Mary T. Barra, the automaker’s new chief executive, has ordered a rare public apology and started an internal inquiry.Credit Paul Sancya/Associated Press
GM has just emerged from the worst chapter in its history–bankruptcy– and is on the road back to profitability as the world’s second largest automaker behind only Toyota Motor Company. It has been an embattled half decade as the biggest of the Big Three who begged Congress for loans only to have to be baled out by TARP in order to keep its factories running and its massive dealer body in business. At one point, GM, in the 1960s, had over 50% of the U.S. auto market. Now it is just under 20% with competitive inroads by Ford and Chrysler, but probably counting its lucky stars it’s still in business.
Now it faces another crisis. And coincidentally, just as it’s first woman CEO, Mary Barra, a 30-year GM employee who is a trained engineer, ascended to the top spot, the only woman ever to head an auto company.
Evidently, according to a chronology of events that the company submitted to the government, G.M. officials were aware as far back as 2004 that keys in ignitions could be jostled and cause engines to shut off, deactivating air bags. The chronology also shows that unnamed employees at the company knew at various times of frontal-impact crashes linked to ignition failures. To date, 13 deaths have been linked to the faulty ignition failures mostly in Cobalt and Pontiac G5 sedans. A massive recall is now underway to fix the problem.
Perhaps most disturbing was that G.M. officials had known for a decade that the switches could fail and cut off engine power and electrical systems in the cars, disabling their air bags and leaving occupants vulnerable to serious injury and death.
One can only ask, Why was this problem concealed for so long and why weren’t senior management executives informed. Ms. Barra and others empahtically say they weren’t. Why not?
One of the challenges of large companies is communication. Large companies are social networks like anything else. The question is, How are problems communicated to the right people and resolved? This is called in network science short path communication. That is where nodes (people) have links (relationships) to other people in the organization who have the expertise or information to resolve the problem or issue. GM, it appears, had no short path communication links to resolve this issue or raise it to the appropriate levels.
Charles Duhigg, in his best-selling book, The Power of Habit-Why We Do What We Do in Life and Business, talks about the habits of successful organizations. He focuses on what he calls “keystone habits” or the habits that matter most to companies. In it, he chronicles the almost obsessive habit of Alcoa to its safety record under its former CEO Paul O’Neill, who went on to be Secretary of the Treasury.
O’Neill focused laser-like on Alcoa safety. He took one the largest, stodgiest, and potentially most dangerous companies into a profit machine and a bastion of safety. He figured if he could focus on safety, the results would ripple through the rest of the company and return it to profitability and greatness. He knew he couldn’t “order” people to be safe, he had to organize and change the company culture to value it and treat it as a habit–albeit a mighty important one. As a result, safety became a mantra, a compulsion, a “keystone habit” that O’Neill believed could influence how people work, eat, play, live, spend, and communicate.
He focused on employee injuries. He instituted an automatic routine so that any time someone was injured, the unit president had to report it to O’Neill within 24 hours and present a plan for making sure the injury never happened again. The incentive was that the only people who got promoted were those who embraced the system. He made it a real deal, a real accountability that had consequences.
What happened? Well, O’Neill had to break some eggs to make the omelettes but the company changed its habits, not only safety, but a bias for action for a whole suite of bad habits. After a decade of these habit-changing routines, Alcoa’s stock price had risen more than 200 percent.
Clearly, GM has its challenges in overcoming this recent crisis. The path forward needs to establish better and faster channels of communication regarding critical issues, a laser-like focus on keystone habits, and a senior management culture that insists on being informed.
This may be the most important management lesson for GM and Ms. Barra on the comeback road for an iconic company and symbol of U.S. dominance in the automobile industry.
Here’s Bill Vlasic’s article in full: http://www.nytimes.com/2014/03/08/business/recall-at-gm-is-early-trial-for-new-chief.html?ref=todayspaper&_r=0