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How the Ford Board Recruited Alan Mulally

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How the Ford Board Recruited Alan Mulally CEO RECRUITMENT How the Ford board recruited Alan Mulally This was a textbook case of world-class collaboration by seasoned directors, a passionate governance expert and board leader, and a powerful, determined chairman. By Dennis Carey and John J. Keller ig iconic corporations often struggle volved key directors, an encouraging chairman, and in times of terrible business stress with an outside search adviser to conduct referencing on having to hurry up and pick a great the finalist candidate for CEO. new CEO. Choosing the right approach and being prepared is one of the most How it began Bimportant responsibilities the board of a public Ford’s recruitment of Alan Mulally is a textbook company can have. case of world-class collaboration by seasoned di- The scenarios that catalyze the need to find a new rectors, all former CEOs, and led by a passionate CEO are always different, but the urgency is nearly governance expert and board leader, Irvine O. always the same. The new leader usually has to pick Hockaday, as well as a pow- up quickly from where the last one left off and take erful, determined chairman, the business forward without loss of momentum. William Clay Ford Jr. It was In identifying a Sometimes the stakes are epic, and the new CEO Bill Ford’s die-in-the-ditch may have to take the business through a crushing commitment to saving his new CEO, the Ford crisis and turnaround, lest the company vaporize company as well as his fam- (like what happened to Enron). Could Ford Motor ily legacy that especially and board would have to Co. find such a leader? courageously saved the day That was a challenge posed to its board of direc- for Ford and ensured it a hit the bull’s-eye on tors several years ago, and most today would say prosperous future under a they rose to the challenge in finding Alan Mulally. new CEO. the first shot. Ford was in decline and skirting irrelevance just The Ford search story be- as the global economy was about to collapse and gins in 2006. The road was take major companies with it. How out of all the becoming increasingly treacherous for the Ameri- great CEOs out there was Mulally picked? How did can auto industry. Meanwhile Ford’s two biggest Ford’s board know — indeed, a direct descendant competitors, GM and Chrysler, were staring at po- of Henry Ford among them! — that Alan Mulally tential bankruptcy, which would end up occurring would be the right choice? two years hence. Bill Ford had informally tried to It is the very question boards and CEO search reboot things on his own, even sounding out other committees are faced with every day. The ques- auto leaders to take Ford’s reins, including report- tion becomes monumentally critical when a search edly Renault-Nissan’s fabled leader Carlos Ghosn. must be conducted in haste and under tremendous It went nowhere. existing stress on the business. Some of the best companies have conditioned Dennis Carey is vice chairman of Korn/Ferry International (www.kornferry.com). themselves methodically to avoid the last-minute He has recruited many prominent CEOs and board members during his career in succession crisis and mint their CEOs. Other com- the search industry. He is the founder of G100, the Lead Director Academy, the panies aren’t so prepared or prescient to have the CEO Academy, and the Prium, among other leadership organizations, and co- CEO solution readily available in-house. When founded the Directors Institute at the Wharton School. John J. Keller, faced with having to go external, the CEO recruit- formerly of Korn/Ferry when this article was being written, is now vice chairman ment can take several forms. Ford’s process in- of CTPartners Executive Search (www.ctnet.com). FOURTH QUARTER 2012 31 CEO RECRUITMENT There was no way Bill Ford or his directors, led in terms of his/her life and career experience. Fur- by Hockaday, would allow Ford Motor Co. to run thermore, the next Ford CEO would have to be aground let alone go bankrupt. Ford decided to well-grounded in complex manufacturing and op- tough it out, but also with an eye toward getting erations, and highly conversant in technology and Ford Motor’s finances sorted out and bear down its importance in sophisticated machinery such hard on finding a new CEO. The board was in full as today’s vehicles and those contemplated in the alignment. future, including electrics and hybrids that use a Ford’s search had to be conducted quickly. The combination of electric and internal combustion most storied American automaker couldn’t afford for power. any hiccups during this most extraordinary