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General Motors Recall Crisis

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Jacquelyn Copeland

on 19 April 2014

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Transcript of General Motors Recall Crisis

General Motors Recall Crisis

Measures of Organizational Effectiveness: Stakeholder Perspective

An analysis of the stakeholder
perspective can help measure the organizational effectiveness
at GM. According to McShane & Von Glinow (2013), an effective organization considers its stakeholders when making business decisions, but has to be mindful as ignoring some stakeholders can cause problems in the long-run (p. 15). According to the AP, in 2002, then later in 2005 GM had information about a flawed switch, a crash related to the switch, and in-house tests replicating the problem, but the company decides against making any changes to the switch and a recall isn't considered at all.
Problems with Problem Identification:
Stakeholder Framing & Perceptual Defense
Due to perceptual defense, the design flaw threatened the self-concept of GM engineers and managment, and a natural coping mechanism was to block out the bad news (McShane & Von Glinow, 2013, p. 198). Stakeholder framing further explains how negative information could be filtered, serving to "supress the seriousness of the situation" (McShane & Von Glinow, 2013, p. 196). These decisions were not made by only one individual, but on numerous occasions GM engineers offered reasons changes should not be made to the faulty ignition switch in light of additional reports of stalling and even a fatal crash in 2005. (Retrieved from http://bigstory.ap.org/article/major-events-gms-recall-26m-small-cars).
Escalating Commitment
The AP timeline makes it clear the ignition switch defect represented a failure for GM, however the company took five years to implement its first redesign of the faulty switch and another nine years and a new CEO before a recall was approved. Decision makers were led deeper and deeper into this failure and continued to invest in it as a form of self-justification. An auto-maker's reputation is steeped in the quality of its vehicles, and its reputation is constantly at stake. The prospect theory effect helped to fuel escalation of commitment because the auto maker was focused on the implication of failure that comes from declaring a recall on the faulty part. Along the way, several decision-makers were made aware of the crashes, failed tests, and deaths related to the switch but perceptual blinders allowed them to "nonconsciously screen out or explain away negative information to protect self-esteem" (McShane & Von Glinow, 2013, p. 206). It seems to me, the initial closing costs to GM would have been significantly less than the current cost of such a late recall. This initial decision was made out of motivation to preserve the status quo over motivation to act in accordance with concern for others and the welfare of others (McShane & Von Glinow, 2013, p. 48). Although there were reports of issues with the switch, with an utilitarian view GM didn't feel compelled to approve massive recalls for a small number of incidents.
Attribution theory
According to the AP, lawmakers on Capitol Hill have gone as far as accuse GM of a potentially criminal cover-up and the new CEO, Ms. Barra, was questioned by an angry and skeptical Senator Claire McCaskill, D-Mo. Further, she has attacked Barra's uncertainty of details and asserts that GM has "a corporate culture that chose to conceal rather than disclose" the details of the faulty ignition switch. According to the AP timeline, Barra joined GM as CEO and in December 2013 learned about the ignition switch defect. By January 2014 a committee had been appointed and approved a recall. Although Barra has promised GM's new leadership is focused on safety and the consumer, lawmakers have decided the entire organization is corrupt. Looking at the history of GM, the recall was overlooked for years so there is high consistency for this distinct behavior and most other people would have declared a recall sooner (McShane & Von Glinow, 2013, p. 79). These factors cause lawmakers to make an internal attribution regarding GM's failure to declare a recall sooner.
Handling Conflict
In constructive handling of this conflict, lawmakers would have focused on the steps GM takes to declare a recall, what steps were skipped or missed in this scenario, and work with Barra to determine how to prevent such an issue from occurring in the future. However, the issue is one that "hits home" and has become emotionally involved resulting in a relationship conflict which makes negotiations with Ms. Barra impossible. Barra represents GM and there is a lack of trust for the organization as a whole. To resolve this issue, GM has brought in outsiders with respect in their fields to show GM is not relying on the same culture or people who made prior bad decisions. Barra tried to make these assertions but her position as CEO of GM had a negative impact on her level of success. GM does't have the option to avoid this conflict and Barra's attempts to problem solve or compromise are hampered by a lack of trust. I believe it is a good sign of a shift in the culture at GM that they quickly realized they needed experts in crisis management to handle this conflict and to ensure the recall itself is handled properly. In addition to this step, GM needs to continue to display its commitment to society and its consumers in particular.
Associated Press. (2014). Major Events in GM’s recall of 2.6 M Small Cars. Retrieved from AP Online http://bigstory.ap.org/article/major-events-gms-recall-26m-small-cars

Associated Press. (2014). Lawmakers Accuse GM of Possible Criminal Cover-Up. Retrieved from AP Online http://bigstory.ap.org/article/senators-express-doubts-barra-about-new-gm

McShane, S. & Von Glinow M. (2013). Organizational Behavior Emerging Knowledge. Global Reality. 6th ed. New York, NY: McGraw-Hill/Irwin.

Vlasic, B. and Stout, H. (2014) G.M. Turns to Experienced Crisis Experts. Retrieved from http://www.nytimes.com/2014/04/04/business/general-motors-turns-to-hired-crisis-managers.html?_r=0
Jacquelyn Copeland
MSL 702 M91
According to the Associated Press, on February 13, 2014 General Motors recalled 780,000 compact cars, including Chevrolet Cobalts, Pontiac G5s and Pontiac Pursuits from the 2005-2007 model years and within another week the recall was expanded to include Saturn Ions and three other vehicles, totaling over 1.6 million vehicles. The recall came some 10 years after GM first learned there was a problem with the vehicles' ignition switch, causing Lawmakers to question the organization and raises suspicion of a possible criminal cover-up. To handle this crisis GM has brought in a team of crisis managers. Through an analysis of articles related to the recall crisis, several organizational behavior concepts are apparent. These concepts include, conflict handling strategies, measures of organizational effectiveness, and attribution theory.
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