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GM’s Crisis: Don’t Blame the Engineers

Mary Barra's ride as CEO of General Motors has been hair-raising. Toast of the business world just three months ago, the former head of product development and supply chain is now getting grilled by the United States Congress in a fantastically public trial. Demands for truth about exactly what was known, when and by whom, can be heard from the press, politicians, and even the public. Barra is suddenly the face of corporate villainy.

A bug in the BOM
The issue is all about ignition switches that turn off too easily, rendering some vehicles (the Chevy Cobalt and Saturn Ion) dangerous owing to a loss of power to brakes, steering, and, most critically, air bags. Parts maker Delphi Automotive, which supplies the switch, is justifiably in the clear, because it told GM engineers early on (in 2002) that the switches didn't meet the company's performance specifications. The low part cost, however, seems to have been enough to carry the day with Detroit's beleaguered automaker, whose thirst for savings was then insatiable.

GM engineers dealing with early reports of problems in 2005 investigated and determined that the cost of tooling and part changes was too high, given the low rate of failure, and decided to continue using the parts.

Email trails obtained by Reuters show that some GM product development staff questioned the wisdom of this call, but in the end, a decision was taken not to issue a recall but instead a “service bulletin” to dealers suggesting that car owners avoid using heavy key chains. For those who died as a result of this quality issue, such a palliative was obviously inadequate. But from a cost-benefit standpoint, it passed muster.

In 2006, engineers tried again with a design change, including a stiffer spring. However, this change seems to have happened with a hazy and incomplete “validation sign off” document and, incredibly, no new part number.

For anyone familiar with engineering change management practices, this is tantamount to sweeping the dirt under the rug.

Few things are more unacceptable to engineers than allowing bill of material changes without proper version control. To me, this smells of a business decision with a dash of legal ass covering and an unlucky lead engineer (Ray DeGiorgio, according to Reuters) set up as the scapegoat in case something went wrong.

Truth be told, Mary Barra is being completely honest when she blames GM's “cost culture” for the crime.

Russian roulette with product safety
Sometimes engineers know that at least a percentage of users will suffer, but given a risk-adjusted net present value analysis of paying off the injured versus fixing the problem in the first place, the business occasionally decides to go forward anyway.

It's rarely the engineers, scientists, chemists, or inventors who lean this way, since by nature they are usually driven to perfection. The villain is not really any one person or even function, but instead a collective willingness to take risks that we institutionalize in the legal construct of the publicly traded corporation.

We are the enemy
Corporations are meant to isolate executive officers' fiduciary responsibilities to shareholders from any personal concerns they may feel as people. Stripped to its basics, this means that officers have an actual duty to make dispassionate decisions that always and exclusively maximize shareholder value.

If, after analyzing the costs of compensation as factored for the chances of injury, such an officer sees more money in a lower-cost but occasionally faulty part, he or she owes it to Wall Street to make that tough call. Sometimes it goes wrong, as in this case, but on average, it works well enough that it keeps happening.

Nasty, but true
Corporations fight regulation because it costs shareholders in the short term. Business leaders, in contrast, usually want regulation because it levels the playing field and lets them face their friends and neighbors with pride.

Corporations are fine with killing a few customers or poisoning the occasional lake, as long as they don't get caught breaking the law or are slapped with costly penalties. Business leaders honestly want to delight their customers and be loved by their communities.

Corporations don't have hearts, but business leaders do. And they hate this latest GM story, because they know how easily it could be about them.

This blog is reprinted with permission from SCM World. GM's Crisis: Don't Blame the Engineers by Kevin O’Marah, was originally posted April 3, 2014.

15 comments on “GM’s Crisis: Don’t Blame the Engineers

  1. Daniel
    April 16, 2014

    Rich, The statistics shows that women employees are more in to logistic industry. Now a day's in general employers prefer female candidates for in house jobs because they may stay back for a longer period than males.

  2. Daniel
    April 16, 2014

    “GM engineers dealing with early reports of problems in 2005 investigated and determined that the cost of tooling and part changes was too high, given the low rate of failure, and decided to continue using the parts.”

    Kevin, that's the problem arise from negligence. If they rectified and replaced with new parts, such problems won't repeat.

  3. prabhakar_deosthali
    April 16, 2014

    While the engineers work on perfection, the managers work on the probabilities.

    So in case of the Ignition Switch problem it seems GM overweighed the low probability of the failure while allowing the low quality ignition switches to be put into its products.

    But as far as human life is concerned , even that low probality may have possibly killed or injured a few precious lives .

    And the cost of erosion of customer faith because of even a small no of such incidents  is enormous!

     

     

  4. Hailey Lynne McKeefry
    April 16, 2014

    I think O'Marah makes an excellent point that this GM story points to a broader problem of accountability and integrity in the corporate world.  In this case, and others, the organizatoin put its shareholders (and itself) ahead of the interest of the customer and the customer's safety.  it's shortsighted and costly.  To me, the gender of the CEO is irrelevant. I think that she had a point when she pointed to corporate culture as a big problem. At the same time, the job of the CEO is to ask hard questions and to make hard decisions. Groupthink seems to have taken over in this particular situation.

  5. ITempire
    April 17, 2014

    How someone can commit such a crime of taking one's life just for the sake of low cost. It's an organization's responsibility to work according to the laws of the existing country and if not then should be punished for the negligence of his/her duties. Once you loose the trust of your customers' then it's difficult to regain that goodwill.

  6. t.alex
    April 17, 2014

    And in this crisis, are they foricing the engineers to work day and night again?

  7. Daniel
    April 21, 2014

    “I can't wait for you to become a blogger, Jacob.”

    Rich, if Hailey allows.

  8. Daniel
    April 23, 2014

    “”The statistics shows that women employees are more in to logistic industry. Which statistics are those?”

    Rich, its from your first comment with snapshot

     

  9. Daniel
    April 23, 2014

    “what if “employers prefer female candidates for in house jobs because they may stay back for a longer period than males”? How will you get a blog, then?”

    Rich, then also we can work as a freelance blogger

  10. Daniel
    April 25, 2014

    Sorry, Rich. I wrongly interpeted it.

  11. Daniel
    April 25, 2014

    “”Rich, then also we can work as a freelance blogger”
     
    Then I can say I knew you when.”

    Rich, sure. Wait for that moment

  12. Daniel
    April 28, 2014

    “No prob.”

    Rich, Thanks

  13. Daniel
    April 28, 2014

    Rich, Thanks for your patience

  14. Daniel
    May 7, 2014

    Thanks Rich

  15. Daniel
    May 7, 2014

    “Oh, no, thank you.”

    Fine

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