Bringing organizational change and leadership to Ford Motor Company - Research Paper Example

?Bringing Organizational Change and Leadership to Ford Motor Company Table of Contents Introduction 3 Company Overview 4 Leadership and Communicationin Ford Motors 6 The Past: (2000-2006) 6 The Present: (Since 2006) 9 Literature Review 11 Analysis of the Problem 13 Conclusion and Possible Solutions 15 References 16 Introduction Leadership and the communication processes that are executed within the provided organizational environment have been proved by numerous evidences to be quite effective in determining the growth prospect of the organization. As stated by Quirke (2008), internal communication implemented in the working culture of an organization can work miracles when accumulated with effective leadership to turn strategies into actions (Quirke, 2008). Consequently, the aspect of leadership also plays a significant role in influencing the appropriateness and efficacy of the strategies adapted with due consideration to the internal communication. Therefore, both the aspects, i.e. leadership and communication can be stated as equally crucial in the modern perspective of business. In order to elaborate on the fact and identify the affectivity of these two most crucial aspects of modern business management, the paper shall emphasize on the organizational changes and leadership styles implied by Ford Motors. It is worth mentioning that along with several other companies and its nearest and traditional competitors, i.e. GM and Chrysler, Ford Motors also had to fight against the recent global recession. In the year 2008, the company’s status was mounted with loads of debts and down-falling sales. This global stress faced by the auto industry led the company to refurbish its balance sheets through fresh strategies and a new outlook by 2010. This amendment included the appointing of a new CEO, Mr. Alan Mulally under whose supervision the company has to follow a comprehensive organizational change in the due course of its operations (The New York Times, 2011). The example of Ford Motors and its operations have laid remarkable evidence in re-defining the impact of efficient leadership and effective communication within the organizational hierarchy. In this milieu, the paper shall object to discuss the various aspects of leadership and communication methods implied in the realistic practices of the company. Another aim of the paper is to identify the problems related to the organization and intend to conclude certain relevant strategic measures to be beneficial for the company in its further performance. Company Overview Today, Ford Motors is recognized as one of the leading automobile companies in the international market with its origination in 1903. The company is a US based multinational company incorporated with designing, manufacturing, assembling and marketing its products to a wide range of customer all around the world. The company until 2010 had more than 90 plants operating worldwide. It presently employs almost 198,000 employees (Ford Motor Company, 2009). Since 1994 the company acquired the second position in the global automobile industry. It was in the year 1999 when the company earned its record profit amounted to $7.2 billion, which was followed by the purchase of Volvo as an investment strategy in the European market. In the following year the company purchased another brand, Land Rover and incorporated a new plant named Premier Automotive Group. This expansion strategy was expected by the company’s officials to be quite beneficial in achieving extra amount of profits through rejuvenated sales worldwide. But in its realistic practices, the company faced a gradual fall both in terms of sustainability and sales. For instance, the company was facing disputes among its workers in various plants. One of its major competitors Toyota had surpassed the company in terms of annual sales in 2006 (The New York Times, 2011). It is notable that a major reason which increased the chances for such occurrences was strategic announcement made by the company to shed more than 14,000 salaried and 30,000 hourly workers in the year in order to cut off costs and restructure the organization. The strategic decision was backed by the most probable occurrence of global recession. However, the current effect recorded during the period was unsuccessful. By the year 2008 the company incurred a loss of more than $14 billion, marking it to be the leading sales slump of the decade (The New York Times, 2011). The fluctuations which occurred during the last five years of its performance can be well depicted from the image represented below. Figure 1: The Stock Price Fluctuations of Ford Motors over the Past Five Years Source: (Business Week, 2011). Therefore, it can be stated that the company in real terms had two major causes for its downfall in 2008. One of the reasons being the global recession which is referred to as an uncontrollable risk factor influencing the external business environment, the other reason was the inefficient leadership traits and communication methods within the internal environment. Hence, the company required a more efficient leader and effective communication