Detroit-based General Motors has been in recent headlines, but for undesirable reasons.
GM CEO Mary Barra fielded questions from House and Senate committees earlier this week, as lawmakers probed why it took 10 years for the automaker to issue a recall for an ignition defect that has killed at least 13 people.
The hearings did not go smoothly, as many members of Congress grew frustrated with Ms. Barra's measured responses. "I am very troubled that you have not committed to ending this culture of secrecy at General Motors," Sen. Edward Markey (D-Mass.) told the CEO, according to a New York Times report.
On Thursday, GM confirmed it hired crisis management adviser, Jeff Eller, who helped handle the Bridgestone/Firestone tire defect case in 2000. The automaker has also enlisted the expertise of Kenneth Feinberg, a lawyer who specializes in compensation claims for victims of disasters, including Sept. 11.
The GM hearings have sparked discussions about the overall role of CEOs, but especially in times of crisis. Here are a few observations and thoughts.
1. The larger an organization gets, the less likely it is bad news will travel smoothly up the chain. The bad news may still reach the top, certainly, but not in a direct trajectory. This has a lot to do with the tension between subordinates and managers, and the former's goal to please their boss, according to a Wall Street Journal report. Everything the boss knows depends on what the employees reporting to him or her decide to share, and that dynamic applies all the way up the chain.
2. As a result, CEOs can learn of events when it is too late and destined to reach crisis-level proportions. There is little time left to correct mistakes. "You get blindsided when things deteriorate," Martin Zimmerman, former chief economist and group vice president at Ford Motor Co., told the WSJ.
3. It's tough to create a culture where the reporting of negative information is celebrated, but it is possible. It seems unnatural for an organization to commend bad news, but it can encourage people to come forward and solve a problem before it becomes a fatal disaster. The CEO of Ford told the WSJ about a time when an executive vice president told members at a high-level meeting that a technical issue delayed the launch of a new line of vehicles. The room went silent until the CEO, Alan Mulally, began clapping. His applause was meant to signal the news was welcome, even though it was not "warm and fuzzy," as he called it. (That EVP, Mark Fields, was later promoted to COO.)
4. The flow of information doesn't stop at the CEO. A CEO must be equally transparent with board members. More boldly put: "A CEO needs to be able to trust the board enough to give directors information they could ultimately use to fire him," Brengt Holmstrom, PhD, an economist at the Massachusetts Institute of Technology in Cambridge, told the WSJ.
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