Ignition debacle shows willful blindness at GM

Commentary:

Now that there's increasing evidence to suggest that both GM and the National Highway Traffic Safety Administration ignored or dismissed warnings about the Chevrolet Cobalt's faulty ignition, the natural question to ask is, why didn't anyone say anything? That questions must be uppermost in the minds of the House subcommittee that will meet later this week to investigate the crashes.

We should no longer be amazed that, when companies go wrong, it often turns out that lots of people knew about the problems but did and said nothing. We saw it at Bear Stearns, when leaders at the investment bank resisted efforts before the housing crash to quantify the bank's mortgage risks. We saw it at Barclays, where the manipulation of LIBOR happened out in the open. We saw it perhaps first when Enron employees openly and jubilantly manipulated oil prices and misstated company accounts.

In fact, most of the biggest commercial and political catastrophes occur because of events that are not secret and hidden, but rather are studiously ignored while laying out in the open. In the trial of Enron's then chairman and CEO, Kenneth Lay and Jeff Skilling, Judge Simeon Lake cited the legal doctrine of willful blindness, which maintains that if there's knowledge you could and should have, but somehow manage not to have, the law deems that you have chosen ignorance. Whether or not the top bosses at GM knew about the faults in their cars, they should have and they could have known; instead, they were willfully blind.

How this happens within an organization is complex. Employees take their cues from those around them. If no one is talking about a problem, then no one will raise it. That conformity is often exacerbated by obedience -- doing what you're told, and only what you're. Add in the "bystander effect" -- the psychological rule that says that the more people who witness something going wrong, the less likely it is that anyone will intervene -- and it's pretty much guaranteed that mistakes will be ignored. And if you have a highly competitive, driven organization, where multitasking and fatigue are normal, few will have the cognitive capacity, never mind the moral will, to do anything.

Since I wrote my book "Willful Blindness," examples have been legion: from banks, from media companies, from oil and gas businesses. The problem is pervasive and now well understood. Less well understood are the means of redress. How do we build businesses where problems are signaled early and often? Where, instead of a few whistleblowers, the whole company feels compelled to safeguard its standards and principles?

It's easy to say this is a function of leadership, but it is. One of the prime responsibilities of any leader is to create the environment in which every single participant feels safe - safe to ask questions, to raise concerns, to point out flaws, difficulties, problems. Whistleblowers, after all, rarely start as natural dissidents. They become so after their serious intentions are spurned, ignored or punished. A useful first step is to ensure that those with the moral courage to voice concerns are embraced as any company's or organization's early warning systems.

That there appear not to have been whistleblowers inside GM, or at the National Highway Transportation Safety Administration, is a bad sign. Did no one in GM care enough to take the risk? Did nobody at the NHTSA care about drivers and their passengers? After the congressional hearings are done, that is the No. 1 leadership problem that CEO Mary Barra and acting NHTSA administrator David Friedman must urgently confront.