12 BRIEFINGS Six Lessons Briefings Profile: Alan Mulally The M a n W h o Saved Ford
Alan Mulally hands us a piece of paper with the points about leadership he wants to cover during our time together. The note is handwritten and, unusual for a CEO of a Fortune 10 company, he’s drawn a heart around the words Korn Ferry on the note. A heart! You don’t think of engineers as people who draw hearts on notes and memos, and there is nothing in his 12th-floor office at Ford’s sleek Dearborn head- quarters that betrays sentimentality. Engineers are tough-minded analytical types who live their lives curled up on the left side of their brains. And while
Interview by Mulally is definitely familiar with the left side — Michael Distefano bachelor’s and master’s degrees in aeronautical and & Joel Kurtzman astronautical engineering from the University of
Six Lessons13 Briefings Profile: Alan Mulally
Kansas and a master’s in manage- ting them go. Weeks after he left ment from M.I.T.’s Sloan School of Ford, Mulally joined the board of Management — he’s also a right- directors of Google Inc. brain guy, a genuine people person. Even before Ford, Mulally’s We, but not Mulally, sometimes platform was global, complex and forget that the tools of modern massively capital-intensive. He spent companies — computers, man- 37 years at Boeing designing, then agement systems, charts, tables, serving on, every one of its “bet-the- spreadsheets — don’t get things company” airliner programs. He then done; people do, which is why his became lead designer, director of people-person style works so well. engineering and finally general man- On June 30, 2014, Mulally com- ager for the 777 — an ex- pleted his latest “big thing,” the tremely intricate machine transformation of the Ford Motor with 3 million parts and a Company from a money-losing global supply chain. The behemoth with an iconic legacy, 777 has been the subject a patchwork of competing (some of documentaries, articles would say warring) fiefdoms, and and business school case a large, diffuse set of brands, into studies because it was a globally integrated, single-team the first commercial company with a smaller, more airliner to be built using profitable and focused catalog of computer-aided design brands, a set of highly touted pro- techniques. And when cesses and 19 profitable quarters in he became president and a row. Mulally masterminded this chief executive officer of transformation during one of the Boeing Commercial Air- grimmest periods of global eco- planes, Mulally oversaw nomic and automobile history, in an even more difficult the midst of the worst and longest project — the design financial and economic crisis since and development of the the Great Depression. Mulally, who 787 Dreamliner, the at 68 is ginger-haired and brim- most complex, techno- ming with as much energy as Saudi logically sophisticated Arabia, Texas and North Dakota, and fuel-efficient jet managed the transformation by airliner ever built. getting the best out of the people And yet, Mulally draws already working at Ford, not by let- hearts on his memos.
14 BRIEFINGS Dearborn
e met at Mulally’s office at Ford’s engineering and development center and — behind a headquarters in Dearborn, Mich., just high fence — one of its proving grounds. From where Woutside of Detroit. It was late spring as the other one of us stayed, a more modern hotel we drove through the city of 100,000, and we could from an upscale chain, you could see the company’s not help noticing the thick, green lawns, leafy trees, headquarters and — if you looked even farther — the and wide, uncongested streets. It was an impeccably old River Rouge Complex. At one time, the complex manicured Midwestern town with a lot of charm. had been the largest and most integrated factory in If Henry Ford had not located his automobile the world, with 1.5 miles of buildings. Truck- and company here, it might still be prairie farmland trainloads of raw materials would enter the factory at with rows of corn and hay, and milk cows dotting one end, people used to say with only modest exag- the horizon. But now it is Ford country, and Ford is geration, and shiny new Fords by the millions would everywhere. come out the other end. From where one of us stayed — a hotel built by Mulally, whose roots are in Kansas, another ear- Henry Ford decades ago and filled with photos from nest, corn-growing, Midwestern state, presided over that era — you could see the company’s sprawling the successful transformation of Ford for eight years. Briefings Profile: Alan Mulally
Vision Fixing Ford
