I’ve been watching the unfolding GM ignition switch problem with some interest. The reason for this is not only is it becoming a real human interest story, but also is providing real clues as to management responsibilities in any crisis.
GM’s CEO, Mary Barra testified to Congress on April 1 that she had not known about the ignition switch problems (that are suspected to have causes at least 13 deaths) until very recently. Yet, according to CNBC, documents recently released show that she knew about related problems as long ago as at least 2011.
Back in 2011, I wrote about how Toyota’s problems – it had then recently issued a recall for thousands of vehicles – had potentially destroyed its reputation for quality. More, I argued that its failures were rooted in three evils:
- The complete focus on rapid growth
- Previous lack of market focus
- The failure of management to promote a communicative organisation
Let’s look at each of these in turn, comparing them to GM’s current woes.
When the need for rapid growth becomes destructive
A few years ago, GM was one of America’s most respected companies. It was making large profits, distributing good dividends to shareholders, and selling cars by the truck load.
Then the financial crisis hit, and GM’s parlous financial state was thrown into the spotlight. It wasn’t making money from selling cars, but from administering the finance packages on its sales. GM needed a huge bailout from the US taxpayer simply to stay afloat.
Since then, it has chased profits again. Only this time, not only for its shareholders but also to repay the taxpayers it owed. That process has now been completed and it has begun distributing dividends again.
But in its race to create this nirvana, it has become clear that it has ignored quality and safety issues.
Years of innovative failure drive mistakes
Back in 2009, the Ivy Business School argued that GM’s problems had been building for some time. It blamed GM taking its eye of the ball and lacking ‘market focus’. It had reacted to competition (ironically the Ivy report cites Toyota) by producing ever increasing numbers of styles, colours, and models.
Its market focus was centred on providing more choice for consumers, but slowly its offerings suffered from a lack of innovation. While other manufacturers were giving customers better in car entertainment, integrated Sat Navs, and more, GM was giving a dozen shades of crimson.
Simply put, GM thought it knew its customers. By the time it realised it didn’t, it had a lot of catching up to do.
When management cuts off the communicative channel, disaster will strike
Perhaps the biggest of GM’s crimes is in its culture. If it’s true that Barra was told about problems with GM models all the way back in 2011, then it’s also clear that nothing was done about them.
When this happens, middle management begin to feel neglected, overlooked, and undervalued. GM’s middle managers are not alone here. A survey in 2011, showed that only 11% felt valued and prepared to face responsibilities. Failing operational transparency led to the Space Shuttle disaster (information about poor performance of sealers was never passed up the line, despite being flagged by middle managers).
Senior managers often ‘punish’ middle managers when they convey bad news. Eventually, middle managers stop communicating in efforts of self-protection.
The answer begins at the top
Whether Barra knew about the ignition problems at the time they occurred first is irrelevant. The solution to GM’s woes stands squarely at her feet. She must be held accountable, if not for the problems, for the way the company has failed to address them.
First, the company needs to remove itself from pushing for rapid growth. As Jack Welch once said, “to ‘maximise shareholder value’ is not a useful guide to executive action.”
Second, Barra must make it her aim to promote a more innovative culture with focus on the customer. There will be a period –possibly very long – where brand has to be rebuilt, and that can only be achieved by refocussing on the customer and creating a culture of transparency that goes hand–in-hand with a culture of innovation.
Developmental errors can only be addressed if they are communicated and listened to.
Third, it may be too late for Barra. She can claim she knew nothing of the problems, but the fact remains she has been part of the senior management of GM for a long time.
Fail to communicate, and you communicate your failure
As Colin Powell wrote, “The day the soldiers stop bringing you their problems is the day you stopped leading them. They have either lost confidence that you can help them or concluded that you do not care.”
Either way, when that happens, the CEO may have no other option but to fall on his or her sword.