(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)

(Want a PDF version for Entries #1-10, #11-20, #21-30 formatted as an e-book? Entries #31-40 available soon. Click links for download. America’s 5th Revolution Volume I (Entries 1-10), America’s 5th Revolution Volume II (Entries 11-20), America’s 5th Revolution Volume III (Entries 21-30)

Scene: Coffee shop with Jordan and JC. Catching up on recent events. They’ve finished their first cup.

JC: “Thanks for buying my coffee refill. You’re so generous.”
Jordan: “You’re welcome. Next time, you buy…dinner.”
010414_1635_16TeachingS1.jpgJC: “So when you look back at what went wrong at GM, is there one overriding issue that comes to mind?”
Jordan: “Yes. And I am not sure I actually said this to Matt. GM’s downfall started when it stopped being fair.”
JC: “Stopped being fair? Jordan, that seems odd and naïve, especially from you. You want companies to be fair? What planet are you living on?”
Jordan: “Think about it? Do you deal with people or companies you don’t think are fair? They must win and you must lose.”
JC: “Occasionally, we all end up with the short end of the stick. But I try to avoid situations where I am always the loser and getting screwed.”
Jordan: “That’s what I mean. Everyone makes mistakes and not every situation is fair. But people try to stay away from situations where ‘heads I win, tails you lose.'”
win lose JC: “Now give me an example. And not just the car stuff.”
Jordan: “OK. Do you know what COLA means?”
JC: “Cost of living allowance.”
Jordan: “Hey, you’re good.”
JC: “Jordan, most everyone knows what COLA means. So tell me the story, already.”
Jordan: “I don’t remember the exact year…sometime in the early 1980’s…and the economy was in a mild recession. Car sales were down and GM was under pressure to maintain profits. More self-induced pressure but that was the claim.”
captain121217 JC: “And who was captain of the GM ship at the time?”
Jordan: “Roger Smith.”
JC: “Oh, Mister ‘focus-on-cost’ himself. This story should be good.”
Jordan: “So Squeaky decides all salaried people should sacrifice some compensation in order to help earnings.”
JC: “Everyone was to sacrifice? Across the board?”
Jordan: “All salaried employees. And Smith decides the most equitable way is to stop paying COLA. That way no one has to take a salary cut.”
JC: “How is…or was COLA calculated at GM. I know for Social Security, COLA is a percentage of benefits. Everyone gets an increase, say 2-3%. The higher the benefit payment, the higher the amount of the COLA increase. A benefit of $1,000 per month would receive $30 more per month. A base benefit of $2,000 per month would get $60 more per month.”
Jordan: “COLA was different at GM. COLA was not tied to salary amount. COLA was a specific dollar amount. And COLA was paid each quarter, not every month. The amount was linked to the UAW contract.”
JC: “You in the UAW? I mean really. ‘Look for the union label…’ That’s really funny.”
Jordan: “C’mon. By linking COLA for salaried employees to the UAW, GM thought it would deter people from joining the union.”
JC: “So Squeaky…I mean Mr. Smith…decides fair means every salaried person should give up COLA. But COLA for salaried is the same dollar amount, whether the person is chairman of the board or a mail clerk. That seems like a new definition of fair.”
Jordan: “That was Smith’s definition of fair. For Smith, COLA was barely pocket change. For lower-paid staff, eliminating COLA meant a noticeable pay cut.”
JC: “What really troubles me about the story is Smith not understanding what’s fair. If everyone had to give up say 5.0% of salary, then people would not like it…but they might understand…and think its fair. But pocket change to one person and 5.0% to another is not fair. For the lower-paid employees, that might have been grocery money.”
Jordan: “I hear you. Before announcing the plan, I wonder if Smith discussed it with anyone or if he did, if anyone tried to talk him into making it more fair?”
JC: “This story is maddening…and probably all too typical. How do we make sure CEO’s and Boards of Directors of companies become more fair? I’m convinced if POTUS wants to rebuild US manufacturing, there needs to be strong emphasis on companies being as fair as possible.”
Jordan: “Telling stories like the one about taking away COLA is a good start. Everyone…well, most everyone…will understand that was not fair.”
JC: “Here’s another fairness issue. Fast forward to GM post bankruptcy, which is a whole lot more recent. GM starts recalling millions of cars. What was it for… something to do with starting the car?”
Jordan: “The ignition switch.”
JC: “That’s it. What really happened?”
GM-Ignition-recall-2014 Jordan: “Short answer is GM was still run by bean counters. GM saved about $1 per car by not fixing a design flaw in the switch. Then GM spent hundreds of millions, maybe a billion dollars or more, to recall the cars and fix the problem.”
JC: “What about all those people who died?”
Jordan: “When the switch failed, the power to the rest of the car, including the airbags was cut off.”
JC: “How many people died?”
Jordan: “We’ll never know exactly. Initial reports indicated 13 or so…but likely more.”
JC: “That’s awful. Why didn’t they fix the problem?”
Jordan: “I’m not trying to defend any actions by GM. But most people have no idea how complicated an automobile is…and how driver’s abuse it.”
JC: “Stuff happens. I understand that. But what’s not fair is the way GM knew about the problem for 10 years and never fixed it.”
Jordan: “I agree. But the report said the problem was confined to a group, not all of GM.”
JC: “Not fixing a problem is a reflection of corporate culture. And culture starts with the CEO. Worse yet, from what I read, the lawyers were some of the main culprits. Jordan, when you were at GM, was there a culture of burying problems…I don’t mean for 10 years…or BeanCounter even five years. And did a bunch of bean counters and even worse a bunch of lawyers effectively run the company?”
Jordan: “The problem would have been fixed…and quickly.”
JC: “That’s my point. GM ran amok. Why? And, you know why.”
Jordan: “GM management go so focused on trying to generate earnings by controlling cost, it lost sight of why it was in business.”
JC: “And, oh great GM historian, when did that culture begin to change?”
Jordan: “You know when. With the reign of Roger Smith.”
JC: “You know something, Jordan, as much as I agree with your assessment of GM changing starting under Roger Smith, GM was not alone. The United States when thru a similar transition starting at the same time.”
Jordan: “You mean under Ronald Reagan?”
JC: “Yes. Just take a look at some basic economic statistics, especially median household income. We talked about this before. Upper incomes started to gain and lower incomes remained flat. The disparity got worse, and worse and worse. Then the disparity became so great…and so unfair…that people revolted. The unfairness resulted in US having its 5th revolution.”
Charles_Wilson_official_DoD_photo Jordan: “Point well taken. And lesson for the project for POTUS.”
JC: “And the lesson is ‘Why being fair is good for General Motors and good for the country.’ I know, a variation on what Engine Charlie Wilson said but still true.”

 

 

 

 

 

 

 

 

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