How NOT to Do a Lean Transformation – A Case Study of GM

Becoming lean is an aspiring goal for many companies. In my first post I showed you how Toyota does it … and why this may not work for you. In this second post of this series I will show you how NOT to do a lean transformation, and try to highlight common mistakes. In a subsequent post I would finally like to show you possible options you have for your lean transformation. Read on!

How NOT to Do a Lean Transformation – The GM Case

GM LogoThere are plenty of failures of lean transformations in industry. Most of them are known only to insiders, which usually are subject to confidentiality. Hence, I can talk about many failures only in abstract terms. However, there is one well-published example (also in my own book Faster Better Cheaper) that I can talk about: General Motors. They were able to train a lot of people in lean at the very source through their NUMMI joint venture with Toyota, but then squandered it all away. They had dozens of mid-level people well trained in lean, and hundreds of workers that believed and trusted lean, but they were unable to transfer this knowledge to their other plants. It is pretty much a textbook case on how NOT to do it. Many other companies also failed with lean transformations, but none failed from such an excellent starting position.

The Initial Situation – NUMMI

In the early ’80s, Toyota wanted to open its first major plant in the United States. To mitigate the risk they decided to do a joint venture. They first approached Ford, since they learned a lot from Ford before. However, Ford declined (and probably regretted it afterwards when lean became popular). They then approached GM, resulting in the New United Motor Manufacturing Inc. in Fremont, California, better known as NUMMI. The GM Fremont plant was by far the worst and most miserable plant at GM, and probably the worst in the USA. Eventually it was closed in 1982. When it reopened in 1984 together with Toyota, it quickly became not only the best plant of GM, but produced comparable quality and efficiency as the Toyota plants in Japan, despite having mostly the same workforce.

NUMMI GM Toyota

This then was the golden opportunity for GM. They had a (joint venture) plant that excelled in lean manufacturing. Lean had the support of the staff, managers were familiar with the lean culture, and many people knew how to do lean properly. When other companies want to do a lean transformation, one major problem is always where to get a lot of people familiar with lean. GM got this handed on a silver platter. They did not have to learn “lean” from scratch, but merely transfer it to their other plants. And that was where they messed up big time.

Using Threats and Force to Do Lean

Motivating the employees?

GM decided to roll out lean in steps … which by itself is a smart thing to do. Two plants were selected to be transformed into lean plants, Van Nuys near Los Angeles and Norwood in Cincinnati. The sensible approach would then be to start with a few small projects within these plants, trying to have the people open up to lean, and build success stories to motivate. This would then build the base to spread lean throughout the plant.

But GM management had a better idea to motivate people. Let’s have them fight each other to the death! Yes, you heard that right, they wanted a death match where only one (plant) could survive. They set up a lean competition, and the winner did NOT get closed, whereas the losing plant would be shut down. They used the threat of losing their job to force the workers to do lean. Obviously, right from the start, the employees of both plants were very suspicious of lean, and not motivated for lean at all. I wonder why …

Using Lean to Eliminate Labor

Fire 25% or fire 100%?

So, the winning plant would not be closed. But, to GM, this of course did not mean that everybody kept their job. Oh no, the goal was a 25% headcount reduction! Hence, the GM workers had the choice between getting everybody fired by closing the plant, or getting one out of four fired. Talk about attractive options …

In effect, they were asking their workers for help to make themselves redundant. Unsurprisingly, the workers were very reluctant to fire themselves, and resistance against lean hardened. Unions called lean “the most dangerous scheme ever conjured up by GM to rob workers of their union.”

Lack of Top Management Attention

Finally, and probably one of the biggest factors, was the lack of top management attention. Toyota managers are always very interested in all the details, wanting to truly understand how things work. Obviously, as a manager you cannot go into every detail, but Toyota focused much more in depth on a few examples, whereas GM managers were more interested in a shallow but wide view. Even then, GM managers did the equivalent of a “five-minute flyby,” instead of spending real time with the situation. GM looked for methods and tools, but missed the big picture.

There is more to a culture than the clothes!

In my last post in this series, I described lean as a culture, using examples of different cultures. GM did the equivalent of dressing their workers in a kimono and pretending that they are now Japanese. Lean is so much more than just its tools. To use another example, buying the best paint and brushes you can get won’t turn you into a Michelangelo. GM managers did not get that. A Toyota manager said that GM understood the process “as far as the hardware and the plant layout are concerned. But I’m afraid that GM upper management doesn’t understand the basic concept.”

Delegating Lean

The managers at GM were always looking for a magic bullet that they then could give someone else to use. They delegated the idea of lean to others, who further delegated it. There were people who knew lean well through NUMMI, but they were unable to initiate a transformation against the disinterest of the management and the opposition of the workers. They were also dispersed into small teams or individuals, and too small of a group to act effectively, even if there would not have been so much disinterest and opposition.

The Outcome of the Competition

Site of the former Norwood Plant in 2011

So, what happened to the competition? After all, it was Van Nuys against Norwood. Norwood rejected the idea of lean from the beginning, and not much happened. The workers at Van Nuys also rejected it, but management forced some lean tools on them, although they rarely worked as intended. You cannot do lean against the opposition of the workers. Even worse, the negative attitude affected other plants, and anything coming from NUMMI was resisted at by other plants. The skills learned by the GM people at NUMMI fell on dry and barren ground, and nothing came out of it.

