A key focus of my upcoming book, The Challenge Dividend, will be to teach leaders of organizations how to apply challenge in hopes of improvement. In addition to introducing the theory, I will share several case studies that back up my lessons. One case study in progress is the story of the Ford, which is in the middle of re-inventing its company and culture under the pressure of challenge.
The June 4 edition of BusinessWeek puts the spotlight on Ford and its attempted turnaround in progress. Ford is clearly a company under severe pressure from investors and consumers. It lost $12.7 billion last year and is rapidly ceding market share. The company continues to suffer from a real or perceived quality gap versus brands like Toyota and Honda. The first "ingredient" in driving improvement is often an external market threat. Check that box for Ford.
In order to drive improvement in the external market, previous CEO and family leader, Bill Ford Jr., gave his job to outsider Alan R. Mulally. The choice of Mulally represented a large step toward embracing the Challenge Dividend. He was one of a handful of outsiders ever to enter at the top of the Detroit auto industry, coming into a company that had traditionally tapped Ford family members. Mulally came from the head post of Boeing's commercial airlines division, where he successfully turned the company around through both cost cutting (eliminated 27,000 employees) and innovation (introduced the 787 Dreamliner).
Bill Ford hoped that Mulally's outsider perspective and history of turnaround success on an even more complex manufacturing business would shock the company back to life. Interestingly, his initial focus seems to be on fixing Ford's company culture by introducing a more challenging mentality. For example, Mulally:
- For the first time forced each operating group to make its financial data public. This opened up every executive to the internal pressure to show results.
- Introduced weekly problem solving sessions among division chiefs.
- Pressured the Focus compact team to squeeze out a profit instead of accepting a $3,000 loss per sale.
- Lengthened job tenure among executives (up from two years) to ensure that long term results are produced and they are held accountable.
- Created a bonus structure that applies to executives and shop floor workers similarly.
Interestingly, part of today's troubles likely go back to the historic family ownership of Ford. A concentration of stock in family hands (40% of voting rights) has meant that the company faced less market pressure. But as their stock value and dividend checks dwindle, the family seems aligned to the need for change.
Mulally seems to have lots of Challenge Dividend cards in his hands, but it is a long road ahead to change the minds of employees, investors and car buyers. Whether his moves pay off in the long run or not, improvement at Ford is already underway, and Mulally's moves serve as strong examples for any leader of an organizational turnaround.
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