By, Stuart R. Levine
Published in, The Credit Union Times

“Literally, silence can kill,” said Transportation Secretary Anthony Foxx at a press conference on May 16, 2014, as he announced the maximum legal penalty of $35 million against General Motors.  The company failed to properly report safety problems with defective ignition switches in millions of its small cars. The switches linked to 13 deaths, had problems since 2001. Yet only this February did GM start recalling 2.6 million of the cars. Additionally, on May 20th, GM issued other new recalls, bringing this year’s total to 13.5 million vehicles, the highest in GM’s history.  GM is under investigation by the Securities and Exchange Commission, the Justice Department and U.S. Attorney’s Office in New York for the switch problem.

GM has not explained why it took 10 years to issue the recall for the defective switch; internal and external investigations are underway.  But analysts, government officials and even GM’s new CEO point to a dysfunctional culture that put cost cutting first and discouraged the communication of “bad news” to superiors. In fact, the acting National Highway Traffic Safety Administration Administrator, David Friedman, noted the culture problem stating: “That GM took so long to report this defect says there was something very wrong with the company’s values.”  He said that many GM employees, from engineers to executives, knew about the bad switch years ago. He identified the situation as part of a larger problem where GM’s training materials discouraged employees from using words like “defect” or “dangerous” when reporting problems to supervisors.

A good leader asks: “Did our culture cause the undesired behavior?”  Individuals must be held accountable for their actions and inactions, but organizational accountability must be examined as well.  Certain employees may directly be responsible for failures, but the organizational systems and culture may also be at fault, which warrants examination.

GM’s internal investigation, led by a respected former U.S. Attorney, as well as governmental investigations may find parties to blame.  Automotive industry analyst Maryann N. Keller explains, such investigations generally find culpable parties, but do not address if “there was a systemic problem within the company and whether people consciously or unconsciously avoided giving superiors bad news.”  She said that GM has long been known for hiring people who “individually were the best and brightest,” but the GM system rewarded conformity.  “One thing you never did is to give your boss bad news, because if he was sidetracked, you were side-tracked.”

Indeed, a leader’s job is to address and, when needed, change a division or company’s culture.  Mary T. Barra, who became GM’s CEO in January, appears to be attempting just that.  Barra recognized that the company made mistakes that allowed the defect to go unaddressed for years.   She admitted:  “Something went wrong with our process in this instance and terrible things happened.”  Barra contrasted the former GM culture, which weighed costs against improved safety, with the customer-centric culture that she is advancing.  On Bloomberg TV, Keller acknowledged that Barra is pushing a customer-focused, action-oriented culture as evidenced by her swift response in handling the massive recalls.

Company culture changes one behavior at a time and a culture like GM’s that has been in place for decades can take a long time to change.  But change occurs over time through leadership’s clear and consistent strategic communication, by broadcasting significant examples and actions both inside and outside the company.

Mary Barra has clearly communicated the “theme” of putting customers and their safety first. Furthermore, “customer focus” as opposed to cost focus is now a key corporate value.  Barra’s take-charge, “safety and customer first” focus will cost billions to GM’s bottom line, but move the culture in the direction it needs to go.

A healthy organizational culture promotes a clear and focused upward and downward information exchange. By commending people who brought him bad news, Alan Mulally, CEO of Ford since 2006, modeled this value-driven approach. He said: “You can’t manage a secret.  When you do [an honest assessment] every week, you can’t hide.”

Barra, as CEO, is spearheading a needed change in GM’s culture. Many senior executives mistakenly delegate the “soft stuff” to Human Resources.  But it is one of the most important jobs of the CEO.  As Lou Gerstner, IBM’s former CEO, advises: “I came to see … that culture isn’t just one aspect of the game – it is the game.  In the end, an organization is nothing more than the collective capacity of its people to create value.”