope to which organizations handle global oppositions by

accomplishing a capability to reason in the environmental setting. Furthermore, it is the vigorous

resource collection encompassed by productive human capital at changing stages of a business,

with cultural tendencies regarding modernization and responsibility, and structural systems that

enable organizational change and renovation (Shipton et al., 2012).

Meyer and Stensaker (2006) provide a recommended method for organizations to

develop capacity for change that have been assembled into the following groups which are listed

as follows, framing, participating, pacing & sequencing, routinizing, and recruiting. Moreover,

organization capacity for change is said to be associated to some other organizational change

concepts, nonetheless it is different in its general extent and consequences; yet, it drives past a

distinct level of investigation to define an organizational component’s capacity for change

(Judge & Blocker, 2008).

GMC Implementation of OCC

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Initially with prominent venture of the Japans auto manufacture GM detected threat,

particularly the evolving of Toyota Japan, who consequently with an excessive degree interfered

the productivity of the GM (Goolsbee & Krueger, 2015). In 2009 the corporation obligated to

file for bankruptcy and required to terminate some products. According to Goolsbee and Krueger

(2015) the start of organizational change for General Motors Company was a reformation that

conceived by dropping their fixed and variable prices at the cost of strain for their creditors,

employees, executives, and suppliers.

Similarly, as significant for their long-run achievements, the new management of the

businesses looked forward to ameliorating the culture of the company and establish improved

business operation to manufacture higher-quality cars (Goolsbee & Krueger, 2015). Another

aspect of General Motors strategy that they formerly carried had to change which stated by

Goolsbee and Krueger (2015) was one concerted on creating greater, less-fuel-efficient, and

more-costly-to-produce models than their competitors and proposes audacious amount

markdowns to customers. In short, general motor focused its change on change process of cutting

costs, changing and improving cultural in addition to overcome challenges with competitors.

As formerly reviewed over the years GMC has been a valuable asset for the U.S.

economy to which the president believed in taking the risk of government providing funding for

the reconstruction of the company, since the disadvantages of not doing so would outweigh the

risks. Throughout implementation of change and funding according to Goolsbee and Krueger

(2015) on December 9, 2013 earlier than anticipated the government completely withdrew its

funds that they had previously invested in General Motors subsequently, they sold the residual

shares,
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Finally, General Motors started emerging from the sunken ground by putting in practice

some building the capacity for change in the organization. setting upfront business goals and

selecting executives and a strong board of directors; only voting as a shareholder on major

corporate governance issues or major transactions; letting the board and management run the

company; and selling the government’s shares as soon as practical to recover taxpayer money

and return the company to private ownership

OCC and to Organization Development

In a study conducted by Faust, Sparks and Hilgendorf (2015) they examined the response

to change in organizations to achieve growth necessities in an emerging economy, they

concluded the study stating that specific leadership in business efforts and program quality is an

additional recognizable sign of organizational growth. The organizations demonstrate varying

development and transformation patterns similarly, like people, organizations correspondingly

go through good and bad times respectively in each stage (Faust et al., 2015). Nevertheless,

Faust et al. (2015) further explicates that change developments also demonstrate and define

patterns of development from natural state to struggle for endurance, evolution, differences and

eminence. Organization capacity for change can attribute to the development of an organization

according to Judge and Blocker (2008) through its powerful capability that permit organizations

to mutually discover and utilize market prospects (Judge & Blocker, 2008).

Judge and Blocker (2008) conclude their study by stating that organization capacity for

change effective capability attempt to allocate the specific scopes that permit organizations to

proceed toward their goal. Thus far, they also believe that exploration in this concept is in its

early stages, and there is a considerable amount of effort to do to comprehend how organizations
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ability proceed through fast and successful change to preserve its triumph with dynamic markets

(Judge & Blocker, 2008).

Conclusion

In conclusion this paper observed the various concepts of organizational capacity for

change. Furthermore, through the exploration of the literature review we concluded that General

Motors was affected by different factors like, change process, high costs, the need to change and

improve cultural, in addition to overcome challenges with competitors. General Motors with

contribution of government funding successfully implemented the process of organizational

change. Additionally, this paper determine that there is a positive relationship between

organizational capacity for change and effective organizational development, but as stated by

Judge and Blocker (2008) that exploration of concept is in its early stages, and there is a

considerable amount of studying and investigating to do in order to comprehend how

organizations can obtain the ability to advance rapidly and obtain successful change to

furthermore preserve its triumph with dynamic markets. While Shipton et al. (2012) says that

organization capacity for change is not solitary correlated to organizational performance but is

evaluated in viability or efficiency relations subsequently, it outlines the scope to which

organizations handle global oppositions by accomplishing a capability to reason in the

competitive markets.
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