The New Chrysler...is it new enough?

US auto OEMs breathed a collective sigh of relief on Oct 10…Chrysler and UAW officials announced a tentative national labor agreement, which hinges on a similar trick as the UAW agreement with GM ratified that same day: an independent retiree healthcare trust. Finally, the US OEMs are unwinding some of the sins of the father and leveling the cost equation for competing with the rest of the auto industry. (It’s interesting to me that the OEMs blame the UAW for the cost differential, when it’s their own executives who naively agreed to the costly concessions back in the day…but, that’s another topic for another entry.)

I’m on the edge of my seat. Better aligning the cost structure does remove some of the impediment for the US OEMs, but it doesn’t resolve the more glaring issue: designing and launching vehicles that people want to buy.

Of the Big Three, Chrysler bills themselves as the most customer focused (that's not saying much...). And, they’ve certainly made some significant structural changes that could reinforce their ability to apply “laser-like” focus on customers, as their new Chairman and CEO Bob Nardelli suggests.

Those structural changes began with the August 3, 2007 purchase of a majority stake by Cerberus Capital Management. Taking Chrysler private creates a real opportunity for management to focus on long term decisions about customer value and releases some of the shackles imposed by Sarbanes-Oxley. Breathing room is a valuable thing in such desperate times.

On August 6, The New Chrysler was officially launched. Despite the obvious propaganda (who cares about the revamped logo or a new corporate ad campaign), this marks an important shift in the winds of change at Chrysler. Equipped with new executive leadership, most notably Mr. Nardelli and Jim Press (from Toyota) as Vice Chair and President, and new private ownership, Chrysler is the first of the Big Three to invoke a big shakeup.

However, I question just how much more customer focused Chrysler will become and whether they can translate this renewed interest in consumers into value for the company. Toyota doesn’t really have a legacy for customer focus, so I’m not sure what Press brings to the table here. And, between his long career at GE and his brief stint at Home Depot, I’m not convinced that Nardelli has it figured out, either.

Even more telling, key posts deeper in the organization don’t provide signs of hope either. Five of the top executives that relate to designing cars people want to buy have been with the Company for at least 20 years each…that does not bode well when transformational change is on the agenda. Those posts – SVP of Design, VP of Global Product Marketing, VP of Advanced Vehicle Engineering, EVP of Product Development and VP of Product Development for Core Components and Processes – are where the rubber meets the road, so to speak, with respect to designing vehicles that people want to buy. And, with such long tenures in the old Chrysler, I have serious doubts about their abilities to orchestrate the massive changes required to achieve success.

The bottom line is that I agree with the New Chrysler’s Strategy of recapturing customer focus, but I’m concerned that this legacy-Structure-under-new-leadership-and-ownership will be incapable of successful Execution.

Wal-Mart Misses The Boat With Employee Recognition

On December 4, The New York Times published an article about Wal-Mart’s plans to increase employee recognition. (“With a Shirt and Discounts, Wal-Mart Says Thank You to Workers” by Michael Barbaro and Steven Greenhouse) It seems that Wal-Mart has decided to polish its tainted image by showing more appreciation for its 1.3 million workers in the US. Promising increased access to managers, increased discounts and reduced healthcare premiums during the holidays, the “Associates Out in Front” program made its debut.

Now, don’t get me wrong, I’m all for employee recognition. If you’ve read any of my previous writings, or my website, you’ll recall emphasis on optimizing Structure to create value for employees. In my opinion, employee rewards and recognition are a key component of the Structure of a business. That being said, optimizing Structure requires a solid understanding of a business’s Strategy and its existing strengths and weaknesses.

It is mind boggling to me that Wal-Mart’s employee incentive program could have missed the boat so miserably – at least on one point: personalized golf shirts after 20 years of service. Wal-Mart’s employee turnover is approximately 44%. (I gleaned this tidbit from a timely article in the December issue of Harvard Business Review, “The High Cost of Low Wages” by Wayne Cascio.) So, with the average employee working at Wal-Mart for less than 2.5 years, exactly who do executives think they are motivating with a golf shirt after 20 years of service?

Clearly, the powers that be at Wal-Mart have neglected to notice that workforce trends are changing. Today’s employees change jobs relatively frequently, voting with their feet in the constant quest for the perfect job. Long gone are the days of lifetime employment, expected by employees and promised by employers…At least in those days 30 years earned you a gold watch and a retirement party.

Wal-Mart would be much better served to establish modest, yet meaningful rewards at much smaller milestones: 3 years, 5 years, etc. This would create an attainable recognition for employees and demonstrate that Wal-Mart executives both value and understand their employees.