This morning David Brooks wrote a very good piece “The Quagmire Ahead” calling out six specific risks in the way the government is managing the bankruptcy of General Motors. While I agreed with everything Brooks wrote, what I thought was most important was the path he took in building his thesis:
“Over the last five decades, this company has progressively lost touch with car buyers, especially the educated car buyers who flock to European and Japanese brands. Over five decades, this company has tolerated labor practices that seem insane to outsiders. Over these decades, it has tolerated bureaucratic structures that repel top talent. It has evaded the relentless quality focus that has helped companies like Toyota prosper. . . when it comes to the corporate culture that is at the core of G.M.’s woes, the Obama approach is strangely oblivious.”
The core of the idea in my book Rethink is that most of us are in “how” trap where we needlessly entangle the outcome of “what” the work is, with how it is done in terms of people, process workflow, and technology. In case study after case study over the past six years I have consistently had cartoonish success in helping organizations identify opportunities for cutting costs and boosting innovation. But I caution that just because a problem or opportunity is exposed through this lens- organizations still have to successfully execute on whatever change is needed, and in the cases where that has failed – corporate culture is often among the causes. Corporate culture is a very strange thing that can be a key to why a company succeeds, but it can also get it in a deep rut, as we have seen with G.M.
Recently a friend was talking about Microsoft’s culture, pointing out that in the early days, all the people in the company did was take risks. Bill Gates dropped out of Harvard, current CEO Steve Ballmer quite a great job at one of the top companies in the world to move to Seattle to work for a tiny company that made something no one at that time was talking about. Crazy risks to take, and that was the culture then. Today, Microsoft is huge and has some giant revenue streams it wants to protect and grow, which has made it so risk averse it behaves more like a “Dutch insurance company” – in the words of my friend. Is that the right thing for Microsoft? Well it probably was in ’90s when competition was less pronounced, but now Microsoft has some fierce competition in the consumer markets and the enterprise markets, so I think Microsoft may need to be more aggressive and less risk averse than we have seen in recent years.
Some cultural change and evolution is necessary, but how can you change it and how can you know if you are trending in the direction of G.M.? I don’t have all of the answers today, but I think a vital part of this sits on the shoulders of the board. Boards can’t be a stale block of insiders (as too many are today), there needs to be frequent turnover to provide some ventilation to the strategies and goals, and they need to be close enough to the management team to be able to actually take someone aside and tell them where change is needed. My advise here is to take a good honest look at your own organization and evaluate how high your risk is in becoming the next G.M., it’s an incredibly hard thing to fix, but simply knowing you have that risk/problem is a start.
-Ric
Two issues that you may have missed are government regulations and corporate taxes that restrict innovation, growth and re-investment. Other than lobbying or relocation, most firms aren’t in much of a position to do much about these issues.