Almost 30 months after Alan R Mulally left Boeing to become chief executive of Ford Motor, it’s still easy to peg him as an industry outsider. . . . Outsider CEOs have a decidedly varied track record. Some bring in their own people and impose a jarring management philosophy on a corporate culture, as Robert Nardelli did at Home Depot with such mixed results that the board pushed him out. Some are unsuited to running an unfamiliar business. Former S C Johnson CEO William Perez’s 13 month stint at Nike comes to mind. Others tread more softly and succeed, like Eric Schmidt, the former Novell guy who runs Google. Mulally arguably falls into the latter category. Since arriving he has left most of the team he inherited in place and quieted talk that an aerospace guy couldn’t run an automaker. . . .
Clay Ford Jr. says his CEO’s progress in shaking up a calcified culture has thus far kept Ford independent and away from the US Treasury’s loan window. Under Mulally, decision making is more transparent, oncefractious divisions are working together, and cars of better quality are moving faster from design studio to showroom. . . .
If Ford had one key insight to share, it was this:
“Ford,” he told Mulally, “is a place where they wait for the leader to tell them what to do.” His point was that Ford staffers below the top echelon weren’t sufficiently involved in decision-making. . . .
Mulally told employees Ford’s existing turnaround blueprint was essentially sound. Besides dramatically reducing head count and closing factories, the “Way Forward Plan” called for Ford to modernize plants so they could handle multiple models rather than just one.
A second piece of the plan was more controversial: a switch to vehicles that could be sold in several markets.
This required a centralization that was anathema to the divisions around the world—fiefdoms used to developing cars themselves. This was the part of the plan that Mulally wanted to accelerate. Some executives sought meetings with Bill Ford to complain. “I didn’t permit it,” he says.
Mulally knew that to get his way, he would have to change Ford’s culture. In the coming months, Ford employees would hear him say, over and over: “That doesn’t work for me.” This included Ford’s penchant for cycling executives into new jobs every few years. The idea was to groom well-rounded managers. But no one was in a job long enough to make a difference or feel accountable. In the five years before Mulally arrived, executive Mark Fields ran the Mazda Motor affiliate, Ford Europe, the luxury Premier Auto Group, and the North and South American businesses. “I’m going into my fourth year in the same job,” says Fields, still president of the Americas. “I’ve never had such consistency of purpose before.”
Another thing that had to change: a culture that “loved to meet,” as Bill Ford puts it. Managers commonly held “pre-meetings,” where they schemed how to get their stories straight for higher-ups. It was a classic CYA maneuver and Anti ethical to problem solving. Mulally had seen this kind of thing before when he was running engineering at Boeing’s commercial plane division. In 1997, Boeing took a $2.7 billion charge when commercial suffered a communications breakdown and failed to match production to rising demand; two assembly lines closed down for a month. When Mulally became CEO of the commercial plane division in 1999, he kicked off a new era of radical transparency that made it harder to hide problems.
He took the philosophy to Ford. As at Boeing, Mulally was determined to have a constant stream of data that would give his team a weekly snapshot of Ford’s global operations and hold executives’ performance up against profit targets. Constantly updated numbers—later validated by pre-earnings quarterly audits—would make it impossible for executives to hide unpleasant truths. But that wasn’t the only objective.
“Information should never be used as a weapon on a team,” says Mulally. Rather, the numbers would help executives anticipate problems and tweak strategy accordingly. The heart of Mulally’s data operation is located in the Taurus and Continental rooms (named after the cars). They are beige and white spaces, about 10 feet by 20, down a flight of stairs from his 12th-floor office.
The walls are covered with color-coded tables, bar charts, and line graphs. They represent what’s going on in every corner of Ford’s operation—China, Russia, South America, Ford Motor Credit, and so forth.
Divisions that aren’t living up to profit projections on a given week are red. Those that are hitting their numbers are green. Yellow means the results could go either way at the next meeting.
When Mulally first instituted the weekly Business Plan Review system, it was viewed not only as a pain in the neck but also like playing poker with all your cards showing. James Farley, a former Toyota hand Mulally hired as his chief global marketing executive, had his own reasons to be uncomfortable. In 22 years at Toyota, Farley had experienced uninterrupted growth. So, it was a blow when his key metric, market share, turned red last September. GM was heavily discounting its pickups, making it tough for Ford to clear out its 2008 trucks before an all-new F-series arrived in October. “I am my market share,” Farley recalls. “So, I didn’t like it one bit.” But when he saw how Mulally used the data, he became a believer. The team agreed to delay the launch of the F-series truck by about six weeks, dial down fourth quarter production by 40%, and focus on clearing out the ’08 trucks that had piled up when gas prices soared last summer. The team swallowed hard because delaying the new F-series, Ford’s biggest moneymaker, would worsen already dismal yearend losses. But, says Farley, “we had total consensus that it was the right thing to do.”
In November, Mulally decided that the dire business conditions, and Ford’s new ability to react to rapidly changing circumstances, warranted daily meetings with the global team. Insiders say these led Ford to strike a new deal with the union on retiree health care before GM and Chrysler and helped it price discounts and boost market share four months in a row. . .. Mulally has imposed discipline on a company that veered from one strategy to the next. Brands such as Lincoln and Mercury changed their positioning every year. Today the plan, hashed over with dealers who have been given more say, is locked: Lincoln will focus on premium sedans and SUVs, while Mercury will sell premium small cars and crossovers.

Questions for Discussion

1. How would you describe Mulally’s approach to decision making?
2. Is Mulally’s approach more characteristic of the rational, normative, or garbage can model of decision making? Discuss your rationale.
3. What type of decision-making styles are most and least consistent with Mulally’s approach to decision making? To what extent is Ford following the practical recommendations of increasing creativity? Explain.
4. What are your key takeaways from this case?