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Accelerating Change at GM

Critical HR hands steer the automaker at a time when direction and speed are vital.

June CoverIn April 2011, when a headhunter suggested that Cynthia Brinkley throw her hat in the ring for the top HR job at GM, Brinkley politely declined. She had been at AT&T for 23 years in increasingly senior roles. After rotating from president of AT&T Missouri into an HR assignment as senior vice president of talent development and chief diversity officer at AT&T's Dallas headquarters a little more than two years earlier, she was inclined to stay put.

Reporting to William Blase, AT&T's senior executive vice president of HR, she had moved quickly and effectively, helping AT&T earn kudos for its learning and development and diversity initiatives. "I was not interested at first," Brinkley says.

But as she mulled over the prospect, she became intrigued. "I came up to Detroit and spoke with CEO Dan Akerson," she recalls. "I was impressed with the commitment, the leadership team and the new direction of the company. They had just come out of bankruptcy, and it was interesting to me to consider the challenges of being involved with a company going through such a major transformation."

GM's leaders also liked what they saw. From a field of more than 200 people, Akerson named Brinkley GM's vice president, global human resources. She began on July 1, 2011.

Brinkley, 52, was walking into a tinderbox. Bankruptcy, like a diet, had enabled GM to shed the debilitating excess baggage dragging it down. With the new start, the question of whether the company could keep the weight off and quickly work its way into a viable, long-term competitor in the global auto sweepstakes was still unanswered. Critics worried that the company wasn't moving fast enough, wasn't cutting deep enough or would revert to bad habits.

HR professionals had been expected to play a significant role as change agents in crafting a new culture and attracting and developing talent, but they had been operating in low gear.

And, there were inevitable questions about Brinkley's selection. Why would GM choose an outsider with no automotive experience–and less than three years of HR experience–to head its complex global HR operations in what undeniably was the most risky time in its history?

To understand the thinking, and why Brinkley may or may not prove to be GM's Ms. Goodwrench, requires a look in the rearview mirror at GM's precarious journey during the past decade and the roles that HR professionals have played.

Bailout and Bankruptcy

In the fall of 2008, by most measures GM was a near total wreck, destined for liquidation or hostile takeover. There were too many employees, too much money tied up in benefits and legacy costs, too many brands, too many plants. The insularity of the management team in choosing insiders with automobile credentials and the bureaucracy that hobbled and delayed decision-making had all contributed to the disaster.

After the company failed to get private equity investors such as Bain Capital to bet on its ability to engineer a turnaround, the Obama administration and U.S. taxpayers came to the rescue with $50.7 billion. But efforts to stay afloat without relief from the courts proved futile, and on June 1, 2009, GM slipped into Chapter 11 bankruptcy.

Forty days later, on July 10, with the federal government owning 60.8 percent of the company, GM emerged from bankruptcy in fighting form. Much of the bloat and costly commitments had been eliminated. U.S. employment had been reduced from 91,000 to about 64,000, U.S. dealers were cut from 6,000 to 3,600, and brands were cut to four: Chevrolet, Cadillac, Buick and GMAC.

Then-CEO Fritz Henderson announced that "business as usual is over at GM." He spoke about creating a winning culture if GM were to slice costs to levels comparable to more-agile competitors while designing, building and selling "the best vehicles in the world." Layers of management would be removed, speeding up decision-making. U.S. executives would be downsized by 35 percent.

HR Takes a Hit

Kathleen Barclay, global vice president for HR at the time, was among the first executives to hit the road. She had been GM's top HR executive for a decade beginning in 1998 and had built the global HR team. Barclay began her career at GM in HR in 1978 and rose through the ranks. As the senior HR leader, she was the consummate HR professional: A true strategic business partner and a respected player in the C-suite, she served on key strategic committees and reported to CEO Rick Wagoner from June 2000 until Wagoner stepped aside in 2009.

Under Barclay's leadership, HR had been integral in implementing and determining the human capital policies that many now believe contributed mightily to GM's woes during the Wagoner era, resulting in losses of $85 billion. "There were about 20 people at the very top level overseeing a lot of bad decisions, and she was one," says Rob Kleinbaum, managing director of auto industry consulting firm Rak & Co. in Saline, Mich. "If you believed that the culture contributed to the problems, which most people did, she had to go." Kleinbaum worked for GM either as an employee or a consultant from 1983 until 2008.

Barclay and her team were viewed as part of the problem, agrees Noel Tichy, a management professor at the University of Michigan with expertise in the auto industry.

"Katy and the CEO went down together. They were not tough enough in taking on and breaking the bureaucracy. On her watch, Barclay should have been able to do what was finally accomplished through bankruptcy," Tichy says.

Barclay was not on the market long. In January 2010, she joined Kroger Co., the supermarket giant in Cincinnati, as senior vice president of human resources. She declined an interview for this article.

In response to criticism, Henderson publicly lauded Barclay. Yet soon after replacing her, Henderson unexpectedly resigned. Edward Whitacre, a GM board member, stepped up next, lasting until Sept. 1, 2010, when current CEO Dan Akerson took the wheel. Akerson is reflective of board members' recognition that outside blood was required to revitalize GM's stultified culture.

