As I write this, General Motors (GM) has announced its 49th through 54th recalls of the year, involving some 8.5 million vehicles. Overall, GM has recalled a staggering total of 28 million cars and trucks worldwide so far in 2014, or nearly the equivalent to all of its worldwide vehicle sales since 2011. And GM is letting it be known that yet still more recalls may be on the horizon.
Since I wrote my last Advisor on GM in April, significantly more information has been disclosed concerning the reasons why it took GM so long to issue a safety recall involving a defective ignition switch used on millions of its Cobalt, Saturn, and other low-end model cars, and which GM has now admitted resulted in the deaths and injuries of dozens of drivers, passengers, and pedestrians.
In early June, GM released a devastating 325-page report written by former US Attorney Anton R. Valukas detailing the findings of his internal investigation. The bottom line: Valukas found GM to be "incompetent and negligent" in how it handled the defective part and pointed directly to a company culture where "everyone had responsibility to fix the problem, [but where] nobody took responsibility" to actually fix it.
Valukas wrote that "throughout the decade that it took GM to recall the Cobalt, there was a lack of accountability, a lack of urgency, and a failure of company personnel charged with ensuring the safety of the company's vehicles to understand how GM's own cars were designed." There were, he said, "failures throughout the company -- including individual errors, poor management, byzantine committee structures, lack of training, and inadequate policies." In sum, the Valukas report describes a global corporate enterprise wracked by disorganized decision making, which in turn led to lethal risk mismanagement.
For instance, one of the inadequate policies GM had in place until recently that especially struck me was a list of 69 words that employees were instructed not to use (the list appears in a GM consent decree with the US National Highway Traffic Safety Administration [NHTSA], in which the company accepted the maximum US $35 million fine for failing to report a safety defect in a timely manner). I've run into this type of counterproductive policy several times in past enterprise risk assessment assignments (e.g., one must never say you have a "risk," only a "challenge" -- or better, an "opportunity for improvement"), but GM takes this nonsense to a whole new level.
For instance, working-level GM engineers attending training on how to document engineering issues that might be material to recalls were explicitly discouraged from using words like "safety" or "defect" or "problem" whenever describing their technical endeavors. Instead, engineers were urged to use such words or phrases as "has potential safety implications," "does not perform to design," and "issue, condition, matter," respectively. Other words that GM employees were to avoid included: always, bad, critical, dangerous, defective, failed, failure, flawed, never, and serious.
Interestingly, "risk" seemed to be a permitted word. I am guessing, but it wouldn't surprise me that the GM engineers had already figured out early in their careers to avoid using that word at all costs.
GM offered as a way of explanation that the reason for discouraging the 69 words was to ensure that only factual, non-emotional communication was presented when engineers discussed a "matter" that had "potential safety implications" that "did not perform to design." However, the company also conceded there were legal implications if an engineer used certain words: namely, if an engineer in GM wrote that a safety defect was found, by law, GM had an obligation to disclose it to the NHTSA within five working days.
In addition, indicating in writing that there was a safety defect might provide ammunition for any later lawsuit against GM for not disclosing a safety defect. GM engineers were told in their training that they needed to "understand that there really aren't any secrets in this company.... For anything you say or do, ask yourself how you would react if it was reported in a major newspaper." One thing apparently overlooked in the training, however, was how such instruction on what words were to be avoided in order to minimize the risk of having to recognize the need for a safety recall itself would look to major newspapers.
As Valukas makes clear in his report, the almost Orwellian (mis)use of the language of risk allowed GM engineers and managers to routinely ignore and/or dismiss the implications of safety defects by minimizing them as something inconsequential and immaterial. For instance, up until just a few weeks ago, GM considered a vehicle unexpectedly stalling while running (like entering a highway or entering a tight turn down a steep hill) as being merely a "customer inconvenience" and not a safety issue. By controlling the risk language used, GM constrained the types and levels of risk perceived or discussed; that is, GM effectively tailored the risk exposure to its liking and benefit.
The Valukas report has also led to the dismissal of 15 GM employees and the disciplining of five others, including several executives, albeit not the most senior executives of the company, who were all exonerated by the report. While CEO Mary Barra has said that she wants "to keep this painful experience in our collective memories" and has called for a cultural change at GM where safety is paramount, she has also indicated multiple times that she specifically blames the Cobalt ignition switch situation to be the result of poor decisions on the part of two mid-level engineers. This unfortunately mixes the messages sent to GM employees; that is, if it weren't for those two engineers, the company wouldn't be in the bad spot it is in now. However, the recall of 28 million vehicles (so far) undercuts Barra's contention that the issue was only systematic and not systemic. Barra's ambiguous messaging risks GM drifting quickly back to its bad old ways once the controversy begins to die down, which it inevitably will.
Time will reveal whether GM can truly change from being concerned more about its own risks to an enterprise that worries deeply about its customers' risks. The announcement the company made regarding its uncapped compensation plan for those who have suffered because of the recalls is a positive sign in that direction.
My suggestion is, if Barra really wants GM never to forget that it mixed up the two, then she needs not only to make sure every employee reads in its entirety the Valukas report, but every GM employee hired from now on reads it as well. Barra should also display one of the many crashed Cobalts that took the lives of one of its customers in GM's corporate lobby at its Renaissance Center in Detroit as a daily reminder of what happened to the lives of individuals when a safety defect was viewed as a mere customer inconvenience. That act would help make Barra's claim that she is leading the "new GM" to become the "industry leader in safety" more believable, instead of an organization that only grudgingly changes its operating behavior after the number of customer tombstones erected by defects in its products reaches a convincing total.
I welcome your comments about this ''Advisor'' and encourage you to send your insights on business technology strategies in general to me at rcharette@cutter.com.
— Robert N. Charette, Fellow, Cutter Consortium
