Case Study:
Leading Change at Ford Motor Company
Ford Motor Company was barely breathing when Alan Mulally became CEO.
The company recorded massive losses as its sales and reputation plummeted.
Today, having weathered the worst economic downturn in 50 years, Ford’s
production efficiency, customer satisfaction ratings, and market share are
rising. Five out of six Ford employees say their company is heading in the
right direction. Mulally has been hailed as a turnaround champion by
transforming Ford into the most successful and competitive automaker in
America.
How did this remarkable transformation occur? Most observers point to
Mulally‘s vision for change (“One Ford-One Team, One Plan, One Goal”),
which focused everyone on one brand (Ford) with a few models that have
global platforms. This change was difficult because executives jealously
guarded their vehicle badges and built their products mainly for the North
American market. Ford‘s transformation was not without pain. It closed 16
manufacturing facilities, laid off many staff, sold off peripheral brands (e.g.,
Land Rover, Jaguar), and negotiated lower labor costs.
Mulally took a hands-on role to change Ford‘s defensive and territorial
culture. He joined staff in visiting customers and industry groups. He held
numerous town hall meetings, repeating the same message: Everyone needs to
cooperate more across divisions and focus more on customers than on careers.
He also emphasized the urgency for change: “We have been going out of
business for 40 years,” Mulally stated at several sessions.
Mulally shook up Ford’s bureaucratic defenses by persistently challenging
engineers and executives to answer tough questions about quality and
profitability. To reinforce change, Mulally created a pilot project-a special
global task force that designed and engineered a new Focus with the same
chassis, features, and name around the world. Today, the Ford Focus is
Mulally‘s “proof point”-a beacon of his “One Ford” vision.
Mulally‘s toughest challenge was to develop an executive team that focused on
“One Ford” rather than departmental fiefdoms. He helped accomplished this
goal through weekly business meetings, where his 16 direct reports were required
to pay close attention to each other’s presentations. Private chats and other
distractions were prohibited. “If you aren’t comfortable with that, you might be
more comfortable leaving the company,” said Mulally with a friendly, yet
meaningful, tone. Alan Mulally’s successful turnaround of Ford Motor Company
required creating a vision for change, communicating a sense of urgency, and
the development of teamwork-no easy leadership tasks. Mulally led Ford,
guided by Henry Ford’s original ideal of universal human mobility.
Objective:
Organizations can become lethargic or stagnant if they do not pay attention
to examining their brand to see if it is still what customers will purchase.
Ford needed an infusion of strong leadership to change and rebrand itself
into a world-class auto maker.
Leading Change at Ford Motor Company
Summary:
Alan Mulally became CEO of Ford when it was facing a critical business
downturn. He displayed the ability to be a “change agent” who revisited the
company’s vision and changed it so the organization would redesign to
become “One Ford–One Team, One Plan, and One Goal.” This effort
required a leader who not only knew the proper processes for such major
change, but also a person who would be the initiator and the one responsible
for the outcome. He was the right leader to eliminate the various “turf
boundaries,” which kept Ford from becoming a one-team culture on the
world auto stage. This is a story of successful “change leadership.”
Questions:
1.
What would you do to sustain Ford Motor Company’s turnaround
momentum?
2.
What actions would you take in the three key areas of people,
production, and profits?
Teaching Points:
✓ Make the point that effective change leaders must be master
communicators with the stakeholders; i.e.; align the process goals with
the vision, provide training, mentor and coach, live the values code, be a
technology innovator, understand the stressors involved in the change
process, and be a caring leader who creates an environment where
employees can do good work. pp. 498 – 500.
✓ Effective change leaders eliminate the boundaries (sometimes artificial
ones) that keep units, teams, divisions, etc. from functioning as teams.
✓ Remind the students that any organization (including our families)
needs to live effective human relations under the umbrella of their
accepted values and ethics. pp. 186 – 220.
Leading Change at Ford Motor Company
✓ Develop a leader “succession plan” within each work unit.
✓ Design a process so that each employee leaves her/his performance
evaluation session with a “personal development plan” containing
measurable outcomes.
✓ Involve employees as soon as feasible in the change process.
✓ Caution the students not to be complacent leaders who ignore the
realities of their competition and needs of the appropriate community.
✓ Empower the people to be “change agents” by:
1) Communicating the clear, concise leader-initiated vision to all
shareholder as soon as possible;
2) Designing a structure that is compatible with the vision;
3) Providing needed training;
4) Aligning information and personnel systems with the vision; and
5) Confronting supervisors, managers, directors, etc. who do not
support the vison. pp. 162 – 164.
Related AOL 6 Text Information to Support Your Class Discussion:
o You can make minor changes in processes for quality product or service
delivery daily. However, you might consider exploring with your students
the process for understanding Complex Organizational Change that Ford
went through. Please see Figure 17 – 2 on p. 397, “The Eight-Stage Process
of Creating Major Change.”
o You will want to caution your students concerning “common errors” that can
occur during the change process. p. 398.
o The word “change” often creates fear among employees even if it is a minor
one since it can affect their sense of stability. You will want to address how
to handle the change fear factor with your class. p. 404.
o Your students will need to exhibit strong leadership with their employees, so
we discuss how to lead people through the change process as it occurred at
Ford. pp. 394 – 396.
o See Figure 17 – 5 “Changes in Today’s World” and relate these changes to
the challenges faced by Ford. p. 403.
NOTE: We routinely research the subject of our specific case assignment to
determine changes in vision, mission, leadership team, new product development,
financials, current national/global news events, etc., prior to the class discussion.
An example of this is found in the Introduction section preceding our suggestions
for using Case Analyses in your class. We have used Hewlett-Packard as a sample
for all the cases since this form of organizational information is fluid and possibly
time sensitive.