Can you lead a company back from the edge of bankruptcy? The transformational journey of a company close to bankruptcy and back to profitability is very, very fascinating to read. Two cases immediately come to mind, Steve Jobs returning to Apple and Carlo Goshen turnaround of Nissan. But Ford turnaround and the leadership prowess of Allan Mulally took home the first prize in my opinion.
I am a huge fan of Allan Mulally leadership style. What his team accomplished at Ford is nothing short of legendary, and it was captured well in Bryce G. Hoffman book American Icon: Allan Mulally And The Fight To Save Ford Motor Company. If you want a blueprint, behind the scenes road map on how to save a company, you must read this book.
After analyzing the changes at Ford and dissecting Mulally leadership style, it is very refreshing to witness the actual meaning of servant leadership, someone who is more of an advocate as indicated in my article The Art of Woo as oppose to an authoritarian type of leader who believes the world revolves around their presence.
Mulally is a leader who inspires and bring out the best in people, a leader who lead from a position of values and genuinely have the best interest of their staff at heart. When you have that type of leadership in your company, it will flourish. Now let put the article into context and revisit the company Mulally inherited in 2006 to give you an appreciation of the transformation.
Ford Difficulties
Ford lost 12 billion dollars in 2006
The demand for Ford vehicles was declining rapidly
Their vehicles were uninspiring
Their share price was at the lowest rate ever
The culture of the company was nauseatingly toxic
Staff morale was the lowest it has ever been
There was no synergy among the various business units in the world and the company completely lost its focus.
The above description looks daunting, and you may be wondering who in their right mind will take such a responsibility with a company losing 12 billion dollars in one year and hemorrhaging cash at an alarming rate. Well, this was the situation at Ford in 2006, on the brink of bankruptcy and feverishly looking for someone to help turn things around.
Allan Mulally, the former CEO of Boeing Commercial Airplanes, was recruited by Bill Ford to be the new Chief Executive Officer of this very dysfunctional multinational company. What made this case so special for me, was his ability to rally the company around a vision, his strategic focus and most of all the humility he brought to the executive team. To lead a business during that time of difficulty required something special and Mulally and his staff pulled off the inconceivable.
If you think I am very melodramatic, in 2006 Wall Street analyst predicted that Ford would be the first of the big 3 to file for bankruptcy given the nature of the company at that time, but it turned out very differently. I want to share with you the five leadership skills anyone leading a company can learn from Allan Mulally.
Humility
“At the most fundamental level, it is an honor to serve—at whatever type or size of organization you are privileged to lead, whether it is a for-profit or non-profit. It is an honor to serve”.
People give CEOs a larger than life personality in their company and many CEOs accept this overture with open arms. They treat their businesses as a kingdom, sitting on their throne looking at the peasants working in the field. When Mulally became the CEO at Ford he understood the culture but more importantly, he was fully attuned to the gap between the executive and the rest of the company. Mulally made it his business to change this because he knew if the company had any chance of a comeback, every single employee must be on board.
Mulally stood in the line at the cafeteria like everybody else waiting for his lunch and soliciting feedback from his staff in the corridor. If you are familiar with the culture in Dearborn, it was unheard of that any CEO of the big three will have that type of interaction with junior staff in the company. Mulally, however, understood that the firm needed to work together as a team if Ford had any chance of survival. Mulally also knew that the CEO must walk the talk and lead by example and it must start with him and the executive team at the company.
Mulally’s leadership style reflected this. Jim Collins, in his book Good to Great, classified this type of leadership as level 5 Executive. Someone who builds enduring greatness through a paradoxical blend of personal humility and professional will. Mulally was a coach, not a king and while he relished the spotlight that came from Ford’s incredible resurgence, he was always pulling other executives with him.
Purpose and Communication is Absolutely Important
When Mulally arrived in Dearborn, one of his first priorities was identifying Ford’s core purpose and charting a vision for Ford recovery. Mulally found an ad from 1925 in which Henry Ford outlined his purpose for the company: “Opening the highways for all mankind.” Mulally had that ad blown up and mounted on his wall. He passed out copies to each of Ford’s top executives.
