Red squares are a good thing
Former Ford CEO Alan Mulally reveals the secret behind bringing America’s most iconic carmaker back from the brink
“Always make sure, if you testify before Congress, that you arrive on a private jet. That helps to get the dialog off to a good start.”
Former Ford CEO Alan Mulally opened his March 4th keynote address at Automation & Power World with this bit of humorous advice, but the situation he encountered when he joined the struggling automaker was hardly a laughing matter. After a 37 year career at Boeing, Mulally made the jump to Ford to shepherd it through what can rightfully be called an existential crisis.
One figure puts the situation in perspective: Ford was sized for a market share of 28% but was serving a market less than half that. Ford had made a lot of acquisitions, too, becoming a patchwork of brands—Volvo, Land Rover, a share in Mazda—that included some decidedly non-core businesses. (Aston Martin anyone?)
Ford also turned in a thumping $17 billion loss for 2006, and in the wake of the collapse in financial markets, was staring down the same bleak road as GM and Chrysler.
The story of how Ford declined a government bailout and re-emerged as the top US carmaker and one of the most respected brands in the world is the subject of many articles and at least one book (Bryce Hoffman’s American Icon). But there’s nothing like getting the story straight from the man who made it happen.
To hear Mulally tell it, Ford’s turnaround had as much to do with leadership as it did with strategy. The company had a product offering fragmented along geographic lines, little sharing of technology and practices, and a disproportionate focus on trucks and larger vehicles. Still, management was indecisive. The one sure thing was that anyone who dared to identify a problem risked being identified as BEING the problem—with predictable results.
“We would have weekly status meetings,” explained Mulally, “and all the squares on everyone’s slides were green,” referring to the color-coded matrices that ABB CEO Ulrich Spiesshofer is also known to favor.
Of course, in reality, not every square should have been green. There were serious issues, but when one senior manager decided to take a risk and turned one of his squares red because of a problem that had stopped delivery of one model, his colleagues started the clock on his imminent departure.
In the meeting, though, Mulally applauded—literally.
“I said, ‘this is great. Now we know about this problem, so we can start working on it.’ People started to offer suggestions, made plans to address the problem (a quality issue on an actuator) and in 8 or 9 seconds we had a solution in the works.”
In subsequent meetings, more managers started to change green squares to yellow or red, and the company began to adopt a management system predicated on working together openly to address problems. Every Thursday, Mulally presided over a meeting to review the business plan with every Ford management team around the world. Everyone bought in and everyone knew the status of the plan.
This was not the work of an autocrat. Mulally said the key was to create an atmosphere where people felt safe to bring issues to light, where those behaviors were encouraged, and “where people feel appreciated.”
The results speak for themselves. The company repaid its massive restructuring loan and rationalized its product line from 97 distinct nameplates to 20. Today, 80 percent of Ford’s entire global production is based on 9 vehicle platforms. The firm’s dealers and distribution network are the most profitable they’ve ever been, and stockholders enjoy a reinstated dividend. Employee satisfaction is among the highest reported by any company in any sector.
And that manager who dared to turn his green squares red? That would be Mark Fields, currently serving as President and Chief Executive Officer of the Ford Motor Company.