Former Ford CEO Alan Mulally has a big reputation: He was No. 3 on Fortune’s “World’s Greatest Leaders” list, one of the ” World’s Best CEOs” according to Barron’s, and Automotive News magazine’s “Industry Leader of the Year.”
But you might remember him better for his appearance at a congressional hearing during the Great Recession where he pledged to take an annual salary of $1 and cut bonuses for management in the wake of a $14.6 billion company loss in 2008. It was the worst annual result in the Ford’s 105-year history.
Eventually though, Mulally transformed the flailing company into a profitable and productive one. At the 2017 Inc. 5000 conference in Palm Springs, California, on Thursday, he related the strategies that led to the remarkable turnaround.
The recession had actually started two years early for Ford. Before Mulally arrived from Boeing in 2006, the automaker had posted a then-record loss of $12.7 billion.
“Ford had become a house of brands,” Mulally said. “No one knew what the blue oval stood for anymore.” He recounted that Ford regional offices had become a set of independent entities, with different product, marketing, and sales plans. On his first visit to Ford headquarters, he said, he couldn’t find a single Ford in the executive garage.
Under Mulally’s “One Ford” strategy, the company was the only one of the big three U.S. automakers to sidestep bankruptcy and not take any money from the government’s massive TARP bailout program. Net income increased to $6.6 billion by 2010, and Ford’s stock has appreciated more than 1,000 percent from recession lows.
Here are the philosophies he credited with sparking the company’s rebound.
1. Make a plan and then make sure everyone knows it.
When Mulally first came to Ford, he asked around for the names of the company’s brightest employees, and then got them together to begin working on a new vision for the business. “The team decided that every new vehicle from then on had to be best in its class,” Mulally said. They then shared that goal with every stakeholder and with the press. Next, he said, “We started our business plan reviews to get everyone connected. We began reinforcing the plan with a laser focus.”
2. Get everyone together and make sure their interaction is respectful.
Mulally’s notorious business plan reviews got Ford personnel around the world on the line at the same time to network and exchange ideas. One of the most important ground rules for establishing open communication was reinforcing a culture of consideration for one another. “Never make a joke or try for humor at someone else’s expense,” Mulally said. “In a high-stakes environment, everyone needs to feel safe.”
3. Reward honesty.
In the past, admitting failure at Ford meant being shown the door, and the field adjusted by hiding problems. In a year that the main office was predicting massive losses, initial meetings with company executives yielded nothing but good reports. When the first company leader finally opened up and shared some of the internal problems, Mulally responded with literal applause. More honesty followed, and the company was finally in a place to address its issues.
4. Put people first.
In Mulally’s first speech to 4,000 Ford dealers and corporate employees, he explained why he came to the company, what the situation was, and why he thought they could save Ford together. “I told [the dealers] they were the most important stakeholders and that we’d work with them as true partners,” he said. Mulally had the Ford employees stand and face the dealership owners and tell them out loud that they loved them. “Make it a self-fulfilling prophecy,” he told them. After all, he said, these were the people whose livelihoods depended on the product they were building.
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