What GM’s recall teaches about corporate culture

It is the role of the CEO to create and communicate a company’s desired corporate culture. Mary T. Barra, who became General Motors’ CEO in January, appears to be leading a much-needed shift in GM’s culture by addressing a number of problems head-on.  On May 16, 2014, GM received the maximum legal penalty of $35 million for failing to properly report safety problems with defective ignition switches in millions of its small cars. The switches have had problems since 2001, yet only this February did GM start recalling 2.6 million cars with models linked to 13 deaths. 

GM has not explained why it took so many years to issue the recall for the defective switch. But GM’s new CEO points out that there was a culture that shunned the communication of “bad news” to superiors and prioritized cost-cutting first.  The acting National Highway Traffic Safety Administration Administrator, David Friedman noted GM’s culture problems stating: “The fact that GM took so long to report this defect says there was something very wrong with the company’s values.” He believes that employees from engineers to executives knew about the bad switch years ago. He observed that even company training materials discouraged employees from using words like “defect” or “dangerous” when reporting problems to supervisors.

Barra admitted: “Something went wrong with our process in this instance, and terrible things happened.”  Company culture changes slowly, and a culture like GM’s that has been in place for decades can inhibit change.  But leaders can change the culture over time through clear and consistent strategic communication, by broadcasting important examples and through their observable behaviors.

Mary Barra has clearly communicated that she will lead by putting customers and their safety first.  “Customer focus” as opposed to cost focus is now a key corporate value.  Furthermore, in a value-driven culture, organizations will attack problems right away with transparency and speed.  Barra’s handling of the massive recall with a take-charge, “safety and customer first” approach leads by example, even though the bottom line cost to GM will total in the billions.

Upward and downward strategic communication that is straightforward and honest contrasts with a dysfunctional culture where employees are afraid to give bad news.  Alan Mulally’s approach sets an example; Mulally, CEO of Ford since 2006, commended people who brought him bad news.  He said: “You can’t manage a secret. When you do [an honest business assessment] every week, you can’t hide.”

Individuals must be accountable, but organizational accountability must be examined as well. Sometimes an employee or group of employees is blamed for failures, and in GM’s case, internal and governmental investigations will probably identify culpable parties.  But the organizational systems and culture must also be examined.  A leader must ask: “Did our culture cause the undesired behavior?”  Then leaders can work consistently and patiently to address what needs to change.  As Lou Gerstner, former CEO of IBM, eloquently stated, “In the end, an organization is nothing more than the collective capacity of its people to create value.”

Stuart R. Levine

Stuart R. Levine

Founded in 1996, Stuart Levine & Associates LLC is an international strategic planning and leadership development company with focus on adding member value by strengthening corporate culture. SL&A ... Web: www.Stuartlevine.com Details