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Bad HR Can Cost You Billions, Just Ask Apple (How ignored HR process vulnerabilities can lead to business catastrophes)

Retention and recruiting were factors in the downfall of Apple’s $10 billion EV car project! Boeing’s missing door catastrophe was also caused by overlooked HR vulnerabilities.

Article Descriptors | Another case of bad HR – Apple’s EV failure – Identifying HR vulnerabilities – 6-minute read

Here We Go Again, First An HR Influenced Catastrophe At Boeing And Now Apple

Right on the heels of my recent article revealing Boeing’s $45 billion catastrophic loss due to bad HR, we now have another example of “bad HR,” this time at Apple. They just announced the closing of their infamous EV car project. The closing of this project must be classified as a” catastrophic failure” because Apple invested 10 years and over $10 billion into it. And in the end, literally, nothing of value could be repurposed or sold.

An analysis by BusinessWeek concluded (in its 3/11/24 issue) that there were three primary contributing factors to the failure. And two of them had HR vulnerabilities at their foundation. The first failure cause was a constantly shifting vision. In this case, the vision problem was not influenced by any HR vulnerabilities. The second failure cause was the team’s inability to solve huge technical problems. And in this case, a vulnerability in HR’s recruiting process was a contributor to the team’s slow problem-solving. The third failure cause was “rampant turnover,” which was unambiguously caused by HR’s flawed retention process 

What Is Bad HR And Why Should We Pay Attention To It?

Because corporate HR almost universally doesn’t accept accountability for any major business failure (more details on HR’s avoidance of accountability can be found here). HR has made no attempt to define or measure its “bad HR” catastrophes.

So, to fill the void, I define “bad HR” as a negative event with two defining elements. The first element is that it incurs catastrophic costs (i.e., the economic losses are in the tens of millions of dollars or if there is a loss of life). The second element is that a neutral evaluator (in this case, BusinessWeek magazine) has determined that at least one of HR’s vulnerabilities.

This is a flawed element in one of the people management processes that HR designs, staffs, and maintains (e.g., recruiting, retention, development, productivity, etc.). That ended up being a major contributor to that catastrophe. 

Action Step when you refuse to accept clear accountability. There is no strategic reason for HR to be on the lookout for major process vulnerabilities and possible catastrophes. And because humans are fundamentally flawed. Unless you start with the assumption that employees will do something wrong, you leave yourself open to these employee flaws becoming the root of a business catastrophe. 


The Specific Retention And Recruiting Vulnerabilities That Hurt The EV Project

Because of Apple’s long history of innovation and success, it is one of the most analyzed corporations on the planet. So it’s not difficult to find research and analysis that reveals Apple’s major people management shortcomings and vulnerabilities. Below you will find my list, which highlights the major retention and recruiting vulnerabilities that contributed to this project’s failure.

Highlighting the major retention vulnerabilities of the team

Some of the team’s most damaging turnover issues included: 

  • There was frequent turnover among project leadership –  over the project’s life, Apple’s EV team has experienced what one analyst called “an executive revolving door.” Under this timeline, the project has had at least four leaders during its 10-year run. And the most damaging case of leadership turnover occurred in 2021 when Doug Field left Apple for the second time. In this case, to take over the electric-vehicle engineering efforts at Ford, a primary competitor. 
  • The retention process couldn’t be powerful without a Chief People Officer – during times of high turnover (the great resignation). No retention efforts are likely to be successful. Unless they are centralized and controlled by a strong HR leader who reports directly to the CEO. So, a contributing factor to Apple’s weak retention efforts is the fact that Apple had no Chief People Officer until 2023. And with the new CPO, Apple also finally shifted corporate wide HR responsibilities (including retention) away from its strange location in the retail division. 
  • Layoffs increased the loss of well-established talent – one analyst noted that the team “hired engineers and designers only to lay them off”. And during a single 2-year period. Apple laid off “120 people, a significant portion of the car project’s headcount”. These layoffs not only hurt team productivity. But, they also caused current and future team members to worry more about their future job security. 
  • Team talent was lost to internal transfers – in addition to having team employees completely depart the company. A significant portion of the team’s mid-level employee losses were internal transfers. Many left the team but not the company. Because when on the team. They were not certain about their career progression because of the ever-changing team leadership and direction. And team members’ overall uncertainty about the future continuation of this project. 