method to regain and stimulate its early growth. Realizing the fact, Mr. Alan Mulally, the CEO of the company since 2006 appointed a new leadership idea supported with a fresh communication style. Furthermore, with the assistance of his extensive leadership quality and effective reformation strategies the company is again on the mode of growth (The New York Times, 2011). Leadership and Communication in Ford Motors The Past: (2000-2006) The problem with the leadership and the communication style implemented in Ford Motors’ organizational environment was addressed during the year 2000, when its most renowned sport utility faced strong controversies. In the year 1999, the company initiated marketing its unique featured sport utility “Ford Explorer” in most of its plants around the world. The car model was outfitted with Firestone AT/ATX tires, one of its close allies. Within a short period of its introduction to the market, the tires were complained to roll over as a result of tire malfunctioning. By the end of 1999, several complaints based on the fatalities were registered against the company. However, explaining that the problem was actually with the weather conditions and/or with the car owner, the company decided to replace its tires. Yet, quite a few numbers of serious injuries were recorded during the year 2000 which headed many lawsuits against the company in different regions and thus hampering its market reputation (Biggemann & Buttle, 2004). The complaints were recorded to affect the organizational well-being quite strongly even in the next year, i.e. 2001. Consequently, the problem resulted in a major dispute within the two companies, i.e. Ford Motors and Firestone affecting their long and healthy relationship. The issue also hampered the customer relationship base of the company which in turn caused major downfall in its annual sales. During the period, the company initiated an operational research which revealed that the real cause for these issues was the faulty leadership traits adapted by the then CEO, Mr. Nasser. As witnessed, Mr. Nasser was on an approach to introduce change within the organizational structure adopting certain aggressive steps which as a result angered the company’s employees, leading to the downfall of the company. However, by the end of the fiscal year, the post was replaced by Mr. William C. Ford Jr. (The Economist, 2000). This particular phase can be stated to be the initiation of the organizational change, both in terms of leadership and internal communication. Consequently, the company witnessed a major downfall in sales which amounted to a figure of $12.6 billion in the early 2006. As a preventative measure, the company borrowed a huge amount of $23.6 billion, putting up most of its American assets including its logo as collateral. In this regard, the company’s officials stated that it was a part of their restructuring strategic alliance. The company further announced a decision in the early beginning of the year 2006, to shed almost 30,000 hourly paid jobs followed by 14,000 salaried personnel (the New York Times, 2011). Summarizing the facts revealed from these instances, it can be stated that kind of leadership style practiced within the organizational environment was somewhat inefficient. This led to a centralized communication process, influencing the corporate hierarchy and the productivity of the employees as well. Moreover, the leadership traits can be observed to create dissatisfaction within the working culture and also in its external business environment, i.e. the community at large. Therefore, the problem of the organization was in fact related to the internal operations of the company in terms of leadership and communication, more than it was related to the external affairs. The Present: (Since 2006) Considering the challenges that the company witnessed in its early performance till the beginning of 2006, the top managerial group of Ford Motors decided to appoint Mr. Allan Mulally as their new CEO. Mr. Alan Mulally was previously associated with the Boeing Company and was quite well known in the corporate due to his effective turnaround strategies which enabled the airline company to regain its growth. With the same focus, the new CEO amended a few changes within the organization. However, he supported the borrowing which according to his perception shall prove to be a cushion for the company during the then most probable occurrence of a global recession (The New York Times, 2011). The leadership style which Mr. Alan Mulally introduced to the company was largely similar to the decentralized flow of information within the managerial group. Certain initiations which were undertaken by him were: Meetings between the top management group and the middle level management group to be held in frequent intervals (most likely to be every month) Integrating each and every department of the corporate as a single team A fresh plan to stimulate almost every field of operation, i.e. manufacturing, assembling, and manufacturing A statement specifying the new developed goals and the mission and vision of the organization (Ford Motor Company, 2006) However, the sales of the company and its profit structure in turn continued to fall until 2008 when the company incurred a loss amounting to $14.6 billion, marking the year as the worst in terms of its performance. The downfall continued to the next year with a drop of almost 48% of sales in the month of February, with comparison to the company’s performance for the same month of the previous year. It is due to this reason that the company decided selling its two of the most renowned car brands, i.e. Volvo and Mercury by the mid of 2010. By the end of the same year, the company’s performance showed certain significant signs of recovery, marking almost 68% growth in sales. While two of its most significant brands were sold out by the company during the downfall, other brands were reflecting rapid growth in terms of sales. For instance, the company recorded a growth of 96% in the sales of Taurus Sedan in the US region during the fiscal year, 2009-2010 (The New York Times, 2011). Considering the significance of the time period around 2007 to 2009, the global market was strongly affected by the occurrence of the global recession. This can be stated as one of the reasons for the company’s downfall. However, in real terms the influence of the leadership and the communication process applied within the organizational environment was stronger than the phenomenon of global recession. To be summarized, it was the leadership communication which initiated the downfall during the early 2000, and it was the leadership communication again which rebound the company during 2006. However, the leadership trait followed presently by Mr. Alan Mulally also has certain flaws which can cause significant drawbacks to the organizational culture. For instance, the leadership trait followed by the present CEO tends to be charismatic while the communications process is largely parallel to that of a decentralized flow of information. The limitations of both these processes and the most likely drawbacks resulting from the implications are elaborated in the further discussion of the paper. Literature Review After joining Ford Motors, Mr. Alan Mulally stated that the company was facing certain significant challenges which he intended to overcome with an advantageous strategic alliance. He initiated to simplify the organizational structure of Ford by integrating all the diversified objectives to one goal and pertain a single strategic planning to achieve it. Moreover, he intended to imply the thought of an integrated team force within the organization (Ford Motor Company, 2006). These leadership traits signified by the current CEO of the company showcased the charismatic style of leadership. According to Dubrin (2008), charisma is referred to a personal quality possessed by an individual. Thereby, certain identifiable traits of a charismatic leader embrace innovative thinking, effective communicating, motivating and influencing (Dubrin, 2008). All these characteristics can be apparently observed in the leadership style followed within the organization. Mr. Alan Mulally introduced innovation to the organization through the integration strategies. According to Taylor III (2009), the CEO further stimulated the communication process within the organization implying the decentralized mode of communication and organizing frequent meetings among the top management group. The level of social interaction reflected by the company leader also reflects the attribute of a charismatic leader (Taylor III, 2009). According to Meindl and Shamir (2007), charismatic leadership can be categorized as entirely leader-produced or entirely follower-produced. In other words, either the leader will enforce this kind of leadership style or it will be the followers to determine the kind of leadership trait within the organization. In the case of Ford Motors it can be stated to be as leader-produced. In the case of leader-produced charismatic leadership style, behavior of the followers matter a lot. For instance, a strong charismatic leadership trait as can be witnessed in the case of Ford is most likely to lower the level of expectation among the followers which in turn shall hamper the working culture to an extent. Moreover, in a leader-driven charismatic leadership process, the perceptions of the leader also acquire a great significance which can affect the organizational operations at large (Meindl & Shamir, 2007). Herman and Human Sciences Research Council (2006) stated that charismatic leaders possess certain serious drawbacks. Notably, it is assumed that the charismatic leaders have a strong impact on their followers, which denotes that his actions shall not only generate positive attitude among the fellow workers but shall also provide rise to certain influential negative thoughts hampering the organizational culture at large. Moreover, charismatic leaders intend to control their subordinates strongly which is accumulated with the prospective lacuna of accountability. It is due to the reason that it is quite difficult to account the fixed certainty of the charismatic leaders (Herman & Human Sciences Research Council, 2006). Analysis of the Problem To be summarized, Ford Motors Company witnessed numerous ups and downs in terms of its financial and strategic performance since the start