Alan Mulally, CEO, Ford Motor Company

This document presents a discussion about Alan Roger Mulally (born August 4, 1945), who is an American engineer and businessman. Mulally is currently the President and Chief Executive Officer of the Ford Motor Company. Ford, which had been struggling during the late-2000s recession, returned to profitability under Mulally and was the only major car manufacturer to avoid government-sponsored bankruptcy.

Mulally moved to Ford in 2006. He had worked at Boeing since 1969. He had been chief engineer for development of the 777, and was later Vice President of Engineering for commercial aircraft. Mulally had no sales experience, and he was not a “Detroit car man,” much less a car man at all. He sold his Lexus after moving to Dearborn.

What is most impressive is Mulally’s “results oriented” leadership style. His management is crisp and authoritative, although he defers to the firm’s design experts on the minutiae of the product lines. But on the big questions of the company’s past mistakes and where it’s headed, Mulally made key decisions that placed Ford in good stead. When Mulally testified before Congress in December 2008, along with GM’s Rick Wagoner and Chrysler’s Robert Nardelli, he announced that Ford would be able to survive the recession without a bailout.

The Role of Leadership and How It Can Impact Organizational Performance

Leadership is an art, and like other arts, requires discipline, good techniques and self-expression. There are some basic rules or formulas connected with an art, but these are primarily guides to self-expressions.  Techniques used successfully by some, are perhaps usable by others.  However, an individual learning the art must first convert knowledge to techniques, and then perhaps blend them with personal characteristics that lead to self-expression.

Perfection in leadership, as in any art is never achieved.  There is always room for improvement.  Techniques of leading must changes with changing times, with variance in customs, and with the differences in the ideals of the society of our day.  Too, applied in research in psychology, sociology, and related fields render some of the previous accepted techniques as invalid and in need of change.  This then, means that leadership is not necessarily measured in terms of what a person does, but rather in terms of the effects of what he does.

Leadership actions must be developed which fit individual and group personalities and bring effective results when used by an individual in a particular manner. This is not intended to indicate that knowledge of leadership patterns is not important.  Quite the contrary, for the greater the knowledge of the leader, the more probable are his chances of selecting and developing a pattern which will mean success for him.  Knowledge is valuable.  Techniques are valuable.  Patterns are valuable.  However, in the future analysis, the results achieved determine the success or failure of an individual placed in a position requiring leadership.

Mulally’s Leadership Style At Ford Motor Company

Mulally’s being “this way” has, at least for now, kept Ford ahead of GM and Chrysler in the fight for survival. Unlike its traditional rivals, Mulally’s Ford insists it has enough cash to ride out the economic downturn and does not want the government loans that the other two companies have accepted. Ford’s financial independence is largely due to a new operational discipline that Mulally has installed, as well as some timely strategic moves he initiated.

So while GM suffered the ignominy of seeing the Treasury Department’s auto task force depose chairman and CEO Rick Wagoner, and Chrysler has declared bankruptcy, Ford stands alone as an independent company and, potentially, a Detroit survivor. Ford Motor is still losing money, like nearly every other automaker, but it shows signs of recovery.

In the U.S. its market share of retail sales to individuals (as opposed to wholesale sales to fleet customers) has gone up in six of the past seven months. It has negotiated four new agreements with the United Auto Workers, bringing its hourly labor cost down from $76 an hour to $55 an hour and, Ford says, promising to make it competitive with Toyota (TM). While GM and Chrysler are hoarding cash, Ford actually laid out $2.4 billion in March to pay down $10.1 billion in long-term debt. Its share price has increased nearly fivefold since hitting a low in November.

How Goal Setting Helped Ford Improve Its Performance

Mulally was hired as CEO in September 2006. He has not engineered, designed, or built any cars. But he has devised a plan that identifies specific goals for the company, created a process that moves it toward those goals, and installed a system to make sure it gets there. Mulally watches all this with intensity – and demands weekly, sometimes daily, updates.

The Mulally method has pointed Ford to some smart strategic moves. Sensing a recession in 2006, Mulally decided to borrow $23.6 billion against Ford’s assets. Piling on more debt wasn’t an easy call, but the extra cash meant that Ford could say no to government loans when sales fell apart last year. Mulally is moving to integrate the company globally, despite several failed attempts in the past. In 2010, Ford was selling small cars in the U.S. that were developed in Europe.

Mulally persuaded Bill Ford to dispose of Jaguar and Land Rover and focus its resources on the Ford brand, and by moving quickly he managed to sell them to India’s Tata in 2007 when there was still a market for makers of luxury vehicles. He took longer to untangle Volvo from the rest of the company, but he has now put that up for sale too. All those moves have helped Ford to separate from GM and Chrysler, and Mulally is pumped.