New Direction for HR

It might have seemed logical for Henderson to look within HR for a successor. Barclay had been grooming executives for such eventuality with global job rotations. But perceptions of the HR team and HR in general at the executive and board levels were not positive. Instead, in July 2009, he turned to insider Mary Barra. A fast-tracking executive with an engineering background, Barra was a GM lifer–dating back to 1980 when she was a General Motors Institute (Kettering University) co-op student at the Pontiac Motor Division. Barra had no HR experience.

"They brought her in because they saw that HR was a really big problem, an enabler of the poor culture, and that there was nobody a layer below in the culture who could fix things," Kleinbaum says. "So they reached out to a manufacturing executive who was trusted within the company. It would have been impossible to get a good outsider, given the condition of the company."

Barra understood the frustrations that line executives had experienced with HR–the bureaucracy, the roadblocks. She seemed like a change agent. She would learn the HR side quickly and take steps to make HR responsive to GM's business needs.

But HR had been hobbled in the bankruptcy and the time leading up to it. For example, GM University, the company's prime training operation, had been shuttered and is yet to re-open. Barra laid the groundwork for new HR metrics and a new appraisal system, and contracted out recruitment functions previously handled inside. She oversaw further cutbacks, restored some salary cuts and immersed herself in HR with a no-nonsense approach. But her days in HR were numbered.

On Nov. 17, 2010, with Akerson ensconced as CEO, GM pulled off the largest public offering in history, with the government's share dropping to about one-third. Soon after, Akerson decided that Barra could serve GM better in another role. "It was the worst application of talent I've ever seen," he told Automotive News in October. In January 2011, he moved Barra up, naming her senior vice president of global product development. She became the first woman to hold that position at a major U.S. automaker.

Brinkley Drives In

The search for Barra's replacement dragged on six months under the guidance of Chicago search firm DHR International.

"A lot of seasoned HR people who are real pros would have passed on this search," reflects Fred Foulkes, director of the Human Resources Policy Institute at Boston University. "It was a pretty risky proposition, a tough industry, and it wasn't like the future was certain."

Finally, in early June 2011, Brinkley, accepting the risks, signed on. She reports to Akerson, joining Barra on the 19-member Executive Operations Committee.

Brinkley knew she had to play catch-up to get HR into the fast lane, but before she could begin in earnest, she had to do due diligence. As an outsider, she needed a crash course. She read trade journals, news articles and history-focused accounts, including the controversial book by Bob Lutz, former GM vice chairman, Car Guys vs. Bean Counters: The Battle for the Soul of American Business (Portfolio/Penguin, 2011). And, leveraging superb communication skills, Brinkley went on the road, "trying to learn about the product life cycle and product development cycle" she says.

"What kinds of people do we need? What kind of organization do we need?" she asks. The reaching out continues as Brinkley conducts "diagonal slices" every other week or so, meeting with employees in groups ranging from 10 people to hundreds to find out what's on their minds.

Hybrid Leadership Strategy

Brinkley received a warm reception from her HR colleagues. "It is refreshing to get a fresh perspective from a new sector," says Tobin J. Williams, director of human resources, corporate staffs, who began his GM career in 1983. "She has the opportunity to transform how HR work is done inside our company. It's all about making sure we have a company that's not managing to the middle but to the top." Now, the philosophy has to be to settle for nothing less than excellence.

The HR organization includes a shared services "factory" that handles data and information flow. HR business partners serve with corporate staff, product lines and regions. Centers of expertise cover compensation and benefits, organizational capabilities and diversity. HR's global head count is 2,700; 22 percent work in the United States.

Brinkley's strength is as a proven executive who understands business and the role that HR must play in supporting the enterprise. "My mission is to make the business better," she says. She gives no quarter to those who question her HR pedigree. "I've never been anybody other than who I am," she says. With undergraduate degrees in journalism and political science, "I have a natural knack for HR but haven't been in the discipline throughout my career. I have a learning curve in HR, but while I'm learning, I have tremendous expertise on the HR team. So for me, a 'hybrid model' works best. I rely on my team to provide the expertise, then I make the decisions."

"Because of her inclusive leadership, her lack of HR experience is not really an issue," says Janice Uhlig, executive director of global compensation and benefits, who reports to Brinkley. "We have very seasoned HR professionals here. Her leadership team is made up mostly of HR people who grew up here in HR. She lets people run their business but sets priorities." Uhlig began her career at GM's Canadian headquarters in finance. She has been with the company in various capacities for more than 15 years.

Decisive Manager

Brinkley meets with her leadership team weekly and individually as needed. "She makes decisions quickly," Williams says. "If you have her trust, you put out your proposal and she goes with it; you don't need to have multi-iterations to convince her. She is open to feedback and perspective, but at the end of the day comfortable in moving forward."

Some HR professionals are still adjusting to her speed and urgency. "In our desire to change," Williams says, "we could be speeding down the road so fast that we miss the exit. People are not accustomed to moving too fast. Quick decision-making catches people by surprise."

