Turnaround delivered, focus on succession at Ford10 min read . Updated: 20 Jun 2013, 12:33 AM IST
CEO Alan Mulally talks about turning Ford around, his way of working and the importance of grooming new leaders
Chennai: Ford Motor Co.’s chief executive officer Alan Mulally is credited with having turned around the auto maker, managing to do so without seeking a bailout from the US government following the 2008 financial crisis. Often cited for redefining the Ford culture, Mulally managed to slash debt to $13 billion at the end of the last fiscal year from $37 billion in 2007-08. Mulally spoke in an interview about the turnaround, processes that the company follows, retirement and his succession plan. Edited excerpts:
Last time we met, there were rumours of you retiring.
You’re responsible for two turnaround stories—Boeing and Ford. How different have they been?
First of all, I would just like to say what an honour it has been to be asked to serve two global icons—Boeing and Ford—because they both serve all customers around the world. There are almost
more similarities between the two companies than differences.
I will just give a few of them. It was why I think I felt so comfortable when Bill Ford called and I decided to go to Ford. Their products themselves were very sophisticated, ranging from small, medium and large. The materials are very similar. The ergonomics, their structures, quality of products were very sophisticated and complex. Another thing that was familiar is when you design cars and trucks, you design them from the point of view of the future in terms of quality, fuel efficiency, safety and smart design. Both of them are exactly the same.
The other one is the safe transportation. Both Bill (William) Boeing (founder of Boeing) and Henry Ford were committed to efficient and safe transportation. So, they have very similar goals. Also, here we deliver the vehicles to the dealers and in the airlines industry, we deliver the aeroplanes to the airlines, but we design the vehicle for the travelling public. So, in a way, I was very comfortable in serving at Ford also.
If you have to name five steps crucial for the Ford turnaround story, what would they be?
Both Boeing and Ford and, going back to your point about transformation, the most important thing that I have found is people, and everybody is included. You hear me using the word stakeholders a lot and stakeholders are investors, employees, consumers, dealers and suppliers. That’s number one, and number two is everybody comes together with a compelling vision about what the enterprise is really about. I mean it’s so exciting when you think that you are going to commit your lives to a means of transportation... That’s the reason why everybody will get up in the morning and come to work.
At Ford, I found unbelievable inspiration in Henry Ford. You remember the advertisement that he took out on January 24, 1925? That said: “Opening the highways to all mankind". His vision offered you freedom to move safely and efficiently around the world. Until then, people lived within 10 miles of their home. The moment people participate in economic freedom, they want the freedom to move out and see the world. So, it’s a compelling vision. I found that at Boeing and also at Ford, and everybody knows that.
Number three, I would say, is the comprehensive strategy. I just find it so interesting today how people are yearning to understand what the strategy is. And the strategy is making choices, right? It also means the job that you are going to do. Here are some big strategic choices that we made. One, we are going to focus on Ford and Lincoln. That means we are going to divest the other ones. Big choice. We are going to commit to a complete family of vehicles—small, medium and big cars, and trucks. Big choice. The other one is every new vehicle will be best in class, quality, fuel efficiency and smart design... huge choice, right? The next one was, we are going to use our resources worldwide and operate like one company. So, that is a really specific strategy. That means all the other things we chose not to do. Now everybody who would come to work would know exactly what Ford stands for.
The next one I would say would be relentless implementation. So, every Thursday, Dave (Schoch, president for Asia-Pacific) is on the TV or he is there in person. Everybody else around the world is all networked in through Internet. We go through all the businesses—China, India, Asean (Association of Southeast Asian Nations), Australia, Europe, Russia, North and South America. Everything about the business, right from engineering, product development, balance sheet to communications.
Blue bars are the plans and red diamonds are the status. Everything that we do is to capture the opportunity and mitigate the risks.
May be the last one and that would be (number) five and that is working together—culture. There are a lot of smart people in the world, but the people who can actually work together excel. There is nobody in this world who can make a car or an aeroplane by himself. You got to treat each other with respect, you need to understand before you want to be understood.
Last thing is to deliver results. This is about profitably growing a company for the good of all those stakeholders. So, I would say those are the five things.
Was it difficult to break the traditional way of working at Ford? You were an outsider with a new set of ideas. How difficult was it to convince the board about your way of working?
Well, this is a very sophisticated question. On the one hand, Ford was in deep trouble and we needed to move decisively. The first forecast that I saw in September of 2006... was a $17 billion loss. And you can run out of money really fast, losing $17 billion a year. Clearly, the plan that we were on was not working. We needed new vision, strategy and implementation plans. So, in a big way, I could use that to rally everybody.
