With the Obama Administration pressuring for quick results, the CEO's first job is to remake a bureaucracy notoriously resistant to change
The clock is ticking for Frederick A. "Fritz" Henderson. Tapped by the Treasury Dept. to run General Motors after the feds fired his old boss, Rick Wagoner, CEO Henderson understands that he needs to take a wrecking ball to the automaker's rigid culture or he could be history, too. "I know I have to re-prove myself," he says.
Henderson, who joined GM in the 1980s as a financial analyst, vows he will make the company less bureaucratic and nimbler. But his government minders are determined to provide adult supervision. They have installed as chairman former AT&T (T) boss Edward E. Whitacre Jr., considered a pragmatic change agent by Treasury officials for his successful reign at the telecom giant. And they're pushing Henderson to recruit other outsiders who can bring dramatic change to an organization that has long resisted it—and may still push back despite the near-death experience of bankruptcy.
Whitacre declined to discuss his new role, but Treasury officials say they are counting on him to help Henderson turn GM into a more consumer-focused company, much as Whitacre did at AT&T. Kent Kresa, who will be the interim chairman until GM emerges from bankruptcy and Whitacre takes over, says the former AT&T boss was so keen to fix GM that he volunteered for the job. "He's the kind of guy who will assess what's wrong, what should be done, and how we will get there," Kresa says. As chairman, Whitacre will stress-test Henderson's strategies and, says one Treasury official, help the CEO build the right management team.
The feds want Henderson and Whitacre to lure the kind of talent that will help GM reach consumers the way it did when legendary Chairman Alfred P. Sloan Jr. turned the company into one of the best carmakers in the world. Task force insiders say they don't want to pick who stays and who goes. But they have suggested that GM find new people who can help it get a quicker read on consumer tastes and build on the handful of recent hit models. "It's about Fritz and Ed picking a winning team," says an Administration official. "There will be a talent search."
In the meantime, Henderson is tackling GM's glacial decision-making process. A couple of four-hour meetings have been cut in half. Gone are the "premeetings," when the agenda for the real meeting was set. "I don't have time for that," Henderson says. Delegation, never GM's strong suit, is now an imperative. In early April, just after Treasury made him CEO, Henderson and several executives were discussing whether to add some pricey features to a future Buick model. Some wanted to save a few bucks while others figured they needed to step out and show consumers that the brand is truly upscale. After some debate, Henderson turned to Buick-GMC boss Susan Docherty. "You're the vice-president of Buick," Docherty recalls him saying. "Make the call." She opted to spend the money, and that was fine with the CEO. "Fritz is creating a culture where we don't need 17 meetings," Docherty says. "In the old GM, we would have to hear from everybody."
Last month, Henderson hired Booz & Co. consultant Jon R. Katzenbach to help make GM's middle managers less risk-averse and more willing to make decisions. Katzenbach and his team have begun scouring the company for mavericks adept at getting their ideas past a recalcitrant bureaucracy. Katzenbach asked each department chief to name five candidates. In most cases, he says, they aren't top managers or people on the fast track. Typically they have toiled at GM for a long time and know how to game the system. The plan is to make their attitudes and work habits the norm, not just a rarity among the few who will buck the system.
Henderson may ditch one managerial bottleneck, a star chamber known as the Automotive Strategy Board. Its 16 members decide where money is spent, what strategy every business unit should take, and who gets promoted. Traditionally, the group has convened monthly. So if the automaker needed to make big calls like cutting checks for a new car or slashing production, those decisions languished until meeting time. GM insiders say Henderson may replace the strategy board with smaller teams that meet weekly and make decisions further down in the company.
Culture of Fear
Henderson has been careful not to criticize Wagoner. But he has begun dismantling some of his mentor's initiatives. Wagoner was a data geek who used nearly 10metrics to measure his executives' performance. Not all were particularly relevant. Henderson says he has boiled those down to the five most vital for each department, with a much bigger emphasis on sales and profits. Under Wagoner, people were focused on minute details that meant more to their own departments than the overall company. "We got a little crazy with metrics," says Chris Oster, GM's organizational czar.
So far so good. But is Henderson willing to do what it takes? GM's new chief restructuring officer, Al Koch, previously advised the company as a consultant and has an outsider's perspective. "Fritz is more hands-on in enforcing decisions than Rick was," he says. But old habits endure. In a June 1 blog post to employees, Henderson asked for suggestions and criticism. Several workers said people are afraid of challenging the status quo. When pressed in an interview on the culture of fear, Henderson said he gets criticism all the time, and then added: "I've never had a situation where people were afraid to speak up." Maybe so, but that doesn't mean managers further down won't discourage new ideas from their underlings.
Henderson also says GM's product planning group is just fine. Yet it has routinely missed major trends and rarely sets them. GM's top-selling Chevrolet division, for example, is just this year launching decent crossover SUVs; rivals have been selling them for years. Plus, the product planners' indecisiveness has led to many delays on new programs. It's not that GM's designers and engineers can't work fast. They often wait for the "numbers dummies," as GM product adviser Robert A. Lutz calls them, to hash over the research. By the time the green light comes on, GM has missed the moment.
Fixing that is one of Henderson's biggest tasks. Lutz, the company's maverick-in-chief, is scheduled to retire at yearend. He's the one who did an end run around or bulldozed over the bureaucracy, says James N. Hall, principal of 2953 Analytics, a Detroit-area consulting firm. But Lutz never created a formal system that will replace his product savvy when he retires. That, say GM insiders, is why Lutz may stay on past his Dec. 31 departure date.
Either way, Henderson will have to make the product planning group— GM's most vital department—work faster and read the market better. He'll also have to prove wrong the critics who think GM needs not a company man as CEO but an outsider like Ford's (F) Alan R. Mulally. Right now it's fair to say that Henderson is moving faster than his predecessor, the incrementalist Wagoner. For the foreseeable future, his fate will rest in the hands of government minders who expect dramatic results—and quickly.
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Ed Whitacre's Learning Curve
"I don't know a thing about cars," confessed Edward Whitacre Jr. in an interview soon after he was named chairman of GM. The 67-year-old Texan knows a thing or two about running a big business, though, having spent about 43 years at AT&T before retiring from his dual role as chairman and CEO in 2007. Still Whitacre will be overseeing a company where no outsider has led the board for more than half a century.
To read the Bloomberg interview, go to http://bx.businessweek.com/general-motors/reference.