Strategic Leadership in Ford Motor Company

Pascale (1990, pp 119-121) studied a range of American companies during the 1980s and concluded that Ford US stood alone in appearing to have truly transformed itself. In 1980 it lost $3.3 billion. In 1986 it surpassed GM in profits for the first time since 1924. In 1987 it broke all previous industry records for profitability.

The process started when, seeking ways of turning the company around, a Ford task force examined outstanding American companies and their characteristics. Top management decided that Ford’s core values were people, products and profits and developed a new statement of Ford’s mission and guiding principles of behaviour. The major organisational challenges to support the strategic agenda were employee involvement (EI) and participative management (PM). The latter at Ford US was used:

• To complement EI by development managerial skills needed to provide employees and fellow managers with opportunities to participate in the managerial processes of planning, goal setting, problem-solving and decision-making • To integrate managerial effort across rigid functional barriers

In Ford US, functional groups formed `organisational chimneys’ – an organisation structured for vertical relationships within functions, and that in so doing put up barriers that prevented effective horizontal linkages. PM sought to change managerial attitudes and to dismantle dysfunctional structures by simplifying managerial control, devolving authority and breaking down barriers between managerial groups.

This was of crucial strategic significance, since the success of Ford’s shift towards innovation hinged on the integration of design, manufacture and sales and marketing – as in Japanese companies operating in the same kind of increasingly turbulent market conditions. PM and product development came together for Ford in a new strategic vision of the company as design leader, and its turnaround in the USA was design-led with the new Taurus/Sable range.

Pascale (1990) attributed Ford US’ transformation of Don Petersen, president from 19080-1985 and chairman from 1985-1990, and Harold `Red’ Poling, vice president, Ford North American Operations, then president from 1984 and chairman of Ford US in 1989.

Their partnership was perfectly balanced. Petersen gave the visionary leadership, engaging with people’s feelings, exciting them and reshaping their goals, needs and aspirations through defining Ford’s mission and values. Poling made sure that behaviour corresponded to the new goals. He concentrated on the quantifiable, getting quality and numbers right and benchmarking against key competitors. He saw to the cost structure, Petersen to EI and PM. Taken together, their leadership and managerial skills were instrumental in tipping Ford into a new era (Starkey 1996).

Petersen deliberately disrupted conventional mindsets at Ford by setting up a participative approach to top decision-making that broadened, deepened and enriched the company’s strategic decision-making. He shifted management’s focus from the functional to the strategic and ensured a balanced management team where difference was valued, using the Myers-Briggs teambuilding process to help Ford managers powerfully learn for themselves how the nature of the strategy process is a dynamic outcome of team interactions and also of individual personality characteristics. He `brought to Ford’s top team an intuitive and feeling approach to decision-making, something which is rarely found at that level’ (ibid. p371, 379).

Failure in Ford Europe

Ford Europe, however, failed to pull off a similar transformation in the 1990s. The reasons were many, but a major problem was that although Billy Hayden, Europe’s Vice President of Manufacturing, said in 1992 that the Japanese had caused Ford to completely rethink their policies and behaviour patterns, in fact mindsets had not been changed. The primary focus was still on cost differences, and the belief remained that the old Ford system, if intensified, could still match the Japanese.

Leadership failed to diagnose that the fundamental problem was in Ford Europe’s backward-looking and finance-dominated culture. The whole drive was one of cost reduction. An `After Japan’ change management initiative strengthened, not reduced, the managerial emphasis on control, doing nothing to stimulate a culture in meetings, functional heads would arrive in a defensive stance, using figures not to improve the quality of decision-making but to improve political advantage of sectional groups.

When, eventually the same American change initiative that had been introduced successfully in the USA was attempted in Europe, with a new company mission, values, guiding principles and a new managerial emphasis on teamwork, the barriers had become too great. In particular `top management endorsement and leadership in getting the whole organisation aligned and working towards the same goal was felt to be lacking’ (ibid. p374). There was no creative tension, no balance of top champions.

Bill Hayden was VP of Manufacturing in Europe from 1974 to 1991 when he became the first Ford chairman of Jaguar after its acquisition. Given the steady turnover in Ford’s European top management cadres he exerted a disproportionate influence, particularly because of the force of his personality and the iron control he exercised over Manufacturing’. He was quite willing to innovate in search of cost-reduction, as with the `After Japan’ initiative, but was more wary of other kinds of innovation (ibid. 375).

His role was comparable to that of Poling’s in the USA, but there was no strong counter balance to him or to his urge to centralise control. The result was that `commitment to the implications of Ford’s new mission and the values and principles of behaviour necessary to support it such as PM, was only skin deep’ (ibid. p376). [Source: STARKEY, K (1996)]

Questions

Please read the case study entitled `Strategic Leadership in Ford Motor Company, US and Europe, 1980’s and 1990’s` that deals with leadership issues and the global marketplace with a special emphasis on organisational challenges.

Consider the following questions:

1. What are the main contextual issues that impact on strategic leadership? 2. What are the main challenges for Ford Leaders?