Today’s quotation:

“There are two mistakes you can make along the road to truth — not going all the way, and not starting.” Buddha

The Ford Pinto and corporate culture

At the turn of the 1970s, the top brass at Ford set out to come up with a car that weighed less than 2,000 pounds and cost less than $2,000. Their answer turned out to be the Pinto, a sporty little thing with just one problem: in rear-end collisions, its gas tank had an unfortunate habit of exploding.

That fault would eventually make the Pinto one of the most notorious cars in history but no-one at the time dared report it to the company’s formidable CEO. “Hell, no” claimed one Ford engineer. “That person would have been fired.” As the cigar chomping boss Lee Iacocca was fond of declaring: “Safety doesn’t sell.”

Rather than repair the flaw, at the likely cost of about $11 a vehicle and probable heap of damning publicity, executives reportedly decided it would be cheaper simply to pay off any lawsuits. But in time, 27 people died in Pinto fires and by 1978 Ford had recalled 1.5m cars.

Think of the ingredients that went into the Pinto debacle. Fearsome management. A workforce who, it is claimed, understood that safety took lower priority. Among Ford’s managers, lawyers, designers and engineers there might have been some rotten people. But for this completely avoidable disaster to have reached such huge dimensions, there had to be more: a blinkered corporate culture that apparently encouraged staff to behave unethically and to turn a blind eye to the tragic consequences.

The cases involving the explosion of Ford Pintos due to a defective fuel system design led to the debate of many issues, most centring around the use by Ford of a cost-benefit analysis and the ethics surrounding its decision not to upgrade the fuel system based on this analysis.

Should a risk/benefit analysis be used in situations where a defect in design or manufacturing could lead to death or seriously bodily harm, such as in the Ford Pinto situation?

Although Ford had access to a new design which would decrease the possibility of the Ford Pinto from exploding, the company chose not to implement the design, at a cost of $11 per car, even though it had done an analysis showing that the new design would result in 180 less deaths. The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit.

Based on the numbers Ford used, the cost would have been $137 million versus the $49.5million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change.

There are several reasons why such a strictly economic theory should not be used. Simple public relations examples such as Perrier and Toyota have demonstrated the damage of not responding quickly. Eventually, Ford suffered significantly from negative publicity and the judgements and settlements resulting from the lawsuits

More importantly, it seems unethical to determine that people should be allowed to die or be seriously injured because it would cost too much to prevent it. Secondly, such analysis does not take into all the consequences. Also, some things just can’t be measured in terms of dollars, and that includes human life.

In a new book called “Blind Spots”, authors Max Bazerman and Ann Tenbrunsel look at how businesses from Ford to Enron to subprime mortgages can end up in ethical disaster.

They describe a process of “ethical fading” in businesses where maximising returns is encouraged over fairness to fellow employees and customers. The result is that right and wrong go out of the window.

How does this come about and how can it be prevented?

Leadership is a key responsibility of the board of directors, and also senior management. They set the standards by their own behaviour.

First thing is to adopt and promote a set of values; next to interpret them into behaviours and ensure that good behaviours are supported and bad ones are discouraged.

I tell my clients that a values statement is not worthwhile unless it is, or at least could be, used against management.

Values statements should be so ingrained that when an instruction or a decision appears to be inconsistent with the promulgated values, an employee should feel able to challenge it.

Next, is needed a formal and accepted complaints or whistle blowing system. So often, we hear of whistle blowers who are not only hounded out of their organisation but often also blacklisted within their industry.

And yet, they should be the safety valve that protects an organisation from internal rot. In a healthy culture whistle blowing would be welcomed, and would then become unnecessary. A means of ensuring this is to have a formal system by which individuals can contact a senior officer in confidence and independent of their line management structure.

What is the role of a coach in this context?

When coaching directors or senior executives, to challenge them on their attitude to corporate values and individuals who challenge them. When coaching individuals who are concerned about inappropriate behaviour, to coach them in assertiveness and to help them to consider their options and risks; then to develop a strategy.

Corporate rot starts with small actions that are tolerated, and like any other form of rot, clearing it up once it has become established is more expensive than attacking it immediately. It is in everybody’s interests to ensure that organisations have processes for both prevention and early action..

Today’s quotation:

“The minute you begin to do what you want to do, it’s a different kind of life.” Buckminster Fuller

What should you not do?

Many years ago I was a director of a small engineering company developing an innovative public transport system.

The company and the product had been created by an inventor.

Unfortunately, although he was indeed a talented inventor and a competent engineer, he fancied himself as chief executive. This was not his strength and the company suffered for it.

