General Motors Corporation (NYE: GM) is the leading American automaker in the world with its operations spanning in 157 countries. The car manufacturer was established in 1908 in Michigan and today it is headquartered in Detroit, the United States of America. Besides the domestic industry of the United States of America, General Motors manufactures cars and trucks in other 30 countries around the world. Among its brand products are Cadillac, Buick, Chevrolet, GMC, GM Daewoo, Hummer, Holden, Opel, Saab, Pontiac, Vauxhall, and Saturn. Besides these brands that are owned by the automaker, GMC also operates joint ventures in China and Japan.
That is, Shanghai GM and SAIC-GM-Wuling Automobile respectively. From its Website, General Motors Corporation is among the leading American employer with 204 000 employees distributed throughout its global markets. The employees include production engineers, financial auditors, marketers, and researchers among others. Before restructuring and retrenching that took place in 2008 following a harsh global financial crisis that resulted into a loss of $37.3billion by the automaker, General motors corporation was the leading American employer with 284 000 employees (GMC, 2008).
Because of its large network of global presence in 31 countries, General Motors human resource management practices entail international practices that are designed in accordance to the international operation requirements and the organizational culture designed to reduce operational costs. Majority employees of the corporation’s subsidiaries in the 31 countries are drawn from the domestic pool of local labour markets and only a few expatriates are drawn from USA as back office managers due to their wide knowledge of its organization culture (Cappelli, 1999). The Board of directors which draws from the organization’s international market presence is charged with the responsibilities of making major decisions critical to the company’s operation. According to Gustin (2008), General Motors Corporation spent up to $103 million in settling healthcare insurance benefits of its retired employees in 2007.
From this information, it is evident that the American automaker provides life insurance covers for its employees upon retirement. However, following restructurung, these benefits were stripped off and only a few employees still enjoy them today. From January 1, 2010, pension scheme of retired hourly employees of General Motors Corporation was transferred to United Autoworkers; a third party insurance firms and all permanent employees who were hired after january 1, 1993 nolonger receive health care insirance benefit upon retirement(GMC,2008).
The entry salary of the global automaker is dictated by the labour laws of each market of operation and thus varied with the United States of America being the highest irrespective by job categories ( Main et al., 2007). The organization has invested in a Human Resource Management system that allows close interraction of its global employees through technology such as e-mailing and enterprise resource Management (Azrul, 2010). Marketing strategy entails presentations by field marketers to the organization’s large distributors and online follow ups.
Reccommended HRM practices for GMC
From the above background analysis of General Motors corporation, it is clear that the organization requires international Human Resource Management practices that will integrate the cultural diversity of its employees.The catastrophic impact of the 2008 financial ciris that resulted into massive restructuring and retrenching of its human resources also underscores the organization’s poor human resource planning. The following recommendations are prescribed for the automaker on the basis of figure 1 below.
The first recommendation, is Re-designing the business strategy to target the bottom line of the market. According to Azrul (2010), one of the main reasons for the $37.4 billion loss incured by the American automaker is external market forces from competitors like Honda and Hyundai that were producing far cheaper vehicles with high efficient engines and low fuel consumption rates as compared to Genereal Motors’ brands. In the heat of global financial crisis, the market shifted to consumption of cheaper and less fuel consumers produced by the competitors resulting in huge losses by the General Motors Corporation.
The new business strategy should entail designing cars and trucks with high eficent engines and electric cars that can survive an upsurge in oil prices. This will involve an investment in manufacturing technologies that ensures high quality at reduced costs such as electric engines that uses bateries.This will give the Amecan leading automaker a competitve advantage against the stiffening market competition.
The second recommendation is outsourcing of labour from China and Japan. Many Corporations prefer to manufacture their products from China because of the availability of a relatively cheaper labour force when compared to western counterparts. General Motors corporation can either outsource its human resoure from China or undertake most of its production from its Japanese and Chinese Subsidiaries. The labour laws in the two countries are relatively flexible and firendly than in the United States of America. This will help the American Automator reduce huge operational costs incured in meeting the big payroll of over 200, 000 employees.
The third recommendation is integration of employees’ training in high involvement work practices. According to Konrad (2006), engaging employees of an organization in job specific training improves their productivity by increasing their job-related skills, reducing propensity of committing costly errors, and increasing their job confidence. Training of General Motors’ employees on their job specifications will improve their productivity. Ofshore trainings in China and Japan are recommended.
This will allow the corporation’s manufacturing engineers to learn new efficient production technologies of Japan and China in making cheaper and highly effiecient cars. Motivational incentives such as team building sessions, delegation of duties, self-managed leadership styles, and monetary rewards will boost their commitment to the organization. The combined effect of training and motivation will necesitate restructuring of a pay roll while leveraging on improved productivity of highly productive employees.
