Five tips on how to build a change resistant business culture

Steven Rattner tells an interesting story about his role in restructuring of the U.S. car industry in a recent issue of Fortune.  In particular, his discussion about the business culture he saw at General Motors is a mini-roadmap of what not to do if you want to build and maintain a resilient business culture.

Here is what he found:

1. Isolated management: The senior management team at GM was isolated from the rest of the company.  In Rattner’s words, “it was sequestered on the uppermost floor, behind locked and guarded glass doors.”  These executives had elevator key card access that swiftly ferried them from their lofty offices to private parking garages below without stopping at any other floors.  “No mixing with the drones,” according to Rattner, and of course no cross fertilization of ideas.  How’s that for the ultimate silo! 

2. Overconfidence:  You’ve often heard that the tone of an organization is set at the top.  Well, in the few interactions Rattner had with then-chairman and CEO Rick Wagoner, Rattner came away describing him as likable, but as setting a tone of “‘friendly arrogance’ that seemed to permeate the organization.”  Let's face it, if you work in an organization where someone else always knows best and your contributions are discounted, you quickly learn how to adapt to survive.  You stop volunteering information.  What's the point?

3. Form over substance:  PowerPoint decks dominated decision making processes.  Transactions over $100 million required the Department of Treasury’s approval once the government’s Car Team was formed so Rattner got to see a lot of them.  He felt like no decision got made without a PowerPoint deck.  He was also stunned by the absence of sound financial analysis to justify expenditures  (see further item #2 above). 

4. Blame game:  GM’s senior management team was of the belief that their problems were someone else’s fault.  Popular targets were the United Auto Worker’s union, the financial crisis, rising oil prices, the yen-dollar exchange rate, or some combination of these.  It's hard to take responsibility for a business relationship if you know you're always right.

5. Denial:  The combination of the factors enumerated above contributed to a state of denial about the viability of the restructuring plans both GM and Chrysler submitted to the Car Team in mid-February 2009.

What does all this have to do with legal risk management? 

Everything. 

This is the kind of business culture that through denial can miss a financial or legal train wreck under their nose.  It happens when senior management isolates itself and cloaks itself with overconfidence and alienates itself from the lower ranks thereby cutting down the flow of valuable information that can surface problems while they are small and less expensive to resolve.  What they really need is more mindfulness.

While confidence is certainly a good leadership trait, overconfidence is a failure to appreciate the limits of our own expertise or available data.  It is a decision trap because statistically, over time the highs and lows of our experience, like the ups and downs on a graph, continuously regress toward the mean – toward average. 

If we continue past practices because "that’s what we’ve always done" and fail to be open to new ideas and change, or simply blame others instead of taking responsibility for our own role in business relationships, our bad habits will eventually catch-up with us. 

One day we out drive out headlights, or in GM’s case burn through more cash faster than they could possibly earn it, lose the road and crash.