One of my heroes is Alec Issigonis, the creator of the Mini car. He was in a similar position but had the wisdom to refuse to join the Austin Morris management hierarchy – and the world has benefited as a result.

I could also be in such a position, having successfully developed and delivered programmes for teaching coaching and corporate governance/director development.

There has been plenty of good feedback about the structure of the programmes. Structure is my strength.

The question I have asked is, “Could this be delivered without me?” The delegates definitely benefited from the depth of my understanding of the theory beneath it.

However, my next question was, “Should this be delivered by me?”

I love teaching but there are others who are naturally better at it than I am. I believe that I am particularly good at facilitation and that this is because of my ability to structure the process.

But, whereas structure in facilitation is dynamic and must be held in my head throughout an event, the structure of a workshop is held in the trainer’s notes and the delegates workbooks.

There is value in keeping hands-on experience but for many managers and entrepreneurs there is danger of holding on too tightly to that which we know best. This is not necessarily the best use of talent, and it can limit progress and frustrate the development of other staff.

Today’s quotation:

“There is nothing about a caterpillar that tells you it’s going to be a butterfly.” Buckminster Fuller

Today’s quotation:

“Children are our elders in Universe time.“   Buckminster Fuller

Today’s quotation

‎”I don’t know the key to success, but the key to failure is trying to please everybody.” Bill Cosby

Repeated actions create character

When I met Deepak Chopra some years ago he told us about happiness. Apparently, we are programmed to naturally complain, or to see opportunities.

50% of this programming is determined in the first three years of life, though it can be changed with time and application.

The other 50% is more directly under our own control. It depends on our conditions for living – do we have enough, or, rather, do we believe that we have enough?

What voluntary choices do we make; how do we obtain personal pleasure; how do we achieve meaning and fulfilment; what is our purpose; how do we express our creativity?

He suggested that we could increase our sense of community by attending organised events, connecting with people with shared passions and volunteering for four hours a week.

Later I listened to a Buddhist talking about karma. We create our own karma, he said. An act can become a habit. Habit can form character and character influences destiny.

So, start with small changes …

Today’s quotation:

“Perfection can be a fetish” Bernard Leach

Directors: Delegate authority to managers

You can be a director and a manager in the same organisation.

It is really important to recognise that these are different roles: you must act as two different people.

If you are a director and not a manager in the same organisation, then you have to understand the boundaries between the board and the management.

Directors direct – and managers manage!

Nonetheless, the board is responsible for the management’s actions and performance.

The board remains responsible for overall governance. This includes ensuring senior management establish and maintain adequate systems of risk management and that the level of capital held is consistent with the risk profile of the organisation.

So, the board needs to have a clear strategy of what to delegate to management and how to monitor and evaluate the implementation of policies, strategies and business plans.

The responsibility to act and decide upon matters for action in between meetings of the board may be delegated to an executive committee.

In general the board will delegate the management of the organisation to the Chief Executive Officer (CEO) or Managing Director (MD).

The CEO/MD is responsible for delivering services according to the strategic plan, within the policies and budgets approved by the board. A team of managers oversee the day-to-day operations of the organisation under the general direction of the CEO/MD.

Delegation to the CEO/MD

Here is an example of a board delegating authority to the CEO/MD over the day to day management of the company, its subsidiaries and their respective operations. This delegation of authority includes responsibility for:

  • developing business plans, budgets and company strategies for consideration by the board and, to the extent approved by the board, implementing these plans, budgets and strategies;
  • identifying and managing operational risks on a daily basis and, where those risks could have a material impact on the company’s businesses, formulating strategies for managing these risks for consideration by board;
  • managing the company’s current financial and other reporting mechanisms as well as its control and monitoring systems to ensure that these mechanisms and systems capture all relevant material information on a timely basis and are functioning effectively;
  • ensuring that the board and its various committees are provided with sufficient information on a timely basis in regard to the company’s business and, in particular, with respect to the company’s performance, financial condition, operating results and prospects, to enable the board and those committees to fulfil their governance responsibilities; and
  • implementing the policies, processes and codes of conduct approved by the board.

Corporate governance

Does your organisation have a clear strategy for delegating authority to management, including reports and measurements that enable the board to monitor performance?

  • Measures are complementary to and consistent with management’s planning and control systems and undertaken in a manner likely to engender managers’ commitment and support?
  • Reports and board reviews cover at least profitability, cash flow, investment and risk?
  • Focuses on causes and consequences of important variances between planned and actual performance?
  • Reports are able to provide early warnings of major risks and notice of changes to the external environment?
  • Reports are presented in time for directors to respond and for the board to ensure corrective actions are taken?
  • The board monitors management’s ability and performance in anticipating, identifying and responding to strategic change?
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