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Effective Strategies Alan Mulally
MGT/312
February 23, 2015
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Effective Strategies
Alan Mulally took over as C.E.O of Ford in 2006 after a successful career in Boeing. With
his considerable experience in customer satisfaction, manufacturing, supply relations and labor
relations, the challenges that were facing Ford at the time were very familiar to Allan since he
had dealt with the same at Boeing and emerged fruitful. In the verge of desperate economic crisis
and a great recession, Ford had lost a market share of 25% since the earlier decade. The company
had brands like Jaguar, Land Rover, Aston Martin and Volvo that were not faring well as
compared to the enormous capital they needed to compete. The company had huge operating
margins brought about by the large workforce with high labor cost per hour ($76/hour) making it
uncompetitive. The iconic company at the time had 12billion in losses and hemorrhaging cash
with losses amounting to $1.4 billion recorded and 30,000 jobs cut down at the beginning of the
year. To add to his woes the company was lagging by months in development of new
automobiles compared to its competitors in Japan who even had a shorter cycle time.
Within four years of joining, the company logged a $6.6 billion profit in 2010 and in 2013
it was valued at revenue of $146.91 billion, operational income of $5.42 billion, net income of
$7.15 billion, total assets of $202.02 billion and a total equity of $26.38 billion
Alan realized that the business was in the final phase of collapse and had to come up with a
strategy to restructure and turn around in order to get Ford back to its toes. On an analysis, he
identified the major causes of failure and came up with a master plan to smooth things out. In his
agenda issues to do with streamlining the products, closing plants, efficiency, dealer and
customer satisfaction from design of existing cars were essential to success towards his company
vision.
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Alan refused to get government money and instead started by using existing assets to get
bank loans worth $23 billion (close to all the assets) which was a huge gamble and made tough
changes to make a comeback that rose above the recession. He quickly realized that there were
many Fords (Ford for Europe, Ford for Asia a host of other divisions) which hindered uniformity
and coordination and cooperation between its many parts. He worked towards making all of them
one by an internal merger and bringing all the Fords under one name and by so doing realized
economies of scale by laying off 35,000 workers to create an effective multinational company.
One Ford vision did not depend on visionary thinking and new products but the ability to propel
new thinking from team to team and partner to partner. The plan comprised of four elements: a
global team, leverage Ford’s knowledge and assets, build vehicles that people value, arrange for
financing for necessary pay.
Mulally had excellent team building skills and understood perfectly that the company’s
culture needed to change so that senior managers and executives could collaborate trust and
report bad news without fear of the consequences. The various executives were called to weekly
business plan review meetings to share and discuss ideas to get things off the ground and get rid
of the tension that existed among the executives. This is what is seen as making everybody part
of the team (connection culture) and bringing everyone on the same page hence it created a sense
of openness and belonging among the members. Statistically, it was reported that connection
culture provides a competitive advantage with its lack jeopardizing 70% of workers in America
and 88% globally in terms of not giving in the best effort at work.
His team building skills are evident through the policies and ideologies he presented and
stood for. One was the positive attitude he bared and knew that someday Ford would rise again.
This was important to instill in the minds of the workers to have a good attitude that would gear
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towards success and build a healthy company culture in the end keeping everyone focused and
motivated.
Accountability and collaboration across leadership structures laid the foundation for the
company to innovate. This allowed change in the cost structure by negotiating lower labor rates
with the United Auto Workers to $55 /hour which was a knock off of $20 /hour since data could
be shared without blame improving collaboration and setting stage for innovation. To navigate
through the complexity a traffic light system was introduced at the weekly management meetings
where direct reports were handed in to indicate their progress in key initiatives. Green meant
well, yellow meant attention needed while red meant a critical situation.
