We live in a world that our grandparents and great-grandparents would not recognize. For they lived in a time when people created things: When someone visualized a better idea for society, he could make that invention, find investors to bring it to market, create the means of manufacturing it, hire employees to run the new firm, and then coordinate the distribution system for selling their product to the public.Think of Louis Renault, Carl Benz, Gottlieb Daimler, Henry Ford, Walter Chrysler, David Dunbar Buick and many others. These are but a few of the men who built the automotive industry around the world, and they did so from scratch — often without the benefit of a proper education, and certainly in the beginning without the help of Wall Street money. Many an automotive inventor would hire someone of unique accounting brilliance to ensure his company’s success, and those employees too became industry legends. James Couzens was that man at Ford. Alfred Sloan not only made sense of the almost unmanageable General Motors, but with Donaldson Brown also created modern corporate accounting.One man, one dream, and from there the world’s automotive industry was created. A century later you still know their names because their car companies still exist. Some were more successful than others, while others nearly failed before making a comeback; still, in a time when information technology was non-existent, these often ill-educated men controlled massive and successful industrial complexes. Does anyone believe that many of today’s Chief Executive Officers could hold a candle to that generation of Americans? Today many CEOs earn more than those who created the corporations they run. Yet they will explain to the business media that what makes them well worth the money they’re paid is their incredible genius. For them, we’ll explain what genius is. Genius is building your first car in the shed behind your house, and less than 20 years later inventing the modern assembly line — followed immediately by building the world’s largest industrial factory. Henry Ford and James Couzens were geniuses; Alan Mulally, while a great CEO for Ford, is not in that category.Advice Minus AccountabilityJust after the Second World War came the advent of management consultant groups, such as McKinsey and Co. By the mid-80s, smaller and less well-known groups were operating across the country, even in local dealerships. Those corporate shrinks would come in, interview the employees and formally diagnose why a dealership was not functioning to its maximum potential, then advise management how to fix it. I hate to point out the obvious: If the CEO, owner(s) or top management doesn’t know what’s wrong with his or her place of business, or how to fix it, then that person shouldn’t be in the business to begin with. Hiring an outside consultancy group only verifies that statement. Fortunately these groups sell those individuals by telling them how brilliant they are for recognizing the need for outside help. Give me a break.A decade ago in this column I related how in 1954, because it badly needed fixing, Chrysler hired McKinsey and Company. Chrysler had numerous major problems at the time — none of which would be addressed in the suggestions McKinsey presented to the automaker. One big problem was that, in 1950 and at the urging of President Harry S. Truman, K.T. Keller had walked away from the top job at Chrysler. Our ballistic missile program was so hopelessly messed up at the time that patriotism compelled Keller to go help the government. Unfortunately for Chrysler, Keller also took many of the company’s best engineers with him; the Saturn 5 rocket that took us to the moon owed more of its success to those Chrysler engineers than to Werner Von Braun. So Chrysler was in a tough position, made worse by the mistakes Keller had made before he left. For example, Keller had always demanded that Chrysler products be tall and wide, almost solely so that a man wearing a fedora could enter and exit his car without knocking his hat off. That was not where automotive styling or men’s styles were headed in the fifties.Of course, with its best engineers gone and Chrysler’s styling stuck in the wrong decade, the company was in trouble. McKinsey’s advice? Chrysler should create a more decentralized system of management, copying GM, and also become an international company. Chrysler tried to buy Rolls-Royce and Volkswagen, but ended up with Simca of France. And none of these suggestions addressed — much less solved — its real problems.Short Memory Shelf LifeThirty years later, when the Japanese automakers started really pounding Detroit, GM CEO Roger Smith hired McKinsey to remake that automotive giant. According to Duff McDonald in his new book, The Firm, at one point GM was paying McKinsey $2 million per month for its consulting expertise. But the advice GM got for its money would actually result in actions that ended in its final bankruptcy in 2009. In case you forgot or never knew this, at one time in America if you shopped different car brands, it was Oldsmobile against Chevrolet or Buick, while Pontiac shoppers looked at Chevrolet as the natural competition. Meaning GM’s divisions competed against each other. And, while some people thought that was spectacularly inefficient, it was not. Because no matter which of those five brands you bought, GM ended up with the sale. That’s how and why that one corporation controlled almost 50% of the total car market.McKinsey told GM to reorganize by type of vehicle — large and small cars and trucks. So the consolidation began, and the extremely capable prima donnas who ran each car division were shown the door. As analyst Maryann Keller pointed out, the real problem inside GM “was that they [Japan] built cars with fewer parts, fewer defects, [and] continuous improvement processes, and took man-hours off making cars without compromising productivity.” She added, “At the time neither McKinsey nor General Motors understood the true nature of Japanese competitiveness.”This all raises the question, “How can a company install a CEO who doesn’t know how their industry really operates or the strengths of their competition?” Toyota felt bad for GM, and may have feared further U.S. government action against imports. So Toyota did a joint venture project with GM in Fremont, Calif., to show its engineers and supervisors how to design and build cars properly. GM placed numerous production managers inside that plant. They reported back to Smith — where their analyses were ignored, then and for decades afterward. Toyota had handed GM the correct answer, free, on a silver platter. Apparently ignorant of Japan’s gracious magnanimity, Smith instead reorganized under the plan it had paid McKinsey for. Following that extremely costly advice gained GM nothing, and in fact GM’s market share took a sharp turn south, from which it never recovered.Why Hire a Mini-Me?In the early 80s GM employed nearly 350,000 people, today around 50,000. Which again underscores the question and demands an answer: Why do so many CEOs maintain that they’re well worth the unbelievable amounts they’re paid? Some are. But many often turn extremely large and well-run organizations into much smaller ones. Still, the 300,000 GM workers who lost their jobs can take one happy thought away from all of this: The CEOs who cost them their jobs all retired extremely rich.One more object lesson in income inequality since 1980, this truth should also convey a lesson to boardroom directors across America: If you need to hire outside management consultants, you definitely have the wrong CEO. © Ed Wallace 2013 Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism. He hosts Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org, and read all of Ed’s work at www.insideautomotive.com.