Book Review on "American Icon"

Business men go down with their businesses because they like the old way so well they cannot bring themselves to change.  One sees them all about – men who do not know that yesterday is past, and who woke up this morning with their last year’s ideas.     Henry Ford

Bruce G. Hoffman is an award-winning journalist who has covered the auto industry, both in the United States and around the world, since 1998. He began cov­ering Ford Motor Company for the Detroit News in 2005. That beat gave him a front-row seat for many of the events chronicled in this book.  He was granted unprecedented access to Ford’s top executives and top-secret company documents.  He spent countless hours with Alan Mulally, Bill Ford, the Ford family, executives, former executives, labor leaders and company directors.

With Hoffman’s’ skills, access and diligence he outlines the story of how Ford turned around themselves in spite of the extreme economic environment of failure.  The story tells of the dramatic painful cultural changes the organizational had to go through backed up with strong leadership and keeping them on a path to executing the turnaround plan for success.

The turnaround started with Leadership by Bill Ford who checked his ego and accepted the fact that he could not change the company’s destructive culture and he needed an outsider that could.  After many failed attempts to get such a leader he was able to convince Alan Mulally to leave his successful career at Boeing to turn around the Ford Motor Company.  Bill Ford and Alan Mulally took on tremendous risk as they navigated the day to day events with hard work, vision and a relentless focus on executing the turnaround plan.

Bill Ford managed the Ford family and many outside stakeholders while Alan Mulally took on the executives and drove the cultural change the company desperately needed.  When separately challenged they both stood side by side supporting each other and not allowing any influences to break the partnership bond they had formed.  This partnership and mutual support demonstrated that the leadership could not be swayed and we are going to execute the turnaround plan.  The plan is very painful, but nowhere near the devastation of a complete failure.  They took their medicine, conducted the hard work and avoided the complete collapse and came out on the other end as a strong viable sustainable organization.

The lessons I learned from reading this book is that an organization can make cultural change if they have the courage, the free enterprise system does work.  Ford is the shining example that it can be done, GM and Chrysler took a different path and relied on government intervention and with that comes political decisions that do not make it in the business world.  Ford is in position to succeed while GM and Chrysler are still beholden to the government which does not free them to do the right things in a business environment, politics are involved.

The book outlines in detail the steps of creating and executing the turnaround plan are as follows:

1. Leadership by all key stakeholders to commit to change
2. Understanding the New Normal in detail and how it impacts the organization
3. Acceptance of the New Normal throughout the entire organization
4. Shared Sacrifice throughout the entire organization
5. Expenditure controls for every spend regardless of the amount
6. Eliminate the non-value services and focus on what we need to succeed
7. Right size the organization to be a lean operation for efficiencies and effectiveness
8. Outsource non-core services as to not distract the organization from the core mission
9. Create a continuous improvement mentality throughout the organization
10. Keep finding ways to improve and make things better, the organization is never done improving

Other lessons from this book are to ensure you are managing all of the key stakeholders that play an important part in executing this turnaround plan.  The most important element in managing these stakeholders is constant consistent communication with key metrics and facts.  All of these stakeholders have a vested interest in the organization succeeding with different views and agendas, it is like herding cats!  However, if this is not managed correctly failure will happen.  Here are the key stakeholder groups Bill Ford and Alan Mulally had to mange to be successful:

• The Ford Family – they had a unique control of the company and if they stayed together they were a very strong influence on the direction of the company, if they did not stay together their control of the company would evaporate.  They questioned Bill and Alan, held them accountable and then completely supported them when the diligence event was complete.  Diligence events were done multiple times as they needed to have complete confidence in the leadership.

• Bankers and Investors – Ford needed many investors to finance the turnaround plan with major cash secured.  They basically put up the “Blue Oval” as collateral to secure financing for the turnaround plan.  If they failed the Ford Family would lose the company, control and wealth; this was a major risk which had to be taken on to succeed.  Ford had to succeed, there was no safety net!

• Key Executives – this was the internal leadership team which was handpicked by Alan Mulally and they had to be a complete cohesive group that supported the plan and each other.  This was a major cultural change at Ford as they all needed to trust each other and work as a team.  This is not how Ford operated over the years and these executives had to trust Alan Mulally and the process.  This was a giant leap of faith by these executives.

• UAW Union Employees – this powerful group with strong labor contracts had to understand the crossroad Ford was at and if Ford failed there would be no jobs.  Secret meetings happen long before any formal negotiations happen, basically Ford opened up their books and showed them the dire state of the company and asked them to join in on the turnaround plan.  They signed up when they understood the facts and realized if they did not change they too would no longer exist.  This was a major cultural change at the UAW.  The UAW leadership was able to convince their constituents to join in on the pay and benefits concessions with major work rule changes to ensure Ford could be efficient and effective.  These changes moved Ford closer to the foreign transplants in labor, legacy and work rules costs.  It did not erase the competitive advantage the foreign automakers had; it only moved them closer.  In the end GM and Chrysler negotiated more concessions secured by governmental pressure and have an advantage over Ford.