He has promised that Ford’s core North American operations, as well as the entire company, will turn profitable by 2011. It had better, because it can’t keep losing money indefinitely. Ford recorded a loss of $14.7 billion last year and another $1.4 billion in 2009’s first quarter. If the U.S. and the rest of the global economy continue to slump, Ford’s survival could be endangered.

Assessing Mulally in communication openness

For Alan Mulally, everyone has to know the plan, its status, and areas that need special attention. For instance, he is determined that Ford reduces its dependence on light trucks as gas becomes more expensive, and he has let the entire organization know it in the bluntest possible language.

Mulally’s openness seems to have won him support throughout the organization. Arriving at Ford, Mulally boned up on the company like a student cramming for an exam, interviewing dozens of employees, analysts, and consultants, and filling those five binders with his typed notes. The research allowed him to develop a point of view about the auto business that now frames all his decisions.

Its pillars draw heavily from his experience at Boeing: Focus on the Ford brand (“nobody buys a house of brands”); compete in every market segment with carefully defined products (small, medium, and large; cars, utilities, and trucks); market fewer nameplates (40 worldwide by 2013, down from 97 worldwide in 2006); and become best in class in quality, fuel efficiency, safety, and value.

The Effectiveness of Mulally’s Leadership Style and Recommendations

So far, Mulally has been mostly managing the hand dealt him when he arrived. The first new model to bear his fingerprints will be the restyled 2010 Taurus that goes on sale in June. His plan for “One Ford” won’t get a real test until next year when two small, fuel-efficient cars, the Fiesta and the Focus, make their way from Europe to the U.S. It remains an open question whether Americans will be willing to pay more for the smaller, higher-content vehicles.

They will have to if Mulally is to succeed in reducing Ford’s dependence on pickup truck profits. The biggest unanswered questions about Mulally are how long he will stay at Ford and who will succeed him. Bill Ford has been saying that he hopes Mulally never leaves, but having spent nearly four decades in Seattle, he isn’t likely to settle in Dearborn, and in fact, the company spent $344,109 in 2008 flying Mulally and his family between the two cities and elsewhere. Now that Ford is running more smoothly, there shouldn’t be a need to look outside again for his successor.

If Mulally leaves when he turns 65, the betting is that he will be succeeded by Booth, who is 60. If Mulally stays longer, then 48-year-old Fields would likely be the choice.

Mulally talks as if he has found a home and is doing the work he was always intended to do. At one of his early meetings with employees upon joining Ford in 2006, Mulally was asked whether Ford would be able to remain in business: “Was Ford going to make it?” “I don’t know,” Mulally replied. “But we have a plan, and the plan says we are going to make it.” It was a moment Mulally’s mother would have appreciated.

Conclusions

Based on the previous information and research, here are five Mulally success factors I have come up with that I think apply to any leader charged with leading a turnaround in their organization:

Preparation: Before he took the job at Ford, Mulally spent a lot of time with Chairman Bill Ford and every member of the senior management team to learn as much as he could about the culture of the firm and its competitive position.  That time spent up front allowed him to come to the table with a clear sense of what he needed to do from day one.

Clear Plan: Upon his arrival at Ford, Mulally’s intent was to focus the company on its core brand, Ford, and to divest other brands they owned such as Volvo and Jaguar. His plan was to invest in the long term future of the core brand and, sensing the recession that eventually came; he established $23 billion in lines of credit within 90 days of taking the CEO job. Those credit lines have enabled Ford to invest in new product development while avoiding the government assistance that GM and Chrysler both had to take.

Clear Point of View: Mulally is a very effective communicator.  He speaks in a down to earth tone with a very clear point of view on his business and his plan. As an example, he says in the New Yorker interview that fuel efficiency, safety, quality and value are going to drive consumer decisions on car purchases.  That’s the kind of clear, concise, easily repeatable point of view that an organization can use as a guidepost.

Align the Culture with the Plan: Mulally is pushing for consistency of purpose, transparency and collaboration in the management culture at Ford.  He has put an end to calendar based rotations of executives into new assignments so that they have enough time to prove themselves in the jobs they’re in.  He is insisting that managers put their cards on the table in weekly update meetings so that everyone has the opportunity to help solve small problems before they become bigger ones.

Focus and Follow Through: Mulally has set up clear systems that keep him and his team accountable to their plans. Every initiative and its major tasks are color coded as green for on target, yellow for questionable and red for a problem.  Charts are left on the conference room walls and updated weekly for all to see the changes in status.
References

http://americanpowerblog.blogspot.com/2009/05/how-alan-mulally-is-saving-ford-motor.html

http://blogs.govexec.com/executivecoach/2009/09/five_things_alan_mulally_is_do.php

http://money.cnn.com/2009/05/11/news/companies/mulally_ford.fortune/index.htm