Looking Under the Hood of Automotive's Corporate Culture

Carmakers are strengthening the ties between corporate culture and customer experience.
Employee Engagement

Corporate culture permeates everything about a company from its policies, procedures, and employee behavior to the customer experience. In the automotive industry, corporate culture plays a crucial role in how companies respond to auto recalls, data breaches, and other issues. And sometimes cultures can falter. Here's how some of the largest carmakers are retuning their cultures in a rapidly changing industry.

Last year marked a recall crisis for General Motors that continues to weigh the company down. The crisis started in February 2014 when several people died because of accidents involving faulty ignition switches in G.M. compact cars. G.M. recalled nearly 780,000 of its 2005-2007 Chevrolet Cobalt and 2007 Pontiac G5 compact cars to fix faulty ignition switches that could unexpectedly shut down the engine and disable air bags. Two weeks later, the auto manufacturer added588,000 more cars to the list.

The issue quickly escalated when it was reported that G.M. had waited more than a decade to recall 2.6 million Chevrolet Cobalts and other models that had defective ignition switches. G.M. scrambled to respond to the crisis. G.M.'s leaders were called to testify before Congress-including Chief Executive Officer Mary Barra, a longtime employee who had been at the helm for only several weeks. The automaker launched a companywide safety review, named a new global safety chief, and pledged to recall any cars that had safety issues. In addition, G.M. established a fund to pay claims related to the defective ignition switches. The automaker has said it expects to spend $400 million on claims, but said it could reach $600 million.

Other problems occurred. The NHTSA reported in August that G.M.'s website for determining if you own one of the defective cars was also malfunctioning. Drivers who used the vehicle identification number (VIN) look-up site were told their cars weren't involved in the recall if the repair parts weren't yet available, even when the cars were actually being recalled. After fixing the errors on the site, G.M. offered owners of the recalled vehicles $25 gift cards if they brought their cars in to be serviced.

By December, the defective ignition switches had been associated with at least 42 deaths and more than 50 injuries. G.M. recalled nearly 30 million cars in 2014 (including cars that had other mechanical problems). Critics blame the automaker's corporate culture for failing to identify and fix the defective ignition switches earlier.

"The question I ask here is not how and why did this dangerous defect occur, but rather what kind of company culture allows passenger safety to be so badly compromised?" writes Amy C. Edmondson, a Harvard Business School professor, in the Harvard Business Review. Companies should promote a strong safety culture that rewards employees for reporting problems and works collectively to solve them.

"If you have consistency of purpose across your entire organization and you have nurtured an environment in which people want to help each other succeed, the problem will be fixed quickly," Edmondson maintains. "So it is important to create a safe environment for people to have an honest dialogue, especially when things go wrong."

Even before the recall debacle occurred, G.M. was on shaky ground. When Barra was appointed CEO in December 2013, the company was just emerging from near-collapse and had been bailed out with government cash. Barra's new role was announced a day after the U.S. government said it had sold its final shares of G.M. Part of G.M.'s problems stems from losing sight of the customer, remarks Fred Hubacker, executive director at Conway MacKenzie, a consulting firm that specializes in turnaround and crisis management.

"G.M. and every other company needs to keep a laser focus on the customer and the product," Hubacker says. "And clearly they [G.M.] did not have the customers' best interests in mind when this recall issue started." It's easy for organizations, Hubacker adds, to lose sight of customers' needs when employees become complacent or managers are focused on day-to-day issues instead of innovative solutions. The best companies "put the customer in the center" of decisions on operations, products, and services, he notes.

The former United States attorney Anton R. Valukas led an internal investigation of G.M. and released a report of the findings in June. The investigation found that "a number of G.M. employees reported they did not take notes at all at critical safety meetings because they believed G.M. lawyers did not want notes taken," Valukas writes. The report also notes that the Cobalt ignition switch "passed through an astonishing number of committees but determining the identity of any actual decision-maker was impenetrable."

Barra responded to the report in a video message, noting that the Valukas investigation uncovered "a pattern of incompetence and neglect" and that "this recall issue isn't merely an engineering or manufacturing or legal problem, it represents a fundamental failure to meet the basic needs of these customers."

The company is taking actions to strengthen safety measures and the customer experience, according to G.M. spokeswoman Susan Waun. "At G.M., taking the customer experience to new levels is a company-wide job," she says. Senior leaders, for example, have become more engaged with customers by making weekly calls to those who recently purchased a vehicle or had their vehicle serviced.

The company has also instituted a "Speak Up for Safety" program that encourages employees to report potential safety issues; added a new Global Product Integrity organization as well as 35 safety investigators, and restructured its safety decision-making process, making senior management more involved in the decisions.

G.M. still has a long way to go in rebuilding customer trust, but the company is "doing what they need to do," says Jason Vines, an independent consultant specializing in automotive issues and former communications executive at Ford and Chrysler. "You can't change a corporation's culture overnight but in general, I'm a fan of their CEO," Vines says. "She's been very clear that they need to be transparent and continue focusing on customer satisfaction."

Additionally, G.M. could learn from other automakers like Mercedes-Benz and BMW, which both have strong customer and employee-focused cultures. "We're in the process of rebranding and focusing our company around delight," said Stephen Cannon, president and CEO ofMercedes-Benz USA, at Forrester Research's Forum for Customer Experience Professionals in June last year.

As vehicles become increasingly sophisticated, the main differentiating factor for carmakers will be the customer experience, Cannon maintained. Mercedes-Benz is betting that improving the employee culture will in turn create abetter customer experience. When a survey revealed that nearly 40 percent of employees felt disengaged throughout the work day, the company launched multiple development and immersion programs to connect employees to the brand mission. The automaker and its dealerships have embarked on a huge project to send 26,000 employees over the next few years to a two-day program called the Brand Immersion Experience at the Mercedes-Benz factory in Vance, Ala. Additionally, Mercedes-Benz invited leaders from its franchisees to a leadership academy that further instills brand values.

At BMW, the company promotes communication between different divisions, writes Mike Steep, a Forbes contributor and senior vice president of global business operations at R&D services provider PARC. BMW's headquarters in Munich uses a "hub-and-spoke model with a central core connected to each of the floors that house the product groups," he writes. Therefore, everyone in the building is within walking distance of any of the expertise centers. "BMW's leaders put as much thought into designing how people work as into their cars," Steep maintains. "Their culture is an exemplar of formulaic innovation management."

Paul Hagen, senior principal with consulting firm West Monroe Partners, agrees that Mercedes-Benz as well as Audi have done of a good job of focusing on the customer experience and employee culture. "These companies have invested in understanding what the customer experience is like in the dealership and they've mapped out all the interaction points on the customer journey," he says. "Too often companies think of the customer experience as just the contact center, when it's actually everyone's business."

A strong customer focus should be embedded in a company's culture from the beginning, but it's not impossible to do so even late in the game, adds Mark Holthoff, Edmunds.com's director of community and customer support. "The first step is to start listening to your customers," he says. "Measure how often people are complaining about things and then devote resources to fixing each issue at its root cause. The goal should be to eliminate complaints, not just to ameliorate them. It's tough, though, because this approach requires everyone from the senior leadership team on down work together."