Ford’s and GM’s Fortunes Offer Lessons for Internal Audit

American business icons General Motors Corp. (GM) and Ford Motor Co. recently have traveled divergent roads. While GM has seen a resurgence in the past three years, Ford’s weak stock performance of late led to a shake-up in May resulting in the ouster of its CEO. While volatility in the fortunes of automakers has become almost routine, internal auditors can learn valuable lessons from GM’s improving fortunes and the messages coming from Ford’s new leadership.

GM CEO Mary Barra has been credited with transforming the company through her innovative thinking and her commitment to leading a culture change. Less than 10 years from bankruptcy and bailouts, GM has seen a number of highly profitable quarters. But beyond the bottom line, Barra’s efforts to change GM’s dysfunctional and bureaucratic culture is what is being viewed as helping the company step back from the abyss.

“In this area of rapid transformation, you have to have a culture that’s agile,” Barra recently told Fast Company magazine. Recent praise for GM includes descriptions of a new culture that is “decisive, focused, responsive, and responsible.”

Every CAE should embrace the concept. Barra urges creating an agile culture that responds to rapid change. In one sentence, she offers a sound strategy to any profession or organization undergoing rapid transformation. Of course, the challenge is how to get it done.

The same Fast Company article describes a number of initiatives Barra has launched to transform the culture. Most significant for me is that this change of culture is being led by a GM “lifer” who grew up with the corporation. Indeed, her father was a lifer, as well, who put in 35 years as a GM die maker. This should send a message that no one is immune to culture change.

If GM offers an example of culture change driven from the top, Ford’s story suggests how company fortunes can quickly change. Ford was the only one of the “Big Three” U.S. automakers to survive the Great Recession without a government bailout.

However, a corporate culture described by industry media as driven by turf building and backstabbing showed its shortcomings when sales turned south. The scramble to point fingers after first-quarter sales this year​ plummeted by 35 percent over the same quarter in 2016 prompted the change in leadership at Ford.

New CEO Jim Hackett, formerly head of Steelcase, has signaled a strikingly similar tone as Barra. His restructuring of top leadership was designed to foster greater teamwork, accountability, and nimble decision-making. Sound familiar?

A recent CAE Bulletin offered through The IIA’s Audit Executive Center relates three strategic priorities identified by Hackett:

• Execution — Improving Ford’s operations worldwide and make tough decision to address underperforming parts of the business.
• Modernization — Capitalizing on trends such as artificial intelligence, robotics, and 3D printing to unleash innovation and improve efficiency.
• Transformation — Ensuring the company has the right culture, talent, and strategies to meet society’s rapidly changing transportation needs.

Ford and GM have identified key strategies to address similar challenges to those being faced by internal audit as a profession and many internal audit departments more specifically. Changing demands born from dynamic economic and risk factors place internal audit in a storm of rapid change, just like the two legacy automakers are facing.

The simple message is that change is crucial to success. Internal auditors are driven by analyzing risk and providing assurance on risk-mitigation processes and strategies. It should not be surprising that as a group, internal auditors are risk-averse. But we must realize that while change carries a degree of risk, in some cases the status quo may be riskier.

As always, I welcome your comments.