GM to try to Inspect Quality In After Letting Experience Walk Out the Door

GM preps for new hires after buyouts

This is a particularly sad story. We often debate the proper role
of layoffs and headcount reductions in the Lean community. It’s
“conventional wisdom” perhaps in the Lean movement that we should
not let efficiency improvements that result from Lean methods lead
to layoffs. To do so would undercut the employee participation that
is required for Lean (and an organization) to be successful in the
long run.

Many consider it to be a different story if the business is
shrinking because of a declining market or declining market share -
case in point, General Motors. At a high level, GM’s leadership has
a responsibility to prevent decline — through product design,
marketing, and general management of the whole enterprise. Toyota
claims to have not laid off employees in 50 years. This is partly
due to continually being in a growth mode rather than constantly
shrinking.

This most recent article about GM paints a different picture. GM is
not just shrinking the workforce. They are throwing out older, more
expensive workers to be replaced by newer, less expensive ones.
This is not “Lean.” This is not in keeping with the “respect for
people” principle of the Toyota Production System.

Some 19,000 GM hourly employees are leaving as part of
the labor deal GM negotiated with the United Auto Workers last year
that allows the company to replace departing workers with
lower-paid new hires. Most are slated to leave July 1.

That’s 19,000 individuals with skills, knowledge, and experience.
If GM views them merely as a back and a set of hands, then shame on
GM. They might defend the decision by saying, “Someone paid $14 can
just as easily turn a wrench as somebody making twice as much.”
What about the accumulated experience and problem solving abilities
that should be there in the older employees? I guess that never was
valued much??

Don’t they realize the impact this mass exodus could have on
quality? Oh wait, they do:

The biggest challenge for GM may be accomplishing the massive
undertaking without compromising
the quality of its cars and trucks. Having begun to win new
respectability on the quality front, the automaker can’t afford
costly and reputation-marring mistakes on the factory floor, which
is a risk when there is
significant turnover.

“We are very intensely focused
on making sure our quality isn’t compromised,” said Joe
Mazzeo, GM’s executive director of manufacturing quality. “Our
customers don’t know this is going on, and they don’t care.”

As with many business decisions, such as outsourcing or
offshoring, the “savings” or “benefit” from such a move is easy to
calculate. It’s easy to calculate the savings from paying workers
$14/hour instead of $28/hour, even considering the buyouts and “go
away” payments to departing workers. But the COSTS are much less
easily quantified. What is the cost of poor quality? What is the
cost of poor morale, of either having to work alongside a new
junior employee who makes an embarrassing low wage or the low
morale of a new employee who resents the older employees who make
twice as much for the same job?

How does GM plan to maintain quality? Sure, the new employees will
be trained, they won’t just be thrown into jobs.

Also, in an unusual step, GM will carry out quality
checks of every vehicle headed off the factory floor during the
initial transition. Typically, vehicles are picked at random for
the checks.

The people at GM must have listened to Dr. Deming a little bit.
They MUST know that you can’t “inspect quality in” to a product.
The need to increase inspection adds cost and must be an
acknowledgment that they KNOW quality will suffer. They won’t be
able to catch all of the defects. The customer will notice. GM says
their customers don’t know this is going on. Um, maybe try to avoid
being quoted in a newspaper article about how this is happening.
Readers of this blog know it is happening. Tell your friends.

I doubt we’ll see loads of books and Harvard Business School
publications about the “General Motors Method” of throwing out
expensive employees and replacing them with cheaper ones. Or maybe
it’s already called the “Circuit
City Method.”
Ford has been doing the same thing, as have other auto
suppliers. It’s the standard playbook anymore, unless you’re Toyota
or a truly Lean company.

Step 1: Fire expensive employees. Step 2: Hire cheaper ones. Step
3: Profit. Oh wait, both companies are still struggling.

Can the GM leaders be thrown out and replaced with newer, cheaper
executives?