Why General Motors Had to Lose $1 Billion Before Acting Responsibly

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Trouble hides in the weeds for a while before it actually strikes out and bites.

There is little difference between finding out where and what it is and snake hunting.

In the corporate world, the two most probable snake hunters will be the General Counsel and the Chief Financial Officer.

The CEO/Chairman may liminally sense it but people in that role tend to deny it for as long as possible.

They don't want to be distracted or confronted by it and they don't want to think about the expense of dealing with it. That allows it to fester a bit.

Eventually someone with awareness of the situation will walk into the General Counsel's or CFO"s office and start a conversation that leads to revealing what is hiding in the weeds..

The GC or CFO will be the person who brings it to the attention of the CEO, at which point the CEO recognizes as the result of that conversation that this must be dealt with or the costs associated with dealing with it will get out of control.

Real trouble can't be dealt with via publicity or advertising.

General Motors has been advertising for years that its management are all "professional grade" and they are going to take at least a $ 750,000,000 hit for shoving its faulty ignition switch issue under the rug for several years and for power steering malfunctions of several year's standing - about 3.5 million cars.

Toyota is about to take a similar hit.

Johnson & Johnson has been doing this for decades.

Someone in the past knew of the problem and decided to try to conceal it and fix the aboveground part of it on the cheap. That almost never works. The company is just deluding itself.

Scores of other companies do this every year.

They never seem to learn.

Denial is a very strong impulse.

Waiting to deal with it until after your potential adversaries have already lawyered up is a very wasteful approach. You can make a much better arrangement for your company if you lead the way. The humiliation and injury to sense of integrity associated with GM's head engineer on this particular matter testifying under oath at his deposition that he does not recall the matter; when it came up; making any decision not to fix the defective cars that already went out to the market, but just to correct it going forward are simply tragic.

When those who know are so afraid to tell the truth for fear of being fired, your company had made a terrible blunder.

Even if GM can afford $300,000,000. In addition GM has now taken the Chevrolet Cruze off the market and Edsels itself beyond anything in history. Professional grade? Yeah right! This is what comes from head in the sand techniques of dealing with impending crises. These were known long ago and nothing helpful was done.

Your company may not have the financial depth to take these hits periodically.

My belief regarding who are the first to begin to register impending trouble is based on the fact that it is always the General Counsel or the CFO who is the first to call me and suggest we visit.

They are the two most likely places that management go to for consolation and direction when bad things are on the horizon. They are usually the people in whom most managers have the most confidence.

Those are the guys to talk to if you are a crisis avoidance specialist.

Sometimes it is their outside law firm if company management does not want it known that they have brought in a crisis specialist,

If potential crisis is perceived it should never be taken by a company's regular law firm.

The reason for that is that they have an inherent conflict. Their first concern is always going to be for self preservation. Either they may have had a hand in the trouble - think Enron - or they tend generally to be ultra possessive about other lawyers being allowed to get close to their clients. If you have ever watched them at a convention with a client person, it is fun to watch them cling to these folks constantly to avoid any other lawyer getting a chance to be alone with them, even for a second. If you know what to watch for, it is hilarious.

Many a crisis situation has been mishandled for just that reason. Confidentiality obligations keep me from telling some horror stories.

They tend to call who they know. The worse the matter is perceived to be, the more likely it should and will go to a specialist rather than to their usual law firm.

There may be liaison with both groups for a short period, but the crisis specialist has a different perception of how potential bet the company situations should be handled. For one thing, putting a lid on the PR folks is an immediate must. What goes out of a company has to be carefully and centrally controlled, and PR template denials are usually the worst opening gambit. If you are being compelled to say something by a stock exchange you are very late in knowing about the issues arising.

But even then the PR auto deny gambit is usually a wrong move. In this day of people tweeting their bloody lives away, control over unvetted public statements by the company itself must be as tight as possible.

Sometimes it isn't a business dispute, but a problem of some key person or group being involved in improper and potentially embarrassing conduct, the scope of which is limited only by the human imagination. Corporate board room types are not well versed in how to manage this kind of damage control, but the first place the news will go is to the GC or the CFO in all likelihood. That is the moment when (after the CEO is advised) the potential crisis management specialist needs to be called.

Misconduct by a key person may be exploited for economic advantage and it may have been engineered deliberately just for that purpose.

Anywhere in the world. Any kind of matter at all.

The difference between the normal course difficult situation and the impending potential crisis is that the latter cannot be dealt with using template approaches.

Template approaches are taught in every law and business school and is practiced by every medium/large law firm and PR group.

Why that is inappropriate and why it usually leads to a terrible result is another story, but it usually does not get you where you want to be. In a really terrible situation, a bet the company problem template approaches are regularly disastrous.

Finally, another nice attribute of the crisis specialist is that, since he won't be anything like the people you socialize with, you are done with him after the conclusion of this one situation.

You can then go back to the golf pals with no bad blood hanging over those relationships.

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As always, you can call me, RIchard Solomon, at 281-584-0519.

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1 Comment

Many CEOs will say to their teams "don't bring problems, bring me solutions".

Well that sounds terrifically "leader like" but the result will often be that the CEO won't hear what they need to know until such time that problem has grown to size that can no longer be hidden.

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