Historical Analysis
Fredericksburg plant, the producer of Torque Converter Clutch (TCC), is a smaller facility in the General Motors (GM) network of plants. Its primary customer is a larger plant, in Dayton Ohio, which assembled transmissions, using among others, parts that Fredericksburg plant produces. Therefore, Fredericksburg is severely affected by strikes and productivity inefficiencies that occurred higher “upstream” in the hierarchy of GM manufacturing and production chain, such as the ones in Dayton. These strikes and inefficiencies are external factors contributing to plant’s inability to keep production running without interruptions, thus allowing it to generate steady profits and meet its budget. Furthermore, these breaks in productions affect overall GM’s ability to produce high quality product, meet consumer demand, and stay viable in a highly competitive automotive industry.
Despite Fredericksburg’s continuous inability to meet its budget, GM corporate decided to invest $30 million into its renovations – new equipment, manufacturing processes and technology. While this investment helped Mr. Hinrichs’ efforts in change management and new strategy implementation at the plant, organizational culture changes are needed if Fredericksburg facility is to become profitable, and thus remain open in the long term future.
Uniform genetic coding is proliferated throughout all the functions of the plant, not only figuratively (speaking about the organizational culture), but also literally, as many of the employees residing in the small town of Fredericksburg are indeed related to each other. Most of its manufacturing workers are in mid-forties to mid-fifties age category. Employees are accustomed to working side by side with their neighbors and family members, as the plant is the primary employer in Fredericksburg. It is not uncommon to have a close family member as a quality control supervisor, which results in many process inefficiencies remaining undocumented, worker idling and under-productivity. Such small town community labor force structure certainly results in uniform genetic coding at the plant, creating strong resistance of the implementation of any meaningful long-term changes in the work processes.
Additionally, complex bargaining unit agreements in regards to unionized labor, made implementing any changes to working arrangements or conditions near impossible. The relationships between union leaders, workers and management of GM were based on distrust, driven by management’s usual “denominator management” tactic of shutting down the plant and temporarily laying off employees whenever the customer plant experienced strikes or other bottlenecks. While this practice prevented GM from incurring expenses for labor during plant closure, it also eroded employees’ morale, trust in managerial intentions, and cooperation levels, creating a defensive environment.
The evidence of some genetic coding is also present in GM headquarters’ handling of the incentives, intended to encourage its locations to adopt new modernized production processes and improve profitability. Corporate ability to control and influence individual plants is manifested by establishing the budgets and performance standards for each location, as well as ordering plant closures and employee layoffs. Since cost reduction was built into major performance indicators and tied to the budget, any incremental improvements that the plant made, would not carry any significance in its evaluation of productivity – if the targets were missed by a fraction of a percent, or by 30 percent, it did not matter. This policy further unmotivated the employees to embrace various process change attempts implemented at the plant over the years.
Thus in order to bring the plant back to profitability and make it competitive once again, Hinrichs realized that he had to obtain buy-in from his workforce and earn his employees’ trust, get them “onboard” by