The Crisis Manager of the Year is the One You Never Hear About – But Don’t Tell Fortune Magazine.
Fortune Magazine selected General Motors CEO, Mary Barra, as the Crisis Manager of the Year. The reasoning behind her selection was her ability to ‘navigate one of the most difficult years imaginable’. Reading the article, there is no doubt that Barra has proven herself adept at managing Congress, and selecting the right experts to show – as the magazine mentions more than once “that she cares.” But as far as identifying and resolving a Business Crisis-Risk™, she and her team should not be held as the standard bearer for crisis management.
To give accolades to the very management team that could have prevented the recall, and resulting fatalities as early as 2006 demonstrates Fortune magazine’s lack of understanding of what makes a good crisis manager. A good crisis manager prevents the ‘crisis’ from cascading into a larger crisis, of which General Motors, its management team – which includes Barra – did a woefully poor job.
According to Barra’s testimony to congress, the initial defect was discovered in 2006 and could have resulted in a minimal recall and a small retooling expense. In 2006, however, General Motors was struggling financially and a decision was made not to have a recall, but to manage the problems and potential claims as they occurred. The Business Crisis Diagnostic Model™ (view image) labels this a ‘Difficult’ business crisis. Management has made a decision as to how they would mitigate that risk.
As the company continued to operate, claims and potential liability began to be reported to the company by its customers. The business crisis had expanded into a ‘Chronic’ crisis and multiple variables began to impact the severity of the crisis. In addition, the company was in financial difficulty and ultimately taken over by the US Government and labor unions in 2009.
At this point, General Motors entered the ‘Severe’ business crisis phase exhibited by a loss of control of the organization. If the recall issue was an example of the management’s team acumen, one has to wonder how many other decisions led to the loss of control.
Business Crisis-Risk™ is the risk(s) imbedded in an organization due to structural design or a breakdown in operational and/or functional processes. If not eliminated, these risks will result in a disproportionately adverse event that will impact people, profitability, brand and/or reputation. Preparing for these risks is the responsibility of management; unfortunately most management teams do not know how to identify these impending risks before they occur. General Motors appeared to identify the risk, but failed to act appropriately.
At this point, the company had a structural design issue, management was busy struggling with other operational issues and the engineers involved apparently did not feel comfortable raising their concerns to more senior executives- a breakdown in culture. The functional process failures in engineering, quality, legal, procurement and manufacturing proceeded.
Barra became CEO as the company was recalling 2.6 million cars and recognizing a $1.4 billion (and rising) charge to earnings. She had previously been the EVP of Global Product Development, Purchasing and Supply Chain.
So what did Barra, the first woman to ascend to the CEO position of a major auto manufacturer, do that earned her Crisis Manager of the Year?
First she was transparent to Congress. The victims’ plaintiff attorneys do not hold the same view, but Congress gave her high marks. That’s good since the U.S. Government owned the company for much of the time that the problem was occurring!
She fired seven engineers, and her inside counsel – who knew about the issue but were ‘blamed’ for not raising the issue higher- although there was a sufficient paper trail for Barra to testify with certainty the date of events as they occurred. It is interesting to note that Barra, as the former head of Procurement, had not had discussions with engineering regarding a supplier issue. But apparently that was the case.
Barra also hired a government insider, Ken Feinberg, to manage the claims. Feinberg’s firm has earned tens of millions dollars managing the Hurricane Katrina, September 11 Victim Compensation Fund, Special Master for Tarp Execution, Bernie Madoff fraud and One Fund (the Boston Marathon bombing victims). Selecting him was a wise choice if the goal was to placate congress.
But the first rule of the good crisis manager is to ‘put people first.’ At that I believe Barra has fallen short. Although she has a fiduciary duty to her shareholders to manage these claims, her initial efforts were to deal with Congress. The victims did not receive as much attention. GM is only compensating customers who had crash or death damages; Barra has specifically ruled out other economic losses.
Second, a good Crisis Manager prevents events from cascading- clearly GM and its team – which included Barra failed to do so.
Third, a good crisis manager can tell their stakeholders when the crisis is over. This crisis is nowhere near concluded, as additional claims continue to be made and additional problems discovered.
I doubt Barra asked for this accolade from Fortune Magazine. Barra has many exceptional attributes; no one should underestimate the difficulty of anyone to ascend to the CEO position of a major corporation, and especially a woman in a male dominated industry. Nor can they imagine the time to prepare and the ability to testify successfully before Congress. She has many qualities which may prove to make her a great CEO; I just wouldn’t have said she was the Crisis Manager of the Year.
The Crisis Manager of the Year will not be known to the masses. Many organizations already know who their candidate would be. It was that person who reacted quickly and decisively; put people first; kept the crisis from cascading; kept a record of decisions made; declared the crisis over and created a learning tool for their organization. But since these people did a great job, they will never get the attention they deserve. If you know someone like that, you should thank them today.