The Previous Structure and the Change
General Motors is one of the organizations that changed its structure recently, where the prevailing market situation caused the company to downsize and reduce some of its processes. Before downsizing, General Motors employed many workers and adopted a business model that sought to ensure rapid expansion. However, the management found out that for the business to be sustainable, it was important for General Motors to cut some of its unprofitable operations and release workers in these departments.
Additionally, the company saw it fit to transition into electronic automobiles (Agnihotri & Bhattacharya, 2023). This is not the first downsizing measure that the global vehicle manufacturing firm has done in the recent past. In 2020, the management of General Motors announced that it would lay off over 10,000 employees and close many of its factory plants. They said this was a measure to ensure General Motors is well-positioned for long-term success (Cole, 2020). In 2023, the entity announced that it would release contractual staff to cut costs. The firm had a more centralized organizational structure, but the company became more decentralized after structural changes and downsizing.
Before the structural changes, the company focused on work specialization, where the employees were each designed with a specific role. According to Robbins and Judge (2018), work specialization or division of labor refers to the degree to which organizational activities are divided into separate job categories. General Motors was well-departmentalized, and each worker had a functional unit.
The power within the company was also centralized, and the senior members made most of the decisions. The organization’s structure was more bureaucratic, but when the downsizing event happened, the firm adopted a more team-structured approach. Team structure is an organizational structure that seeks to replace the chain of command and departments to create a more empowered workforce (Robbins & Judge, 2018). This move enabled and continues to help General Motors address challenges related to geographical barriers.
External and Internal Reactions
The internal changes initiated by General Motors brought both internal and external reactions. The layoffs in 2020 reduced morale and caused employees to become more disturbed by job insecurities. These observations align with Chapter 15 of Essentials of Organizational Behavior, where the authors note that despite the many positive impacts of downsizing, it could make the staff less motivated (Robbins & Judge, 2018). It was also noticed that the downsizing option, particularly cutting off some functional units, made key stakeholders resist change.
Downsizing efforts also had external impacts as investors became more interested in the company since they knew it would be beneficial in the long term. Robbins and Judge (2018) agree with this observation, stating that when organizations take downsizing measures, they are often faced with scrutiny from the media and the employees who lose their jobs. This makes it necessary for the company to downsize to notify the workers about the potential dangers of losing their jobs. GM has also promised to produce all-electric vehicles by 2035 (Boudette & Davenport, 2021). The changes in structure for GM to be more focused on producing electronic automobiles also resulted in them engaging a different group of suppliers focused on providing green solutions.
Effects of Downsizing
The downsizing and cuts reduced the firm’s costs, thus becoming more profitable. However, despite the tangible profitability, downsizing hurts the GM brands and could hurt the company long-term. Since the downsizing in 2020, GM has consistently performed well in the stock market. The stock for GM has improved over 100% since the event, but this metric should be used with care since the automobile industry has performed exceptionally well over the years. As previously stated, the downsizing was motivated by the need to streamline operations and cut costs. The company has also sought to cut many RD projects that are not focused on producing autonomous and electronic vehicles.
References
Agnihotri, A., & Bhattacharya, S. (2023). General Motors creating shareholder value through diversification in electric vehicles: can a legacy company win?. SAGE Publications: SAGE Business Cases Originals.
Boudette, N. E., & Davenport, C. (2021). GM will sell only zero-emission vehicles by 2035. The New York Times. Web.
Cole, A. (2020). Fundamental valuation of the General Motors Company: Assessing the value in the midst of a pandemic (Master’s Thesis, Norwegian School of Economics). Web.
Robbins, S., & Judge, T. (2018). Essentials of organizational behavior: Global edition (14th ed.). Pearson.
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