gm core values violations cost billions

8/11/2019 GM Core Values Violations Cost Billions

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Lack of Attention to Core Values Could Cost General Motors Billions

General Motors ignition switch problem has resulted in anywhere between 13 and 300

deathsdepending on which source proves to be accurateand a recall of more than 2.6

million vehicles. It took more than 11 years for the organization to take the necessary action

to fix the problem, according to a report issued by Anton Valukas, the former US Attorneycharged with investigating the issue.

The Valukas Report identifies aspects of the corporate culture that prevented the issue from

escalating to higher levels of management, including, an unwillingness to raise problems for

fear that it may delay the launch of a vehicle, a fear of reprisals against employees that

raise safety issues, a devotion to cost control that permeates the fabric of the whole

culture, and the lack of accountability referred to as the GM salute.

Core Values and Culture

An organizations core values should be the foundation of its culture. In the case of GM, it is

clear that the values embedded in the organization are not the same as their stated core

values. At the very least, they violated their stated values of safety, accountability,

quality, and customer focus. One could also argue that they violated a few more too.

The chart shows all GM's core values in the context of the Consilient Universal

Organizational Values Framework, highlighting which ones were explicitly violated in the

ignition switch scandal.


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Detroit Free Presscredits Kathryn Harrigan, professor of business leadership at Columbia

University, with saying that the old GM structure demonstrated to employees that safety

was not a top priority to management and that this culture migrated into the rebooted GM

after it obtained bankruptcy protection in 2009.

All too often we see companies that proudly display their core values, but make no effort atembedding them into the organizations. It is often a checklist item that a management

consultant is tasked to develop based on an off-site meeting of senior executivesand then

its back to business as usual. These tend to be organizations that do not understand the

importance of values, and how they can work for an organization. In some cases, it is just

an organization that has lost its way. But the very essence of a core value is that it is

prioritized over short-term profits.

Costs

The cost of the GM ignition switch saga is likely to exceed $3 billion, according to the

analysis conducted by Consilient Inc., and includes: the actual costs of the recall itself;

additional fines by regulatory authorities; class action lawsuits; and wrongful death suits.

We can also expect increased regulatory scrutiny of the companyand the industry as a

wholeand reputational damage to GM could have a far-reaching long-term impact on

market share and profitability.

The Valukas Report, while scathing and calling out incompetence and neglect, concludes

that the top three senior executives in the organization were not aware of the problem until

very recently, exonerating them from any guilt. Some have viewed this conclusion with

skepticism, maintaining that the investigation was funded by GM and there has been a long-standing relationship between Valukas and the firm.

US Senator Richard Blumenthal ison recordas saying that the report amounts to circling

the wagons to marshal a legal defense, and has labelled it as whitewashing.

It is likely the reputational damage to the firm will, at least in part, be determined by their

actions going forward. Newly appointed GM CEO, Mary Barra, has already announced

some sweeping changes in the safety management regime at GM, ushered 15 people out

of the door, and pledged to bring the company back on track. But there is the issue of

whether the company will shield itself behind its 2009 bankruptcy protection and distance

itself from pre-July 2009 claims, or whether it will waive its immunity.

If GM chooses to ignore earlier claims, the reputational damage could be severe, even

though it may have a sound legal footing for doing so, because customers will no longer

trust GM to do the right thing. This will demonstrate another set of values violations, namely,

integrity and respect in favor of wealth creation.
http://www.freep.com/article/20140603/BUSINESS0101/306030171/gm-recall-blamehttp://www.freep.com/article/20140603/BUSINESS0101/306030171/gm-recall-blamehttp://www.autoblog.com/2014/06/05/us-senator-general-motors-has-yet-to-come-clean/http://www.autoblog.com/2014/06/05/us-senator-general-motors-has-yet-to-come-clean/http://www.autoblog.com/2014/06/05/us-senator-general-motors-has-yet-to-come-clean/http://www.autoblog.com/2014/06/05/us-senator-general-motors-has-yet-to-come-clean/http://www.freep.com/article/20140603/BUSINESS0101/306030171/gm-recall-blame


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While the costs of embedding its core values into an organization with 220,000 employees

will be large, there would be huge benefits, namely, a reduced risk of adverse events such

as this one, improved organizational functioning, increased employee pride (coupled with

improved employee engagement and lower turnover) and increased customer commitment.

Over the long-term, it will pay for itself many times over, and may even act as a bulwarkagainst intense competition.

Author:Christie Christelis, CEO, Consilient Inc.

www.consilientinc.com
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gm core values violations cost billions

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