Week 11: It was the worst of times...at Ford

This week, I started reading American Icon: Alan Mulally and the Fight to Save Ford Motor Company.

Ok, so for full transparency, this is not my first time reading it. I’ve never read the whole thing but I’ve read 2/3 of it in the past. However, I didn’t read it from the lens of studying someone who was effective at leading a major change. I happened to listen to a podcast episode that featured him and it’s become one of my most shared podcasts and one of the episodes I most listen to. I was fascinated with him and so I just wanted to read the book to learn more about him.

However, after reading about the dangers that organizational change leaders face and our subsequent study of why people resist change and how to mitigate that risk, I feel like I have a new lens with which to analyze the study.

And I was right - I might as well be reading a different book entirely based on the parts that I now find most relevant as I read it.

Alan Mulally (AM) led Ford Motor Company through “one of the greatest comebacks in business history.” In this week’s post, I wanted to capture the state of Ford prior to AM’s taking over. I will be more specific later but in case you only get through this much of the blog post, let me summarize it for you:

Ford was a HOT MESS!

Honestly, at this point I’m less interested in understanding how AM turned Ford around than I am in understanding what made him say yes to taking the position!

What did Alan Mulally walk into?

Whenever I think about needing change in an organization, I imagine that there was a time when the organization was run well and succeeding, something happened that changed that and the change is needed to ensure success in the future. Reading about Ford’s history is incredibly interesting in that it seems to have been dysfunctional from the very beginning - in 1903!!

In American Icon, the author calls out three major leadership failings that contribute to that dysfunction:

• they invested massively in game-changing products and then did nothing to keep them competitive
• they allowed cults of personality to form around larger-than-life leaders, but drove away the talent needed to support them
• they allowed a caustic corporate culture to eat away at the company from the inside

Chapters 1&2 of this book capture the state of the business for the 100+ years of its existence before AM finally takes over as CEO in 2006. It reads as one failed change effort after another and is underpinned by almost consistent cultural dysfunction at the highest levels.

Here are some examples:

Henry Ford II as CEO

When Henry Ford II took over, he aimed to right the ship through a few main actions:

• he instituted disciplined business practices
• he ordered his managers to treat their employees and one another with respect
• he promised that the truth would no longer be punished
• he encouraged more transparency with the outside world

Amazingly, he sabotaged his own success when he became more territorial of his own position which resulted in Ford’s managers worrying more about their own careers than the success of the company.

Jacques Nasser as CEO

Jacques Nasser’s strategy for saving Ford was to diversify its portfolio and unwind Ford’s core automotive business. This included spending large amounts of money on:

• a chain of car repair shops in Britain
• a junkyard company in Florida
• dot-com deals with Microsoft, Hewlett-Packard, and Yahoo!

He also

• removed the Blue Oval (the Ford symbol) from World Headquarters
• spun off Ford’s parts subsidiary
• seriously considered getting out of the US car business entirely to focus on the truck and SUV segments

His plan was aggressive but the company was failing and sometimes aggressive in what is required. However, his aggressiveness was quickly destroying the company.

Morale was low. Relationships with workers, dealers and suppliers were…strained.

Finances continued to deteriorate.

Ford’s credit was downgraded and the stock tumbled.

And worst of all…there were no clear successors within the company.

Bill Ford ends up taking over as CEO, brining control back into the Ford family.

Bill Ford as CEO

Bill Ford really tried. The company meant more to him because it was his family’s legacy.

In contrast to Nasser, his approach was to make the deep cuts he felt were necessary to save the business. He cut factories, reduced dividend payments and fired high-priced consultants.

He also increased product spending - a clear 180 from Nasser’s approach.

Finally, he ordered a new push to improve quality and make each vehicle profitable.

With the best of intentions and a very clear vision, Bill Ford still comes up short over time.

For a period of time, he is both ineffective as CEO and unwilling to give up the role. He seeks out high quality talent but is only willing to offer them the COO role which they all decline.

Eventually, he comes to realize that if Ford couldn’t address their fundamental problems, it would not survive. He finally agrees to find someone to replace him as CEO and deliberately looks for someone from outside the automotive industry.

Enter Alan Mulally.

Wow, this blog post got LONG and I still have so much to say. However, I’ll save the answer to who was Alan Mulally before he stepped in as Ford’s CEO for next week.

Instead, let’s reflect…

What I find most interesting is that all of this means that AM steps into the organization at it’s lowest point and faces all the normal barriers to change AND a history that lends absolutely no optimism to indicate that change is even possible!!!

I haven’t even mentioned that he comes from OUTSIDE of the automotive industry altogether. You might be thinking that might be a good thing. Even though you are right, can you imagine how much LESS trust he inherited as a result of having NO institutional knowledge and stepping into the CEO role?

Again, who in their right mind would say yes to this job?!!!

What are we learning from this

If there’s one thing I’ve DEFINITELY learned from this is that I don’t think I would ever want to lead an organization this large.

Self-awareness is important.

I really enjoy leading change. I have grown more and more confident in my ability to assess an organization and identify several tangible efforts that would have positive snowball effects within the organization to get things back on a better path.

However, in reflecting on the state of Ford in 2006, it’s hard to identify one or two things to focus on without feeling like the rest of the business would collapse in the meantime.

I’m trying something new so I made a video to capture my final thoughts and share a useful mental model for planning for change. Check it out! Thanks for reading!