GM failed to install a part for its ignition switch and the result was as many as 29 fatalities, millions of recalls, a testy appearance by GM’s CEO, Mary Barra, before Congress on April 2, and other unfavorable consequences. The cost of the component is between $2 and $5; the cost to GM to address the claims of victims’ families and the recall of 2.6 million vehicles (6.3 million globally) will run in the billions.
Criminal charges may be filed against some GM personnel (the engineers knew of the faulty ignition switch more than a decade ago). And the cost to GM’s reputation and future sales is uncertain.
What can small business owners learn from this mess?
- Pay attention to complaints. While there’s always some customer who’ll complain about nothing, usually there is a solid basis for customer grips. Follow what’s being said about your company in social media to discover potential problems. Take phone calls from disgruntled customers. Read your email and snail mail complaints.
- Acknowledge problems as quickly as they are discovered. The longer you wait to fess up and fix the problem, the more ancillary problems (e.g., difficulties with customer retention and marketing to new customers) there are. And the cost for fixing the problem can, like credit card debt, skyrocket beyond the initial cost of a simple fix (as GM found out).
- Spend the money to correct problems the right way. Don’t try to shortcut a resolution. Customers (at least the reasonable ones) know that errors are made; they just want things fixed, and in the right way.
- Discover how the problem arose. Dig deep to uncover your practices that led to the problem. In this way you can change your practices and, hopefully, avoid similar problems arising in the future.