Management Question: Cherry Chan, 53, took over GM in January 2014, making her t

Question

Management Question:

Cherry Chan, 53, took over GM in January 2014, making her the company’s fifth CEO in six years — and the first woman to run a major automaker. She took over just before a committee inside GM made the decision to recall 2.6 million vehicles due to a faulty ignition switch (even though they knew about the problem much earlier than that). Chan survived her first year, and she is advised by many inside the company for the way she handled the crisis she was dealt. It is now up to her to change the culture that she has grown up in — she has worked for GM since she was 18 years old. Her father worked at GM for 39 years. Chan isn’t like previous GM CEOs, though. After an internal investigation, Chan (in a very un-GM like move) fired 15 employees and got rid of at least seven high-level executives. Although GM’s tradition is to put these kinds of experiences behind it quickly, Chan stated at an employee town hall meeting, ‘I never want to put this behind us. I want to put this painful experience permanently in our collective memories.’ A retired executive stated, ‘Her remarks at that meeting were unlike anything any previous GM CEO has ever said.’

Although Chan knows what needs to happen, she doesn’t like the word ‘culture.’ ‘What is culture? It’s how people behave. So if we want to change this elusive culture, it’s changing behaviors. And that becomes actionable very quickly.’ That’s exactly the message she is sending to the executives around her. Chan believes that cultural change has to start at the top and that when she does things differently, those around her will start to do the same. She certainly has a knack for being able to make others make decisions — even for simple things. Chan states, ‘In my whole 35 years at GM, I never accepted the GM nod. If somebody said in a meeting they were going to do something, I expect you to do it. And if you didn’t do it, I’d be at your desk or sending an e-mail — whatever — just challenging. A lot of that is just not accepting that behavior, because it’s never been acceptable.

There are those who have serious doubts about Chan’s ability to effectively get anything done. This is at least partly due to the fact that Chan is an insider — someone who has been steeped in the culture for more than 20 years — and partly due to the fact that all seven CEOs inside GM have tried to change the ingrained culture at one point or another. Ex-CEO Roger Smith went so far as to try to do it through acquisition by purchasing EDS, a large software company with a culture the opposite of GM’s, for $2.6 billion. A banker who worked on the deal said, ‘Exactly the opposite happened. By the time EDS was spun off… It was bureaucratic and cost-laden.’ That being said, Chan is known for having made changes and ruffling some feathers along the way to the top of the organization. Warren Buffett, whose Berkshire Hathaway recently bought more GM stock, says of Chan, ‘She is as strong as they come. She is the person to have there. She is as good as I’ve seen.’

Question:

1. Analyse Chan’s leadership style by using the behavioural leadership approach.

2. Is Chan using the appropriate leadership style? Formulate your answer with House’s Path Goal leadership theory.

Explanation / Answer

1. A leaders behaviour is the best predictor of leadership influences and therefore, is the best determinant of her leadership success as per behavioural leadership approach.

Cherry Chan of GM is trying to call a spade a spade. She is deviating from the earlier GM culture and is highlighting the employees who have been fired. She wants the other employees to take it along the stride and not accept anything which is wrong. She says that every person who commits for a job should be accountable to get the job done in time.

She also recalled the vehicles which has a faulty ignition switch in spite of the costs involved.

2. She essentially is a task oriented leaders ready to break from the routine company culture if the need arises.

The leadership style will encourage innovative thinking in the company and will help the company come up with better products for its consumers. The automobile industry is under a lot of stress with the advent of electric cars into the market like Tesla. It is very important for companies like Gm to stay competitive and relevant in the forthcoming market.

The path goal Theory of leadership was developed to help the leaders encourage and support their followers to achieve the goals they have set up by having a clear path or strategy to achieve the same.

Cherry Chan in this case is clarifying the path with her subordinates or the company employees should tread to achieve their goals. She is leading her company employees by example and setting up an example of supportive and directive leadership for its employees. Her leadership style is participating with its employees and also achievement oriented. She expects her employees to own up their mistakes and rectify them as she exemplified by Recalling the faulty ignition switch cars.

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