ransforming a legendary company like Ford hen Mulally entered Ford’s blue-glass requires “vision,” Mulally told us in his intense headquarters building for the first time T style, sometimes touching our arms or shoul- Win September 2006, the company was ders, and always leaning in to drive home his points. deteriorating rapidly. It was losing money, and some But what does he mean by that well-worn word? investment analysts and industry pundits wondered In another handwritten note, Mulally gave us his whether the company that was the first to harness and William Clay “Bill” Ford’s visions for the com- mass production would be able to remain in business. pany. The notes were surprisingly brief. Bill Ford’s The company’s debt was “junk,” and its stock, which vision was “Great products, strong business, better had been as high as $17.34 in 2004, had fallen to $8.39 world.” Mulally’s vision was “People working together when Mulally joined, before plummeting to $1.01 in as a lean global enterprise for automotive leadership.” 2008, as the world plunged into the financial crisis. But even more telling, Mulally wrote these words On the day he joined the company, the internal with precise penmanship on an old Ford advertise- forecasts were bleak. “The forecast for profits for 2006, ment titled, “Opening the Highways to All Mankind.” for automotive, was for a $17 billion loss,” he told us. It ran in the Jan. 24, 1925, issue of the Saturday Evening “And at the end of the year, we achieved that loss.” Post, a defunct magazine from a bygone era. That Mulally does not believe you can achieve greatness message was the reason Henry Ford started the com- or growth simply by cutting costs and streamlining pany, and by placing his and Bill Ford’s words on that processes. True, you can’t ignore costs and processes, sheet of paper, Mulally was demonstrating respect for and they have to be tightly managed. But what you really need is to invest in the future. He did this at Boeing, and under Lesson one: his leadership, the commercial airplane division regained its No. People rally around 1 sales position for large airliners. Investment, by definition, takes something meaningful. money, which Ford didn’t have. Just as significantly, investment requires the man and the sentiment that started it all. Ford focus, especially in times of scarcity. In Mulally’s was always about producing cars with value for the vocabulary, “focus” means “plan.” masses. As we sat around a small table in his office, which It also demonstrates something else. “Leader- also had a view of the River Rouge Complex, Mulally ship is having a compelling vision, a comprehensive explained that he had been methodically studying plan, relentless implementation and talented people Ford well before his first day on the job. Part of this working together,” he said. “People also want was interviewing dozens of Ford insiders, including meaning. All of us want to know that we are doing the board. In addition, he interviewed professionals great things, that we are touching a lot of people, and from the automobile industry, finance, business and that what we are doing is about something bigger consulting. Mulally created summaries of all these in- than ourselves. The truth is, you can only do that if terviews and put them in a thick set of binders, which you are growing, if your margins are improving, if he kept in his office. He used the insights contained in you make products that people want and value, and these books, plus “what I learned during my nearly 40 you do it more efficiently with regard to time and years at Boeing,” to write Ford’s plan. resources than the competition,” he said. Henry Ford The plan was about numbers — as all business couldn’t have provided the average consumer with plans ultimately are — but it was even more about mobility, thereby changing the world, unless he made people — what else would you expect from a man a profit. In Mulally’s view, a vision is not a hope. It is who draws hearts? Specifically, it was about getting an action plan. Ford’s employees — with their reputation for in-
16 BRIEFINGS fighting and for sharp elbows — to work together constructively and to help each other. It was about Operations changing how people at Ford interacted. Mulally called his plan to get people to work perationally, Mulally explained in his together across the company “One Team.” He unostentatious office, the plan wiped called the goal of getting people to work together Oout Ford’s old fiefdoms and created a across the company’s vast global ecosystem “One new, simplified leadership structure made up of Ford.” Then he set a simple goal for the company. the heads of the company’s profit centers — its He wanted “an exciting, viable Ford delivering major geographies, plus Ford Credit. The leader- profitable growth for all.” ship structure also included heads of Ford’s 12 To accomplish this, he added to the plan a set functional areas, some of whom, like the heads of of behaviors he expected employees to follow, such communications and technology, had never been as “foster functional and technical excellence,” part of the leadership. Each of these individuals, “own working together,” “role model Ford values” plus Mulally, Bill Ford and Mark Fields, chief op- and so on. Though these changes would alter the erating officer and Mulally’s successor, were at the company’s culture, Mulally felt they were needed top of Ford’s One Team. With amazing economy, to make the company profitable over the long run. Mulally was able to fit the plan, and some added de- tails, on two sides of a single card, which was given Lesson two: to every employee and to everyone doing business When making big changes, you need everyone on the team.
