NOTES: MANAGEMENT PRACTICES, RELATIONAL CONTRACTS, AND THE DECLINE OF

GENERAL MOTORS BY S. HELPER AND R. HENDERSON

- GM market share fell from 46 to 20% and the firm went bankrupt
- Parsing alternative explanation for the decline of GM
- Is that decades of overly generous union contracts put it at an overwhelming cost
disadvantage
- Legacy costs
- Poor quality and poor design
- Appears to have been significantly less sproductive than its rivals in nearly every
aspect of its operations
- Direct laour costs were only 10% of total costs at GM, while purchased parts
were 70%
- One stream of work argues that these problems are failures of perception and
motivation
- Comparing managerial practice sat toyota and GM
- Automotive assembly
- Supply chain management
- Product design and development
- Why did GM struggle to adopt toyotas management practices?
- Took time to understand exactly what toyota was doing and to attempt the full
bundle of practices necessary to successfully imitate its japanese rivals
- Had great difficulty building the relational contracts on which these practces
relied
- Conclusions and implications
- We have suggested that GM first sharply declined and then failed for three
reasons
- First, it appears that GM’s enormous success lef it to deny the threat
posed by foreign comeptition for over a decade
- Second, even after Gm recognized that its once-secure position was
under threat, it took some time for the firm to understand the nature of the
cluster of techniques that drove japanese success
- Third, these techniques could ot be implemented without the
simultaneous development of effective relational contracts