The two companies that have undergone similar, and fairly substantial, changes in recent
years are Wal-Mart and General Motors (GM). Both are established publicly traded companies
that are typically considered blue chip stocks. However, both have made the major decision in
recent years to undergo corporate restructuring.
In 2009, an organizational change was announced by Wal-Mart. It was the restructuring
of Wal-Mart’s global sourcing team to leverage the scale of its global merchandising operations.
The purpose was to reduce costs and improve quality within its supply operations. At the same
time it also announced the formation of a global dot com organization. Wal-Mart’s US
operations were also reorganized. The three divisions (Logistics, Real Estate, and Store
Operations) were united and reorganized into geographic divisions: Wal-Mart West, Wal-Mart
South, and Wal-Mart North. According to Wal-Mart, this transformation was brought about in
order to help unlock opportunities for customers, associates, and shareholders. Since the
organizational change, Wal-Mart has performed extremely well. Its operating income has
increased from $22.7 billion in 2009 to $26.5 billion in 2012. Its net income has also increased
from $13.38 billion to $15.7 billion during the same time period.
In 2009, General Motors received a “bailout” from the United States government because
it promised that there would be a substantial change within the company. The organizational
changes that General Motors brought about were corporate downsizing. There was drastic
restructuring within General Motors so that it became less bureaucratic. In fact, several layers of
management were removed. These decisions saved money and improved the speed of decision
making. Further, General Motors’ culture was changed to one of building cars that directly
satisfied the needs of customers. Already, there have been positive effects within the company. It
had incurred a net loss of $30.9 billion in 2008. However, in 2011 it earned a positive net
income of $9.2 billion. In 2008, GM’s operating income showed a loss of $21.2 billion and it
showed a positive figure of $5.67 billion last year.
The changes that occurred in Wal-Mart during 2009 were to unite three high-performing
functional departments and reorganize them into geographic divisions. The purpose of this
reorganization was to improve the alignment among its merchandising, marketing, and
operations groups. Wal-Mart carried out this change to give strength to its price leadership
strategy, to improve product assortments, and to improve the shopping experience of the
customers. The geography-based teams were expected to develop new segments across the
United States. Wal-Mart also restructured its field-reporting structure that has three geographic
business units in the west, the south, and the north.
The change in General Motors was dramatic, between 2009 and 2012 there were 24 new
vehicles launched of which 22 were fuel-efficient cars. There were reductions in manufacturing
costs and other fixed costs through reduction in the number of employees and a substantial
increase in productivity. Liquidity was obtained from Federal government assistance. General
Motors reduced the number of brands, nameplates, and retail outlets to concentrate available
resources on profitable operations. At the same time General Motors achieved full compliance
with the 2007 Energy Independence and Security Act. General Motors changed its employment
in such a way that its’ labor cost once again became competitive with foreign car makers within
the United States.
The similarity between the changes occurring at both Wal-Mart and General Motors is
that each has become significantly more customer oriented and both companies have also
focused on cost reduction. In order to bring about this change, Wal-Mart and General Motors
changed their organizational structure. The companies focused on attracting customers from new
market segments. The differences between the changes in the two companies were that Wal-Mart
was seeking to protect a profitable position whereas General Motors was attempting to survive.
The other difference is that Wal-Mart is seeking to grow with the change but General Motors is
seeking to consolidate its position. Further, Wal-Mart was in a strong financial position but
General Motors was taking losses and received assistance from the Federal Government.
In the case of both Wal-Mart and General Motors, the most relevant images are those of
the Director, Navigator, and the Caretaker. There are several other actions taken as a part of the
changes at Wal-Mart. Some of the operating functions have been centralized, whereas the
merchandizing function has been regionalized. Its store merchandizing operation has been
organized around the new geographical structure. It has also restructured Wal-Mart’s ecommerce section by integrating the dot-com merchandizing and operations with traditional
retail business. These images are, however, those of control and have been implemented from the
top. The threes images (Director, Navigator, and Caretaker) are those of control, what changes is
the extent to which the outcomes are believed to be achievable.
