Case Study Three:
Thanks for 24 Years of Service. Now Here's the Door!
Russ McDonald graduated from the university of Michigan with his MBA in 1969. He had numerous job offers but chose General Motors for several reasons. The automobile industry offered terrific career opportunities, and GM was the world's number one car manufacturer. Salaries at GM were among the highest in corporate America, and a job at GM provided unparalleled security. A white-collar job with GM was the closest anybody could come to permanent employment, outside of working for the federal government.
Russ began hi career at GM as a cost analyst at the company's Fisher Body division in Detroit. From there he proceeded through a long sequence of increased job responsibilities. By his 20th anniversary with the company he had risen to the position of assistant vice president of finance in the corporate treasury department. His salary was $124,000 a year, and, in a good year, he could expect a bonus of anywhere from $10,000 to $25,000.
But those bonuses had become increasingly rare, because GM's profitability had declined throughout the 1980s. Increased foreign competition, aggressive action by Ford and Chrysler, and GM's slow response to change has resulted in a serious erosion in the company's market position. When Russ joined the company, nearly one out of two new car sold in the United States was a GM product. By the late 1980s, that number was down to one in four. As a result, GM's management was taking drastic action to try to stop it's decline in market share. It was closing inefficient plants, reorganizing divisions, introducing new production technologies, and making huge cuts in it's staff. Tens of thousands of white-collar positions were eliminated. One of those was Russ McDonald's job. In the summer of 1993, less...