Fritz Henderson's Resignation Shows the Board Is Eager to Change GM

GM's troubles have been a frequent subject on KnowledgeToday and in Knowledge at Wharton articles. The most recent news about the automaker indicates that the new board — which includes employee and taxpayer representatives, the two groups that invested the most to keep the company afloat — recognizes the need for a speedy transformation of what was once the biggest and perhaps most bureaucratic automaker in the world.

This week comes the news that GM chief executive Frederick "Fritz" Henderson has resigned under pressure from the board. The board chairman, Edward E. Whitacre Jr., former CEO of AT&T, will assume the CEO post until a permanent successor can be named. Henderson's departure is good news for GM, says Wharton management professor Lawrence G. Hrebiniak, who has consulted for GM and other automakers. The resignation, he says, "definitely signals the fact that the board wants major change."

And change is what GM needs, Hrebiniak adds: "My work with the company in the past revealed a risk-averse, slow-moving culture, with managers afraid to take chances and rock the boat. Too many managers believed, regardless of the threats or problems facing the company, that 'this too shall pass,'"essentially denying the challenges they faced. "Old timers — 'lifers' — ruled the company; their risk-averse style and resistance to change won’t go away easily. New blood from the outside is needed. Culture is affected by changes in people, structure and incentives that bring about changes in behavior, planning, decision making, and performance-related evaluations of managers against new, robust goals. Promoting a few 'lifers' t new positions won’t do the trick. Real change is needed and Whitacre must bring in capable talent from the outside to achieve this objective. A makeover is necessary, not simply more cosmetic change."

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