Mulally made sure that all future product decisions would be weighed against that promise. The core purpose was used as the guiding light for the company and reignited the fire that somehow got extinguish. Ford required a change of focus, vision, strategy and culture. The glue that held all the components together inside and outside of the company was communication.
The team developed their One Ford Plan, which became the reference point for the transformation. Mulally had this plan printed on wallet cards and distributed to every Ford employee. He opened every weekly meeting by reviewing them. He recited them in every speech, in every town hall meeting, in every press conference.
One of the most critical variable use to achieve the transformation was a compelling vision, clarity of strategy, open and honest communication and a change of values. Mulally ensure that his communication was constant and consistent to point where people got fed up of hearing the four-point plan.
Mulally went at lengths to communicate and make people feel comfortable about the change and to explain their role in the process. His positive influence over the company eventually caught on and even his doubters begin to believe in his ability to pull this thing off. When you have open and honest communication in your business, it will remove any ambiguity and allow your employees to trust the plan, trust the process and most importantly trust the leader.
The Positive Psychology of Leadership
Weak leaders focus on all the things that are going wrong. Great leaders like Mulally bring out the best in his team. The most effective leaders apply the principles of positive psychology, ensuring their interactions with employees contain a healthy balance of positive and constructive feedback. They maintain an optimistic outlook despite the setbacks, reinforcing that there is a hopeful way forward.
A Stanford social psychologist Leon Festinger in his 1957 published theory of cognitive dissonance, found that when people believe that their beliefs are inconsistent with their actions, a deep-seated need arises to eliminate that dissonance by changing either their actions or their beliefs.
To change any behavior in your company, you should start with changing the mindset of your employees. If you get your staff to believe in the purpose of the company, you stand an excellent chance to change their behavior. Remember what Mulally did when he arrived in Dearborn and found that ad from 1925 from Henry Ford. It was blown up and placed in his office, and a copy was given to all his managers.
That core purpose “opening up the highway for all mankind” was use as the catalyst to change the belief of the management team and by extension the company. Mulally understood that if he got his team to believe in the purpose of the company, a change in behavior will follow. But it all started with the mindset, when people feel included and accountable in a very supportive work environment, you get the best out of your staff.
Build a Culture of Trust
The Ford that Mulally inherited was notorious for its sharp-elbowed corporate politics and boardroom backstabbing. The company’s culture had become so caustic that every good idea and smart initiative was stillborn; executives were too focused on preserving their interest as opposed to the overall success of the company.
Before Mulally arrived in Dearborn, high-level meetings were arenas for mortal combat. Executives would enter them looking for weak points in each other’s armor. This made it impossible to have an honest discussion about the company’s many challenges, because any time an executive admitted they had a problem, their rivals would pounce.
The turnaround at Ford really began when the executive team started to trust one another. During the team BPR meeting, Mulally asks all his manager to use a color code in their presentation. Green if there no problems, Yellow if the problem is being dealt with and Red if there is no solution. Because the culture was so toxic, no one wanted to admit a problem existed, so in every meeting, all the slides were green to point where Mulally ask the team “guys we are projected to lose 12 billion dollars is there anything that is going wrong”.
The vice president of the Americas Mark Fields was the only person to include a red spot on his slide at one of the meetings. Now, picture that room at that very moment, everyone waiting for the response of the new CEO. But Mulally clapped his hand and indicated to Mark "that is excellent visibility" and asked the team for help to solve Mark’s problem.
At that moment, some of the executives indicated their willingness to assist in resolving the problem and that allowed the other managers to show their problems in their unit. At that moment the real transformation began, only because the CEO made it safe for the team to address their problems and trust was built into the culture.
Can you lead a turnaround, yes you can? What is required is an authentic leader who can bring out the best in people, to recognize potential, to empower people to take responsibility and to create an environment where everyone understands that working together is the key.
On his first day as Ford’s CEO in 2006, Mulally asked to tour Ford’s famous Rouge plant where Henry Ford created the Model T. Mulally was informed by one of his top executives, “Our leaders don’t talk directly to the factory employees.” Ignoring that advice, he went to the plant immediately to talk to front-line.
When you have a consistency of purpose across your entire organization, and you have nurtured an environment in which people want to help each other succeed around a vision, your company will be on the road to success.
Thanks for the inspiration to write this article Dr. Goldsmith and Pawel Motyl.