time Finally the leader would have to be a confident, in American economic history. In identifying and passionate, and indefatigable manager. Tough, fo- finding a new CEO, Hocka- cused, and able to handle ambiguity and any major day and his directors would challenge the world could throw at Ford, including ‘You guys must have have to hit the bull’s-eye on one as formidable as what was soon to become the the first shot. worst economic meltdown since the Great Depres- the best Rolodexes on Fortunately for Ford, it sion. Ford’s turnaround would require a triathlete had on its board exceptional who could sprint and run the long-distance race the planet; you should firepower. There was Hocka- as well. day, one of the most seasoned That was the spec anyway. Now the Ford direc- be able to get anyone CEOs and governance veter- tors had to go out and find a match, or as near a ans in corporate America. match as possible. to come to the phone,’ The former CEO who built Hallmark Inc. into a major A tall order Bill Ford said to consumer brand and multi- The Ford directors drew a deep breath and looked media powerhouse, Hocka- around at one another. This was going to be a tall the board. day also is lead director at order. No one manager could have all of this, but Estee Lauder and until re- it would be great to find one who had most of it. cently was the lead director at Should they hire a search firm? Sprint Nextel. He is characteristically modest about In fact, the board had discussed hiring a search his own contribution to bringing Mulally to Ford, firm to be its full partner in the project and con- and points out that his search committee partners duct the search, but this idea was put aside at least included John L. Thornton, former president and temporarily when Bill Ford commented that he had co-COO of Goldman Sachs Group Inc., and Jorma some of the world’s great CEOs sitting around his Ollila, the chairman and former CEO of Finnish boardroom table. In addition to Hockaday, Thorn- cellphone giant Nokia Corp. ton and Ollila, there was also Thornton’s former colleague, Robert Rubin, who had been Treasury Drawing up the spec Secretary in the Clinton administration and who The Ford board met in extraordinary session to was a former chairman of Goldman Sachs and a discuss the CEO project. They hashed out the is- Citigroup director. (Ollila and Rubin have since left sues at Ford, the macroeconomic forces internally the Ford board.) and globally that were impacting the business. “Bill Ford said ‘You guys must have the best There was Ford’s high cost structure, its balance Rolodexes on the planet; you should be able to get sheet challenges, its distractions from numerous anyone to come to the phone. Why not talk among acquisitions, including Jaguar and Volvo (pushed yourselves first and come up with some ideas,’ ” re- by former Ford CEO Jacques Nasser). There were called Hockaday of that day. “So that’s exactly what Ford’s ongoing union and pension cost challenges. we did.” There was the threat from formidable players such The Ford board quickly agreed on a search strat- as Volkswagen Group, the Japan Inc. contingent, egy and formed a special committee of the board and from lower-cost rivals such as Korea’s Hyundai, to find the new CEO. It would be confidential and which was surging spectacularly. contained within the walls of Ford for as long as Indeed, running Ford would require a samurai possible, and it would have to be done very quick- of tremendous ability and stamina and one who ly. They talked about individuals, as Bill Ford had had focus and a global view of the world and its urged, and discussed a few individuals who were fa- challenges. The directors drew up a spec: Ford’s miliar to them. Then one of the directors — proba- next CEO would require that the ideal candidate bly Thornton, according to Hockaday — said “How be a CEO-ready leader, one who was world-class about Alan Mulally of Boeing?” 32 DIRECTORS & BOARDS CEO RECRUITMENT Finding their ‘knight’ AP Alan Roger Mulally at first wouldn’t have occurred to everyone as a realis- tic candidate to run Ford Motor Co. Schooled in aeronautical engineering and possessing a masters degree in man- agement as a Sloan fellow from MIT’s Sloan School, Mulally made airplanes. He had never been in the auto industry. Nor had he ever been a public company CEO. He was CEO of Boeing’s highest- profile business, Boeing Commercial Airplanes, and by most accounts should have been given a shot at the top job at Boeing. Yet incredibly, after a stellar career of devotion to Boeing and having produced fabulous, almost legendary, operating re- sults, Mulally had been passed over not once but twice for the top job at Boeing.
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