by stevoarnold

Alan Mulally — Making Ford a Model for the Future
[Via HarvardBusiness.org]

Almost exactly a year ago, I wrote an article about why Ford has the potential to become a company of the future. It had just come off reporting a $14.6 billion loss for 2008, its fourth losing year in a row.

One year later, Ford reported a profit of $2.7 billion. Yesterday the company reported March sales up 40 percent. GM, by contrast, was up 22 per cent, and Chrysler was down 8.3 per cent.

There are many reasons Ford has achieved such an extraordinary turnaround since Alan Mulally took over as CEO in 2006. After observing him in action, talking with him and spending time with his senior team, I’m convinced Mulally is taking an old-school industrial company and turning it into a model of how a modern company ought to be run.

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Perhaps because Mulally is an engineer who actually built things at Boeing, rather than just a sales/marketing MBA, he has a firm understanding of how to get people to do creative things, even at an automobile manufacturer.

Innovation, and the creativity that drives it, does not come from short term metrics and 9-5 mentalities. Mulally had a huge influence on Boeing’s success against Airbus and is now doing something similar with Ford.

I wrote about some of these approaches before. It looks like Mulally has continued on this path.

Some we have heard before. ‘Rally around a mission.’ ‘Long-term strategic planning.’ ‘Be fearless.’

All great aphorisms but execution is what makes them work. Observe how he creates a culture of truth-telling and transparency:

Finally, Mulally has created a culture in which telling the truth, however painful it may be, gets rewarded. Every Thursday morning, he presides over what he calls a “Business Plan Review.” The heads of Ford’s four profit centers around the world and its 12 functional gather to report on how well they’re meeting their targets and on any problems they’re having. They’re all in together.

To broaden transparency, Mulally invites outside guests to sit in on the meeting each week. The day I was there, one Ford executive described a significant shortfall on a key projection. No one cringed, including Mulally, and the executive calmly outlined his suggested solutions. Then he invited others to share their ideas.

Not only does he have everyone in it together and makes sure his own approach of finding solutions to problems, not blame, but he includes outsiders with no ax to grind or domain to defend. These observers provide a perspective that keeps the focus on finding answers.

And I bet they often ask naive questions that can sometimes explode into creative ideas.

I think that they have a great chance to adapt to the changing markets in ways others can not.