When culture and strategy go to dinner

Alan Mulally gets a lot of credit for being the leader who orchestrated one of the most significant business turnarounds in U.S. history — an effort that helped land him at No. 3 on Fortune’s “World’s Greatest Leaders” list. He stepped in to lead an ailing Ford Motor Co., at the behest of the great-grandson of Henry Ford, the company’s previous leader, who was concerned that the iconic company was about to go bankrupt.

It’s reported that the company, in 2006, had lost half its stock value and dropped billions in profit. Addressing these problems required significant changes. One central change was to the culture.

The culture before Mulally joined the business has been described as broken, without alignment and one in which the staff was reluctant to share bad news with leadership. That made changes to process — Mulally’s now-famous Business Plan Review meetings — impossibly ineffective. The story goes that after simplifying the leadership structure and color-coding operational targets red, yellow and green based on urgency of attention, Mulally asked his leadership team in a BPR meeting how they were progressing toward their goals. Only one of the 16 reported that they were off track on their progress, a move that could have resulted in their firing under the previous culture. Instead, Mulally reportedly stood up and clapped, praising him for his courage to tell the truth.

But Mulally’s well-documented turnaround of Ford wasn’t just about the culture. There also were many strategic moves, such as the well-timed $23 billion in bank loans just ahead of the credit crisis (saving the company from needing to take a federal bailout), as well as the strategic sell-off of troublesome overseas acquisitions. These moves freed Ford to streamline its focus and gave it the capital it needed to retool. Coupled with the increased transparency, a better method of sharing information throughout the organization, and the creation of an environment that facilitated, rather than punished, honesty, Ford returned to profitability and got back to being one of the world’s leading automobile companies.

There has been a great deal of change — in companies and throughout the world — in the past few years. How we go to work has changed, business models have changed, how and where we recruit has changed. But what’s remained the same is that people drive companies. A good culture — one of comradery and inclusion — marshals that force. Setting the cultural example and focusing the energy it creates through the strategic mission is the most important role of leadership. When a solid culture meets the right strategy, anything can happen. ●

Fred Koury is President and CEO of Smart Business Network Inc.

Fred Koury

President and CEO
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