Group 5 : De Dios | Fernandez | Lim | Rabi | Sun | Valentino

Executive Summary

When Alan Mullaly came onboard as Ford’s CEO in 2006, the company was far from the market leader it was once-
-its market share is fast losing to Japanese competitors, key executives are fleeing the proverbial sinking ship, company
competitiveness remains elusive, and the huge fixed costs are bogging down profitability. Mullaly, a seasoned executive in
the commercial aviation industry, was a newcomer in the auto industry and many were hesitant in their optimism about his
One Ford One Goal Plan. Optimism within the company was even hard to come by, and for valid reasons. Ford was facing
battles in so many fronts all at once and resolving these was a monumental task for any chief executive. The group identified
the following issues in Ford Motor Company grouped into three categories: operational issues, company culture issues, and
leadership issues.

Operational issues would include: a) high fixed costs leading to excess capacity and higher costs during low
production levels (Ford’s fixed costs and vehicle production are at $57bn and 6.6mn units, compared to GM’s $55bn and
8.3mn units); b) large R&D expenditures that don’t translate to improvements in products; c) unintegrated global operations;
d) disorganized product line planning and management; and d) conflicting goals of the finance and operations departments
resulting to clashes between managers.

Issues relating to the company culture includes: a) dysfunctional competitiveness and hostility in management
interactions; b) a silo mentality which casts each department as lone teams focus on their performance rather than the
company as a whole; c) people feel pressured to project a good image rather than be candid in rooting out problem areas;
and d) goals for each department/regional units are inconsistent. Together with the above issues in the company culture,
problems in leadership also pose an important dilemma for Ford, to wit: a) the executive ranks fail to align the goals of each
level of management, from the very top down to the line managers; b) leadership within the company is influenced by desire
for individual gains/advancement of career; and c) important senior executives are leaving the company at at time when
decisive leadership is needed to turn around Ford.

After analzying the dysfunctions in the company’s management control system, here are some of the changes that
the company must consider in order to help leverage its market position and sustain profitability:

• Moving from function-based to team-based to promote collaboration between functions as well to improve goal
congruence within the company. This may be specifically important in Ford’s product development, wherein the
management can create teams for each specific project they are eyeing: the small car-segment, luxury car, full-
sized pick-up trucks. By operating in teams, the new CEO will be able to manage each better with the help of the
leadership in each team, despite his lack of knowledge in the industry;
• Reduce complexity of the management information system so that even line and operation managers can easily
comprehend and work with internal information to tackle an issue or preempt a would-be issue;
• Prioritize inter-function and inter-department collaboration between managers to align development projects
towards consistent and non-competing goals;
• Restructure company by streamlining the company’s product lines- removing high cost-low profit products and
reinvesting in R&D, and consolidating production which would promote economies of scale;
• Lean management and kaizen should be a focus of management in order to cut down on costs and possibly
minimize large fixed costs that affect product profitability;
• Develop guidelines for teamwork and KPIs meant to measure team performance rather than individual outputs,
regularly evaluate these, and at the same time create an atmosphere that values the long-term success of the
company rather than blindly focusing on short-term KPIs and other operational measures;
• Install faster, more direct communication avenues for raising issues within the company, where candor and
objectivity are valued, so that critical areas are given prompt management attention instead of trying to patch things
in vain;
• Dedicate a hotline for lower-level employees to report operational issues, dysfunctional company managers or
executives, and other sentiments, without fear of retribution from involved managers; investigate the reports, and
use these information to raise and resolve issues during management meetings; and
• Reinforce the organizational culture introduced by Mulally and steer away from the organization’s bureaucratic, one-
for-each-own culture. The reformulated culture should be characterized by collaborative planning, transparent
communication, direct reporting and regular presentations from the business units. By operating under this culture,
identifying and resolving off-track operations and functions could become more timely and efficient.