{"id":3789,"date":"2015-06-11T06:53:13","date_gmt":"2015-06-11T06:53:13","guid":{"rendered":"http:\/\/www.lifeandnews.com\/articles\/?p=3789"},"modified":"2016-08-29T20:00:11","modified_gmt":"2016-08-29T20:00:11","slug":"why-automakers-so-frequently-botch-product-recalls","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/why-automakers-so-frequently-botch-product-recalls\/","title":{"rendered":"Why automakers so frequently botch product recalls"},"content":{"rendered":"

Dennis A. Gioia<\/a>, Pennsylvania State University<\/a><\/em><\/p>\n

There has been a spate of highly visible recalls in recent years that have given a collective black eye to the automotive industry.<\/p>\n

From Toyota\u2019s fumbling<\/a> of the recall concerning its sticky throttles a few years ago, to GM\u2019s more recent mishandling of its ignition-switch problem<\/a>, major car manufacturers look like they only know how to consistently mismanage the critical activity of recalling dangerous vehicles.<\/p>\n

Now it\u2019s Takata\u2019s turn in the unwanted media spotlight, and this time the recall is not just big, it\u2019s huge. The most recent count<\/a> puts the number of vehicles affected by its defective air bags at more than 30 million, marking a new world record for apparent incompetence in managing what many people believe to be any industry\u2019s most important task: protecting public safety. Furthermore, it is going to be a logistical mess that will take years to fix all the affected vehicles<\/p>\n

The dismay is widespread. Many members of the car-driving public are now asking one of journalists\u2019 favorite questions: given the level of presumed ineptitude involved, how could these blatantly bad decisions have happened? Beyond that concern, we have an even bigger question: are these decisions criminal? And if they are criminal, who\u2019s to blame?<\/p>\n

(On that note, the Justice Department just last week raised allegations<\/a> of criminal wrongdoing against GM and some of its executives for failing to disclose its ignition-switch deficiencies in a timely manner.)<\/p>\n

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Reuters<\/span><\/span><\/figcaption><\/figure>\n

Why recalls are slow<\/h2>\n

All these cases come in the wake of Ford\u2019s miserable experience<\/a> failing to recall the Pinto because of exploding gas tanks during rear-end collisions at low speeds almost 40 years ago, and this question is a latent concern of all current executives. Remember, Ford as a corporate entity \u2013 not the individual decision makers within the company \u2013 was charged<\/a> with a crime. And the crime was not negligence, it was murder (in an accident involving three teenagers who burned to death in a 1978 accident in Indiana).<\/p>\n

As a former insider who worked as corporate recall coordinator for Ford during the time of the Pinto problem \u2013 and now a management professor at Penn State University who uses the case in his MBA teaching \u2013 I might have some insight into the factors that lead companies to make decisions that the engineers and executives see as complex and rational<\/a>, but the public sees as simple and criminal.<\/p>\n

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Executives from Takata and several automakers were in the line of fire of House lawmakers in December.<\/span>
\nReuters<\/span><\/span><\/figcaption><\/figure>\n

Question #1 is: in each of these cases, why did the companies wait so long to acknowledge that there was a problem and initiate a recall?<\/p>\n

Frankly, I sympathize with the corporate decision makers on this one. To me, the key issue is one of deciding when to pull the trigger and recommend recall. In my case, I was tracking a myriad of possible problems that might qualify for recall.<\/p>\n

To initiate a recall I had to have two things: 1) traceable cause (I had to know that some specific component was breaking), and 2) a demonstrable pattern of failures. In most cases I had one or the other, but not both. In some cases I had neither.<\/p>\n

What\u2019s a person to do? Recommend recall when you don\u2019t know what\u2019s failing? Not very likely. Recommend recall when you don\u2019t have convincing evidence of a pattern? I don\u2019t think so.<\/p>\n

The academic decision-making literature gives us some help on questions about decisions under risk (uncertainty), but not a lot of help on decisions under complexity and ambiguity (where information is either vague or subject to multiple opinions about the most effective course of action). Yet everybody knows executives are paid to make decisions under both these conditions.<\/p>\n

It\u2019s not easy, and everyone and every corporation can be accused of having had prior knowledge of a problem. The real question is how much knowledge is enough knowledge to act?<\/p>\n

Who knows there\u2019s a problem and when<\/h2>\n

Which gives rise to Question #2: who knew?<\/p>\n

In each of the four cases I\u2019ve cited, some engineers allegedly knew<\/a> there was a problem. In 1970, a subset of Ford engineers knew the Pinto would not meet a proposed fuel leakage standard because protruding studs would puncture the gas tank (the recall didn\u2019t happen until after the Indiana incident in 1978).<\/p>\n

As early as 2004, a small group<\/a> of GM engineers suspected that there was a problem with Cobalt ignition switches (the recall was in 2014). In 2006, Toyota engineers became aware<\/a> of customer complaints about \u201cunintended acceleration\u201d (the recall was initiated in late 2009). Now it has come to light that Takata had reports of shrapnel from its air-bag inflators years before a recall that is only now getting under way.<\/p>\n

Who\u2019s at fault here for not pulling the trigger? The corporations? The individuals within the corporation? Well, who is the corporation anyway?<\/p>\n

If a subset of people know of a problem, can the corporation be held culpable? Of course it can. But that consequence raises very interesting theoretical questions about organizations as agents in modern society. (It also raises questions about whether Mitt Romney was indeed correct in asserting that \u201cCorporations are people, my friend,\u201d but that is a different essay.)<\/p>\n

On the campaign trail\u2026<\/figcaption><\/figure>\n

Organizational learning<\/h2>\n

More importantly, perhaps, it raises questions about organizational knowledge and learning.<\/p>\n

Question #3, therefore, is: if some people in an organization know something important, but there are not adequate structures and processes in place to inform the key decision makers, how can we even talk about \u201corganizational\u201d learning?<\/p>\n

Yet, we must. This is one of the most important academic questions of our time. How do we teach organizations how to learn, such that the entire entity acts like a distributed intelligence system? (I should note that Ford took steps in the \u201890s to make the company display the hallmarks of a learning organization)<\/p>\n

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GM was in the spotlight earlier last year after fatalities resulting from faulty ignition switches.<\/span>
\nReuters<\/span><\/span><\/figcaption><\/figure>\n

Dysfunctional cultures<\/h2>\n

Lastly, all of these putatively bad actors (automotive corporations) have had questions raised about their dysfunctional cultures. So, Question #4 is another area of longstanding academic interest, and leads to several other related questions.<\/p>\n