I am ambivalent about whether the auto industry should receive the 25 billion dollars that they are begging and pleading for from the U.S. taxpayers. On the one hand, I realize that millions of jobs depend on the industry and that saving these jobs is not only a humane thing --- it also may help the country(and even the rest of the world) from sliding into a deeper recession in the long-term. On the other hand, I worry that it will be a waste because the industry has lost so much money and so many jobs in recent years that these firms are in a death spiral that is impossible to stop (GM alone lost 39 billion last quarter). I also believe it will be a waste because the leaders of these firms (at least GM, which I know best) are so backward and misguided that the thought of giving these bozos any of my tax money turns my stomach – which is pretty much the same point made by observers ranging from ultra-capitalist Mitt Romney to near-socialist documentary filmmaker Michael Moore. Recall that Moore made the famous film that attacked GM, Roger and Me.
I don’t claim to have comprehensive information about the industry, but I have had pretty regular interactions with GM in various capacities over the past 30 years. I completed my Ph.D in Michigan and had a fair amount of direct contact with GM managers as a student and a lot of indirect contact because my dissertation was on organizational death. GM closed a lot plants during that time, so I talked with many GM executives, mangers, and workers. I also have had numerous contacts since as a researcher and occasionally as a speaker at GM events over the past 25 years since I moved to California – for example, Jeff Pfeffer and I spent several days doing interviews at Saturn in Tennessee and with GM executives in Detroit to gather material for The Knowing-Doing Gap. I hesitate to speak out as I have contacts there who would not be happy to know that I am speaking my mind, but I feel compelled to do so because I feel that GM’s problems are best described as suicide rather than homicide (despite their executives’ claims to the contrary – they seemed to refuse to take any personal responsibility at all during the congressional hearings). And I feel that if we are going to give them billions of dollars, I should do my small part to identify some problems and potential solutions that may help a bit in this uphill struggle for survival.
I could list hundreds of management, cultural, and operational reasons why I believe that GM is such a flawed organization, but to me, a pair of root causes standout: Most of the senior executives -- and many of the managers -- are (1) clueless about what matters most and (2) suffer from a “no we can’t” mindset.
The culture and work practices at GM almost seem designed to create executives who are clueless about what kinds of cars people want to buy and what kind of experiences that car owners want to have -- and about a lot of other important things as well. The executives were criticized for being so insensitive and clueless that they flew corporate jets to Washington to beg for money;unfortunately, that is just the tip of a dangerous iceberg. For starters, my experience with GM is that – more so than any company I have dealt with – the norm in meetings is that the highest status person in the room does all or most of the talking. Plus, more so than any organization I have ever dealt with, employees are expected to express agreement with their bosses. Why didn’t anyone have the guts to tell the executives that taking a private plane to beg for a bailout was a bad idea? I suspect that it is just standard operating procedure: GM is a culture where subordinates are expected to shut-up and kiss-up when the boss is around. I can think of a few exceptions, one manager I’ve met recently in particular. But on the whole it is as if the system is designed to prevent the upward flow of information. At first, when I was in graduate school, I thought this was a personality characteristic of the first few GM executives I met. But then I started keeping track of what happened when managers and executives arrived and left meetings. To entertain myself as the top dog droned on, I would measure talking time. Regardless of the subject (and who had the greatest expertise in the room), the highest status person would blab away – and when he or she left the room, the next highest ranking person would then demonstrate GM’s blabbermouth pattern of leadership. Note I have been seen this pattern for almost 30 years at GM – the cars have changed but the yakking pattern has not.
Not only are managers and executives insulated from learning what goes in their company because they generally talk rather than listen, they are also insulated from experiencing what it is like to buy and own a car. GM has a perk for managers down to fairly low levels where all are given a GM car to drive – they rotate from one car to another. I am not sure of the exact details, but answers to the questions I’ve asked over the years suggest it goes something like this: the lowest level managers have to buy their own cars, the ones at somewhat higher levels get a new car to drive every six months or so but have to do some servicing, the managers who are somewhat higher-up get somewhat fancier cars and are freed from any servicing (gas is even put in the cars of some executives so they don’t have to go to the service station), and the highest level executives get a car and a driver.
In other words, this system effectively insulates people in management – especially those in senior management -- from experiencing what it is like to shop for, bargain for, purchase, service, and sell a car. They only get the driving experience. Well, except for the most senior executives, who don’t even get that experience -- they watch a person in the front seat drive a big car. Now, it is true, that the most senior executives do own GM cars for personal use, but it is my understanding that when a car is delivered to a senior executive, special attention is devoted to the car – even during the production process –to make sure the top brass aren’t exposed to a car with any flaws. Wouldn’t that be nice?
So there you have it, a system that seems designed to isolate executives from reality. They talk instead of listen and are protected from the experience of owning car. I might be exaggerating some, but not much. Whether the current crop of GM executives are fired or not, it seems to me that some major changes need to made, perhaps including:
1. A limit on the percentage of time that the highest status GM manager or executive can talk during a meeting. Perhaps 25% of the time is a realistic goal?
2. Only managers who know how to ask questions and to actually listen to people who have less formal power will be hired and promoted. Failure to demonstrate these skills will be grounds for dismissal.
