ANALYZING CRISIS/REPUTATION MANAGEMENT 7
Analyzingthe crisis and reputation management of General Motors
GoodCorporate social responsibility and ethics are important aspects ofeffective businesses. Corporate firms have great opportunities tobenefit from by integrating high standards of ethics. Lack of socialresponsibility and business ethics have adverse effect on company’sreputation this makes business less appealing to its stakeholders.Therefore, corporations need to strike a balance between socialresponsibility and the firm’s interests in order to have anappealing face in the society. This paper presents an analysis ofGeneral Motor crisis resulting from the customers’ dissatisfactionwith the firm’s defective cars.
Anoverview of the crisis at General motors
GeneralMotors Corporation has been going through wide range of institutionaland market crisis in the recent years. In particular, the car makercar maker has been unable to design vehicles that suit market demandwhich has led to low sales in the market. In addition, the firm has apoorly organized business strategy which has lowered its marketinfluence. These internal problems coupled with global financialcrisis led to diminishing revenues and overall operation costs forthe firm. The most recent crisis has been recalling of nearly 12million small cars after great complaints from clients locally andabroad due to their cars’ defective ignition keys. As a result, thecorporation suffered negative reputation in the market which couldhave been detrimental for the firm’s future business operations.Closer assessment of these problems indicates elements of poormanagement of corporate affairs by the leadership. The reputationsuccess of effective business rests on its business ethic by ensuringthat business operations do not results to customer dissatisfaction(Prime Point Public Relations. 2002). The company is facing multiplelaw suits for approving faulty cars in the market without anyattempts to fix the problem soon as they were discovered this led tocar accidents causing grievous injuries and deaths on some clients.These issues indicate that, the corporation deviated from theacceptable standards of business ethics in customer satisfaction. Assuch, General Motors need to devise approaches of managing the crisisto regain trust and reputation among clients (Danielleet al,2014).
StrategicCrisis and Reputation management
Corporatereputation is an essential aspect of attracting and retainingcustomers as well as other stakeholders. Therefore, businessreputation need to be protected through integration of effectivecorporate governance, high standard of business ethics and adaptingto relevant government legal obligations. Reputation is hard to buildespecially among stakeholders and therefore, effective crisismanagement is essential in redeeming the lost corporate image. Inaddition, effective crisis management and implementation of strategicplans promotes customer satisfaction by addressing their concerns ontime. In order to regain its corporate glory and improve its revenue,the management of General Motors needs to adopt a clear businessstrategy and a restructuring plan on its organization structure. Thiscould be achieved through integrating effective governance, highstandards of business ethics with government regulations (Danielleet al,2014).
Inaddition, the top leadership at General Motors needs to provideadequate leadership for solving issues and monitoring ethicalcorporate culture. The corporation needs to develop shared vision andgood relationships with the stakeholders in order to promoteeffective implementation of critical decisions regarding the company.The company should desist from distributing and manufacturingproducts that have not been fully examined, as a way of regaining itsreputation in the market this will protect the business frommarketing fraud which negatively impacts on the clients trust in thecompany’s products.
Similarly,the company needs to be responsible by promoting legal and ethicalconducts within its business operations as a way of promoting itsreputation. This could be achieved through communicating the ethicaland legal values of the firm’s culture, history, industry andoperating environment to the relevant stakeholders. When such ethicalprograms are integrated in the organization they createpredictability of employees’ behavior and increases stakeholderstrust with the company’s leadership (Danielleet al,2014).
Standardsof business operations and activities should be explicit and based onresponsibility (Prime Point Public Relations, 2002). Fairness,trustworthiness and respect for all stake holders in the market. Thecurrent reputation crisis at GM needs to be addressed throughspecific corporate measures that will enhance organizing thecompany’s identity, image, performance and reputation in line withcustomers’ needs. This means reassessing the corporate culture,identifying stakeholders’ issues, assessing the firm’s commitmentto social responsibility and identifying available resources foraddressing arising issues. It is important to assess and understandclients’ needs in order to keep in touch with prevailing trends inthe environment which could affect the firm’s corporate socialresponsibility (Danielleet al,2014).
