Posted tagged ‘Wall Street Journal’

Courageous Leadership? On the Line at GM

February 23, 2009

After a recent session that I presented on success measures, I was asked by one of the participants about the fiscal crisis plaguing our three major United States automakers, Ford, General Motors and Chrysler. The person was wondered why these three manufacturers, with all of the many intelligent and professional leaders in their employ, continued to build cars that the American public did not want to buy.

I responded by explaining that the automakers knew what they were doing and how their cars were being received.  In fact, the problems plaguing the car manufacturers were not one of knowledge but rather of courage.

Paul Ingrassia, Wall Street Journal writer and bureau chief, articulated this issue as it relates to GM beautifully in his Journal opinion column on February 19th.

According to Ingrassia, there are several issues that have created this predicament. Here are two.

(1)   The car manufacturers agreed to let auto workers retire with full pension and benefits after 30 years, This means that it is very conceivable for an employee to be paid for thirty plus years and not contribute to the end product. Couple this scenario with greater life spans and rising costs in health care and the cost structure take a painful hit. Add in the nation’s desire to have smaller cars with smaller price tags and competitive margins and the problem is exacerbated. One can only surmise that new and fresh ideas and the investment in R&D was limited because of these cost factors.

(2)   GM continued to keep two losing brands alive – Saab and Saturn – even though it was costing them money to do so. This was done because the company had spent $1.3 billion dollars to shut down its Oldsmobile brand in a way that allowed them to comply with state-dealer franchise laws.

Could this crisis have been averted? Very possibly but it would have required courageous leadership to take on the unions early on and absorb the short-term losses inherent with shutting down a failing brand early on.

Some weeks ago, we spoke about the concept of false kindness and the consequences of putting off uncomfortable decision s regarding staff. The car crisis today is yet another example of the need of leaders to be willing to do unpopular things, when they need to be done.

The Five Stages of Crisis-Management According to Jack Welch

October 2, 2008

As we all know, our country is experiencing a staggering financial crisis. This crisis has stunned the nation and left many fearful and concerned regarding how to address and solve it.

In September of 2005, Jack Welch, former CEO and Chairman of General Electric, wrote an op-ed piece in The Wall Street Journal. The article was entitled “The Five Stages of Crisis-Management.” The context for the article was the aftermath of Hurricane Katrina and the devastation left behind in New Orleans.

Although we are experiencing a crisis of a different sort, it seems appropriate to revisit and synopsize the lessons that Mr. Welch shared in that article as they are helpful in contextualizing what we are experiencing today.

* * *

Stage 1: Denial

According to Mr. Welch, the first stage of that pattern is denial. This stage usually begins with the belief that the problem isn’t that bad. This is a typical reaction, in part, because people never believe that bad things will happen to them. He goes on to suggest that “one of the marks of good leadership is the ability to dispense with denial quickly and face into hard stuff with eyes open and fists raised.” It becomes the leader’s job to help people confront reality, create a new direction and inspire people to address that reality with positive action.

Stage 2: Containment

The initial symptom at this stage is for people to try to keep the problem quiet. From there, it is not uncommon to find that leaders, even those who are extraordinarily gifted, try to make the problem disappear by giving it to someone else to solve.

Stage 3: Shame-Mongering

Mr. Welch goes on to state that at this stage, “all stakeholders fight to get their side of the story told, with themselves as the heroes at the center.” In the last few days, we have witnessed a demonstration of this phase as we have listened to our present administration, Democratic and Republican leadership tell us who is to blame and who will save the day.

Stage 4: Blood on the Floor

In the fourth stage, as in just about every crisis, there is at least one high profile person who pays with his job. This crisis is no different. Leadership at AIG, Fannie Mae, Freddie Mac and many of the companies that have been swallowed up have paid with their jobs. And unfortunately, again in this case, that leader often brings down many other people with him or her.

Stage 5: The Problem Gets Fixed

In the fifth and final stage, the crisis is resolved and, as Mr. Welch notes, “despite prophesies of permanent doom, life goes on, usually for the better.” The bill that passed the Senate floor tonight added in may new features for taxpayers including increases in the limit on federal bank deposit insurance, tax breaks for production of and investment in industries promoting clean energy such as solar, wind and biodiesel and tax relief for victims of natural disasters in the Midwest, such as flooding, tornadoes and other severe weather events (although there certainly are “sweeteners” that look alot like “pork” such as tax breaks for builders of auto raceways and rum producers in the Virgin Islands and Puerto Rico).

* * *

It seems that we are beginning to enter stage five of the crisis-management process even though it may take us a number of years to fully experience the results. It is also important to remember that crises have a positive element to them as well. They let us know where things are broken and help us identify the solutions so that future similar crises may be avoided.

Mr. Welch’s insights are extremely valuable in one other arena as well.

Knowing that there is a predictable pattern to crisis management is useful as it will help us move on to the recovery stage.


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