• Salaried Employees – the only way out of this mess was to have a robust global vehicle development process that took advantage of the various global assets Ford had.  They had to develop new products that was of high quality and launched quickly with efficiency that the customer wanted.  This employee group made the cultural change, stayed focused on the product while they personally took large pay and benefit cuts and saw many of their peers get laid off.  It is incredible leadership that kept them focused during these difficult times; it was like a war where the soldier continues to fight, when your buddy next to you was just taken out by a bullet.

• Customers – without them there would be no money to fund the company and it would quickly go out of business.  A laser focus on what the customers wanted and ensure the entire organization was focused on delivering the customer value.  A complete product line that met every need as the customer changed on a whim of wanting large SUVs to the small efficient cars and everywhere in between.  Not only having the right product mix does it, it has to be high quality so they will believe their purchase was a good value.  The right product at the right time that provides value to the customer is the only deliverable that will work.

• Governmental Regulators – the government sets and regulates the many regulations each car manufacturer must comply with so they can sell their vehicles in America.  Compliance to these regulations is important to meet the various safety, function and environmental elements which are designed to protect the consumers.  The political winds keep changing these requirements and the constant change is extremely complex and expensive to comply with.  Keeping these regulations realistic and value added is a full time job with great costs; the continual addition of more governmental regulations has destroyed industries, jobs and businesses.

• Governmental Legislators – these 3 branches of government set the policies, write the laws and spend our tax dollars to make our lives better.  The policies they set and the laws they write have a day to day impact on all of us and every one of our industries.  In many cases they pick winners and losers in business with limited success.  Lobbying this group has become a major strategy by companies to ensure their voice is heard and is very time consuming and expensive.   Unfortunately the political winds change often in this ever changing environment.

Bill Ford and Alan Mulally both understood each of these key stakeholder groups and they had to manage each of their individual expectations.  There was not one group of stakeholders that was more important that the other, they all were equally important and they had to ensure they we on board to successfully execute the turnaround plan.  Do not underestimate the importance and hard work it takes to manage these stakeholders’ expectations.

The 10 rules Alan Mulally outlined to all stakeholders as he made the tremendous cultural change at Ford were simple and to the point:

1.  People first
2.  Everyone is included
3.  Compelling vision
4.  Clear performance goals
5.  One plan
6.  Facts and data
7.  Propose a plan, “find a way” attitude
8.  Respect, listen, help and appreciate each other
9.  Emotional resilience, trust the process
10.  Have fun, enjoy the journey and each other

Ford also realized the upcoming economic storm that was on the horizon and took immediate action to put them in financial position to survive.  They secured financing when it was available as preparation for what they believed was about to happen.  Alan Mulally had several conversations with the Feds (Ben Bernanke and Henry Paulson) about what Ford believed was going to happen and from those conversations refined Ford’s turnaround plan.

What I found interesting is Alan Mulally’s conversation with both GM and Chrysler about the upcoming economic storm and the potential impact on the automobile industry.  GM and Chrysler ignored the data and continued on their separate paths; it is easy to see who took the right steps.  GM and Chrysler had the same data, they both could have taken the steps Ford took, but they were in denial.  In the end they went bankrupt and were under governmental control.  Their fate was avoidable if they just listened to the data and made the hard decisions in time.  This is sound advice for any organization; take swift action on what you see is coming before it is too late.

When it was apparent that both GM and Chrysler were going to fail they separately approached Ford to partner up and weather the storm together to survive.  In typical GM fashion they said GM would be in charge of such a partnership because they are larger.  Alan Mulally rejected both requests and felt Ford was already on the right path and these two companies were just realizing they need to change; it was too late for them.  However tempting, any partnership with them would distract Ford from the turnaround plan and mean failure.

In Chapter 19 “Turning the Corner” explains how Ford took the bold step of no government bailout and how they were treated very differently from GM and Chrysler with our tax dollars.  You can draw your own conclusions on whether government intervention is a good or bad thing and if they reward good or bad behavior.  We have a clear example of Ford choosing the hard way of free enterprise compared directly to GM and Chrysler’s way of governmental aid.  This example is in the same industry at the same difficult economic times in the same geographic area, an apples to apples comparison.  We are at a cross road in our country and we need to ask “which way is the best way for our country?”

This turnaround approach used by Ford works for any organization that is at a cross road, as they figure out their own plan to survive and thrive.  This is not just for manufacturing companies; it applies to service industries, academia and governmental entities too.  All of these organizations are currently experiencing difficult economic times and trying to survive and thrive in the “New Normal.”  All paths to improvements are painful and demand shared sacrifice, but this turnaround pain is far less painful than the devastation of total failure.  What does not kill you will make you stronger!

The first step is for the leadership in the organization to be willing to make timely hard decisions and choices to put them on the path to success by using the process to drive cultural change.

Unless you have courage, a courage that keeps you going, always going, no matter what happens, there is no certainty of success.     Henry Ford

Any brave leaders interested in some hard work?