Leadership and Organizational Effectiveness of Ford Motor Company
“This is everything.
It’s children’s future.
It’s everything tied up into one.
Failure is not an option.”
- Bill Ford, Jr.
CEO, Ford Motor Company
The global marketplace is faced with different challenges that affect its overall management and operations. Various pressures on the internal and external conditions such as the unstable world and local economies, the workforce, the customers, and even the management itself risk the success or failure of the organization. In implementing effective management of a business, regardless of what kind of management strategy is used, the person who is foremost in all the transactions of the business must be able to deal with all the potential hazards.
Ford Motor Company is well known as the #1 manufacturing experts in the western world. During Ford's early years, the company was virtually indistinguishable from its founder. "Fordism," as it came to be known--a system of mass production which combined the principles of "scientific management" with new manufacturing techniques, such as the assembly line--created more than fantastic profits for his company: it literally revolutionized industry on a global scale within twenty years of its implementation (Kalliney, 2002).
This paper aims to discuss the leadership implemented in Ford Motor Company under the administration of Bill Ford, Jr. and specifically, it sought to answer the following questions:
a. what are the problems he inherits as the CEO of Ford?
b. What are the adaptive challenges he recognises?
c. How does he go about projecting the voice of leadership?
In order to point out the answers to the aforementioned queries, there is a need to provide brief discussion of the concept of leadership and its styles that will help to the entire analysis of the case. The integration of the concepts and the facts from the primary source will present a comprehensive result of the case analysis. The application of these theories will be evident to the next parts of the report.
Leadership and Leadership Styles
Leadership is an important aspect of any organization. For decades, the issue on leadership has been undertaken in various studies and related discussion. In fact the study on leadership dates back in 1921 (Hughes, Ginnett & Curphy, 1999, p. 8). Leadership comprises the aptitude and ability to inspire and influence the thinking, attitudes, and behavior of other people (Adler, 1991; Bass, 1985; Bass and Stogdill, 1989; Bennis and Nanus, 1985; Kotter, 1988). Leadership is a process of social influence in which one person is able to enlist the aid and support of other individuals in the achievement of a common task (Chemers, 1997). The major points of this definition are that leadership is a group activity, is based on social influence, and revolves around a common task. Although this specification seems relatively simple, the reality of leadership is very complex. Intrapersonal factors such as ideas and emotions, interact with interpersonal processes (i.e., attraction, communication, influence) to have effects on a dynamic external environment.
Among the many definition of leadership, the most relevant definitions were given by Yukl (2002) and Schein (1992). Yukl (2002) defined leadership as the process of inspiring other people to comprehend and agree on what needs to be done and how to accomplish them effectively. In addition, leadership is also defined as the process of facilitating collective and individual efforts to fulfill shared objectives.
Alternatively Schein (1992) stated the creation of culture is the main essence of leadership and that both culture and leadership are two sides of a single coin. Relating leadership to management, Schein believed that leaders tend to establish and change culture, while administrators and managers live within the culture. While both related definitions differ from one another, both speak of the essential role leaders have to play in corporate culture.
The charismatic power of leadership has already been analyzed and challenged (Nadler and Tushman, 1990). Along the process, leadership has been considered as a vital element of powerful and strong organizational cultures (Kotter & Heskett, 1992). Leadership has been a subject of numerous discussions that oftentimes, it is considered as an attribute of personality, a characteristic of particular positions or behavior attribute (Katz and Kahn, 1978, p. 574). Clearly, organization culture and leadership have a strong and established relation. Leadership is vital in applying organizational culture. The role of the leaders for example, is significant in developing organizational efficiency and creating corporate culture.
According to Bohn (2002), leaders have the ability to view the future. They are equipped with compelling abilities to visualize where things will naturally end or lead to. Unlike other people, individuals with leadership abilities see things that are not noticeable or obvious to others. In addition, leaders have the ability to build and establish confidence to others. Hence, in order to be a good leader, a person needs to have a personal sense of efficacy and confidence (Bohn, 2002).
Each of these aspects brings complexity to the leadership process. Somewhere between the broad personality trait and the specific behavior sits the leadership style. Different styles of leadership that a leader may follow or may not. Styles reflect relatively stable patterns of response to social situations. Leadership style refers to the degree of direction that the leader provides to subordinates in attempting to influence their behavior toward the accomplishment of organizational objectives (Gibson & Marcoulides, 1995). The three styles of leadership are the authoritarian (autocratic) style (Lewin, Lippitt, & White, 1939), permissive (delegative) style, authoritative (democratic) style (Schriesheim, 1982; Newstrom, 1993).
Authoritarian style (Huffman and Piggrem, 2003) of leadership states that the leader has the authority over his subordinates. In this manner the authority have the right to do the decision making without asking the opinion of the followers. The leader is this type of leadership tends to tell the followers what must be done in order to achieve the goals or objectives of the organization. On the other hand, the permissive (delegative) or the so-called laissez-faire style refers to the kind of leadership wherein the followers are permitted to be involved in the decision making process. The leader implements minimal control or manipulation on their followers. However, the leader is still accountable for the final decision to be made. Herein, the opinion and ideas of the followers are being valued by the leader and each follower encompasses different tasks set by the leader. The last style is the authoritative or democratic style of leadership. In this type of leadership, the leader and the selected subordinates are involved in the process of the decision making. Herein, the subordinates have the right to voice out their ideas and thought which they think would be helpful for the leader in making the final decision. In this style of leadership the leader is in control or has the authority for the final decision.
Ford Motor Company
One of the leading transnational manufacturers of cars and trucks and even one of the principal providers of automobile financial services, popular modern symbol that affects the economy, ecology and society (Luke 2001) is Ford Motor Company. Products are produced in facilities operated by Ford Motor Company and/or joint ventures and Ford itself is a publicly traded company listed on the New York Stock Exchange. There are approximately 328,000 employees and has made an estimated 6.7 million vehicles globally in 2002. There are 25,000 dealers and more than 10,000 suppliers as business partners.
For the past years, due to some consequences, the company encountered several challenges. However, with the efforts of gaining back what was lost, there is a significant development in the whole organization. William Clay Ford, Jr., popular in his moniker, Bill Ford, the Chairman of Ford Motor Company, assured that the company would distinguish themselves excellently by their efforts to make the world a better place. This is in line with moving the company’s vision from concept to reality. A public commitment was made to strengthen connection in the society and play a dynamic part in bringing about the transition to a greater economic, social and environmental sustainability.
But before the glorious position of the said company in the marketplace, there were several problems that he needed to face. He underwent numerous challenges, dealt criticisms – both constructive and destructive in nature, and the dilemma of proving himself.
What are the problems he inherits as the CEO of Ford?
“I don’t believe this.” – Bill Ford, Jr., on a board meeting
Jacques Nasser’s administration was toppled due to many negative forces within his management. After leaving the company, he left big troubles that Bill Ford – the new CEO must tackle immediately. Among these are the following:
lowest stock recorded in a decade - $7.15 a share
hammered bonds that leads to junk bonds
the shocking company’s debts - $162.2 billion
a shortfall in the pension plans totaling to $6.5 billion
intense price war in the market
worldwide competition among the competing industries
internal, suppliers, and human resources upheavals
external pressures – the state, economy, and media
low worldwide demands in the car industry
customers – needs, satisfaction, and behavior
What are the adaptive challenges he recognizes?
“We’ve come back from adversity many times I the history.
We’re going to do it again…
We started the job; now let’s finish it.”
– Bill Ford, Jr., on a board meeting
Bill Ford, being a democratic leader, he recognized the challenges that may hinder and/or allow the immediate solutions to the existing problems of the company. In order to recover to such organizational challenges, he studied the roots of the problem and identified the actions to be done.
Primarily, he took all the risks. Ford launched an ad campaign that he himself is the model. Then, he planned extensively. Ford recognized the difference of setting strategy and implementing it. He helped the hammering out of the turnaround plan that forced the closure of five plants, elimination of over 35,000 jobs and workers, and cutting of $9 billion cost in the middle of the decade.
The pressures of the situation are opportunities for him to see his strengths behind those challenges. Further, he sought the advices, help and reinforcement of his old-timers in which he trusted very much. Ford is not afraid on strong people. Hence, he firmly believes that when bright people and brilliant minds work together, a masterpiece will be created. He reorganized his whole management panel.
In relation to Ford’s line of products, he noted new innovations in the product development. Further, he met and consulted environmentalists and worked on the strategies in manufacturing cleaner and environment-friendly cars. Additionally, he built nonpolluting factories and turned the organization into a role model corporate citizen.
He visualized the possible problems that the company will face in the future operations. By facing such challenges, he relates his predictions to every party concerned. Ford was the first person to warn the board that they are headed to a great trouble. He took all the risks up to the extent of sacrificing his own personal commitments – such as evenings at home with his family and management of his beloved Detroit Lions.
In fixing the gap of the human resources and upper management, he stepped down the corporate ladder for the sake of mingling to the ordinary employees of the company. Sometimes he dropped off on the assembly line to check up and frequently buys his lunch to the cafeteria where he will casually talk to the people there.
In his management, Ford is not the traditional command-and-control CEO, according to James Padilla, group VP of Ford North America. He possesses outstanding qualities and practices. He perfected the act of good listening. He meets with the executives who are layers below his direct reports. He also elicits feedback and opinions from all people. Ford forces debate and discussion. After he overrules an executive, he often calls the person to personally thank him or her for the job well done. Ford’s dealing with other inefficient employees in the company is also unique as shown in the situation of Thursfield, a greedy cost cutter.
All in all, Bill Ford, Jr. found numerous opportunities in challenges and he adapts them so that he can apply his innate leadership abilities coupled with his practicality and intellectual expertise.
How does he go about projecting the voice of leadership?
“I think I am the guy to pull this off… I want the company to win. If we get into this down the road and it’s not working, I will be the last person to hang on by my fingerails and fight it.”
- Bill Ford, Jr., on an interview with Fortune
Ford was the opposite of the ousted CEO Jacques Nasser who is more into money and power. Rather, he is more into preservation of the tradition and valuing people. As stated above, his personal qualities and his knowledge of who and what a real leader is proved his effectiveness. His voice of leadership is gifted that it can offer hope to risky situations, motivate every employee, elicit brilliance in performance, and contribute to the performance of the company.
He is not a pushover. He takes risks and finds the best and applicable solution for that specified crisis. According to Ford director Irvine Hockaday, Jr., Ford can talk strategy and vision clearly. “He has both the credibility because of his name and the ability because of his style to marshal all those forces and get them, moving forward.” Ford is the one who can talk to dissatisfied dealers and suppliers in a quick manner possible.
He is very humble. He gets straight away into matters of significant discussions. He is frank according to Michael Kennedy, a dealer in Philadelphia. Ford is trying to balance short-term and long-term objectives without sacrificing one from the other. Optimism is one of his greatest virtues. Finally, he has a good sense of where he and the whole company need to go. To quote an director’s comment: “His vision is right. He is willing to make strong decisions and to bring strong people in around him.”
With these attributes and their practical applications, Ford projects a voice of leadership that is loved and appreciated by all people that surrounds him. Aside from being acknowledged, the aftermaths of such practices and decisions bring benefits to all areas and people concerned. It is as simple and plain as it is. Granted that he belongs to the lineage of great Ford past heads, he definitely have good genes.
Up to now, Bill Ford firmly believes that an improved sustainability performance is not just a requirement but a remarkable business opportunity for the purpose of putting the company at the top in driving the transition and to be in a position to benefit from it. His outstanding leadership and effective management played a very crucial role to the present market and economic dominances of Ford Motor Company – which he considered his everything, heritage, children’s future, and everything tied up into one.