GM’s Recall Problems and MnSCU’s Leadership Problem
By John W. Palmer

Stephen B. Young, Global Executive Director of the Caux Round Table concluded in his introduction of the July edition of “Pegusus”:

Leaders are needed to achieve good stakeholder relationships, not mere managers.

The focus of the July edition of “Pegusus” was the Report to Board of Directors of General Motors Company Regarding Ignition Switch Recalls issued on May 29th, 2014 by Anton R. Valukas of JENNER & BLOCK.

The Valukas report began with a section titled: GM’S LEADERSHIP, THE TONE AT THE TOP, AND GM CULTURE. In this opening section of the report, Mr. Valukas wrote:

As described elsewhere in this report, the slow pace of the Cobalt investigation and the emerging pattern of accidents potentially related to the safety defect were not escalated to the Company’s most senior executives who from time-to-time met with the Board. The Board of Directors was not informed of any problem posed by the Cobalt ignition switch until February 2014.

The key phrase in this statement is: “…The Board of Directors was not informed…”.

The safety defect associated with the Cobalt investigation was in an ignition switch. This defect has been associated with 32 deaths when Cobalts were involved in automobile crashes where proper deploying of the air bag would have saved lives.

The recent concerns of various Minnesota State Colleges and Universities (MnSCU) stakeholder groups in the performance of Chancellor Steven Rosenstone are not as serious a matter as the loss of lives but the setting of “The Tone at the Top” and the creation of normative practices that engender a lack of confidence in leadership have serious consequences related to the future effectiveness of any organization.

In the past year, the MnSCU Board of Trustees (BoT) were not informed about two very important matters. In the first instance, the Chancellor’s contract was renewed in secret. In the second instance, a $2 million consultant contract concerning the major initiative called “Charting the Future” was entered into without the BoT being informed. In June of this year, the BoT was informed of concerns regarding the Chancellor’s performance. In recent weeks the BoT has been acutely aware of problems in stakeholder relations.

How will the BoT respond to the problem? I hope the response will not be like GM’s where:

One witness described the GM phenomenon of avoiding responsibility as the “GM salute,” a crossing of the arms and pointing outward towards others, indicating that the responsibility belongs to someone else, not me.

At GM, it took a change in leadership to begin a process of changing the norms. That change in leadership required the engagement of the Board of Directors. It is to early in the process of change at GM to know if norms will in fact change, but it is not to late to see change in the behavior at the top. You don’t hear the new CEO of GM using semantics to minimize and employees are no longer being told not use certain words and to call a:

“Problem an Issue, Condition, or Matter”
“Safety = Has Potential Safety Implications”
“Defect = Does not Perform to Design”.

GM has a new CEO that is a straight talker. Here are a couple of examples of some of her straight talk:

“I… believe if you have a problem you better solve it. Because if you don’t solve it you won’t be here or the company won’t be here. ”
Mary Barra, NY Times: Jan 23, 2014

And in front of Congress:

From the concluding article in the July 2014 Pegusus written by Erik Sande:

The culture at GM appears to have been one completely lacking in effective leadership. In many cases, what leaders need to instill in their organizations, among other things, are trust and responsibility….

The absence of actual leadership, inspiring trust and accountability, the opposite of the diffusion of responsibility, was a plague within the GM structure. One can only hope that Mary Barra, the newly appointed CEO, will be able to change this culture for the better.

It is now time for the Board of Trustees to step up and establish trust and accountability to MnSCU’s stakeholders by recalling Chancellor Rosenstone and establishing high expectations for themselves and all their employees. Recalling might not be sufficient in the Rosenstone matter and it may take discontinuation of the model to establish trust and a shared sense of accountability to do what is right for Minnesota.

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