The fourth recommendation is embracing technology in Human Resource Management system to enhance global cordination of its business. According to Dreher and Dougherty ( 2002), the use of technology such as centralised Enterprise Resource Management system to co-ordinate human resource activities of General Motors will enhance quick sharing of ideas and consultation among the global employees of the company without barriers. This will allow the organization to carry out its marketing strategies efficiently and effectively without limitation by geographical distances. Effective Human Resource Management through streamlined sofware-based systems enhances fast communication and online training which gives an organization a higher competitive advantage.
The fifth recommendation is integration of social benefits such as pension and health care schemes in the reward system. From the backround information above, it is evident that General Motors Corporation with-held social benefits for employees who were hired after January 1, 1993 and transferred the remaining ones to third pary insirance firms. The American automaker also stripped healthcare benefits for retired employees beyond 65 years. Acording to Konrad (2006), social rewards like health care insurance schemes make employees feel more valued by their organizations than monetary rewards in terms of bonuses and salary increments. Also pension schemes improve employees’ commitment to their employer because of future guarantees. This reduces employees’ turnover which is essential in retaining critical human resources for continuity of operation of General Motors. High staff retention improves an organization’s competitive advantage in a complex market of operational rivalry.
The sixth recommendation is the implementation of employee productivity management and monitoring systems such as Balanced Score Card (BSC) and High Performance Work System (HPWS) (Rouse, 2000). The latter system refers collectively to open systems, autonomouas teams and teamworks, and performance-based pay (Azrul, 2010). The implementation of the two Human Resource Management systems will improve organizational performance by providing real time employees’ information storage database from which future managerial decisions, and rewards will be based.
According to Konrad ( 2006), employees of an organization are more productive when they are aware that their performance is recorded for review in determining their future rewards. Effective implementation of the Human Resource Management systems will help General Motors Corporation in categorising employees according to their productivity rates. This information is important in determining the relevance of job training and objective restructuring in the event of a crisis like that which befell it in 2008. In this case, only high productive employees will be retained.
The seventh recommendation is the implementation of an integrative pay/ reward system to inculde performance-contingency pay scheme, skill-based pay, and seniority-based pay scheme. According to performance-contingency pay scheme, the employees’ reward will be based on the performance of their working teams. This will help the automaker in creating effective self-managed and motivated teams. Skill-based pay will ensure that employees’ pay schemes are based on their job skills.
For instance, production engineers will be given high pay than marketers because of their technical skills required by the organization. Seniority-based pay scheme demands that those employees who have stayed longer in the organization will get a higher pay than new comers because of their cumulative salary increements along their carrier path. Seniority-based pay scheme promotes staff retention even when the entry salary is relatively lower than the market rates because employees know that there is a room for growth.
In general, General Motors Corporation should ensure total compliance with the labour markets and legal environments of their respective countries of operations before implementation of the proposed recommendations. For instance, the employment laws regarding hourly wages, minimum wage policy, employment opportunities, labour regulations, and safety rules in China are different from those of the United States of America. Therefore it is imperative that the American automaker consider their implications in setting the minimum entry wage in each country of operation.
In conclusion, General Motors Corporation can sustain its competitive strategy as a leading automaker by embracing the above prescribed Human Resource Mangement system that integrates staff training on job related skills, outsourcing, social reward scheme, technology, and performance-contingency pay scheme among others as strategic competiencies in its operation. The implementation of Balanced Score Card and HPWS is critical in improving the productivity of the organization’s employees. The proposed system will enhance high staff retention, high staff productivity, and objective contingency planning in times of global crises like the 2008 global financial crisis that lead to massive retrenchment by the automaker.
Azrul, A. (2010). Human Resource Management & General Motors. Monash University Publication, p.1-13.From: http://www.scribd.com/doc/14812855/Human-Resource-Management-General-Motors
Main, B.G.,Jackson, C., Pymm, J.,& Wright, V. (2007). GMC:The Remuneration Committee and Strategic Human Resource Management. University of Edinburgh publications, p.1-49.
Cappelli, P. (1999). Employment Practices and Business Strategy. Oxfford, ew York : Oxford University Press.
General Motors Corporation. (2008). Restructuring Plan for Long-Term Viability: Submitted to Senate Banking Committee & House of Representatives Financial Services Committee. Detroit: General Motors Corporation.
Rouse ,D. (2000). Manufacturing Sdvantage:Why High Performance Work Systems Pay off. Journal of Team Performance Management, vol 96(5) , p.1420.
Dreher, G., & Dougherty,T. (2002). Human resource strategy: A behavioral perspective for the general manager. Boston: McGraw-Hill/Irwin.
Gustin, L. R. (2008). Billy Durant: Creator of General Motors. Ann Arbor. Michigan: University of Michigan Press.
Konrad, A. M. (2006). Engaging Employees Through High-Involvement Work Practices. IVEY Business Journal , n.p.From: