Problem-Solving Application CaseCultures Clash at Ford Ford Motor Company has attempted to remain ahead of an increasingly competitive and innovative auto industry by hiring James Hackett as CEO in 2017. Unfortunately, Hacketts leadership style and proposed changes have not entirely been well-received by employees, the media, and the auto-buying public. This activity is important because it demonstrates the various effects senior leadership can have on both the external competitiveness and internal climate of a company.

The goal of this activity is for you to evaluate Hacketts tenure as CEO of Ford by examining the connection between his various approaches to leadership and Fords initiatives during his tenure. Read about Ford under Hacketts tenure as CEO since 2017. Then, using the three-step problem-solving approach, answer the questions that follow.

Ford Motor Company revolutionized the auto manufacturing industry more than 100 years ago with the invention of the assembly line, but lately, the company is struggling to remain attractive to investors. Ford has experienced costly recalls and lost hundreds of millions of dollars from its international businesses in recent years.1 New tariffs on steel and aluminum have eaten up $1 billion of Fords profits, and Moodys has downgraded the companys credit rating to one level above junk status. By the fall of 2018, Fords stock price hit a nine-year low.2 Meanwhile, rival manufacturers are inching closer to delivering on new technologies like fully autonomous and connected automobiles, and Ford needs to reinvent itself to have any chance of surviving, let alone thriving, in its rapidly shifting competitive environment. But can a massive, entrenched, 116-year-old company change itself?

Executive Chairman Bill Ford believes it can, and in May 2017 he brought on CEO James Hackett to make it happen. Hackett planned to drastically alter the way Ford operated.3 Specifically, he wanted to change Fords culture to one that was more open-minded, creative, and adaptable so that it would be better equipped to respond to rapidly shifting market demands.4 Stakeholders had high expectations for Hacketts ability to deliver. In the two decades he spent as CEO of Steelcase, Inc.an office furniture companyHackett was a strong proponent of design thinking. This approach to problem-solving focuses on the customer what goes through their minds and how they experience a product.5 At Steelcase, Hacketts teams of sociologists, anthropologists, and technology experts used design thinking to transform the company from a cubicle designer to a trailblazer in todays open, collaborative workspaces.6 Hackett was hired to bring design thinking to Ford, overhaul its culture, and reinvent the approach the automaker took to creating its products.7 Hackett made some noticeable changes right away. He reduced the number of people reporting directly to him from 18 to 8 and decreased the frequency of meetings with them to allow them more time for creative thinking and decision-making. He hired 28-year-old Clare Braun as his chief of staff, calling her a reverse mentor who would help him understand how people under 30 were thinking. Hackett also made waves by removing a plaque that commemorated former CEO Alan Mulallys One Ford plan. Mulallys plan had been credited with repairing Fords culture and saving profits ten years earlier, but Hackett wanted to make the point that old approaches only continue to work if the past and future were identical. The space on the wall became dedicated to drawing, mapping, and diagramming out Fords strategy for competing in its new reality.8 Hackett favors collaboration over traditional top-down management. Much of his efforts to change the culture inside Fords corporate offices have centered around removing hierarchies to generate creative discussions across functional areas.9 For example, Hackett launched Team Edison to focus exclusively on electric vehicles. The cross-functional team occupies an open space inside one of Fords former Detroit factories and, according to director Darren Palmer, knew that to succeed they needed to be willing to challenge every truth and every process we had developed over the course of our careers. Hackett has encouraged the team to generate ideas from multiple viewpoints. According to Palmer, On any given day you can find yourself sitting next to someone working to market our electric vehicles, someone looking at the profit potential of our electric vehicles, or be on a coffee break with someone involved in our charging strategy.10 Frustrations with Hackett By mid-2018, approximately one year after Hackett took over, Fords profits were down around $1 billion. Key stakeholders were growing increasingly anxious and impatient with the fact they still didnt understand exactly what was going on or how Hackett planned to change the company.11 Analysts began criticizing Hackett for failing to articulate a compelling vision for exactly where he planned to take Ford. Morgan Stanley analyst Adam Jonas said what little Hackett had communicated was vague and unstructured compared to Fords industry competitors. One journalist said Hackett used fuzzy terms more common to urbanists and businesspeople, and talking with him can feel like taking a college philosophy seminar after a few bong rips.12 Issues with Hacketts communication were present inside the company as well, where executives were often calling upon Braun, Hacketts chief of staff, to translate Hacketts diagrams and cryptic messages after meetings.13 Ford dealership owners also expressed concerns about communications from corporate headquarters. Jack Madden, owner of a Ford dealership in Norwood, Massachusetts, said Theres been a lot less exposure to senior management. Theres just not enough information flowing down to dealers about where the companys headed.14 One thing Hackett did make clear was that reorganizing and reinventing Ford would require that the company become leaner in both its product offerings and its workforce. Hackett moved quickly and explicitly to slash Fords unprofitable vehicles and ventures. He announced in early 2018 that the company would discontinue five of its sedans to focus on SUVs and trucks.15 Ford also announced in 2019 that it was closing its oldest factory in Brazil and pulling out of its South American commercial truck business.16 Hackett has been less transparent on how and when he plans to trim Fords workforce. While the need for some job cuts within Ford is not disputed, the manner in which Hackett has communicated about the impending layoffs has been heavily scrutinized. Experts believe that vague statements about layoffs, along with a long process, have the potential to negatively impact employee morale. Employees may feel undue stress and begin job searching and underperforming if they worry about losing their jobs.17 Is Ford Turning a Corner? Ford reported first-quarter earnings in 2019 that far outpaced investors expectations.18 Around the same time, Hackett gave what some felt was his most straightforward statement to date. He told analysts that Fords two previous CEOs had allowed the companys costs to incrementally increase so much that the company had to, as one article put it, stop the bleeding before it could start showing gains from herculean efforts to turn the company around. Hackett reported that by the end of 2018, the company had finally been able to put a stop to the spending and level off structural expenses. Hackett said the company would be able to move much more quickly to deliver new products to the market now that this problem had been solved.19 Ford has announced it will make substantial investments in electric vehicles, and Hackett recently told CNBC that drivers should expect a big surprise on the horizon.20 Still, its likely that Hackett will continue to mystify Fords stakeholders. In an industry looking for a savior with a clear, concise plan of action, Hackett operates more like a coach. He favors using things like TED talks and Socratic exercises to slowly draw creativity and organic solutions from his people, rather than handing down personal dictates.21 Hacketts quirky style is closer to that of a tech CEO than an auto industry leader, which he sees as particularly important in Fords situation. Fords competitors are no longer limited to other auto manufacturers and now include Silicon Valley. Hackett thinks Fords best shot is to start thinking like a tech startup, saying Corporations tend to reward action over thinking. ... But the truth is youll find the companies that didnt do the deep thinking and acted quickly have to redo things.22 Hackett acknowledges that it has been difficult for his executive team to adjust to him and his penchant for design thinking, but he believes they are starting to see the method to his madness.23 One member of his team said recently that they believe People will look back in a few years and say, I understand now.24

Questions:

Step One: Define the Problem

Step Two: Identify causes

Step Three: Recommend Solutions