Many were outraged when it was revealed earlier this year that GM had decided back in 2005 not to spend about a dollar per car to change an ignition switch that eventually was linked to the deaths of 13 people. What's equally outrageous, in my view, is how little GM's CEO, Mary Barra, knew about this problem. Barra, to be fair, is new to her job and had no role in the ignition-switch problem. But when she was presented with a number of facts about the long history of ignition-switch failures while testifying before Congress, she seemed unaware of them. And when asked why it took GM 10 years to even acknowledge the defect, she had no answer.
How could it be that the chief executive officer of a major corporation knew little about a decade-long problem that ultimately led GM to recall 2.6 million cars, resulted in at least 55 lawsuits against the company and will cost several billion dollars in fines and settlements? How could this icon of U.S. industry allow the ignition-switch problem to fester for a decade without recalling the faulty vehicles and without notifying federal authorities (as required) and the public?
The answer seems to lie in the company's culture. For decades, GM was plagued with warring fiefdoms, so it wasn't in one's interest to surface problems in front of your colleagues. And even when problems were brought to senior managers' attention, action was often impeded by poor communications between GM units. As crisis-management expert Gerry Meyers puts it, "In any big organization, there's an effort by lower-level management to insulate upper- level management. And the more layers there are, the less [likely] that a very serious matter can get to the top."
GM's problems were hardly unique. From the 1980 until the Great Recession, the Big Three became arrogant, bloated in the middle and top, unwilling to learn from competitors, and increasingly disconnected from what car buyers wanted.
But there's a very positive side to this story, and it comes from Ford. In 2006, Alan Mulally was hired away from Boeing to be Ford's CEO. Ford veterans were amazed; some were mystified. After all, Mulally wasn't a "car guy" -- he'd spent his entire career working in the aircraft industry. True, Mulally wasn't an expert in car design and mechanics, but he knew how to create an open, candid corporate culture, which was exactly what Ford needed.
One of Mulally's early moves was to initiate a weekly Business Plan Review, where Ford's senior executives meet to review the previous week's performance numbers. From the start, Mulally required openness. His mantra was, "I can't manage a secret!" He repeated it continually. Everyone at these meetings was expected to discuss current and anticipated problems along with their plans to address them.
After a few of these meetings, someone brought up a significant challenge. Mulally said, "So-and-so has a problem. He's not the problem. Who can help him with that?" Soon, everyone got the message: Your responsibility is to the team and the company; you're expected to be open. Nobody is criticized for having a problem; you're only in trouble if you don't raise the problem early or if you have no ideas for solving it.
These meetings, and the message they sent around the company, have been a major reason for Ford's success under Mulally. The company, which lost over $14 billion in Mulally's first year, has been solidly in the black for years, with strong customer satisfaction scores to boot. And Mulally has received multiple awards for his leadership, including being named 2011 CEO of the Year by Chief Executive magazine.
Colin Powell once said, "The day the soldiers stop bringing you their problems is the day you stopped leading them." Alan Mulally says, "I can't manage a secret." Different words, same sentiment. Effective leaders foster a climate that invites and rewards openness and candor. What are you doing to create such a climate?
