Why US car companies are in trouble

As you probably know, the top folks from America's top car companies - because of the dire straits they are in - went to the US government asking for money.

Why did these companies fail in the first place? Bob Sutton, Stanford professor, said in his blog (emphasis mine)

"My experience with GM is that – more so than any company I have dealt with – the norm in meetings is that the highest status person in the room does all or most of the talking. Plus, more so than any organization I have ever dealt with, employees are expected to express agreement with their bosses. Why didn’t anyone have the guts to tell the executives that taking a private plane to beg for a bailout was a bad idea? I suspect that it is just standard operating procedure: GM is a culture where subordinates are expected to shut-up and kiss-up when the boss is around."

Sutton added, "On the whole it is as if the system is designed to prevent the upward flow of information. At first, when I was in graduate school, I thought this was a personality characteristic of the first few GM executives I met. But then I started keeping track of what happened when managers and executives arrived and left meetings. To entertain myself as the top dog droned on, I would measure talking time. Regardless of the subject (and who had the greatest expertise in the room), the highest status person would blab away – and when he or she left the room, the next highest ranking person would then demonstrate GM’s blabbermouth pattern of leadership. Note I have been seen this pattern for almost 30 years at GM – the cars have changed but the yakking pattern has not. "

I'd say this is true not just of the auto companies but also of the financial services industry. Because the workplace system hasn't changed, the yakking pattern cannot change. The results are not pretty.

(If you have any comments, please email me at cvdhruve@gmail.com)