Posts Tagged ‘Gioia’

Toyota Maneuvers

Thursday, January 28th, 2010

“In a stunning and unprecedented move, Toyota Motor Corp. on Tuesday halted sales of most of its popular models in the U.S. in response to growing concerns that possible defects may cause the vehicles to accelerate unintentionally,” The Wall Street Journal reports. The paper is also questioning whether the world’s No. 1 automaker “has sacrificed quality in its quest to capture global market share.”

Smeal’s Dennis Gioia, chair of the college’s Department of Management and Organization, weighs in below on the recall and its possible effect on Toyota’s reputation for safety. Prior to joining Smeal, in the 1970s, Gioia served as corporate recall coordinator for Ford Motor Co. and was initially in charge of the infamous Ford Pinto fires case, which resulted in a recall of the vehicles because of exploding gas tanks during rear-end collisions and an eventual indictment of Ford in 1980 on charges of reckless homicide.

Here’s Gioia’s take on the Toyota recall up to this point:

It seems like Toyota is making a good move in halting production. The problem is bad enough to justify it and Toyota seems to have been caught in the uncomfortable position of having a huge number of vehicles with similar, dangerous problems (floor mats trapping gas pedals open and now gas pedals that stick open). It seems apparent that this latest one is the more serious engineering problem. The most embarrassing part of this whole thing is that Toyota didn’t initiate the recall of their own volition. The U.S government forced the issue, which makes Toyota look even worse.

Of course, these days, any crisis manager will tell you that the prudent course of action is to “get out in front of the problem,” but it’s a little late for that now; so the company needs not only to fix the problem, but also appear to be dealing with it in an extraordinary fashion. Toyota leadership must know it’s serious and wide-ranging because you don’t shut down production lines solely for PR reasons. Shutting down lines does convey the sense of responsibility, however, and also gives them time to stop producing flawed vehicles that are going to cost a small fortune to fix once they are in the field. Not doing so would only magnify their problem.

Will this mess hurt? Oh,yes, financially and reputationally. Will it cause long-term damage? Maybe. Toyota finally has serious competition in the international market (Hyundai—see the latest Fortune magazine), so they can see the future from here and it looks much more problematic than the past. In addition, you can bet that other manufacturers are going to make hay with this one. Of even greater consequence is the perception that Toyota is the poster boy for Japanese quality, more generally, so when Toyota suffers, other Japanese companies could suffer, as well.  Furthermore, many observers seem to think that this problem is a consequence of Toyota’s ambition to be No. 1 in vehicle sales, and that to achieve that goal they sacrificed quality for volume. That’s not a desirable perception for potential customers to have.

What’s really ironic is that Toyota has enjoyed a reputation as a very quality-oriented, safety-conscious, and responsive company. I remember them recalling cars in the early ’70s  because one customer (one customer!) had a Coke bottle fall off of an under-dash tray and lodge behind the gas pedal—a true freak occurrence, but Toyota responded by recalling all affected cars and won big points in the public eye. Now their eyes are blackened a bit and they are trying to avoid adding to an increasing reputation for arrogance, ambition, and imperiousness because they have had such profitability that they can ignore complaints. Not this one. This one will hurt at a time when they can least afford it.

Tags: Auto Industry, Gioia, Management
Posted in News | 25 Comments

Stakeholders More Than Shareholders

Monday, March 16th, 2009

The current economic crisis may be traceable back to America’s business schools and the way they teach their students, according to an article in yesterday’s New York Times, which asks “Is It Time to Retrain Business Schools?” Among the article’s critiques of the modern business school is the argument “that schools give students a limited and distorted view of their role—that they graduate with a focus on maximizing shareholder value and only a limited understanding of ethical and social considerations essential to business leadership.”

Smeal’s Dennis Gioia echoes this concern in his 2003 article “Teaching Teachers to Teach Corporate Governance Differently,” which appeared in the Journal of Management and Governance. Gioia argues that businesses today have a multitude of stakeholders beyond merely shareholders, and that business schools should be teaching tomorrow’s business leaders that they should be looking out for the best interests of all of them.

Gioia writes:

I am not arguing that owner interests are not the prime interests of the managers and governors of business organizations. Generally, shareholder interests have priority. It would not be credible to suggest that owner interests typically should queue up with a long line of other equal claimants. I am arguing, however, that shareholder interests are never the only interests. The ever-rising influence of modern business on the welfare of society is too great to continue believing that we have but one stakeholder that invariably matters above all others.

… In our more challenging role as change agents, [business school faculty] need to account for the significant social and economic changes that have occurred in the last 50 years. Perhaps the most pronounced (if little noticed) of these is that modern industrial societies are no longer mainly societies of individuals; we are now predominantly societies of powerful organizations—most obviously, business organizations. When any element of society achieves the kind of dominant influence that modern business has, their influence comes with commensurate responsibilities toward the societies of which they are such key constituents. In today’s environment of heightened sensitivity to business scandal, it is perhaps the best possible time to question the degree to which we invoke a property rights perspective and to (re)examine the assumptions regarding how we teach corporate leadership and governance. It is also an especially good time to (re)evaluate how we account for social responsibility in our hoped-for new paradigms of corporate governance.

Tags: Business Education, Economic Crisis, Gioia
Posted in News | 1 Comment