In the case of General Motors, the change in their US portfolio, the shift in production to
fuel-efficient cars/crossovers, the reduction in brands, their compliance with energy laws, their
cost reductions, and their laying off of workers are all changes imposed by their top
management. From the perspective of management, it’s in control and can achieve its objectives.
From the perspective of government, the management is taking action but the company is likely
to be affected by a variety of internal and external factors – this is the Navigator image. From the
stand point of the workers, the control of management is severely impeded by a number of forces
that are beyond their control – this is the Caretaker image.
Both of these companies are facing turbulent environments. The Wal-Mart stores were
finding it difficult to maintain their market share and remain competitive. General Motors was
finding it difficult to survive and avoid liquidation. Under such circumstances, management has
to be in control, make decisions for the good of the entire organization, and implement their
decisions throughout the company. In the case of General Motors, the government was watching
the actions of management very carefully. It was a condition of the assistance received from the
federal government that General Motors would implement these changes. The image that is most
appropriate for General Motors is that of the Director. The management was in control and the
change outcomes, such as improved profits, were achievable. Similarly, in the case of Wal-Mart,
the appropriate image is that of management in control. Other retailers have been adversely
affected by the economic recession and have incurred losses. In such a business environment
Wal-Mart also requires an image of the Director. It must have the image of management as
control and the objective of change as being achievable. Such an image must be conveyed to all
the stakeholders of Wal-Mart. Such an image will help inspire management, employees, and
shareholders. In my opinion, in the case of both companies the image of the Director would have
best facilitated the described change. Under the circumstances, management has the knowledge
and the ability to make the changes. The image of management in full control is beneficial to the
companies.
Diagnostic Model
The diagnostic model selected for this assignment is the 6 box model. This model has
been chosen because according to Weisbord, identifying and solving a problem must be done
systematically by the same people, because by so doing, they learn from their own situation and
then seek improvement. Diagnosis is a way of looking over an organization to determine the
variance between what is and what ought to be. This model has been chosen because its six
broad categories in his model of organizational life, includes purposes, structures, relationships,
leadership, rewards, and helpful mechanisms. These are appropriate for diagnosing change in the
two organizations we have selected. The six box model properly assesses the organization’s
current level of functioning to design appropriate change interventions.
Diagnostic Assessment
The six box model of diagnosing change is first applied to Wal-Mart:
Purposes: In Wal-Mart the organizational members agree with and support the organization’s
mission and goals. Wal-Mart has a strong culture that supports low cost strategy, each employee
supports it.
Structures: The structure has modified to improvement the alignment between its merchant
marketing and operations group. The restructuring has been done to support its strategy. WalMart’s structure supports its strategy.
Relationships: Wal-Mart reorganized three high performing functional departments and
reorganized them into geographical divisions. The purpose was to reduce conflicts among
functional divisions, improve communications, and increase control over the supply chain.
Leadership: Wal-Mart has improved the use of its leadership through the reorganizations. Those
who have shown good performance have been placed in important positions.
Rewards: Wal-Mart has rewarded its best leaders through promotions and giving them more
responsibility. The shareholders have been rewarded through improved performance.
Helpful Mechanisms: The helpful mechanism is the formation of a global dot com organization.
The geographic division has improved the control that Wal-Mart has with its suppliers. The
integration of the dot-com merchandising and traditional retail business has been helpful in
achieving its goals.
The six box model of diagnosing change is now applied to General Motors:
Purposes: In case of General Motors, there were several employees who had to be terminated.
These organizational members did not agree with and support General Motors mission for
survival.
Structures: There is a fit between the new structure and the purpose. The new structure has
fewer layers of management. This has a better fit between the purpose of cost reduction and a
flatter organizational structure.
Relationships: After the restructuring there is an improved relationship between the employees
at General Motors and their jobs. Their jobs are more fulfilling because of greater responsibility
and variation in job. The current employees are happy that they have been retained by GM.
Leadership: The leaders have clearly defined the goals of GM, they have included the purposes
in their programs. Their purpose is to turnaround GM so that it becomes profitable and gains a
larger share of the market.
Rewards: Currently the formal reward for employees is their survival in General Motors. Those
who have been discharged feel that they have been punished. Those who have been retained feel
that they have been rewarded.