Early on, Brinkley sought advice about HR operations. She brought in consultants from The Hackett Group. "We've taken a deep dive to learn how HR compares to other companies as to who is best in class," she says. "How effective are we at what we do? How are other companies structured? How are they staffed?"

Meanwhile, the news is encouraging: On Feb. 16, with the government still owning 26 percent of GM, the company reported record profits of $7.6 billion for 2011, up from $4.7 billion in 2010. On May 3, GM announced that it earned $1 billion in the first quarter, a 69 percent decline from the year-ago period, when it benefited from one-time gains from asset sales. Earnings in North America improved 30 percent during the quarter, but continued struggles in Europe dragged down overall results. Globally, GM still employs 205,000. In the United States, there are 26,000 salaried and 47,500 hourly union employees.

Brinkley's impact, influenced by the Hackett report, is beginning to be seen. She's overhauling a four-day training program to pound home new attitudes and values GM aspires to. The program, "Leading in Today's GM," will be a prerequisite for all managers. Through webcasts and presentations, she's helped communicate a new appraisal system with five rating tiers now being used for salaried employees. Employee engagement surveys, last done five years ago, will now be conducted annually. So far, she is keeping her top reports but is beginning to shuffle them around.

Addressing the Culture

Brinkley is determined to make HR and the entire GM workforce more business-oriented, seeing winning in the marketplace as the only acceptable outcome. Generating more and sustained car sales worldwide requires being more innovative, being more cost-effective and earning more market share than the competition. The message is clear: "If we do this, everyone does well; if we don't, everyone suffers."

In the new GM, leaders stay mindful of lessons from competitive Asian cultures. "There is a heightened appreciation for cost," Williams says. "People speak in terms of margins. Their culture is based on negotiation. We see a price here, we accept it. They see a price, they negotiate, trying to get it down as low as possible. GM, and that includes HR, needs to have that emerging nation mentality."

Changing the compensation mix has also accelerated change. Now, raises and bonuses are tied to business results. As of October, all salaried workers will move from traditional defined benefit plans with guaranteed payouts to 401(k)-type plans with contributions based on salaries and bonuses.

Still, "Unless you have a magic wand, changing culture is easier said than done," Brinkley observes.

"The caution is not to fall in the same traps," says Bruce Belzowski, assistant research scientist at the University of Michigan Transportation Research Institute. GM has taken on culture change before. There have been "project-of-the-month interventions, but each time people don't change. They sit back and wait it out. This time may be different."

Historically, HR has been viewed as less of a strategic partner and as more transactional, Williams says. Now, "We have to bring value to the business by being agile and nimble, by executing or implementing systems that help reduce structural costs and increase margins."

Brinkley says, "HR people need to be able to connect their work to the business. If it doesn't drive the business, then why are you doing it? You need to know what margins mean, what we're talking about when we speak about ROI [return on investment] and EBIT [earnings before interest and taxes]." She plans training in HR and throughout GM to teach business basics.

Observers Weigh In

Experts caution that Brinkley's long-term ability to change the culture and attract and maintain top talent will depend on how fast she moves to bring in her own team. "The directors that report to her are part of the problem," Kleinbaum says. "Unless she sweeps out that level, she will be continuously frustrated. It sounds harsh, but other companies like IBM and GE that did turnarounds did that."

Why? Leaving the incumbents in their jobs, reassigning them or offering them a drawn-out exit strategy increases odds against GM, Kleinbaum contends. "Moving people out in dribs and drabs, it's not clear they haven't made things worse. People are frightened for their jobs, unwilling to speak out. You need a culture where you can have debate and dissent and where things can be fixed."

The jury is out about whether Brinkley's lack of HR experience will hamper her. "There's a science about talent and succession, to name just two areas," Foulkes says. "If these disciplines are not in the toolkit, it will be a disadvantage."

Yet, there are many examples where non-HR executives move into top HR slots, either as career moves or as part of a job rotation. "It's not rocket science. It's not like designing complicated engines for new-age vehicles," Kleinbaum says.

Given GM's precarious position, this situation is different, Tichy says. "People with limited experience may land top HR jobs, but they've not been the head of HR driving transformation in a large company. HR is central to GM's ability to achieve its mission. It needs to revamp the organization for the global world of tomorrow. And I can't think of someone coming in with her background–and I know the HR fraternity well–that played a significant transformational role.

"This should not be on-the-job learning," he concludes.

Tichy, who helped transform HR at GE while working for the legendary Jack Welch, insists that a transformational HR leader needs "guts, acumen, leadership ability and support from the top." Though it's too early to judge, Brinkley seems to possess these qualities–and more. Tichy, however, hedges his bets: It "looks like a long shot," he says. "But she just may overcome her lack of background, build a new HR team and become the transformational leader that GM desperately needs."

Can she provide the octane that GM needs to run smoothly? Time will tell.

The author, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.

Web Extras

Article: Retooling GM’s Culture (University of Michigan)

Article: The New GM: A Report Card (Fortune)


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