The GM recall is an astounding tale of one preventable mistake after another. Time and again, there were problems with automobile parts that people in the company knew about, but executives and managers reportedly never heard a word until the issues snowballed. That lack of knowledge turned into the recall of nearly every vehicle model the company makes: almost twenty-nine million units worldwide. The GM recall roster will cost $2.5 billion in the first half of 2014 alone, according to company estimates.
Big companies aren't the only ones that can face recall problems. Graco Children's Products has recalled 6.1 million car seats this year. In 2010, the company had to recall two million strollers after four infants died of strangulation. The situation raises the question: Were executives and managers told of these problems early on, or as at GM, did people hide bad news from the bosses?
Making sure that bad news reaches your ears is more critical to a middle market company than a larger one. Middle market companies are more dependent on employees because they lack the same degree of automation and sophisticated processes. There is less of a chance that executives will receive warning from computerized systems (although relying on computers has its limits, as GM showed).
Employees are your first line of defense and likely the only ones who know when a problem is beginning to brew. Here are some steps to get people to tell you what's going on before it's too late.
Don't Shoot the Messenger
It's not uncommon for executives and managers to foster an atmosphere of positivity, but this can create a damaging dislike of receiving bad news. According to middle market CEO coach Robert Sher, "one of the major underlying causes of founder firings is their loss of the ability to accurately gauge their environment because they hurt those who bring them bad news." Intentionally or not, they shoot the messenger.
There is such a thing as too much positivity, and it's important to find a balance of emotion and to be aware that people with issues and criticism concerning the company aren't out to cause more problems. Bad news should be seen as something that must be addressed in order to make an organization stronger. Bearers of bad news are more likely trying to help than hurt, and they should be treated with goodwill. Those who want to undermine your firm would be more likely to hide problems from you.
Remember that your attitude is everything. You must act in a way so that people know bringing bad news to you is not an automatic road to termination.
Show That You Want to Hear the Whole Story
Employees often assume that supervisors and bosses don't want to hear the truth, so you have to prove that you want to hear both the good and the bad. Publicly praise people who uncover weaknesses that can be improved. Consider an incentive system that takes into account finding problems and presenting workable solutions. Under no circumstances should you allow yourself to show anger or displeasure at the messenger, let alone hand out blame or punishment. If you do, you ensure that no one will want to be truthful with you.
Keep Some Candid People Close
One of Sher's suggestions is to develop a few trusted loyal team members. "These stalwarts bring back ground-level intelligence on morale, employee perceptions, and at the board level, allegiances and voting plans," he explains. Over time, you can consider everything these confidants tell you and determine if it is accurate. You need both honesty and a keen eye at your side.
Use Your Executive Intuition
It's imperative to develop a sense of when you're being protected from unpleasant news. There are always problems in business, and one of the main tasks of management is to find and correct them. When everything sounds too good to be true, it probably is.
What level of transparency should executives use when communicating to employees about bad news? Let us know what you think by commenting below.
Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.