3. GM managers – and especially top executives – will be required to buy, service, and drive their own cars. That way, they will experience what it means to own a car. Now, I feel badly for all the drivers who will lose their jobs at GM (although I am very curious to know how many executives have drivers – that is a place where I bet we can save a few million dollars in bail out money – and if they sell the private jets like Sara Palin did in Alaska, that is more millions).
There are good things and bad things about GM cars (My family has one,
along with three others as we have two teenagers who drive) – indeed, after
years of trailing the Japanese in quality, they have nearly caught-up. But only owning a GM car does not provide any
information about the competition. As such, if GM does insist on still buying cars for
all those executives and managers going forward, at least 50% of those cars
should be from competitors so that decision-makers can experience what it is
like to drive – and buy and service – a wide range of cars. I am sure that GM executives would be horrified
to have all those Toyotas and the like in their parking lot (an auto executive
once made my wife park her Nissan around the corner when we lived in Michigan,
as he was horrified when she parked it in front of his fancy house in Bloomfield Hills). But they might actually learn something.
Do I believe that that the current crop of executives could transform the GM culture to include these and other practices that will increase their awareness of what is going in their company and in the marketplace? No. It is partly because they are so entrenched. But it is also because I sometimes believe that the core competence of GM managers and executives is explaining why they are powerless to make sensible changes. It pains me to say this because the company has a higher percentage of nice people than most other big organizations (except perhaps for P&G), but the “No we can’t” mindset is something that pervades the place. And, unfortunately, when people believe that organizational change is impossible, it becomes a self-fulfilling prophecy.
If you watched the executives testify to congress the other day, their sense of powerlessness was hinted at in their refusal to take even a token amount of blame for their firms’ troubles – smart and empowered executives believe and talk like there is a link between their actions and performance, even when bad things happen and even when events are very hard to control (see this contrary example). But this “can’t do” mentality is pervasive. Consider the case of the free GM cars. This isn’t a new problem. Many other observers have commented on it before me. I commented about it very forcefully about to some GM managers a few years back. I argued that they needed to abolish the program because it caused the whole top of the company to be out of touch with the car ownership experience. They answered that GM couldn’t possibly get rid of the program because they had negotiated such a great tax deal with the state of Michigan (much better than Ford, they bragged) and because it was one of the few perks left for white collar employees. I was not very nice, I argued that this mentality was one of the reasons that the company was in trouble and would get in more trouble. They treated me like I was insane.
You could also see the “no we can’t mentality” in the answer GM gave about why they had to fly the private jet to Washington – “our rules require it for safety reasons.” Huh? I know lots of CEOs of big companies who fly commercial. And you may recall that when John McCain’s campaign was in trouble, he flew commercial for about a year – it seems to me that he was more at risk than some unrecognizable big guy from Detroit. Couldn’t they change the rules? I bet the board of directors of GM would be convinced by the argument “we need to get rid of these planes, we need the money and it looks terrible to congress.” I suspect that they are working on this change right now or at least considering it (Update: Looks like they are getting rid of them.). But, of course, they were so clueless and isolated that it never occurred to them that keeping and flying the private planes were a dumb idea.
Or consider another example -- a really big cause of their problems. GM has way too many brands. Toyota has, I think, just Toyota and Lexus. GM has – if I can remember them all – Pontiac, Chevy, Hummer, Saturn, GMC, Cadillac, and Buick – and I guess now Saab. There are so many GM models that buyers are bewildered by the differences and – especially among Chevy, Pontiac, and Buick – there is little if any distinct brand identity. I have asked multiple GM managers and executives why they don’t just get rid of most these, trimming back to say, Chevy, Saturn, and Cadillac. This not only would reduce brand confusion it would lead to many efficiencies in advertising, manufacturing, distribution and so on. They answer, of course, is “no we can’t.” My answer is that, with all due respect to the dealers, sticking to this business model has created a tragedy of the commons that is bringing everyone down.
In short, my view is that if GM can’t figure out ways to get their managers and executives to understand the experience of owning a car for the average person, if they can’t get rid of those jets, and if they can’t reduce the number of brands, and if they can’t make a host of other changes required to make them competitive, than my answer is “no, you can’t have our money.”
I don’t usually write such long blogs and don’t usually rant so much. But GM’s predicament just makes me sick. I saw the pain that people were experiencing in Flint in the early 1980s, the depressed workers and former managers, the ripple effects on businesses, and the helplessness. It is all much worse now. I don’t know if the U.S. auto industry can be saved. I hope it can and if we are spending 700 billion to bail out the banks, well, then perhaps another 25 billion is worth the risk. But I can’t see how things can change with the current bunch of clowns in charge. I know that changing the leaders and the culture may not be enough to save GM, but I also believe that without these changes, there is little if any hope at all. Getting rid of them and instituting an intense program of cultural and organizational change strikes me as the best way to save the company. Mitt Romney argued today in The New York Times that bankruptcy was the best path for GM and the others. Perhaps he is right, that creative destruction is only way out of this mess.
Am I being too harsh? Am I too biased? Do you have more and better ideas? Let me know.