Tuesday, February 23, 2010

GM and Fritz Henderson

Alex Taylor of Fortune reports that GM is paying ex-CEO Fritz Henderson $59,090 per month for 20 hours of consulting work on international operations. I don't doubt that Henderson may have institutional knowledge that the firm wants to tap, but is this really worth $3,000 per hour? Wow...

9 comments:

Luke Bornheimer said...

Taking a more-modern, alternative approach to their situation, the company could have opted to pay $59,090 out in portions to the best crowd-sourced ideas and proposals using a social media.

May seem slightly outlandish, but for a company in as much trouble as GM, it might just work.

Thoughts?

Tim Berglund said...

Fascinating idea, Luke! I'm disappointed I didn't think of it myself. :)

The software to aggregate crowdsourced ideas is easy enough to conceive (could be an email address, could be a wiki with registration and an audit trail), but thinking seriously about this, how would GM measure the winning ideas? I doubt there's much measurement going on of Henderson's consulting output, but for crowdsourcing to work, GM would have to have some objective means of determining winning ideas.

Or perhaps I am fetishizing measurement a little bit too much here. Maybe GM executives could just make judgments about winning ideas and award prizes on that basis, sort of like they are with their expensive consultant. As long a participants had a sense of procedural justice in the system, a less-objective rubric could work.

All of which might be gratuitous over-analysis, but like I said, I like the idea!

Luke Bornheimer said...

Good point, Tim. Awards based on crowd-sourcing might be hard to keep track of, although there are some sites that allow users to brainstorm ideas, design prototypes, and plan out marketing and distribution strategies earning money all the while.

Perhaps another approach would be a virtual or viral contest, using YouTube as a "stage" to present your strategies and ideas to the company. This past week, our class competed in the Target Case Competition, which awards $4000 in total to the top 2 groups...couldn't this be an effect model to turn viral?

Regret said...

This is chump change to pay someone who can help the company avoid very costly mistakes and figure out how to dig us out of the hole we're in (the taxpayers, after all, are the shareholders of GM). If we are willing to piss away billions of dollars on thousands of pork barrel projects in the name of "stimulating" the economy, I don't see anything wrong with spending a few hundred thousand a year on someone who can actually help save the taxpayers some real money by helping GM.

Luke Bornheimer said...

Regret, I agree that the investment is small in terms of its importance, but isn't it slightly ironic to pay the CEO who got you into the mess to get you out of the mess?

To your point of taxpayers being shareholders, this would seem to support my idea of crowd-sourcing the consulting to the public, wouldn't it?

Also, the site I discussed earlier was http://quirky.com - Perhaps GM could use a best practices-method to choose a crowd-sourcing viral effort that offers legitimate cause and the best ideas which can be cultivated from millions.

Thoughts?

Tim Berglund said...

Luke, I like the YouTube audition idea. It still exposes the board to a broad array of ideas, but more closely parallels the normal communication patterns the board would use (e.g., listening to a person or small group presenting an idea verbally with visual aids).

It's interesting to think about how the economics of that scenario differ from editing a wiki page. It's a lot harder to put together a video like that then it is to dash off a paragraph in a web form. Would this have the beneficial effect of limiting replies only to serious contenders with real ideas, or would it impose such a barrier to entry that good, small suggestions would be missed?

I realize this has descended into complete navel-gazing here, but I wonder if this link of thinking would make an appropriate paper for an MBA student at any point. Serious consideration of the uses (and uselessnesses) of social media and its economics is something the world does not yet have enough of. There's a sweet spot to be had between ignoring it and worshipping it. It seems like that's where you're aiming.

Regret said...

Luke, regarding the irony...

Henderson wasn't CEO when GM got into the mess. While he was part of the management team, he was appointed CEO by Obama.

From Wikipedia: Frederick A. "Fritz" Henderson was President and Chief Executive Officer of General Motors. Prior to his appointment as CEO on March 31, 2009, Henderson was the Vice President of General Motors and has been with the company since 1984. Frederick Henderson resigned as the CEO of General Motors on December 1, 2009. He replaced Rick Wagoner as CEO of GM when Wagoner stepped down at the request of President Barack Obama in relation to the General Motors Chapter 11 reorganization after serving in that position for eight years. Henderson assumed the new position on March 31, 2009. Welcoming the appointment, Wagoner said: “Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM’ers worldwide to succeed.”

Regret said...

Luke - regarding crowd-sourcing as a way to determine solutions...

I don't think the difficulties that GM and other old U.S. manufacturers face require creative solutions. The solutions are somewhat obvious - it's implementing the solutions that's difficult because of the political situation. The ability of unions and corporations to successfully lobby our elected representatives to create laws that protect their particular interests pollutes the competitive market environment which would otherwise solve these problems pretty quickly.

If crowd-sourced ideas can fix the political system so voters see how it's really working against them, I'm all for it!

Tim Berglund said...

Regret, I was having fun ruminating uselessly on the fine points of social media! Stop with your simple-but-inarguably-correct assessments of the situation! ;)