Smeal professor reflects on GM crisis

July 17, 2014

UNIVERSITY PARK, Pa. -- When GM began recalling vehicles in February because of an ignition-switch problem, the situation brought back early career memories for Denny Gioia. Currently, the Robert and Judith Klein Professor of Management and chair of the Department of Management and Organization at the Penn State Smeal College of Business, Gioia once worked as recall coordinator for Ford Motor Co.

In the early 1970s, reports began to surface at Ford that its new model, the Pinto, could explode upon rear impact. It wasn’t until 1978, after nearly 30 deaths, that the vehicle was finally recalled. Gioia was initially in charge of handling the early stages of the Pinto case.

“Upon hearing about the GM case this year, I thought that things looked pretty ambiguous, so it didn’t seem clear that a recall was justified,” said Gioia. “I always have sympathy for the difficulty of the job of recall coordinator. It’s so easy to decide the right call in retrospect, but when things are happening in real time, you have to have a basis for confidence that the right call is to recall.”

But, as the GM story has unfolded, it looks much less ambiguous, according to Gioia.

“The fact that GM changed a part then didn’t change the part number looks incriminating,” he said. “It looks like you’re hiding the fact that the part had a problem.”

Gioia thinks that the problems at GM might have been systemic ones. Though individuals make decisions, those decisions are made within an organizational context that heavily influences them, he said.

“These decisions were organizational level decisions,” he said. “There appear to have been willful attempts to put profits above safety. People pick up cues to how things are done, and these people seem to have learned that cost outweighed safety.”

At the macro level, he says, the company must change its culture, starting with a more direct reporting relationship between recall personnel and leadership at the top.

“When you structure an organization in a way that doesn’t give prominence to a department as important as the recall department, it’s prima facie evidence that you don’t really care about safety,” he said. “That’s unacceptable in today’s corporate world."

Though Gioia said current GM CEO Mary Barra is taking the right steps to correct the issues, he is disappointed to have seen an avoidable problem like this appear again among one of the U.S.’ major automakers.

“My experience (at Ford Motor Co.) is now over 40 years old. It was my experience they could and should have learned from. Organizations can learn from their own direct experience, or they can learn vicariously from the experience of others. Everybody should have learned from the Pinto Fires case. My biggest disappointment is that GM apparently didn’t learn as an organization.”

At Smeal, Gioia ensures that many students have the opportunity to learn from his experience at Ford. Over his many years at Penn State, he has spoken to numerous classes at both the undergraduate and graduate levels, leading students in frank discussions about the circumstances surrounding the Pinto case.

Gioia stresses how crucial it is for students to develop a core set of values early in their careers and to prepare to have courage when faced with even subtle challenges to those values.

In addition to his corporate experience with Ford, Gioia has also worked as an engineer for Boeing Aerospace at Cape Kennedy during the Apollo/Saturn lunar program. He joined the Smeal faculty in 1979 and currently teaches in the Penn State Smeal MBA Program and the Smeal Executive MBA Program. His research focuses on cognitive processes in organizations; change processes; corporate recalls; and organizational identity, image and reputation.

(Media Contacts)

Last Updated July 21, 2014