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Running rings around Saturn: A turnaround tale

MIT Sloan Professor Emeritus Arnoldo Hax knows what makes an organization work, and he knows how to turn it around when it doesn’t. Hax has been a major player in transforming companies—even the government of Chile. Generations of his students, scores of colleagues, and loyal readers of his seminal books on business strategy consider him a sort of enterprise whisperer.

So when MIT Sloan alumnus Richard “Skip” LeFauve took the helm of Saturn as CEO, he asked Hax, his former professor, to consult on strategy. “Skip looked at the corrosive relationship between the unions and management at GM, the financial losses, and the disgruntled workers and said, ‘We can’t run Saturn that way.’”

General Motors, says Hax, “was a huge organization, the largest in the country, but the company was beginning to go off the rails. The catalyst was the entrance into the market by Japanese carmakers. Toyota and Honda were creating cars that were affordable, dependable, attractive, and fuel-efficient. And those vehicles appealed to an enormous segment of the American market.”

GM’s solution was to develop the Saturn, the first compact car to be introduced into the American market. The Saturn operation was a kind of skunkworks for GM, a sub-brand with its own management and its own management style—a completely out-of-the-box and un-GM style.

Moving the skunkworks to the sticks

Location, LeFauve thought, was crucial—far enough away from Detroit that the enterprise could be truly independent from its parent company. He decided to move the entire operation to Spring Hill, Tennessee. “We wanted to invent a wonderful car,” Hax says, “but just as important, a wonderful culture, and we wanted to create a new management style, a new way to run a car company.”

Saturn’s counter-culture labor agreement gave the union workers a greater say in plant decisions. “We started out determined to avoid any us-against-them vibe. Our premise was that we all share the same bottom-line goals, so let’s work together to achieve them.” That human-centered approach extended to all areas of the company—internal and external. LeFauve created an image for Saturn as a customer-focused organization that put service and personal attention before profit. Perhaps most famously, he instituted Saturn’s groundbreaking “one-price, no haggle, no hassle” policy.

As it turned out, the approach was phenomenally successful. LeFauve was promoted out of Saturn, but a few short years later died of a heart attack. Eventually, GM took the renegade brand under its own wing and absorbed it into the larger company culture. “The rest,” Hax says ruefully, “is history.”

Read more about organizational turnarounds.

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