Wednesday, October 8, 2014

1:57 PM

When General Motors announced the largest recall in the company’s history, the nation’s media turned to George Cook.

Executive professor and former auto
executive George Cook offers insights
into GM's massive auto recalls.
After fewer than three months on the job, General Motors CEO Mary Barra appeared before Congress to answer questions about the unfolding crisis centered around the largest safety recall in the automaker’s history. At the time of Barra’s testimony in April, nearly 5 million GM cars had been recalled due to safety issues associated with the ignition switch. To date, 16 deaths have been attributed to the design flaw.

Within days of the CEO’s apologetic first appearance on Capitol Hill, media outlets including CNN, Fox News, USA Today, and The Washington Post all reached out to Simon’s executive professor of business administration and marketing, George Cook. A former Ford Motor Company executive, Cook is well known for teaching the high value and important business ethics of proactive and transparent communication—particularly when an organization is in crisis.

As the GM crisis continued, Cook delivered the same message to national television audiences and newspaper readers as he does to the students in his classroom. “It’s critically important that the communication culture within any organization, particularly one as large as GM, be completely open,” he says. “There is a strong hesitancy for employees to report when they see something is off kilter, because they don’t want to be reprimanded.” Cook also notes there is real fear on the part of some employees that they will lose their jobs if things like safety issues are brought to light. “Pushing up good news is fine,” he says. “Pushing up bad news has some risk.”

It seems GM learned its own record-breaking lesson when its number of recalled vehicles swelled to 26 million in early July. “One of the concerns is that this massive recall with GM would damage everything from their reputation to their revenue and market share,” Cook says. “Now the danger is the recalls going all the way up to the most current model year. If they keep pushing recalls for the 2008–2012 model years, I think you’re going to see some problems—problems that could take their toll on consumer confidence and customer loyalty, and even weaken the market in general.”


video

George Cook discusses General Motors on CNN Money.


Even if the auto market stays strong, Cook says, a big issue may dog Mary Barra and General Motors. “The big question is why did they wait so long to report the safety issue? There was about an 11-year delay before GM announced the recall. Again, it’s that culture of blocking the upward communication channel and not letting top management know issues when they come up.” But Cook gives Mary Barra high marks for the changes she seems to be implementing in post-bankruptcy GM. “I think she’s got them on the right track,” he says. “She has certainly set the tone and message down through the organization. She is practically demanding that employees inform their managers of any safety issue and rewarding them if they do.”

Professor Cook says there are lessons GM can learn from other major recalls, such as those from the damage control model Toyota followed a few years ago, when many of its models experienced unintended acceleration, to businesses outside the automotive industry that faced their own crises. “Johnson & Johnson did two important things when it was discovered some bottles of Tylenol had been laced with cyanide,” he says. “They got in front of the issue by saying the problem was theirs until they found out differently. They also pulled millions of bottles off the shelves. Accept accountability and responsibility, but don’t overpromise and under-deliver. Just communicate what the problem is and what you’re going to do to fix it.”

Cook also points out that the Tylenol case resulted in an important market innovation: tamper-resistant bottles. “Good things can come from bad situations,” he says. “Barra has already appointed a chief safety officer who has a direct line of communication to her and the board of directors. You can bet the rest of the industry is doing what it can to stay out of the hot seat.”

On July 17, Mary Barra was back before Congress, this time with far fewer apologies. According to The New York Times, she made it clear that General Motors will not expand its compensation for victims and will not waive its protection from lawsuits that was gained in bankruptcy reorganization. But while legal protections may be in place, public opinion may not be so forgiving. “People talk about the old GM versus the new GM,” Cook says. “But that’s not really the case. They don’t really have a clean slate. The building in Detroit doesn’t say ‘Old GM’ or ‘New GM.’ It just says GM.”

Ultimately, Cook believes Barra is making all the right moves. “If nothing else major happens, this will be out of most people’s minds in less than a year,” he says.

By Jim Ver Steeg

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