You know the story about the business review plan and all the charts were green, but you and me know that we were losing $17 billion. Is there anything that was not going well? I remember Mark (Fields, chief operating officer), said we are on the edge in Oakville, Canada, and we were behind schedule and we stopped the production because it’s right... from 5,000 vehicles to 800.
And he said I need to colour this red. (In Ford’s business plan reviews, red stands for bad, green for on track and yellow for under-recovery). And there was this guy who said, My Gosh! that’s not Ford’s culture. We don’t like to know how it’s really gone bad. We don’t like bad news. Then, he said, well, I have got to trust that one because it can’t work like this, if everybody doesn’t know. Next day, up come 320 charts, all green and up comes this one red chart and I started to clap.
I can remember looking around that room because everybody is around the table. All eye contact going to the floor. I just knew they were thinking—there is a sign, that the doors are going to open up and some really big guys come in and they are going to rip Mark out here and he is gone.
And before Mark could say anything, I said what can we do to help you? Before he could say anything, Bennie Fowler, who’s looking after global quality, said I will get this help for you. Joe Hinrichs, who was leading manufacturing worldwide, said we are going to fix the issue. You need good manufacturing engineers. I am going to get them identified and get them to the shop floor. That took us 10 seconds to solve that problem and then we moved on to the next green chart and then to the next green chart.
Two weeks later, Mark got red turned to yellow. They identified the problem. Two weeks later, it turned into green. Next week was exhilarating and important as the chart was a complete rainbow. Everybody, worldwide, 170,000 people knew why we were losing $17 billion. Because it was safe to say so. (Before) there was no accountability. Can you imagine the pressure that everybody feels? When it gets red, our job is to create an environment to really know what the situation is. Then we all have take steps to turn red to yellow to green. So, that’s the best example of breaking through that culture—when you know what the plan is, when you know what the strategy is. A clean environment works safe.
It’s said Ford will be known by the legacy you leave behind. In this context, have you thought about the succession at Ford?
I think, here, there are a few very important contributions I need to make and I take them very seriously. One is you need to have a vision, you need to have a comprehensive strategy and you need to have a relentless implementation plan. And it’s all about people, it does not get done by magic. It’s all about people working together, it’s all about leadership. So, one of my foremost responsibilities is succession planning as well as the culture of working together.
I personally spend 25-30% of my time on leadership development and succession plan. There is one really good example (pointing towards Schoch). There is another really good example (pointing towards Joginder Singh, Ford India president). I chose them and we all work on it and we do it in a regular way, just like we do business plan review. We have four meetings. One is about strategy, one is about product, another one about production and the last one process improvement, which is all about people.
These are the things that we have in the business plan review. Succession plan and working together have always been, to me, at par with everything. We have succession plans for every leader. We talk about (this) all the time. We coach them, we counsel them. We give them great feedback. Here is one interesting thing— 80% of the people who were at Ford, when I arrived, are still there and 80% of them are at different positions. Here is the finest leadership team I have ever associated with. Now everybody is recruiting from Ford because they know about people and them working together, they know about business plans and they know about leadership. It’s all about the development of team.
Mark became the COO (chief operating officer). Great experience for him to learn about the business. Dave, who has taken over Asia-Pacific, could be the chief financial officer also. He is growing like mad. He is becoming a terrific general manger. Joe Hinrichs moved back to the States, he is the perfect guy at the perfect time in leading the unbelievable increase in production. Raj Nair, product development head, is another such example. People who move up to this level are the ones who are always open for it. They are in continuous life-long learning. They want to be the best in whatever they do.
You have said that 60-70% of your sales growth will come from the Asia-Pacific region. Can we see that figure translating into leadership positions across the globe as well?
Yes. When I joined Boeing, 70% of Boeing sales were outside of the United States. I just treasure my relationships all around the world and (it’s) one of the reasons I love Asia and I spend so much time here and morally incorporate all of the diversity. (It) just makes Ford and Boeing so competitive because you are using their culture, their ideas, their technology because there is no one place where it’s going to come from. It’s going to be bringing all that together. I think you see all of that diversity reflected in Ford going forward in a big way.
The other day I was talking to Dave and he was sharing with us that the people that we are hiring now in Asia-Pacific, one of the things that they are really excited about is that they are going to serve in other markets around the world. We have people from all around the world and we just love it.
Is it your commitment that you will be with Ford till 2014?
I think what I have said is I would serve at least till 2014. To your other question, I care so much about making this transition as thoughtfully, as thoroughly and keeping this wonderful Ford going. The people who are leading Ford now have to believe that. They don’t want to go backward. They don’t want a different plan. They know their working together is the absolute key. I am very pleased that I am able to do that.