TALENT+LEADERSHIP 17 Briefings Profile: Alan Mulally
with the company. The plan, along with its expected and you say to the rest of the team, ‘I’m really sorry. I behaviors, might as well have been carved in stone. was really busy last week. I didn’t have time to work The plan began working almost immediately. It on that.’ The accountability and the responsibility did so because Mulally connected it to operational here is to help everybody on the team turn reds into targets dealing with profitable growth. Everything yellows and greens, and to deliver increasing earnings that contributed to, delayed, or cost the company and increasing cash flow every year.” profitable growth was measured, mapped and color- There was another interesting dimension to these coded — green for projects going well and on plan, meetings. “We invite guests every week to sit in on yellow for areas needing attention and red for the the meeting in Dearborn,” Mulally said. “We intro- most urgent situations. duce the guests, who sit behind the team member During our conversation, Mulally stopped, smiled that invited them, and we ask them for their reflec- slyly and invited us to “see where it all happens.” tions and thoughts. The guests might be an engineer Mulally, a compact former gymnast, is in excellent or someone from down on the factory floor. So, all shape. We learned that when he raced us down the this data is flowing up, but then all the results are also 12th-floor hallway to the elevator, and then into a flowing down. It is going back and forth every week large conference room with a massive round table at these meetings. And at the end of the meeting, the suitable for Arthur and his knights. There were comments you hear from the guests make your eyes video screens on the walls and microphones on the water. They say, ‘My gosh, this is so big, so vast. We’re table. This was a room where big things happened. in every country. I want to contribute to the plan as It was where Mulally’s weekly business plan review soon as I get back.’ I have heard many guests say that.”
Lesson three: If you want everyone to pitch in, be transparent.
took place, where the managers at the top of Ford’s One Team got together to make decisions that led to Raising money Ford’s 19 consecutive quarters of profitable growth. Though it was empty, you could feel it hum. ullaly knew Ford needed new products to A moment later, Mulally whisked us down the hall survive. Its lineup was tired, in places, and and into another room, this time a nondescript, bare- M some of Ford’s product decisions had been bones conference room almost directly underneath shortsighted, in Mulally’s view. Take the Ford Taurus, Mulally’s office. In this room, on the walls, were some a car that revolutionized the automobile design pro- 320 color-coded charts laying out goals and progress cess in the late 1980s when it was developed. When toward those milestones for each profit center and the car was launched, it was to almost universal ac- function. Above each set of charts was a photo of the claim and went on to become the No. 1-selling car in leadership team member responsible for the results. the United States. “We are all sitting around the table, and the charts But the Taurus suffered from a lack of attention in- are all color-coded,” Mulally explained. “Can you side Ford that resulted in years of uninspired designs. imagine the accountability? You come to the table and Initially, the Taurus blended rounded edges with sleek you were red on the launch of something last week, styling in a package that was futuristic, aerodynamic,
18 BRIEFINGS confident and warm. Toward the end, the Taurus re- to the team, ‘Good luck. Let me know how it goes,’ sembled an oblong American football, albeit one that and it got quiet. Then I said, ‘What’s wrong?’ And they looked a little deflated in the middle. Sales plummeted said, ‘We can’t make this presentation. We can’t raise and it became a fixture of rental fleets. this money, because we’ve told them all this before — In his first week at Ford, when he was reviewing how Ford has a great plan.’ They said, ‘You have to do the company’s product plans, Mulally asked where the it, Alan, because you’re the only new model we have.’ Taurus was in the lineup. He was surprised that it had So I stood up the next day and presented the plan, and been discontinued. 10 days later we had raised $23.6 billion, based on the “Why?” he asked, dumbfounded. strength of the plan we devised to work together.” “Well, we made a couple that looked like jelly The decision to raise $23.6 billion before the onset beans and didn’t sell, so we stopped it,” he was told. of the financial crisis was prescient. With its bank ac- Mulally looked at the product team. “You guys sold count full, Ford had sufficient capital to invest, even as nearly 7 million Taurus cars. Talk about a brand!” he automobile sales collapsed around the world and the said. “Why don’t you just make a new one, and get it capital markets froze during the worst of the crisis and going again? How long would it take to make a new recession. Ford’s domestic rivals, G.M. and Chrysler, one?” The team told him it would take four years. hadn’t raised money and were not so lucky. They were “How about doing it in two years? And make it the forced to go to Washington to ask the federal govern- best Taurus you can. A brand like that would cost bil- ment for emergency loans. The government granted lions of dollars to create from scratch,” he told them. the request at the cost of filing for bankruptcy, forced From that moment forward, Mulally understood reorganizations and the loss of each CEO’s job. Ford’s development of new cars had to be accelerated, Though few industries have more entrenched a capital-intensive task. In his first weeks at Ford, he rivalries than the automobile business, Mulally understood the company would have to raise money went to Washington to testify on behalf of bailing if the automaker was to have a future. “We decided out his biggest competitors. He did it, he explained to take out a $23.6 billion home-improvement loan,” to us, because the death of G.M. and Chrysler would Mulally said, joking. have meant the demise of the industry’s network of Given his experience at Boeing, Mulally expected suppliers, which would have severely damaged Ford. that once the loan amount was determined, Ford’s The demise of these companies could have plunged finance team would be able to raise the money. “I said the United States into depression. Lesson four: Concentrate on the future.
