GM Takes On Business Alignment–And Wins

The IT challenges at General Motors have always been huge. The immense scale of the enterprise, the extreme autonomy of the business units (until recently, Buick, Cadillac and Oldsmobile weren’t just brands, they were baronies), the hijacking of the entire IT function by Ross Perot’s EDS in the early ’90s—all combined to create one giant hair ball of IT problems.

When Ralph Szygenda became GM’s first corporate CIO in 1996, EDS had just been spun off from GM, but it was still running all of the company’s systems. Consequently, GM had no IT staff of its own. “There weren’t any IT people to speak of; there was no IT leadership,” Szygenda recalls. “How do you transform that?”

His answer, which got quite a bit of publicity at the time, was to build an organizational matrix of IT managers unlike that found in any other company. Szygenda hired five divisional CIOs to correspond roughly to GM’s business divisions: North America; Europe; Asia-Pacific; Latin America, Africa and the Middle East; and finance. At the same time, he hired five process information officers (PIOs) to work horizontally in different specialities across all divisions around the world: product development, supply chain management, production, customer experience and business services (HR, legal and so on). These CIOs and PIOs came on board in 1997 to form the management organization of GM’s IT, formally known as Information Systems & Services (IS&S).

CIOs and PIOs work from divergent perspectives and have different reporting relationships. Each CIO reports not only to Szygenda but also to business heads; PIOs report to Szygenda alone. IT managers refer to “the matrix” or “the basket weave” to determine their relationship with one another and to explain their occasional clashes. (See “How the Matrix Works,” Page 92.)

This matrix, proven over time, has been a critical part of how IS&S took control of IT spending from EDS. During the past seven years, Szygenda’s team has lowered GM’s IT budget by $1 billion (25 percent). Where previously GM used 7,000 different information systems, there are now fewer than 3,500.

By setting up overlapping, intersecting responsibilities among his direct reports, Szygenda designed the matrix to create internal competition, believing that was how to improve processes. “CIOs are driving efficiency in their world and PIOs are driving efficiency horizontally,” says Cherri Musser, PIO for supply chain operations, who has twice been a CIO within IS&S and who was one of Szygenda’s first hires.

GM’s experience illustrates the impact an organizational structure can have on business. But before you start whipping up internal competition in a GM-style matrix, consider this: The effectiveness of the matrix rests as much on the managers who work within it as on their defined reporting relationships.

The Matrix in Action

The matrix works because it integrates different viewpoints for better, more thorough decisions, says Dan McNicholl, CIO for GM North America. To illustrate his frequent debates with PIOs such as Kirk Gutmann, who heads up global product development and global service delivery, McNicholl gives this example: “I might say, ’Kirk, what are the next areas I should be focusing on in my product development cycle? What tools should we be standardizing on? What architectures should we be using? What do you think are funding priorities?’” McNicholl balances Gutmann’s input with what he hears as a member of the North American Strategy Board, which includes business-side executives from the division. “If Kirk says, ’I think we ought to focus on A, B and C,’ I can say, ’Well, you know, I’ve heard [the exec committee] talk about A and C a lot, but B doesn’t get a lot of attention, so maybe that isn’t a priority,’” McNicholl explains.

Those who work within the matrix sometimes grumble about it. The matrix “doesn’t come without a price,” says Steve Hanna, PIO for business services and application solutions delivery. “Sometimes it takes longer to get to a decision—we circle around it for a while.” McNicholl, who unlike the PIOs has budgetary responsibility, says, “Every PIO thinks they’re the most important, [but] we can’t afford everything.” CIO-PIO disagreements get aired at the six-and-a-half-hour meetings Szygenda holds with his direct reports every Friday morning in a room high up in Detroit’s Renaissance Center office towers.

But the price seems worth paying. “It’s important to have creative tension,” says McNicholl. “Most companies don’t have that. They spend too much on IT, or fund he who yells loudest.” Hanna adds, “When you don’t have that cross-pollination [created by CIOs and PIOs], you lose that broader view.”

Indeed, IS&S’s matrix has been so successful that GM’s business side has adopted it—the ultimate compliment. In early 1998, CEO Rick Waggoner set up global process leaders in the business units who parallel IS&S’s PIOs—a case of IT leading the business side to alignment.

GM’s matrixes arguably have led the company to huge gains in manufacturing quality and productivity in recent years, although the public’s perception of GM vehicles remains skeptical. In May, J.D. Power and Associates released its “2003 Initial Quality Study,” viewed as a benchmark of new car quality. Although GM as a company rated only average, Cadillac, Buick and Mercury were among the top six makes, ahead of Toyota and Honda. (The top 11, in order, were Lexus, Cadillac, Infiniti, Acura, Buick, Mercury, Porsche, BMW, Toyota, Jaguar and Honda.) Szygenda argues that “GM is so close to Toyota and Honda, it’s a nonissue. We had a product problem in 1996. We don’t anymore.”

Many factors have contributed, but IT’s role in GM’s turnaround shouldn’t be underrated, says Kevin Prouty, automotive research director for GartnerG2, which analyzes vertical industry. “The IT backbone is what drives processes” at auto companies, he says. “The technology and business processes are so intertwined, you have to have someone in charge of processes.” That someone is Szygenda’s invention, the PIO.

The Matrix Evolves

Now Szygenda is adding another layer to the IS&S matrix in an effort to gain even greater efficiencies. One executive calls it “a third dimension.” Last April, Szygenda announced the creation of three virtual “factories” within IS&S:

• An IS factory, pulling together all IT executives and staff who maintain and run hardware and software, including software development and e-business systems.
• An operations factory, tying together IT people who are primarily concerned with manufacturing and supply chain operations.
• An enterprise business management factory, for internal processes such as contract management, purchasing and HR.

Each factory formed its own steering committee to look for ways to reengineer its processes. Although GM’s operations have improved in the past few years, there’s still a fair amount of fat, says McNicholl. “In one year, I was asked by PIOs to fund four different lessons-learned databases. It’s good to do that once, but three?” Responsibility for reining in eager database developers now falls to the new IS factory.

The factory overlay may sound like a confusing twist to an already complex structure, but it’s what GM needs, says Maryann Goebel, IS&S’s chief strategy officer, who now also heads up the enterprise business management factory. “As crazy as it sounds, [the factory concept] does help simplify things, to think of each activity falling within one of three factories,” she says. “The familiarity we [already] have with the matrix makes us ready for the next step.”

The Matrix Replicated?

Given the impact the matrix has had at one of the world’s largest companies, why haven’t more CIOs adopted a similar organizational arrangement? Szygenda has an answer: “The matrix bothers a lot of people.” It’s too complicated, too redundant. GM’s size and the overgrowth of IT systems prior to 1996 made it right for them but, says Szygenda, “You can’t take the same model across companies.”

Two big auto parts makers, Johnson Controls and Delphi, have adopted a form of GM’s matrix, but Delphi spun off from GM, and Johnson Controls is a big GM supplier. Prouty thinks the real reason matrix-style structures haven’t spread is that only a few executives can tolerate and make creative use of the tension they foster.

“The thing that’s unique at GM is that the people who work there [are able to] balance between collaboration and competitiveness,” Prouty says.

Szygenda says that ability was precisely what he was looking for in 1996 when he interviewed 300 candidates. “A lot of the 300 were great CIOs or consultants, but I didn’t think they could team” with others. Ultimately, he says, the effectiveness of any organizational structure comes down to the personal qualities of the executives, managers and employees who work within it.