The situation of General Motors (G.M.) from year 2007 to 2009, as described in the article, resembles the ambiguity model proposed by Thompson and Tuden, where the company had low agreement on goals and causation during its decision-making.
Low agreement on goals and causation could arise when there are various constituencies with different preferences (i.e. a situation of organized anarchy). In the article, key constituencies identified are the management (like Rick Wagoner the CEO), the bondholders (including the US government and banks), shareholders and the employees (represented by the United Auto Workers union). The low agreement is clearly outlined from the negotiation between G.M., the bondholders and the union – “… Talks with the union… remained inconclusive, as did agreement with G.M.’s bondholders to reduce debt”. The Union’s goal was to improve the welfare of its workers, entailing that G.M. had to spend more money on the retirees’ healthcare. On the other hand, the bondholders’ goal was to recover their investment, signifying that G.M. should cut down on its debts. However, the management of G.M. wanted to keep the business going in order to hopefully make a profit. To achieve that, the managers would prefer to pay less for healthcare benefits and delay the paying back of debts. In the end, due to their different preferences, they did not come to a conclusion, justifying the low agreement on goals and causation.
We can take the argument deeper and relate the decision making of G.M. to the Garbage Can model proposed by Cohen and March because we also see the problem of fluid participation of G.M.’s decision makers. During the crisis, G.M. appealed to the U.S. Congress for financial aid. And when the Bush administration pumped US$13.4b into G.M. in November 2008, the administration, therefore, became one of G.M.’s biggest stakeholders (or bondholders), with the position to make powerful decisions. However, when the Bush administration stepped down and President Obama came to power, we witnessed the coming and going of decision-makers, a situation of fluid participation. This gave rise to ambiguity because the previous goals, decisions and solutions associated with the Bush administration were replaced by that of the new leader. It is noteworthy how Bush willingly granted funds to the automobile industry (even sacrificing the funds used to rescue the finance sector) but Obama, on the other hand, questioned whether more financial aid could bring G.M. out of its current crisis. The problem of fluid participation as well as low agreement on goals and causation made decision-making in G.M. extremely ambiguous and difficult. Thus, given the situation, if G.M. were to make any goal-setting decisions in the near future about restructuring or reorganizing its brand, the Garbage Can model would be most suitable in explaining those decisions.
In addition, we can use the model to predict the outcomes of the goal-setting decisions that were likely to be made by G.M. in the future. One of the outcomes of the model is that choices are made without solving the problems. For G.M., huge amounts of money were pumped in to cover expenses, operations were scaled down and jobs were laid off to cut cost, but the fundamental problem of diminishing unit sales was not addressed through these actions. Another outcome is that problems may persist without being solved after choices are made. In the case of G.M., financial aid was granted to the company many times but its situation just kept deteriorating. A final outcome is that problems are rarely resolved which is evident in G.M. from 2007 to 2009, outlined in the article. Therefore, for the goal-setting decisions that were likely to happen, it would be extremely hard to know if goals could really alleviate the dire situation as these decisions would depend largely on which stakeholders happened to be on the scene, the new solutions or problems the company faced and the other problems and solutions that already existed there. And it is highly unlikely, given the ambiguity of the situation, that problems would be solved. Overall, the Garbage Can model would explain the goal-setting decisions that were likely to be made in G.M. and it indicates to us that the company’s situation would continue to worsen if no change in leadership or organizational learning occurred.
The firm’s survival became in “substantial doubt” due to its lack of balance or ambidexterity in its organizational learning. From the article, we see that G.M. was either fully devoted to exploration (the mode of learning that involves experimentation, risk-taking, searching and variation) when it had the financial capability, or totally engaged in exploitation (the mode of learning that requires refinement, efficiency, execution and selection) when the firm had to tighten its belt. Prior to the 1960s, G.M. dominated the US auto industry, so the firm had huge profits to make “innovation… part of G.M.’s DNA”. However, in the later part of 1960s, as foreign firms invaded the US market and “began to diminish its (G.M.’s) luster and its sales”, G.M. responded by cutting off (as an act of selection) the innovation projects and focusing single-mindedly on exploitation. The company justified its move by saying that “the money was needed elsewhere or because they were not delivering enough profit”. In the early 1990s, although G.M. finally brought its SUVs to the market, it lagged behind its competitors by five years. Later, when the other car manufacturers started to focus on small, efficient cars to counter the spiking oil prices, G.M. refused to introduce small cars and stubbornly continued to exploit its SUV business. Therefore, when the financial crisis hit in 2008, G.M. naturally engaged in more exploitation by scaling down its productions, trimming its business lines, and laying-off employees instead of exploring new ways of selling and new business models. As a result, G.M.’s survival became in “substantial doubt” in 2009.
Another reason why G.M.’s survival was doubtful is because it did not fully exploit its innovations, thus increasing its overall costs. One of the innovative products that were dropped during the 1980s was the small car division named Saturn. On hindsight, should the firm continue to refine the small car division and exploit it 10 years later, G.M. could have been a great success when the oil price spiked and consumers switched to smaller cars accordingly in the early 1990s. The success might have granted G.M. more sales and consequently larger cash reserves to weather through the 2008 financial crisis. The competency trap could also be a reason why G.M.’s survival was doubtful in 2009. G.M. could have been reluctant to change due to sunk costs in existing processes. There could also be power struggles (described in Michels’ Iron Law of Oligarchy) among the management when G.M. managers had vested interests in their positions, and so tried to co-opt potential opposition so as to resist change and continue to enjoy the existing benefits associated with their positions. As a result, the firm saw its sales dwindling and profits shrinking through the years. All these reasons consequently led to the dire situation of G.M. in 2009.
For G.M. to overcome the current situation, it must learn to be ambidextrous. The firm has to establish a culture of innovation to stay competitive in the future. Thus, their business model has to change, from a product-centric one to a customer-oriented one where the firm searches for ideas that fit the needs of the customers and trends of the market. As mentioned above, the reason why G.M. started going downhill since 1960s was because it relied solely on its past competencies and consequently fell into the competency trap. However, the vicious circle must be stopped when a learning attitude is carved into the new culture of the firm to convince the stakeholders that the firm has learnt its lessons. This also entails former routines being broken down and a more cooperative and collaborative workplace being established (perhaps by encouraging more cross-functional partnerships). Only through sufficiently radical changes will stakeholders, such as the government, understand that G.M. is not taking the easy way out by simply using the loans to cover costs and other debts but really putting the money to good use. At the same time, G.M. must be able to exploit new ideas instead of merely cutting off innovations (like Saturn) when they are not profiting. To put this culture into practice, a more charismatic CEO should be elected to direct this transition period. Such a leader should demonstrate exceptional qualities such as resistance to adversity, leadership, and possess the drive to prioritize and execute the goals while encouraging learning and innovation. Overall, G.M. must learn to be ambidextrous to survive the crisis and become more competitive in the future.