Taurus Resurrection. One of Ford’s most popular vehicle nameplates throughout the 1980s and 1990s was re- introduced into the Ford lineup. Today, the sixth-generation Taurus is among the best-selling mid-size sedans and most recognizable car brand names.
TALENT+LEADERSHIP 19 “Opening the Highways To All Mankind” was the headline of Ford Rouge Center a Ford advertisement first printed inThe in Dearborn features Saturday Evening the world’s largest Post in 1925. The living rooftop. statement is still used to summarize Ford’s vision for automotive leadership today. Focus said. “Can you imagine working on the Ford Fiesta hen Mulally joined Ford, it had dozens from 8 a.m. to 8:15 a.m., then on a new Jaguar from of automobile brands around the 8:15 a.m. to 8:30 a.m.? We needed a different plan to W world, and while not all of them were be world-class.” Just as importantly, Mulally said, “It profitable, they all competed for scarce resources was a question of ‘What did Ford stand for?’ What do and management time. Buying these brands was people think when they see Ford’s blue oval? Do they part of a plan to create a premium group within think of us as a house of brands, or do they under- Ford, capable of earning premium profits. Unfortu- stand that they are going to get a complete family of nately, the costs were high and the profits never ma- best-in-class vehicles that are also affordable?” terialized. The brands — Aston Martin, Land Rover, Jaguar and Volvo, plus some other investments, such as Mazda — were an expensive drag on a company, Lesson five: and the decision was made to sell these assets. Mulally did not regret selling these assets. Once more, his timing was impeccable. Ford sold Aston You can be Martin to an investment group in 2007, and Land Rover and Jaguar to India’s Tata Motors in 2008, known for a just before the financial debacle. The timing of Ford’s sale of Volvo to China’s Geely was not so lot of things, lucky, since it didn’t happen until 2010. And, while Ford lost money on each of these deals, when measured against the cost of buying the assets in but you can’t the first place, selling these companies stanched the financial bleeding and added to Ford’s cash reserves. be known for There was more to the decision than raising cash. “The company had to have focus,” Mulally everything.
20 BRIEFINGS Ford celebrates 50 years of the Mustang. One of the most iconic cars ever built. In 2015 Ford will release 1,964 units of a limited anniversary edition.
Lesson six: It’s always about the people.
Mulally’s method team of the leaders worldwide and also the leaders with skills needed going across the world,” he said. ulally is a leader with a method that works, Once you have the people and the plan, you have to especially when applied to big projects, like stick with both. M designing and building a new generation “After a couple of years at Ford, journalists would of airliners, or transforming a great-but-teetering come in here and ask, ‘Does Alan have a new card with automaker like Ford. a new plan on it?’ My answer was always ‘No.’ Stick Mulally’s method is straightforward. It begins with what works.” with understanding the problem and how it came Many companies less successful than Ford, and about, then determining what to do about it. Next, many executives less successful than Mulally, have leaders have to “pull everybody together around a written bold, comprehensive plans. But what they lack compelling vision, a comprehensive strategy and a is a leader who cares as deeply about people as Mulally plan aimed at achieving your goals,” he said. “We de- does. What they don’t have is a leader who draws hearts veloped a plan to go forward, after selecting the entire on his memos and notes.
TALENT+LEADERSHIP 21