A Washington culture at GM?

If I meant Washington as in George, then I’d be cheering. Sadly, I refer to Washington DC, the White House and Congress in particular. If we thought GM was in trouble before, just wait.

I read today of a speech given by GM CEO Fritz Henderson in which he points out that back in the 60’s, the corporate culture at GM was so good it was copied by scores of other companies. He compared that to recent times when their culture and management system has been heavily criticized and no one copies them any more. Then he said this: “I certainly think our management system has to drive the right decisions, so we’re fast, we’re accountable, we’re market-focused, and everything we do within the company has to be focused on that.”

Well, does anyone really believe that’s going to happen with the US Government being the majority owner of GM? And the labor unions holding almost 18%? (they control a whopping 65% of Chrysler!).

Creation of corporate culture begins with the senior leadership team and especially the CEO or owner. It’s the job of the CEO to set the vision, look into the future and create a vision so compelling that people will follow gladly. Fritz Henderson may be the CEO of GM, but let’s not kid ourselves into thinking the vision and management system will be generated from anywhere other than the White House and Congress. We’ve already seen the President of the United States outline his vision for the US auto industry in general, from the types of cars he thinks should be made to the management structure of GM and Chrysler to specific compensation systems. And where does that leave the alleged CEO of GM, Fritz Henderson, who, by the way, received his position through White House influence?

It makes Henderson a figure-head, devoid of any real leadership influence. His primary responsibilities are taken over by the US Government and he warms the CEO seat while waiting to be told what to do.

This is exactly how not to create a high-performing culture. I’ve read that well, GM and others did a pretty lousy job on their own, this will force the unions to think and act like owners and the government will give Henderson a long leash because they really don’t want to be in car business. Right. And I’m leaving for Fantasy Island tomorrow.

Culture influences belief and behavior, and an effective culture is essential to business success. If it’s being determined by Washington then I see no cause for optimism and plenty of reasons to worry.

Push back the falling sky

This is not time to be Chicken Little. The sky has fallen on certain industries and in some cases they seemed to actively pull it down themselves, like the US auto industry. GM and Chrysler need only look in the mirror to see the real reason for their downfalls. But other segments of the economy are holding their own and here again, the reason is internal. They're doing things differently and making improvements. It only makes sense to do this.

I know of a couple of movie theater complexes that are doing pretty well through innovating and diversifying their services. Yes, they don't have to only show movies! They can and now do other things, like renting out their spaces for group gatherings, and improve upon what they already do, like better seating and a place for kids to play (like McDonald's has done for years). I love having reclining seats and cup holders when I go to a movie. Wouldn't you?

When I heard Rahm Emmanuel exclaim "never waste a good crisis," I was concerned because I don't trust his motives. On the other hand, that's great advice for the business community today! Is there a crisis? Yes, there is (although some of it is just perception). Don't waste it by running for cover or becoming inert. Do what my client is doing that I wrote about in my previous post. Examine the whole business. See what can be improved and do it. Reinvent yourself in areas of your strengths and market need.

Tony Robbins once wrote that when things go wrong we should immediately ask what's great about this situation. That seems counter-intuitive, but I can tell you from personal experience it works. Businesses today should do the same.

Make the recession work for you.

Some people know how to make this recession work for them. I speak with too many who don't and who pull the covers up and hide, thinking they'll just go into neutral and wait it out. I have a client who's doing everything right and I recently spoke with her to find out more.

Her business has taken about a 20-30 % hit in revenue, leaving the company with more spare time than they want. Rather than just take early days, they're using that time to revisit every facet of the business and make improvements. The core services are being inspected to find greater efficiencies, new services have been planned and are close to rolling out, and marketing has been ramped up. The sales team has a new model to follow that has already brought in new clients and ensured repeat business from current and past clients. Office personnel have been shuffled according to need and strengths, so layoffs have been minimal (only a few).

The result is renewed excitement as her people have a clearer focus for both the present and the future. Sales are down for the year, yes, but they're increasing. And as they lay a strong, improved foundation for the future, they will be in a terrific position as the economy rebounds. When I spoke with her I heard optimism, the kind that comes from focus, vision, hard work and a realistic understanding of the economy.

Business owners of all kinds should learn from this. What a great time this is to have some time for examination and improvement, even reinvention if called for. Let's see more of that.

Chase Bank declares war on me

This week I joined the legions of Americans who received notice that their credit card APR was rising, for no reason other than they can. In my case, it's doubling, from 7.24 % to 14.24%. I know some people would be happy with 14%, but I'm used to low rates on all my cards. On a personal level I'm outraged, as I've had this card for years and I'm never late with a payment. As a consultant, I'm baffled at this business model.