Helpful Mechanisms: Currently, these mechanisms have been helpful. The company has shown
a positive net profit. In this manner the restructuring has helped GM achieve its goals of
restructuring.
SWOT Analysis
Wal-Mart
Strengths: Wal-Mart has been able to reduce its costs. It has also been able to improve its
dot.com operations. The geographic divisions have contributed to its improved performance. Its
net profits have consistently improved.
Weaknesses: Wal-Mart has been found to violate environmental laws. This has weakened its
reputation. It has also been implicated in a number of bribery scandals. It could be found in
violation of Foreign Corrupt Practices Act. Its method of rewards and punishments has
encouraged very low wages, poor working condition, labor union opposition, and even tax law
violations.
Opportunities: Wal-Mart has experienced new opportunities from the restructuring. The
opportunities are a growth in its e-commerce business, stronger bargaining power with its
suppliers, improving its customer base through e-marketing, and mail subscription service.
Threats: Wal-Mart is threatened by the weakness in the economy. Very low margins and a large
organization that is unwieldy. Wal-Mart is also threatened by the Department of Justice
investigation into alleged bribery scandal.
General Motors
Strengths: General Motors has been able to comply with most of the terms of the restructuring
plan with the US government. It has also been able to show a positive financial performance.
GM has been able to streamline its production, improve its product mix, and gain investor
confidence because of the organizational change.
Weaknesses: General Motors still has production lines that produce cars that have low demand.
It has not been able to introduce flexibility into its production. It has not been able to regain its
market share.
Opportunities: General Motors have opportunities of innovating its cars and producing low
cost, fuel efficient cars. Also if it expands more aggressively into hybrid and electric cars it is
likely to experience growth in market share. Further, marketing opportunities for General Motors
exist in the global market. The restructuring has brought about the promise of reducing the costs
of General Motors.
Threats: General Motors faces threats from foreign car makers who are strong competitors.
They threaten to saturate the market. Further, the sluggish growth in the economy may curtail the
market of General Motors. The demand for large family cars is declining as the number of large
families decline.
Effectiveness of Changes
Wal-Mart’s effectiveness of changes made is moderately successful. It has been able to
maintain its growth in revenues and profits even though the economy has been sluggish.
However, Wal-Mart has been plagued with numerous problems such as criticism from labor
relations groups, international human rights groups, and environmental groups. It has been able
to satisfy its shareholders and to an extent its customers but its other stakeholders have objected
to its methods. The most recent problem is the Department of Justice investigation into bribery
charges abroad.
On the other hand the effectiveness of the change in case of General Motors has been
dramatic. Apart from the change in organizational structure, there have been changes in its
product mix, there is a change in organizational culture, and there is profitability. This change
has been possible because General Motors has faced possible bankruptcy related liquidation. The
implementation of the change is effective and GM appears to have turned around.
Potential Areas of Resistance & Strategy
Wal-Mart is likely to face strong charges and fines on the count of violation of Foreign
Corrupt Practices Act. If these charges are established, Wal-Mart will face fines, strictures, and
loss of reputation. One strategy that Wal-Mart should follow to prevent this is to train its top
officials in ethics and stress the importance of following home country laws and host country
laws. The top managers should specifically be warned not to give bribes. Further, internal
inquiries should be conducted to detect and identify corrupt officials. Often Wal-Mart has to deal
with matters in countries where corruption is widespread. In such cases, Wal-Mart must send
special messages to its officers and employees in those countries.
In case of General Motors the greatest threat is competition from foreign car companies.
It might face strong price competition and may not be able to sustain its growth. The strategy that
General Motors should adopt is flexibility in its manufacturing systems. It should be able to use
its facilities to make different models of cars. It must be able to change over its production
process to cars that the customers want.
References:
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Mills, Jean Helms; Dye, Kelly; Mills, Albert J. Understanding Organizational Change.
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Cawsey, Tupper F.; Deszca, Gene. Ingols, Cynthia. Organizational Change: An ActionOriented Toolkit. SAGE, 2011.
Sharma. Change Management. Tata McGraw-Hill Education, 2006.
Singh, Kavita. Organization Change and Development. Excel Books India, 2009.
Weisbord, Marvin Ross. Diagnosing Your Organization: A “six-box” Learning Exercise.
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