No sooner had GM’s new CEO Mary Teresa Barra
reported for duty on January 15, 2014, that she immediately found herself
seated in front of congress having to answer for GM’s failure to effect recalls
in a timely manner and for a number of consumer deaths that were associated
with the delayed recalls in question.
This past week General Motors announced the
additional recall of yet another 8 million vehicles with faulty ignition
switches. Over the course of just the past six months since CEO Barr’s arrival,
GM has now issued over 28 million product recalls.
CEO Barra's recent experiences serve to
remind leaders everywhere of the immense challenges that must be faced on a
daily basis. Leadership truly is the fulcrum of change. Clearly, leaders would
love for their future leadership role to be the successor for a highly
successful leader that is retiring after a long tenure of service. The
opportunity to take over the helm of a well-oiled machine and then keep it
running smoothly, simply isn’t by any measure the reality of an authentic
leader.
The factual truth is that the average tenure
of a Fortune 500 CEO is just 3.5 years. As CEO Barra can attest to, leaders are
replaced for very real reasons and the incoming leader is typically going to
inherit a multitude of challenges which must be addressed forth with.
If there is a downside to leadership, it is
that every role that you undertake will require you to assume full
responsibility for your predecessor’s failures and short sightedness.
Regardless of how competent a leader may truly be, he or she is going to have
weaknesses and blind spots. Even the very best of leaders can never get every
decision right.
When successful organizations acquire one of
their competitors that are struggling or failing, they have several courses of
action which they can pursue. They can elect to acquire only the company’s
assets, without taking on any responsibility for the competitor’s liabilities.
Conversely, they can also choose to buy out the competitor lock, stock and
barrel, including all debts, liabilities and operational headaches.
As an authentic leader that is positioned on
the front lines of day to day operations, scenario #2 above will invariably be
your plight. Whatever the magnitude of the situations that you may have
inherited, you now own them… lock, stock and barrel. Your leadership
responsibility is to meet these challenges head-on, while creating effective
solutions.
In the circumstance of GM CEO Mary Barra, not
only has she inherited 28,000,000+ recalls, she has inherited total
accountability for them. Although the manufacturing deficiencies did not happen
on her watch, CEO Barra must now address the engineering, sub-contractor and
manufacturing glitches after the fact. Such is the true nature of leadership.
The GM situation serves to reveal just how
deep the tentacles of flawed leadership that have preceded the current leader
can reach. In like fashion, the extent of the cost fix that is required to
correct such circumstances can be exorbitant. Simply consider the GM situation
as it now stands.
While there are a variety of recall issues
that must be repaired, for the sake of analysis, you would have to project at a
minimum that the replacement cost of each defective part is at least $100.00
per vehicle. The labor involved to then remove the defective part and
subsequently install a new component would again involve a minimum of two labor
hours at a going labor rate of approximately $90.00 per hour at your typical GM
dealership. 28 million recalls at $280.00+ each equates to a staggering recall
repair cost of approximately 8 billion (that’s with a “b”) dollars or more.
Allow me to put that in context for you. GM’s
North America sales were 1.9 million vehicles in 2013 and 1.8 million vehicles
in 2012. 28 million recalls at the rate of 2 million sales per year equates to
14 years’ worth of vehicle sales. GM’s
annual profit in 2013 was 3.8 billion dollars, while 2012 came in slightly
higher at 4.9 billion dollars. The final cost of GM’s existing recall scenario
will without question completely eradicate all of the company’s substantial profits
for the past two years.
This brief is being provided to stress the
point that new leadership roles are akin to icebergs, in that there is far more
to be dealt with than what is visible at a surface level. As an authentic
leader, you must perfect your skills for both that which can be reasonably
anticipated, as well as those situations than cannot in any way be perceived in
advance.
In the final analysis, an quintessential part
of leadership is being adequately prepared for the unexpected.
Copyright © 2014 Developing Forward | Thomas H. Swank,
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