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18 January, 2010 Posted by John G. Self Posted in Career Management
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A Cautionary Tale for Healthcare Leaders: GM’s $48 Billion Talent Strategy Mistake

Posted January 18th, 2010 | Author: John G. Self

In his book Why Smart Executives Fail, Sydney Finkelstein provides an excellent example of what can happen to a company when they forget that, in the end, it is employees who will make the difference between success and failure.

Healthcare providers, in the throes of evaluating their strategic options in the face of increasing competition and impending healthcare reform, must look at their employees – particularly executives and managers – to determine whether they have the right people to deal with the consequential changes.  They must examine whether the skills of their team match up with the demands of new strategy.  Do the executives and managers have the depth of experience to succeed if, for example, you require them to be more entrepreneurial in how they grow revenue?

A spectacular strategic misstep at General Motors more than 25 years ago provides an excellent example of what happens when you focus on strategy and not the people.

In the 1980s, Roger Smith, GM’s Chairman and Chief Executive Officer, was frustrated,  Finkelstein wrote.  He faced two thorns in his side:


“First, low-cost, high quality Japanese imports were starting to gain a foothold in the U.S. Market.


“Second, GM’s labor relations were horrible.  What to do? The questions Mr. Smith asked aren't hard to reconstruct.  What was the biggest expense on GM’s balance sheet?  Workers.  Who prevented increased operation speeds by threatening to strike? Workers. Who made the production line errors that resulted in defective cars?  Workers.  Who made life difficult for managers by refusing to do what they were told?  Workers.”

“Bold, brilliant in its simplicity and, in retrospect, more than a little loony,” Smith's solution was to solve all of his problems at once by eliminating his workers.  Robots could work night-and-day with no wages, no complaints, no strikes, and no worker errors.

But there was a fatal flaw in this if it sounds too good to be true, it probably is strategy to turn back the Japanese auto invasion and return GM to global dominance.  Instead of installing the lean manufacturing techniques that made the use of robotics more effective and, to this day still defines how Toyota operates, GM’s senior team focused on the idea that robots would make their life easier and profits more robust.  This obsession with machines over people led to what manufacturing engineer Charles McElyea described as “automated confusion” and fueled GM’s spectacular demise which ended in 2009 with a humiliating government bailout and forced bankruptcy just to stay in business.

When you leave people out of the strategy equation, you are in effect pouring gas onto fires of failure. 

The question for healthcare leaders who are facing a critical point in our industry’s future is whether they match the demands of their market and the strategies necessary to survive with the skills of their workforce.  Mr. Smith learned a $45 billion lesson.  He focused on a strategy, not the real problems that threatened his organization.

Far too many healthcare organizations are traditional top-down, command-and-control operations.  That management approach does not foster strong middle managers, and market conditions that require rapid response to strategic shifts, will have significant financial and clinical consequences. 

As healthcare organizations review their strategic options, the Chief Executive and Chief Human Resource Officers need to plan for an enterprise-wide systematic evaluation of the strengths, weaknesses and skills of the existing team – from the executive office to shift supervisors to determine whether they can adapt.

This cannot be a one-time exercise.  It should become, at a minimum, an integral part of the organization's quarterly operations review.  While the dashboard data is important, if you focus only on those metrics you will miss equally key indicators of your future success or failure.

 Our team is in the business of designing processes to evaluate executives and managers.  We can take your existing system and convert it to an enterprise-wide program faster, better and at less cost than the average health system, hospital or large physician group practice. 

GM’s Mr. Smith lost focus.  It was an expensive lesson.  During the time that automation was touted as THE ANSWER to all their corporate woes, production costs actually increased.  For the $45 billion he invested in automation in hopes of defeating the Japanese invasion, GM could have bought both Toyota and Nissan, according to one analysis.  

 John G. Self is Chairman and Senior Client Advisor of JohnMarch Partners.  He is a Co-Founder of the Firm.  

With more than 30-years of healthcare leadership experience in public relations, national marketing, business development and as Chief Executive Officer of hospitals and consulting firms, Mr. Self is highly regarded for his keen insight into operations, business culture and for his ability to consistently select the right leaders.

John is a highly rated speaker on inspirational leadership, career brand management and the future of healthcare in America. To learn more about his presentations, you can reach him at JohnMarch Partners.

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© 2019 John Gregory Self

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