Highlighting the major recruiting vulnerabilities of the team

Three of Apple’s most damaging recruiting problems that impacted team success included: 

  • They hired rejects from Tesla – Apple’s weak recruiting function prevented them from poaching the very best quality talent from each of their competitors. In fact, Elon Musk once publicly commented on their weak recruiting. When he stated, “They have hired people we’ve fired. We always jokingly call Apple the ‘Tesla Graveyard.’ If you don’t make it at Tesla, you go work at Apple.”
  • Recruiting’s failure to supply the team with quality talent limited its ability to solve difficult technology problems – the second-ranked cause for the EV team’s failure was its inability to create workable solutions for each of its significant technology challenges. And those solutions never emerged. Primarily because, despite its brand strength, Apple’s recruiting process simply couldn’t land the high-level quality talent that the team needed to solve its toughest problems. For example, the recruiting team never produced the quality recruits that were needed to reach level 5 self-driving. So, the team never met its autonomous driving goal. 
  • Recruiting internally for the team was also difficult – because Apple had so many exciting and highly visible other projects going on at the same time. The group found it difficult “to find spare engineering talent within the company.” In fact, Apple’s software engineering chief, Craig Federighi, was once forced “to donate personnel to what he considered a vanity project.”


Other Organizations That Have Experienced “Bad HR” Catastrophes

There are, of course, many other examples of when bad HR has contributed to catastrophic failures. They include:

  • Weak recruiting forced The U.S. Army to lower its enlistment standards – recently, it has become apparent that the U.S. Army does not have the recruiting capability to fulfill its annual enlistment quota. So, in order to meet their quota, the Army has been forced to significantly lower its enlistment standards. Those lower standards are likely to result in several negative consequences that could potentially cost billions of dollars. Including a greater need for additional costly training to bring these once considered unqualified recruits up to speed. Having less qualified soldiers will also mean more costly accidents, errors, deaths, and a higher percentage of lost battles.
  • Norfolk Southern Railway needs to examine its people management vulnerabilities – in addition to the infamous East Palestine Ohio train derailment that cost over $800 million. Norfolk Southern has had an average of 163 derailments each year. Although the underlying causes of most derailments aren’t universally the same, employee failure is highly likely to be one of the major contributing causes.
  • United Airlines needs better risk management – United has in a little more than a month. Experienced numerous equipment failures. Including a lost wheel, a missing fuselage panel, a complete technology shutdown, and an engine fire. Just like at Boeing, employee quality control and risk management issues are likely to be contributing human factors that led to these mechanical failures. Of course, when these events occur almost all at the same time. You know it is likely to lose millions in lost passenger revenue and brand value damage.
  • You won’t find bad HR at these benchmark corporations – there are several firms that are continually growing and innovating because of their data-driven HR practices which proactively seek out vulnerabilities. Those corporations that have been found to be worthy of further study and praise include Nvidia, BMW, and Amazon.


Finally, HR Must Accept Accountability For People Management Errors And Then Focus On Risk Management

If HR leadership at a corporation is to completely eliminate catastrophic HR events. There needs to be a shift in the mindset of its leaders and its professional staff. The first required shift is to openly accept full accountability for any errors that might occur in a process that HR designs, staffs, and maintains (and stop whining about shared responsibility).

Next, HR needs to embrace risk management. So that HR leaders know the probability and the cost associated with each major people management vulnerability. And then after using this information to prioritize all possible vulnerabilities and potential errors. HR must develop a strategic plan for preventing, mediating, or limiting the impact of every one of these major errors.

If you only do one thing – begin looking for examples of bad HR catastrophic events that have recently occurred in your industry. Next, work informally with leaders of corporate recruiting and retention processes. In order to identify any major vulnerabilities and negative events that could cause millions in damage. And finally, alert senior HR management about any possible risks that you have discovered

Final Thoughts

In the past, HR professionals have been overworked while attending to day-to-day activities. They have been allowed to focus almost exclusively on short-term issues. However, in today’s fast-moving and ever-changing unpredictable business world where catastrophes seem to be more frequent and more costly. It now pays to formally allocate some time and resources towards planning for the top three catastrophic losses that your organization could face as a result of flawed people management processes.

Author’s Note

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