The Gm Acquisition of Eds: A Clash of Organizational Cultures

The GM Acquisition of EDS: A Clash of Organizational Cultures

Address the following components as related to GM & EDS:

What was the implied strategy for the GM & EDS acquisition? What was the realized strategy?

According to Gary Jacobson (2012), EDS merger was to bring order to General Motors chaotic and confusing maze of computer and telecommunications system that had no centralized system to link operations. In 1984, Smith and Perot entered the $2.6 billion marriage with great enthusiasm. The terms of the deal seemed modest since EDS would operate as an autonomous unit within G.M, with H. Ross Perot at the wheel and EDS executives transferring to GM according to The New York Times (1989). Also, G.M. Class E stock is created to preserve a separate identity for E.D.S. in the marketplace (Carlsson, n. d.). The deal was intended to strengthen GM and EDS, by forming a great company that would allow GM to better compete against it competitors.

However, no sooner than saying their vows problems started. GM executives quickly comprehend they never received any notification of the new EDS senior executives until their arrival. Perot had thought he would to be more involved in GM’s everyday business practices realizes he is placed on the public policy committee a position on the board of directors with the least influence (Carlsson, n. d.). The New York Times (1989) cites Doron Levin, saying everyone realizes this is the innovative mind of Smith reaching for radical solutions. The realized strategy is the two companies have cultures that differed greatly. Perot had built the culture of EDS to be marked by it customer-first focus (Jacobson, 2012). GM culture is described as internally flawed with unnecessary bureaucracy and moves too slowly to revitalize itself (McEachern, 2014). Perot insisted on independence and Smith demanded allegiance to GM’s code of honor.

What is the impact of divergent Corporate Culture during a merger?

The corporate culture of GM-EDS crashed; therefore, the company was unable to exploit all synergies successfully. The problem with mergers is the people are expected to work together to solve complex strategic and operative tasks; unfortunately, when there is a mismatch in corporate cultures and the organization culture becomes disruptive. When two companies come together have a different history and opposing styles of working with people; it did not take long for trouble to manifest itself. For example, virtually overnight, E.D.S. employees became G.M. employees; however, this is disturbing for GM employees since they had not been informed of the merger and now all of GM’s computer technicians were reporting to EDS managers. Perot’s employees highly respected him and the way he ran EDS. Perot was dedicated, had high ethical and moral standards, and he rewarded his employees well (Hitt, Ireland & Hoskisson, 2008). The New York Times (1989) reports, there was clashing about the employees pay for EDS between Smith and Perot. Perot thought he should decide EDS salaries, but Smith claimed the amounts were too high compared with General Motors' payment structure (The New York Times, 1989). GM data processors initiated several lawsuits due to the changes of their employment status (Hitt, Ireland, & Hoskisson, 2008). Jacobson (2012) mentions Todd Carlson, a former GM executive There was a great divide between the GM data processors and EDS personnel.

What is the impact of powerful leaders on corporations?

What should have happened when these two corporations came together, they should have been engines of change. Unfortunately, when having two influential leaders such as Smith and Perot, the impact creates a power struggle. Two powerful leaders understood leadership from two different angles. Smith was looking to the 21st century and wanted to move GM forward. Smith loved Perot’s aggressive entrepreneurial spirit, someone who would speak his mind and felt he could lend some vitality to GM’s stogy style (Carlsson, n. d.). Perot was lured by the challenge of lending his services to one of America’s most established companies (Carlsson, n. d.). Perot's entrepreneurial spirit comes from a culture of “can do” that stimulates growth and innovation that strives to meet customer’s demands. Smith wanted changes, but he knows GM must let go of the old stump. Smith changes to General Motors were more than any chairman since Alfred Sloan, but more was needed to move into the 21the century. Smith transforms business ventures at General Motors with the acquisitions of EDS and later Hughes Aircraft in 1985 a moved which Perot opposed (Hitt, Ireland & Hoskisson, 2008). There must be a shared vision to move the GM-EDS merger into the future, and the best way to do that is for leaders to connect with that vision.

What is the importance of "shared vision"?

A shared vision is what Smith and Perot should have been trying to create or accomplish for the GM-EDS organization. Having a shared vision creates a sense of cohesion when working on diverse activities. I do not believe Smith and Perot analyzed the culture of their businesses. As it seems GM bureaucracy had too many levels to go through, while Perot, believe in being leaner administration to adapt to changes in the market rapidly. Organizations should be guided by a set principles to achieve the 'shared vision' environment that can benefit an organization and transform 'the company' into ‘our company'; especially, when the top executives capture the collective wills and minds of their entire team. Creating a sense of purpose is essential for any organization wanting to build a ‘shared vision’ that works.

What are the hard issues, the soft issues associated with the merger?

The hard issues dealt with in this case are compensation and legislation. The acquiring company, GM told their data processors to accept lower pay, reduced benefits, and that their employment under EDS management could bring more risks to them (Carlsson, n. d.). GM’s employees were outraged because their pay would be decreasing, could this be fair or a matter of discrimination? The compensation structure should be uniform. The soft issues associated with the GM – EDS merger is that the employees were suffering different emotional syndromes ranging from disbelief, anger, fear, and sadness, this is common in mergers (Nargunde, 2013). Management should quickly identify these soft issues and deal with them early to eliminate significant psychological and legal repercussion. Cultural incompatibility can produce feelings of hostility