In the past, different members were used for different audiences and Ford had many
excuses and there were always reasons for things not working out well even though it rarely had
anything to do with the dysfunctions in Ford. Mulally insisted on rigid reliance on the facts with
each executive availing themselves in the weekly review meetings and comprehensive progress
of the departments in relation to the turnaround plan. Any miscalculations of presented data were
easily exposed since all senior executives were available. High concentration on the performance
of the firm was observed as no explanation whatsoever was needed
In an earlier time it was noticed that Ford was locked to the union contracts negotiated in
better times that prevented retrenchment of workers or closing of dysfunctional plants that
brought about filling with cars that were sold at a loss. There was a need to cut down from 97 to
20 of what they were offering. Mulally had a plan for a top-down restructuring of the product
lineup. This was geared towards making automobiles that had built-in technology (Ford Sync and
currently My Ford Touch), were liked by the people and met customer needs and demands. He
had realized that the future of Ford did not only lie on cars and trucks but with the technology
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they had. A different perspective was taken to view issues concerned with quality, fuel,
efficiency, safety, smart design and offering best value for the money paid.
The pre-Mullaly era was marked by different plans every year even though they did not
work. Mulally insisted on having a single plan and sticking to it. This was what he envisioned
and had it known through the one Ford plan since he realized that with this attitude in his team
there was going to be a gradual change and eventual turnaround. The one Ford phrase described
the plan towards the vision making it more credible by communication of a credible vision. In the
same phrase it was made known how the leader expected people to progress towards the set
vision. The phrases he used were a constant reminder of “one Ford”, ” one team” , ”power of the
teams” and “working together always works” to communicate how much he valued team players
since it was important to make known his values.
As a leader he facilitated meetings, discouraged humor made at the expense of colleges and
encouraged leaders to work together in facing the obstacles. This prevented focusing completely
on the problems at hand. A win-win mindset helped him realize other individuals and
organizations were not competitors therefore brokering a deal with the United Auto Workers and
consolidated company purchases to suppliers that were willing to partner to reduce cost in return
for greater shares.
The restructuring and turnaround strategies widely depend on clear identification of the
problem. It could either be the strategy is flawed, strategy is good with poor implementation or
poor strategy with poor implementation Strategies that could have worked may have made use of
self-assessment to focus on the critical areas like the strategy which entails the direction of the
business, the problem it solves and the customer target. The people would be evaluated to see if
the right people were running the company and in the right places. The employees could have
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been evaluated for commitment towards business success. The incentives to share in the success
of the firm, commission plans could have introduced to gear the sales team towards gross
revenue and total profits. The behavior towards employees could have been reviewed to see if
certain individuals were dragging down the collective effort of the team.
The customer needs would have been evaluated to know if they liked and trusted the brand
.it would be in order if it were known if the right customers were targeted to distinguish between
profitable and unprofitable clients.
Product evaluation could have been carried out to check if innovative products were being
offered and at the same time consider technology to cut down on the costs and improve
competitive advantages.
The process could have been reviewed to see if systems in place were working efficiently
and done in the right way. The policies in place could have been examined to evaluate if they
were hindering or facilitating the work for high-performance structure
The financial aspect could be evaluated to gauge the company competitiveness and its
ability to sustain ongoing commitments and operations and so communicate if it were highly in
debt.
The strategies can be achieved through the objective for crisis stabilization is to conserve
liquidity that in turn opens doors to opportunities to turnaround and restructure the business,
stakeholder buy-in, strategic focus, organizational change and critical process improvement and
financial restructuring.
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References
Saving An Iconic Brand: Five Ways Alan Mulally Changed Ford's Culture. (2010, March
12). Co. Create. Retrieved February 19, 2015, from
http://www.fastcocreate.com/1680075/saving-an-iconic-brand-five-ways-alan-mulallychanged-ford-s-culture
Leadership to love: how CEO Alan Mulally changed ford’s culture and transformed its business.
(2012, June 12). OC Tanner. Retrieved February 19, 2015, from
http://www.octanner.com/blog/people-who-achieve/leadership-to-love-how-alan-mulallychanged-fords-culture
Business Turnaround Strategy - GaryRushin.com. (2013, April 30).GaryRushincom RSS.
Retrieved February 19, 2015, from http://garyrushin.com/business-turnaround-strategy/
Why Ford's Alan Mulally Is An Innovation CEO For The Record Books. (2014, June 25). Forbes.
Retrieved February 19, 2015, from
http://www.forbes.com/sites/sarahcaldicott/2014/06/25/why-fords-alan-mulally-is-aninnovation-ceo-for-the-record-books/
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