President-Elect Obama said that the American car companies must “reform bad management practices.” Noted car company analysts have said that the industry needs a culture change. When I think of changing management practices and organization culture, I think of Edgar Schein’s definition of culture: the values, basic assumptions, beliefs, expected behaviors, and norms of an organization. Culture is all aspects of organizational life that affect how people think, feel, and act. Nothing that I’ve heard so far about the bailout package (excuse me, “bridge loan”) for GM and Chrysler will change the culture and management practices of these companies. In fact, there is a real possibility that they will just do more of the same: put more pressure on suppliers to decrease costs; put more pressure on unions to reduce wages and benefits, especially legacy costs; and make only cars and trucks that deliver maximum profit. Real change that will make these companies competitive, sustainable, and admired will only come about through a transformation in how they do business (See How: Why we do anything means everything… in business (and in life), by Dov Seidman). How the auto companies relate to key stakeholders is the place to start. At least four kinds of relationships need transformation.

  • First is the relationship of manufacturers to customers. Autos must stop giving customers what the companies can design and build at a certain profit and start giving customers what they want and need. Nobody wants fuel inefficient cars that don’t perform and don’t look much different from what we drove 20 years ago.
  • Second is the relationship of management to suppliers. A study by Booz & Company and Russel Reynolds Associates points out the need to shift from an adversarial relationship, which most leaders in the industry recognize is counter- productive, and switch to a cooperative relationship in which information and competencies are shared for the good of the customer.
  • Third is the relationship between management and unions. This, too, has to become one of cooperation and win-win negotiations. They need each other. They must not wait for contract renewals; this relationship must be built on trust, over a long period of time, with the goal being a competitive, sustainable, admired company.
  • And fourth is the relationship between supervisors and their direct reports. All employees, from management to hourly, must be constantly learning. Change is happening too fast to not always be acquiring new knowledge and skills and developing one’s ability to help the company be successful. Supervisors are critical in this relationship. They must be guiding, coaching, and holding individuals and teams accountable for learning.

If GM, Chrysler, and Ford change these four kinds of relationships in the way I have described, they will have transformed their cultures and the way they manage. Of course, these companies are large, complex systems that are, as is evident in the current problems with the U.S. economy, interdependent with many other large, complex systems. Even dramatically changing relationships with customers, suppliers, unions, and employees will not be sufficient to prevent their demise, but neither will the infusion of loan money. However, without a change in culture, they have no chance at all.