This card is issued by Chase, and like many banks, Chase has it's share of problems. Unfortunately, they think the way to solve their problems is on the back of loyal customers. I saw a web headline the other day that said "Banks are Declaring War...on You." Sadly that appears true.

Why not use this economic crisis as an opportunity to change strategy, and communicate a message to customers and consumers that we'll find a way to weather this crisis, but not at customer expense? Banks are perceived as greedy and evil these days, so why add evidence to the perception by punishing loyal customers? Why not present Chase as a bank that will innovate and improve itself and find other ways to cut costs and increase revenue?

But Chase won't. It's a dinosaur and unwilling to shed its arrogant behavior anytime soon. I called Chase and let them know my response, which is to shred my Chase card and never use it again. More people should do the same.

Watch for signs and make your move (in business, that is).

The economy is going to recover. When, I don't know, nobody does. But it will recover. It always does. One big question is what it will look like when that happens. I think it's essential for those who fret about the economy to look at small signs of change. Not in the usual way, not by looking at the usual indicators like the Dow or consumer spending reports and the like. I mean take notice of small changes or tweaks in the nature of how business is operating in the turmoil of today.

The Wall Street Journal had an interesting article the other day describing how while companies are laying off large numbers of employees, they are also hiring at the same time. But who they're hiring and for what skills is what's different. In the struggle to survive, businesses are changing and adapting as they try to navigate their way to a profitable future. So rather than hire for the same skill sets for the same jobs in the same way, new employees are brought on for positions that didn't exist before or have changed job descriptions in adaptive ways.

Every business in America should be doing this. We don't know how radical or how nuanced the changes in the economy will turn out to be, but smart companies will watch carefully and make these adaptive changes along the way. Those that do will be in a better position to thrive once we pull out of this. In fact, they may well begin to thrive now! Why not? What better time to innovate and experiment? Hunkering down will leave you where you were before this whole mess began. What's the point of that? Crisis brings opportunity for those willing to step up, and they will see success first.

After my small rant on the administration's meddling with the Chrysler's marketing budget, along comes the state of Washington with its own form of a bailout. In trying to emulate the Washington D.C. mindset, Washington state has decided to give its newspapers a 40% cut in business taxes to help them stay alive and print another day. One of the papers has already stopped publication and changed to an Internet-only format. Other newspapers around the country have struggled with low subscriptions and falling ad revenue as people look for news in other ways and without the perceived biases plainly evident in many of the nation's largest papers.

If newspapers are failing, what should we do first? Well, I think we should look at the leadership of the industry, its collective attitude and mindset, and the leadership of individual papers. If there was ever a case study of failed leadership in a single industry, this is at or near the top (along with the automakers and airlines). I have always loved newspapers since I was a kid, and still find great satisfaction in holding a paper in my hands and reading every section. However, I no longer subscribe to any paper and get all my news online from several newspaper Internet editions and online news sources. I would love to see the newspaper industry succeed, but on their own merits and not because the federal government subsidizes them.

Technologies come and go according to the marketplace and the vision and leadership of particular companies. I love horses, but I'm glad the horse and buggy industry didn't get bailed out. The horseless carriage won out and we have been the better for it as a nation (can't argue that, all environmental arguments aside). Newspapers have done a terrible job of adapting to market needs and trends, and their editorial policies are a national joke (I loved one comment from a reader of the Seattle Times...the online edition... about the new tax break policy: "Why don't they create one paper and call it Pravda?").

Really, what do we want? Do we want Washington or state governments to step in and try to save certain industries? Or do we allow the market, that is, you and me, decide who wins and loses according to what we're looking for?

Detroit vs. Washington

Here's a headline that shocked me: Obama Halves Chrysler's Planned Marketing Budget. That's the president of the United States telling an American automaker how much it can spend on advertising. This is what we can expect when quasi-nationalization occurs in private industry. Accept bailout money and lose operating control, even in marketing. I have to say that I hate this concept and it worries me to see this happen. Our economy is built on the principles of free enterprise and you (in theory) rise or fall according to your merit and the marketplace. Unless the federal government steps in and takes control as a return for the cash to keep the doors open. If you thought Cerberus couldn't run Chrysler, wait 'till you see the government try!

A while ago the head of Russia was visiting the US and noticed some highly critical remarks published in a local paper about his host, the American president. He asked our president why he didn't simply fire the newspaper editor. The response: I can't do that; we don't do things that way in the United States." Well, look at what's happening now. Government steps in with money, and suddenly executives are fired and marketing budgets are cut. Is this what we really want?