In September 2006 the Auto industry was riding high. SUV sales were through the roof as gas prices remained in the $1.50/gallon range. The bigger the better was the thought as Escalade's and Explorer's were rolling off the assembly lines as fast as Ford or GM could produce them. Ford needed to make a decision on who they would bring in to succeed former CEO William Ford Jr.
Enter Alan Mulally. He had never worked in the auto industry before, in fact he drove a foreign car. He had never had to make a sale or put change his own oil. Mulally had worked for Boeing since 1969 and was a shrewd business man. The Ford family needed a change of atmostphere and Mulally was the man they targeted. For $700,000 and a $7.5 million sign on bonus Ford made possibly the best decision the company has ever made and brought on Mulally as their new CEO.
What made Mulally special though? Mulally was considered by many to be a control freak. He wanted things done his way, when he asked, and he wanted it done correctly. He was your high intensity manager who arrived at work by 5am and left between 7 and 8 pm. He was also considered a risk taker. Mulally was a fan of preparing for the future through investments in the now, he had done so by overhauling Boeing's retirement schedule to allow for increased health care benefits. But Mulally trusts those around him before making decisions. He increased his inner circle to include an HR representative and an IT administrator so that he could be further connected to the ins and outs of Ford. He instructed directors who attended meetings that they were to hold meetings with their management prior to meeting with him so that all information was up to date. Mulally wants the most up to date information from all sources before he makes his decisions. He instituted a color coding method for memo's, green meaning good, yellow meaning cautious, and red meaning urgent so that he could address the difficult issues immediately and nothing got swept under the rug.
Mulally used his authoritative style of management to institute changes that have made Ford the top American car producer once again. After months of meetings with upper management he came to the conclusion that Ford was not prepared for the future. He made the risky decision to mortgage the future and take out a $20+ billion loan to modernize Ford's fleet. They went with smaller, more fuel efficient vehicles that had the sleek look of European Cars. As a result, Ford was prepared for the 'great recession' and have seen sales rise in the past 2.5 years. They were the only American automaker who did not accept a taxpayer bailout. Mulally saved an American legend, his authoritative style played a large part in that.
I can not help but wonder several things. Do leaders who bring in those they trust perform better than those who are thrown into a situation with people they do not know? Would a leader who did not have an authoritative style have been able to make such a risky decision by gambling the entire company on one decision? And is Mulally a fluke or will other companies start to follow the lead and bring on more of the natural leaders who do things their way?
Analysis based on a cnn money article found here...http://money.cnn.com/2009/05/11/news/companies/mulally_ford.fortune/index.htm
Chase Behrendt
Taking the collectivistic culture approach for Mullaly seemed to work for the Ford organization. He hired individuals who he worked well with and could trust. These individuals were Mullaly's right hand men (so to speak) and nothing went to him before going to them. The low uncertainty level risk Ford took in hiring him seems to have paid off. Mullaly has taken Ford and re-energized, re-branded, and re-established Ford into a high competitor in the auto industry. I am curious as to what the demographic dynamic of the organization is and how Mullaly works around that...and in terms of demographics, I'm thinking about those who hold higher level positions within the company. Whatever Mullaly is doing, seems to be working in favor of Ford.
ReplyDeleteAngela Minichiello
With Leaders, comes the power of taking risks and analyzing the situation if favorable to take that risk.Its interesting to read that he made the risky decision to mortgage the future and take out a $20+ billion loan to modernize Ford's fleet and went with smaller fuel efficient cars. It worked wonders for the organization.
ReplyDeleteHe not only showed authoritarianism but also brought innovation like the color coding method for memos. How simple and effective.
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Sheena
Perhaps one reason Mulally was able to make such risky and well educated decisions was due to his top management team. It has been noted that the best decisions are made by a diverse group of people who know the customer base best. Mulally most likely had an excellent team who knew the customer base well and as a result, turned a risky gamble into a well educated decision.
ReplyDeleteMatthew Fowles