Dear Ms. Barra,
Over the last several weeks and months, you’ve been immersed in the ignition-switch fiasco. You’ve had to deal with Congressional and internal investigations, lawsuits, vehicle recall fixes, and associated reputational damage.
As you work through these problems, you’ve said you’re working to change the culture at GM, and undoubtedly have your top lieutenants advising you on how best to do that. Yes, it may seem like changing the culture at an organization of GM’s size will be a painfully slow and difficult process, but it can be done more quickly.
I’d like to offer my views on how that can be accomplished.
First, let me compliment you on already taking a number of important steps. You’ve acknowledged that the way GM operates must change. That’s critical, as we know cultural change is driven by the CEO—and it has to be. You’ve also seen to the departure of at least 15 employees who shared some level of responsibility for the failure. With the scope and depth of the problems you face, that also is critical. I’ve called that “throwing a body on the fire,” though I now prefer a colleague’s phrase, “voting the executive off the island.” Such action sends a message that resonates in the far reaches an organization—that things are going to be different from now on.
Certainly, you want your company to continue to be cost conscious. You’ve been through a very public and demoralizing bankruptcy, and attention needs to continue to be paid to the bottom line. But it’s all too clear that a short-term focus on profitability can be counterproductive, evidenced by what you’re dealing with now.
Underlying Root Causes
You have the Valukas report on the internal investigation of the ignition-switch problem at GM, and surely have read it cover to cover. Who knows, maybe you even sleep with it under your pillow. One observer called the report a “tale of nonchalance, ignorance, and incompetence.” You don’t seem to disagree: You have reportedly said the GM culture reflects a “pattern of incompetence and neglect.” While there may be elements of all of those factors, it’s clear other causal factors were more important. It’s really a tale of turning a blind eye to critical information, breakdowns in communication, senior officials not listening, and seeking to protect the company and executives from criticism.
Yes, you know about the “GM nod” and the “GM salute.” You also know about actions, or rather lack thereof, by committees, as well as lawyers’ instructions to write in Orwellian language and take no notes in meetings.
But there are telling cultural flaws emanating directly from the top of the organization. In recent testimony you said that company executives usually were isolated from debates regarding recalls—in order not to influence outcomes. I’m guessing that this protocol was established well before you took over the reins at GM, because it makes absolutely no sense. Decision making about a recall is so important to your company—from the standpoint not only of cost, but of customer safety and the company’s reputation—that the most senior executives, including the CEO, and also the board of directors, must be involved in making the final determinations.
What about the general counsel? I’m wondering why he wasn’t informed by lawyers in his department about the ignition-switch issue. Sure, he’s a busy guy, but I can’t help but wonder whether there was an insulation barrier purposefully erected. The extent to which information was prohibited from flowing upstream is among the matters you will have to deal with directly and forcefully.
Fixing these cultural problems will take bold action. It’s one thing to recognize and understand the core issues and another to know how to deal effectively with them. It’s true; you’re off to a pretty good start, having already:
Voted those directly responsible “off the island,” thereby sending a message about accountability, as well as integrity, communication, and doing the right thing;
Appointed a new vice president in charge of global product integrity, who will work closely with GM’s head of global vehicle safety, and another new VP overseeing engineering operations;”
You have taken bold action on safety problems, with your recalls now totaling a whopping 20 million vehicles.
Further, the idea of the board establishing a risk committee is a good one. All of this is a good start—but you know that more is needed, much more.
The Way Forward
Ms. Barra, you have begun to send the right message through your company, and that needs to continue. But you need to also combine the right messaging with overt actions, effective risk management, and communication processes. GM also needs to build supporting HR systems that drive motivation, assessment, and reward. Surely GM already has systems and protocols in place, but their effectiveness must be questioned. Let’s take a closer look.
Actions you take, inside the C-suite and out, will drive the mindset of the people in your organization. Your spoken and written words are important, but actions you take in dealing with difficult issues are critical. And it’s not just about the next recall decision. It’s about taking responsibility, doing the right thing for the company and its customers, and demanding the same of your direct reports. When a manager has the courage to speak up with damaging and potentially costly information, he or she must be acknowledged and rewarded—and those who don’t should be told the GM “island” cannot tolerate their presence.
Certainly GM has a risk-management process, and I wouldn’t be surprised if it’s referred to as an enterprise risk management process. Based on the risks that have now resulted in such damaging events, however, I can only wonder how effective, or rather ineffective, it is. Critical to effective risk management is not only identifying events that might cause major damage (as well as those representing opportunities), but also communicating key information up, down, and across the organization, and ensuring dots are connected and potential problems analyzed. With a company as large and far-flung as GM, it’s tough to do this well without using technology, and use of the right technology for your organization is critical. The company needs systems and processes that will enable and ensure the identification of risks, with associated communication to those who are positioned to analyze the potential likelihood and effects of those risks and make appropriate decisions. A good ERM process, of course, should also include clear lines of accountability and ongoing monitoring.
GM’s human resource processes need to ensure that the company’s values are embraced and demonstrated through performance objectives and measures, with assessments and rewards—in terms of salary adjustments and promotion opportunities—reflecting quantitative and qualitative appraisals of how well those values are demonstrated in performance. The qualities and mindset that you demand going forward must be built into these processes.
By the way, risks can be identified in a multitude of ways. If, for example, when you personally uncover a problem when driving a new vehicle—as former CEO Rick Wagoner found back in 2004 when his knee hit the ignition switch and the Chevy Cobalt he was testing lost all power—then for gosh sakes, you’ll want to act on it.
I’m sure you and your executive team will keep in mind that the next major challenge you face will likely have nothing to do with ignition switches, or even safety issues, but something entirely different that nonetheless will jeopardize the financial well being and reputation of the company.
Yes, Ms. Barra, you know what has gone wrong, and have begun to take preliminary steps to make it right. I hope and trust that you have the skill, capacity, and drive to follow up with the full range of actions needed to change your organization’s culture to what it needs to be. Certainly, the future success of GM depends on it.
Richard M. Steinberg