Auto Industry Insanity, Defined

Edmunds AutoObserver Michelle Krebs, commenting on the termination and replacement of Cadillac’s leadership, concluded, “ If GM is going to change and is going to succeed, it must change people.” Paraphrasing Eistein, she added that “Doing the same thing over and over again with the same people in the same positions and expecting a different result is…insane.”

Michelle Krebs is far from the first to suggest that, to survive, a struggling company must replace the executives that oversaw its decline. And she won’t be the last. But this is a superficial solution that, without additional measures, will surely fail.

A key reason for the popularity of this solution is that it’s easy to observe and easy to comprehend. But it’s based on a very shaky assumption: if an executive didn’t achieve the desired result, then that executive either lacked ability or lacked the proper intent. The latter is addressed through demands for “accountability,” which Krebs also suggests.

But what if these are good, talented people placed in an unwinnable situation? What if the structure and culture of the organization prevent them from doing what they know should be done, and would otherwise do?

This has very much been the case within General Motors. I essentially lived within the GM organization for over a year back in the late 1990s, observing it as an anthropologist would. I encountered, over and over, people who knew the right thing to do, and who wanted to do the right thing, but who were unable to do it because GM’s structure and modes of operation placed endless barriers in their way. As a result, the predominating mood within the organization was one of frustration.

Putting different people in the same organization and expecting a different result is insane.

Actually, the outcome could well be different–but worse. Developing and building cars in an intensely collaborative exercise. For people to do well within it they must both be experts at what they do and know those they work with very well. Place an expert among strangers, and they will likely discredit and ignore his or her suggestions. You cannot really know who knows what they’re talking about by listening to them for the first time. Knowledge of the extent of others’ knowledge, especially if they’re in a different field than you are, can often only be gained through repeatedly working together.

Bring in new people, and they will know neither their new jobs nor the expertise of those they must work with. This is proven recipe for either indecision or, when the pressure for results is intense, bad decisions. GM and many other companies have gone through this cycle over and over. While GM hasn’t often fired executives outright, as they did in this case, they’ve switched people around many times before, but rarely with the intended results.

Now, perhaps GM’s new leaders aren’t merely changing people. Perhaps they’re also making fundamental changes to the way the organization is structured and the way it operates. Maybe these changes simply aren’t being reported in the press because they are much more difficult to comprehend and communicate than personnel changes. Maybe they’re even the right structural and cultural changes. If so, then changing people might be necessary to keep the new organization from reverting to the old one. As one piece within a much larger solution, personnel changes might make sense.

But, if they’re the entire solution, personnel changes are bound to fail. To repeat: putting different people in the same organization and expecting a different result is insane.

The suggestions I offered to GM nearly a decade ago:

Executive summary of report to GM

Michael Karesh owns and operates TrueDelta, an online source of auto pricing and reliability data