“The Plant” mall, formerly GM Van Nuys

Since Van Nuys did at least pretend to do something, they looked better than Norwood, which did not do any lean at all. Hence, Norwood was closed in 1987. However, Van Nuys survived only five more years, before also being closed in 1992. It is now a shopping mall, aptly named “The Plant.”

So overall, it was a mess. Lean did not take off at GM. They were not only unable to transfer the culture from NUMMI to other plants, but the other plants actively resisted lean. As so often, it was a failure by the management. To their defense, since then they have improved their Lean abilities, although it is still mostly tool-based and without much mindset change. Now, go out, learn from mistakes instead of repeating them, and organize your industry!

Series Overview

13 thoughts on “How NOT to Do a Lean Transformation – A Case Study of GM”

  1. Yes. This has been the experience of failures attributable to the lack of commitment from the Top Management. Delegation comes with responsibility too and one cannot expect improvemements to come just by delegation.

  2. Thanks for the awesome read! I was excited to see a post about the struggles and mistakes in lean. I am currently completing my Green Belt Practicum and find this very helpful in reducing the number of mistake I make and how to learn and fix them. It is also very interesting to read about each struggle GM made along the way, and continued to make as time went on. I wonder if they would not have failed if someone were to come in outside of the company. What would be different in the end?

  3. Correct today all industries want to apply lean and want to get savings from that directly by lean.
    Industries take lean as showcasing and good poster as lean.
    When I was appointed as lean practitioner people feel I was assigned to remove them from job, that’s most negative impact. And I think in this 4th industrial revolution any transformation most important factor is empathy, leader’s task not end at transformation, it’s end when he give some work to all his people who were replaced though they are skilled or unskilled. Any worker is also part of economy cycle and earning his bread, So if there is no work then they may do anything ill eagle also!!!

  4. Pratik, you make a good point about empathy and recognising that people are part of the economic cycle. I’m drawn to the famous quote attributed to Ford executive Walter P Reuther when touring Ford’s automated engine plant in Cleveland, Ohio. An un named executive said, “You know, not one of these machines pays union dues”. Reuther’s response was “and they don’t buy new Ford cars either”. Businesses cannot standstill. They have to develop new technologies and drive effectiveness, but we must always remember people buy goods and services and if we take away their ability to earn, eventually demand will fail. Striking a balance is always difficult.

  5. Nice article Chris. It was all the more interesting to read as i have just enrolled myself for Lean Sigma green belt with the intention i get the opportunity to apply lean principles across our organization.

  6. Dear all,

    These observations are quite true.

    However, there is also another -later- example of lean implementation to be shared within GM, which took place in the European Operations after the fall of East German wall.
    The autoworkers of Eisenach Wartburg plant were familiar with building cars, but had to learn manufacturing after East German market opened to the the west, anyway. And -different than the American workers directed by UAW- the Eisach automobile workers were eager to adopt the new lean way.
    As experiment, GM sent a dozen of engineering (!) executives to develop GM GMS based on TPS. This is perhaps an important difference to the financially motivated economic executes form GMNA.
    The „Eisenach standard“ was documented in written and later rolled out in Europe. Of course, a written standard may serve as basis for CIP., which happened.
    When I visited many North American GM pants (incl. NUMMI), a few years later (1999/2000) the plant managers referred to the „Eisenach book“ as the GM lean process.

    The difference to the initial attempt to introduce lean in the two NAO plants are, just like Christoph pointed out, open and eager-to-learn employees and executives, who are interested in the technical details.

    Today, I teach engineering students that „Lean is an attitude“ or a mind set focusing on the (next) customer, not a collection of methods or tools.

    Best Regards

    Peter

  7. Hi Peter, I did not know about the GM “Eisenach Book”. Would be interested to have a look, but couldn’t find infos online. GM did indeed have better implementations later on, although to this day I think the YEs-men management culture has not really changed. Maybe it also helped that Eisenach in Germany was far, far away from headquarters, and without good airport connection?

  8. In 2007 I asked a GM coordinator (while we worked at NUMMI) why, after all the years spent in bed with Toyota, didn’t GM get it (TPS).
    His take was all the GM coordinators over the years were too dispersed across GM after their three years spent at NUMMI. His feeling was if all NUMMI trained GM managers were put into one plant, it (TPS) would’ve taken hold. The proof that it worked and was worth adopting would’ve convinced all GM employees TPS or Lean was valid for GM.
    We will never know if that was true, but the Saturn plant in Springfield, TN, was supposed to be a more earnest attempt at Lean than what was attempted in Van Nuys and was based on NUMMI. GM ended up turning Saturn into GM and ultimately closed it.
    There are many ex NUMMI and former NUMMI/GM coordinators on Linkedin who can give you their angle on the hits and misses of NUMMI.

  9. Christoph, wonderful article. Well articulated to focus on people & culture and not on tools & authority. It would be a good idea to add ( though hypothetical), what GM could have done differently to revive those two plants.

  10. I really enjoyed your thoughts on General Motor’s failed attempt at integrating the lean strategies they learned from their joint venture with Toyota. They squandered a great opportunity from Toyota, especially when they were only tasked with applying the lean strategies they learned to the rest of their company. I agree that their plan of turning their plants against each other, and penalty of termination for the losing plant and a 25% cut for the winning plant, was an awful approach to take. I believe in order to implement lean successfully, a company must first invest time and resources into a culture change for the whole organization. GM would have benefited greatly from a management and staff that were welcome to the idea of lean, and would have most likely seen success in both factories if this were the case.

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