Duringa congressional testimony, the new CEO at General Motors admittedthat the firm had taken long in recalling the defective cars forfixing this revelation illustrates inadequate corporate socialresponsibility and ineffective ethical program by the company. Thefirm’s failure to convey critical information to governmentregulators on defective cars, breached several business operationrequirements. One is that, the corporation failed to adhere togovernment regulation requirements and corporate socialresponsibility. Government regulations on corporate firms areessential in promoting the reputation of a firm as well as protectingconsumers from unethical business practices. Therefore, if theallegations that GM failed to submit important information needed forrecalling faulty cars, this needed government intervention to preventundesirable effects in the society. It is important for corporationsto understand national and international laws governing businessoperations (Binneman, 2002b).
Governmentregulations are important for businesses and the society in ensuringsafer products and environment. However, General Motor Company agreedto compensate families of the affected individuals this is a strongpillar of regaining corporate reputation and indicating corporatesocial responsibility. In effective business organizations, there isneed for consistent implementation of business strategies and ethicsto reduce chances of employees making unethical decisions. During acongressional testimony, the new GM CEO, Barra agreed that, theautomakers engineer had contravened his professional oath throughnegligence leading to faulty switches that led to fatal accidentsthis was a serious unethical business practice. The corporation needsto establish and continuously improve its ethical program foremployees in order to have a shared vision of corporateresponsibility and creating trust among the company’s stakeholders(Prime Point Public Relations. 2002).
Furthermore,the corporation needs to improve its organizational culture bycreating an ethical environment which ensures effectiveimplementation of corporate policies, moral conduct of workers andtop managers in order to create an effective corporate image. Inaddition, the organization needs to educate it staffs onorganizations policies, relevant laws, expectations, regulations andsocial standards. During the testimony at the congress, Barra agreedto carry out investigations on why the automaker took long in fixingthe faulty switches. Governments have moral and legal grounds toinstitute heavy fines on corporations that fail to implement ethicalprograms for safeguarding the society. General Motor Corporationshould have been fined for breaching several corporate ethical issuesand failing to comply with federal regulatory agency directive insubmitting critical information for recalling faulty cars(Danielle et al,2014).
Corporatefirms have great opportunities to reap from by integrating highstandard and sensitivity social and ethical concerns. Lack of socialresponsibility and business ethics negatively impacts on company’sreputation and make the firm less appealing to its stakeholders.General Motors Company needs to restructure its corporate managementin line with legal requirements, social responsibility and businessethics in order to regain its corporate reputation. The automakershould balance the interests of stakeholders with those of social andlegal obligations. This is important for business survival incompetitive markets. Furthermore, the corporation needs to haveadequate internal controls and risk management systems that areeffective in promoting positive corporate image (Bernstein, 2002a).
Bernstein,J. 2002a. ‘Crisismanagement and the law’.Available at www.bernsteincom.com/docs/gemplers020927.html.
Binneman,D. 2002b. ‘Analysis:Protecting organizational reputation: Your role!’EthicalCorporationMagazine.Internet Resource, Available athttp://ethicalcorp.com/NewsTemplate.asp?IDNum=275.
PrimePoint Public Relations. 2002. ‘Managingthe reputation — an interview with Deon Binneman’.Internet Resource, Available atwww.prpoint.com/INTERVIEWS/VOL_7_2002-deon%20binneman.htm
DanielleIvory,RebeccaR. RuizAnd BillVlasicapril,2014, ‘SendingAlerts Instead, G.M. Delayed Car Recalls’TheNew York Times Company, Internet Resource,http://www.nytimes.com/2014/04/20/business/sending-alerts-gm-delayed-recall-of-cars.html?_r=0