GM’s management model should not be a model.

In a carefully argued and compelling piece for the Business section of yesterday’s Observer, the paper’s management editor, Simon Calukin,  reminds readers that decline of General Motors began  when “Japanese companies figured out how to make cars in small quantities equally cheaply and of higher quality; and, being much more attuned to what customers wanted”

Economies of flow and market pull replaced economies of scale and marketing push.

For GM, it appears, the penny has never really dropped. It’s has for decades –almost three – clung to belief that management of scale marketing push are the way you do business, and it is now paying the ultimate price for its foolishness.

GM’s management model is as obsolete as fins, chrome and whitewall tyres. It has been kept on the road only because, like the banks, it was too big to be allowed to run off it.

The bigger problem, as Caulkin sees it, is not so much that GM has no longer got a workable management, or working, management model, but that that very management model, with its fatal flaw,  is now being seen by others as one worth using.

It would be nice to think that with its chief protagonist humbled, the GM management model could be buried, the page turned and a new one started. Unfortunately, it has developed a potent half-life in the services sector. With the development of computers and the internet, financial services and communications companies have been sold a vision of services mass-produced like consumer products, with a virtual supply chain linking low-cost suppliers around the globe.

Alas, the template is usually pure GM. The emphasis on economies of scale and low transaction costs achieved through specialisation and standardisation exactly parallels the obsessions of the bankrupt US carmaker. The result is white-collar factories like HM Revenue and Customs, the Department for Work and Pensions and the Probation Service, which are as inflexible, error-prone and customer-unfriendly as any car assembly plant.

Services, says Caulkin, should be systematised, not industrialised. And why not? Because, says Caulkin  “wide variety of service demand means that the standardise-specialise-automate formula can’t work.”

Services are the most likely place to develop a post-industrial management model, one that is more sensitive to customers than mass production, more responsible than the financial services industry, and less wasteful than either. To do that, though, the first imperative is to dismantle the legacy of GM. RIP.


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