What led to General Motors' decline? Long regarded as one of the best managed and most successful firms in the world, its share of the US market fell from 62.6 to 19.8 percent between 1980 and 2009, and in 2009 the firm went bankrupt.
Toyota's practices were rooted in ...effective relational contracts-- ...based on subjective measures of performance ...enforced by the shadow of the future.
The authors argue that the conventional explanations for GM's decline are seriously incomplete...and make the case that one of the reasons that GM began to struggle was because rival Toyota's practices were rooted in the widespread deployment of effective relational contracts-- agreements based on subjective measures of performance that could neither be fully specified beforehand nor verified after the fact and that were thus enforced by the shadow of the future.
GM's history, organizational structure, and managerial practices made it very difficult to maintain these kinds of agreements either within the firm or between the firm and its suppliers.
...Two aspects of GM's experience seem common to a wide range of firms.
First, past success often led to extended periods of denial: Indeed a pattern of denial following extended success appears to be a worldwide phenomenon.
Second, many large American manufacturers had difficulty adopting the bundle of practices pioneered by firms like Toyota.
See a companion piece, also referencing GM in Deb's comments in Change Management Resources ScoopIt newsletter: