Cultural Change at Ford Motor Company

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Running head: CULTURAL CHANGE AT FORD MOTOR COMPANY
Cultural Change at Ford Motor Company
Colleen MacKinnon
Colorado State University - Global Campus
Effective Organizations: Theory and Practice
ORG 502
Dr. Victoria Figiel
February 18, 2015
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CULTURAL CHANGE AT FORD MOTOR COMPANY
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Cultural Change at Ford Motor Company
The publically traded Ford Motor Company (NYSE: F) is one of the 500 largest
companies in the United States, and has produced the top selling American vehicle for the last 32
years (Miller, 2014). At the turn of the century, Ford was facing severe financial difficulties and
an organizational culture described by some as poisonous (Reed, 2012). In 2006, William Ford,
Jr. decided that he needed an outsider’s help to turn the company around. The newly hired CEO,
Alan Mulally, restructured the company and introduced several policies aimed at creating a new
strategic vision and cultural change. The success of these changes allowed Ford to survive the
Great Recession without a federal bailout (Reed, 2012). Although there is room for
improvement, Ford has gone to great lengths to improve the culture of their company and has
continued to find success in a tumultuous economic environment.
Dysfunctional Culture
Due to the Ford family’s dependence on dividend income, the company was focused on
immediate profitability instead of long term planning (Kiley, 2007). In addition to
manufacturing and selling Fords, the company had acquired several other brands and expanded
into financing. A massive bureaucracy developed with a rigid hierarchy; family ties were
esteemed and employment grades ranked employees accordingly. During this time, managers
and executives were “pitted against each other like gladiators to prove themselves” (Kiley, 2007,
para. 15). This organizational structure created social stigmatization and a culture of paranoia
that stifled innovation. Little was done to ensure the quality of their name brand, even the
executives would not stoop to drive a Ford vehicle (Reed, 2012). With a massively
dysfunctional culture and bloated bureaucracy, Ford had begun to suffer financially.
One Ford as a new Direction
CULTURAL CHANGE AT FORD MOTOR COMPANY
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Mulally began his change initiatives at the top, with a focus on executive behavior and
consolidating the company’s holdings and workforce (Kiley, 2007). He introduced mandatory
weekly meetings for senior management. Executives were expected to contribute to these
meetings without referencing electronic devices or background binders. Additionally they were
banned from belittling one another and had to grade their own personal progress. In order to refocus on the company’s brand name product, four luxury brands were sold and production was
stopped on another (Koenig, 2014). Mulally also offered buyouts and early retirement packages
to thousands of hourly employees (Krisher, 2006).
Once initial changes were underway, the One Ford strategy was introduced as a Blueprint
for Sustainability (Ford Motor Company, 2014). It is based on a four point business plan:

“Aggressively restructure to operate profitably at the current demand and changing model
mix

Accelerate development of new products our customers want and value

Finance our plan and improve our balance sheet

Work together effectively as one team” ("Our strategy," n.d., para. 2)
This plan was accompanied by a new set of employee guidelines intended to support the
One Ford plan and promote cultural change. F.O.R.D. is used as an acronym for these
guidelines: “Foster functional and technical excellence - Own working together – Role model
Ford values – Deliver results” ("Supporting Ford," n.d., para. 3). The One Ford strategy, in
combination with executive level change and the consolidation of the company’s resources, is
credited with Mulally’s success in saving Ford from the difficulties they had created (Reed,
2012).
CULTURAL CHANGE AT FORD MOTOR COMPANY
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Table 1
Ford Gross Income and Profit
Year
Gross Income (Gross Profit)
Profit (Net Income)
In Billions
in Billions
2007
42.94
-2.72
2008
29.63
-14.67
2009
18.29
2.72
Note. Data collected from “Ford Motor Company (F)” by Wikinvest, n.d., retrieved February 19,
2015, from http://www.wikinvest.com/stock/Ford_Motor_Company_(F)/Data/Key_Metrics
Financial Impact. Publically traded companies provide quarterly and annual income
statements to the Security Exchange Commission (SEC). In these statements, accounting
measures have specific definitions. Gross income is total revenue minus cost of goods sold and
is referred to as either gross margin or gross profit ("Gross income," n.d.). Profit is a calculation
of total revenue minus total expense and is referred to as net income ("Net Income," n.d.).
Mulally’s changes at Ford were expensive, and it took three years for the company to show a
positive change in their net income.
Impact on Employees. Ford conducts an annual survey of their salaried employees, the
results of this survey are included in their annual report (Ford Motor Company, 2014). In 2013
the employee satisfaction index was at 75%, this was also the tenth straight year of improvement
in this statistic. The report also included voluntary quit rates. The rate was lowest in Germany at
less than 1%, highest in Thailand at 9.5%, and in the United States it was 1.4%. Among Fortune
500 companies, Ford is ranked #51 for employee tenure, with an average of 5.8 years
("Employee tenure," n.d.).
CULTURAL CHANGE AT FORD MOTOR COMPANY
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Table 2
Employee Satisfaction and Management Commitment to Diversity
Year
Employee Satisfaction by %
Diversity Commitment by %
2008
66
80
2010
68
82
2013
75
87
Note. Data collected from “Sustainablity report 2013/14” by Ford Motor Company, 2014,
retrieved February 19, 2015, from http://corporate.ford.com/microsites/sustainability-report2013-
Change Effectiveness
To assess the effectiveness of a change project, Şipoş (2009) proposes that changes must
be measured against the fulfillment of their objective. Mulally’s objective was to solve Ford’s
financial problems. The cultural changes and organizational restructuring were used as a means
of achieving this objective. To this extent the changes were effective. Ford was able to see a
profit despite a massive decrease in their gross income. The success of these changes were
reinforced during the recession that followed the financial crisis of 2008. Unlike GM and
Chrysler, Ford was able to avoid bankruptcy and refused a federal bailout (Reed, 2012).
To assess the effectiveness of cultural change as an objective unto itself, the Ford annual
survey gives insight into several aspects of Ford culture. The perception of commitment to
diversity, ability to overcome workplace obstacles, and overall dealer attitude has improved
(Ford Motor Company, 2014). Ford has also increased the hours of their volunteer corps by
50,000 hours a year between 2008 and 2013.
Despite many improvements, Ford has had little change in their percentage of women and
minority workers. The composition of the board of directors is 12% women and 12% minorities.
Corporate officers consist of 10% women and 19% minorities. Disparity between women and
minorities when compared to white men in a workplace is referred to as a glass ceiling.
CULTURAL CHANGE AT FORD MOTOR COMPANY
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Although a glass ceiling is considered a cultural norm, its basis lies in discrimination (Wilson,
2014). This shows a failure in the effectiveness of Ford’s cultural change.
Implications
By beginning his changes at the executive level, Mulally was able to create and
incorporate the One Ford strategic vision (Ford Motor Company, 2014). This vision included the
F.O.R.D employee guidelines, which were intended to encourage more cultural change. In
addition to solving Ford’s financial problems, several aspects of Ford’s culture have improved
and Ford’s employee tenure is ranked among the top 11% of the Fortune 500 companies
("Employee tenure," n.d.). A company that is suffering from organizational culture problems
could benefit from these examples, however it should also be mindful of Ford’s shortcoming in
addressing their glass ceiling.
In a change process, organizations often fail to develop a measurement for cultural
change (Atkinson, 2014). These measures should be based on critical incidents that reveal
whether or not a change has been accepted. Although Ford has seen improvements in their
employee satisfaction and the perception of management’s commitment to diversity, there has
been little effect on the composition of their executive leaders. This suggests that the changes at
Ford are not fully accepted. A company seeking to effectively change their culture should create
specific measurable objectives, and use these measurers to find the weak points of their change
initiatives. Overall, Ford has shown that organizational culture is an important component of a
business strategy. A good culture impacts all facets of an organization and will result in a
positive effect on their financial bottom line.
CULTURAL CHANGE AT FORD MOTOR COMPANY
References
Atkinson, P. (2014). OD strategies: Installing a lean and continuous improvement culture.
Management Services, 58(4), 12-17. http://dx.doi.org/Retrieved from
Ford Motor Company. (2014). Sustainablity report 2013/14. Retrieved from
http://corporate.ford.com/microsites/sustainability-report-2013-14/default.html
Ford Motor Company (F). (n.d.). Retrieved from
http://www.wikinvest.com/stock/Ford_Motor_Company_%28F%29/Data/Key_Metrics
Full list of employee tenure at Fortune 500 companies. (n.d.). Retrieved from
http://www.payscale.com/data-packages/employee-loyalty/full-list
Gross income definition. (n.d.). Retrieved from
http://www.investopedia.com/terms/g/grossincome.asp
Kiley, D. (2007, June 3). The new heat on Ford. Bloomberg Business. Retrieved from
http://www.bloomberg.com/bw/stories/2007-06-03/the-new-heat-on-ford
Koenig, B. (2014, May 1). Alan Mulally: Ford’s Mr. Discipline. Forbes. Retrieved from
http://www.forbes.com/sites/billkoenig/2014/05/01/alan-mulally-fords-mr-discipline/
Krisher, T. (2006, September 14). Ford to offer buyouts to U.S. workers. The Washington Post.
Retrieved from http://www.washingtonpost.com/wpdyn/content/article/2006/09/14/AR2006091401446.html
Miller, D. (2014). Truck wars: Is ford motor company truly crushing general motors? Retrieved
from http://www.fool.com/investing/general/2014/02/15/truck-wars-is-ford-motorcompany-really-beating-ou.aspx
Net income (IN) definition. (n.d.). Retrieved from
http://www.investopedia.com/terms/n/netincome.asp
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CULTURAL CHANGE AT FORD MOTOR COMPANY
Our Strategy. (n.d.). Retrieved from http://corporate.ford.com/microsites/sustainability-report2013-14/blueprint-strategy.html
Reed, J. (2012, April 15). How Alan Mulally rescued Ford. Los Angeles Times. Retrieved from
http://articles.latimes.com/2012/apr/15/business/la-fi-books-20120415
Şipoş, G. L. (2009, ). Measuring the innovation projects effectiveness. Megatrend Review, 6(2),
229-237.
Supporting One Ford. (n.d.). Retrieved from http://corporate.ford.com/microsites/sustainabilityreport-2013-14/people-workplace-employees-oneford.html
Wilson, E. (2014). Diversity, culture, and the glass ceiling. Journal of Cultural Diversity, 21(3),
83-89.
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