Does Ford Need To Change Its Corporate Culture?
Essay Preview: Does Ford Need To Change Its Corporate Culture?
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Presentation Outline
Does Ford Need to Change Its Corporate Culture?
Introduction — Segment length: 1:00. Total: 1:00
Relationship of Topic to Course
Leadership
Power and Politics
Decision Making
Organizational Culture and Development
Topic question: Does Ford need to change its corporate culture?
Answer: Yes, mistakes in corporate decision making and failure to keep up with competition has left Ford’s market share dwindling.
Methodology
Survey (Primary)
Secondary research
Supporting Arguments – Segment length: 4:00. Total: 5:00
Automotive design
Ford Explorer
When it debuted in 1990, the Explorer quickly became the best selling sport-utility vehicle in the US. It held that spot for most of the next 16 years. In 2007 the Explorer was 10th in sales. While some of the numbers were dampened by Ford’s own Edge and Escape, the three best selling SUVs were a Honda, Toyota, and a Chevrolet (Edmunds).
Ford Taurus
The Taurus was the number one selling car in America from 1992 through 1996. In 1997, as part of a recurring theme, it lost its title to a Japanese rival, the Toyota Camry (wikipedia).
In 2006, it didn’t even make the top 10 list. (Vella)
Ford’s crucial mistake
In the late �90s and early 2000’s, Ford saw its SUV sales skyrocketing. It decided to put its eggs in that basket. A corporate culture of arrogance and entitlement led them to neglect their cars. They assumed that the cars had always sold well and would no matter what. Because of this lackluster approach, the Japanese cars blew right by them in quality and design.
With gas prices up and the economy not as good as it was in the late 1990’s, people began to steer away from gas guzzling large SUV’s.
Taurus-Camry-Accord graphic
In the 8 years from ’00 to ’07 of that Ford Taurus’s design run, there were three different Camry’s. Toyota stayed fresh and cutting edge in design, while continuing to build on its reputation of quality and reliability. Ford barely tried to advertise the Taurus, assuming it would just sell itself.
History: What happened? (Kiley)
How did Ford evolve from one of the most admired companies in the world into one where losing money has become the norm? Until the mid 1960’s, it was considered a management shrine. Under U.S. Defense Secretary Robert S. McNamara, one of a celebrated group of military veterans at the company dubbed the Whiz Kids, Ford developed scientific consumer research techniques that are now commonplace throughout the business world. It was one of the first auto companies to create products that were based on hard data rather than the personal tastes of executives.
McNamara exited in 1961, Henry Ford II gradually assumed a bigger role in management. He built a high-testosterone culture where up and coming executives were often pitted against one another to prove themselves. As the auto industrys postwar growth slowed, limiting opportunities for an overstaffed field of managers, executives turned on one another. They became more cautious. “The bureaucracy at Ford grew, and managers took refuge in the structure when things got tough rather than innovate or try new ideas that seemed risky,” says Allan Gilmour, a former CFO at Ford
Personal ties with the Ford family, always important at the company, sometimes trumped actual performance in promotion decisions.
Ambitious managers focused increasingly on kissing the right rings instead of racking up results. It became “something of a palace atmosphere,” says Gerald C. Meyers, a professor at the University of Michigan School of Business.
Critics also blame the family, which has many members who depend on dividends as their main source of income, for encouraging a focus on current profits rather than long-term planning over the decades.
In the royal hierarchy at Ford, an elaborate system of employment grades clearly established an employees rank in the pecking order. The grades also had the effect of quashing ideas and keeping information tightly controlled. When Mark Fields, now president of Ford Americas, first arrived at the company from IBM in 1989, he couldnt make a lunch date with an executive who held a higher grade. People asked him what his grade was “as a condition of including me or socializing with me,” Fields recalls. He was discouraged from airing problems at meetings unless his boss approved first (Kiley).
Ford posted a net loss on the books of 12.6 billion dollars for 2007 (Hoover’s).
In 2006, for the first time, the market share of American cars fell below 50% (Motor Authority)
Another contributor to Ford’s fiscal downfall was its inability to align production capacity with demand. Their size became unsustainable. They were manufacturing to 79 percent capacity, but they were paying for an infrastructure to deliver at 100 percent capacity (Levine).
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On September 5, 2007, Ford lured Alan Mulally away from Boeing to become its new CEO. He would set in motion a new plan to restructure the company and improve its corporate culture. This is known as The Way Forward (Wikipedia).
The Solution: The Way Forward
The Way Forward is Ford’s massive restructuring plan with aims to cut costs, gain efficiency, regain lost market share, and to make Ford vehicles profitable across the fleet.
“We call our North American plan, “The Way Forward.” It’s bold and sweeping and it builds on the innovation-driven vision we talked about last September. Its a strategy that calls for sacrifices at all levels of the Company. It puts the customer first. And it demands we look beyond short-term financial