of the 21st century. In 2000, the company decided on marketing its sport utility car ‘Ford Explorer’ which proved to be inefficient. Later in the next year willing to enforce an organizational change, the company’s then leader selected the autocratic leadership style to an extent. This also resulted in incompetence heading to a leadership alteration. However, in 2006 the company found a new leader who followed the charismatic leadership trait to a large extent accumulating the features of decentralized communication, innovation and integration within the organizational hierarchy. During this period the company also witnessed a rapid fall in its sales revenue which led to the selling of the company’s two brands, Volvo and Mercury. Even in the beginning of the year, i.e. 2006, the company had to accept a huge loan of nearly $23.6 billion against most of its American assets. Under the leadership of Mr. Alan Mulally the company recorded its lowest revenue till date in 2008. However, fortunately with the assistance of an effective leadership the company regained its position in the global automobile industry until 2010. Eventually, economists confirm various issues related to the problems faced by the company. One of those causes is the occurrence of global economic down-turn which not only affected Ford Motors but also hampered the well-being of other well-reputed companies such as General Motors, Chrysler and others. However, evidences reveal that Ford was less affected by the event in comparison to other global players. Thus, it can be stated that chief problem of the company lay in its internal operations and not in the external business environment solely. The internal problem that the company witnessed can be illustrated as the power of leadership and communication which led the company to a rapid downfall, and then again pulling it back to its position in the global platform. For instance, the strategies adopted by the company leader during 2000 focused on the marketing strategies of the company raising multiple questions regarding the company’s welfare in the international market. Consequently, this fueled the dissatisfaction level within the organizational hierarchy. It was thus ineffective. The next leader decided to raise a huge loan from putting most of its assets on stake as a precaution to the most probable emergence of a global recession. Prima facie it was remarked to be unnecessary by most of the company officials and external analysts, the amount adopted as a loan fortunately saved the company from coming across the major obstacles of the incident similar to its competitors. In the words of Mr. Alan Mulally, the amount was accepted “as a cushion to protect for a recession or other unexpected event" (The New York Times, 2011). This proved to be quite beneficial in supporting the company against the external fluctuation emerging in the market during the period. Hence, it was again the effective leadership and the communication process which assisted the company to regain its growth. However, the company in its present operations is most likely to witness certain major consequences of charismatic leadership which if appropriate measures are not taken shall again effect the organizational operations. Conclusion and Possible Solutions With reference to the above discussions, it is well identified that the company is most probably to witness the consequences raised by charismatic leadership traits. For instance, the trait of a charismatic leader is to steer the followers strictly according to their perceptions, which might lead to negative impacts on the followers. Moreover, the current leader of the company belongs to a non-auto background. Therefore, the company can suggestively assign another leader to be directing the company’s operations together with the current leader. Significantly, the other leader should be quite experienced in the automobile sector and should not be strictly charismatic, which shall reduce the consequences of charismatic leadership style. It is worth mentioning that a chief strategy adopted by the company leader is focused on integrating the diversified operations of the company with one single objective and mission statement. In its realistic practices, Ford is quite well known for its diversified operations and multidimensional strategies. Consequently, integrating all the dimensions of the corporate shall lead to a complex organizational structure which would be quite challenging. Therefore, the company leaders can enforce the integration strategies to few of its dimensions, but avoid other major sectors in order to overcome the obstacles laid by the complex organizational structure. Conclusively, after several fluctuations the company is gaining stability which should be significantly considered by the company leaders along with the fact that effective leadership can accelerate organizational changes in an efficient manner and even raise the risk of strategic failure according to the basic concept of organizational behavior. References Biggemann, S. & Buttle, F., (2004). The Ford Explorer – Firestone Tires Crisis: a Rules Theory Analysis of Relationships. IMP Group. 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