Corporate Culture, George Westinghouse, and Ford’s New CEO

Bill Waddell writes about a product-quality decision made by Mark Fields, who will shortly become CEO at Ford…and about the reaction of then-and-current CEO Alan Mulally:

Early on his tenure at Ford Mulally implemented a process in a weekly review meeting whereby the execs color coded their status reports – green for those on target, yellow for those running behind and red for any project in serious trouble.

No one had ever brought a red project to the meeting when Fields learned that there was a serious defect in the roll out of the first Edge cars.  Customers and dealers were anxiously waiting for the Edge and it was a critical part of Ford’s strategy.

According to “Once Upon a Car” – a great book about the crises in the auto industry when the economic bottom fell out in 2008:

“Fields had two choices, neither one of them good. He could ship the Edges that worked, restart production, and hope the glitch could be found and fixed on the fly. Or he could delay the launch and be the first executive to go into Mulally’s Thursday-morning meeting with a big fat red dot on his weekly progress sheet. He sat down with his team in Dearborn and made the call. “We are not going to ship a vehicle before it is ready,” he said. ‘We just can’t . We have to delay it. I’m going to have to call it a red.’ His staff members looked at him. He could almost feel their pity.

At the next business review, Fields took his seat, right next to Mulally. As luck would have it, he was the first executive to present. His mind raced. I’m going to get killed here , he thought. Then he took a deep breath and showed everyone the launch page with a large red dot on it. ‘The Edge launch is red,’ he said. ‘And we’re delaying it.’

Fields thought he felt people moving their chairs away from the table, away from him. Bringing bad news to senior management at Ford was typically avoided at all costs. Nobody wanted to even be near the culprit. The Thunderbird Room got very quiet. Everyone looked at Mulally, waiting for his reaction. A few seconds passed. Then Mulally turned toward Fields, stood up, and started clapping.

This reminds me of a story about entrepreneur/inventor/industrialist George Westinghouse, which I posted years ago as part of my Leadership Vignettes series, and re-posted more recently:

The date, sometime during the late 1800s. The scene, a Westinghouse Electric factory complex in Pittsburgh, with an unpaved yard between buildings. A young laborer–a recent immigrant–is trundling a wheelbarrow, filled with heavy copper ingots, over an iron slab which serves as a track across the yard. The wheelbarrow goes off the track and into the mud. As the laborer struggles to get it back on the track, other workers begin mocking him.

At that moment, a man in formal clothing is crossing the yard. It is George Westinghouse, founder and chief executive of the company. He wades into the mud and helps the man get the wheelbarrow back on the slab.

Not a word was said, but powerful messages were transmitted: when someone is having problems, you don’t laugh at him–you help him. When things go wrong, no one is too important to dive in and get his hands dirty.

This is a splendid example of how good organizational cultures are created: through the power of example. Think how much more effective Westinghouse’s action was than the mere posting of a “corporate values statement” containing phrases such as “we must respect our fellow employees at all times.” Not that such things lack value, but they are meaningless unless backed up by action.

It would have been very easy for Westinghouse to simply ignore the incident and continue on his way. After all, he was heading to a meeting about something–a multi-million-dollar bond issue, say–compared with which a wheelbarrow stuck in the mud would seem to pale in importance. But his instincts were the right ones.

(The story is from Empires of Light, by Jill Jonnes)

And similarly, Alan Mulally’s action in applauding Mark Fields’ bad news was far more effective than any poster or e-mail tag line to the effect that “transparency is our highest value,” or some such phrase.

Disclosure: I’m a Ford shareholder.


8 thoughts on “Corporate Culture, George Westinghouse, and Ford’s New CEO”

  1. Unfortunately, none of this applies to medicine. I spent 40 years in private medicine and have had enough exposure to the institutional variety to fear what is coming. In my somewhat limited experience, hospitals are probably the worst managed institutions in America, the problem only exceeded by those of the National Health Service in UK.

    I spent my training years in a county hospital and have written a book partly about those years. A week ago, in our last session of teaching students the principles of diagnosis and physical examination, I showed the students the movie, The Hospital, a movie made in 1971 starring George C Scott in a great role. It is a black comedy about all the things that could go wrong in a big city hospital. It should be badly dated but it is not. The students saw things they immediately recognized, even this early in their training.

    I spent 25 years practicing in a doctor owned hospital that was run by the doctors and mostly the young ones recently out of training. We did medical care that I could say with some confidence was not exceeded in quality or sophistication by big training centers. When we applied for designation as a trauma center in 1979, the survey committee appointed by the American College of Surgeons arrived, they told us, expecting to be underwhelmed. After all the hospital was only 120 beds and located in a rather small suburban area. When they had looked at all the hospitals in the county, they rated ours first, above the university hospital.

    The hospital was sold to an order of nuns about the time I retired and I have kept track of the goings on through friends in the operating room. For a while, I was on the city planning commission and was one who was asked to review the plans for expansion of the big new hospital they were building. The number of assistant administrators had ballooned amazingly. Nothing like a non-profit for growth of overhead. There were at least 30 assistants who spent hours explaining their grandiose plans.

    The most recent administrator has no background in healthcare. He came out of Pepsi-Cola, like the guy who almost wrecked Apple. He made his brother-in-law, a chiropractor, the director of the operating room. They are busy shedding experienced staff and harassing those left. Morale is in the toilet. Mission Viejo is a very high cost area even for California. They are blithely alienating senior nurses who will be hard to replace. New graduates will not be able to afford the housing. Two bedroom condos are around $500,000. A lot of the senior nurses, and their husbands, owned homes since the 70s and 80s, before the big inflation of real estate.

    I suspect this is a microcosm of the adaptations going on under Obamacare. The old engineering sign used to say, “Cheaper, faster or better. Choose any two.” That is where health care is going, I fear. I sent some time studying quality and “lean healthcare.” That is not what is going on. I’m glad I’m retired but I am now patient.

  2. Beware – this is a “when I was but a lad” yarn. When I was about sixteen I went out for the first time on a trawler . After a while I was asked to take the helm and told the course to steer. Unfortunately this meant that I took the net over a “scaur” i.e. a stoney patch on the sea bed (presumably the sand previously covering it had moved) and the net was ruined. The skipper’s verdict was curt: he’d told me the course and I’d steered it, so it was not my fault. After the net was replaced I was again at the helm.

    Full marks to the skipper, don’t you think?

  3. (The story is from Empires of Light, by Jill Jonnes)
    I read that when it was first published after I’d seen the author interviewed on BookTV. The book sounded fascinating, and it was.

    I agree that corporate culture is set at the top and permeates the organization. After actual people, it’s of prime importance. Vision is the other prime ingredient. That’s why Apple has succeeded. Steve Jobs had almost unerring vision in terms of product design. It’s very rare. Elon Musk seems to have it as well.

  4. Mulally is a rare bird. I witnessed the massaging of combat reports during Vietnam. At the working level they were pretty straightforward. They noted the problems and failures reasonably honestly. By the time they got to the Pentagon the problems and failures were glossed over. As a result there was too much optimism at the upper levels.

    When I reported to my squadron in 1963 we had a skipper who delegated authority widely and used foul ups or failures as teaching moments. The morale was high and people looked up to the skipper. His replacement was q

  5. Comment continued: (submitted due to a keyboard error.) :-(
    …..quite a change. Nothing went out of the squadron without the new CO approving it and few decisions could be made without checking it with the skipper. Department heads were standing in line outside his office waiting to get approvals day in and day out. Everything slowed down and morale plummeted. I took note.

    When I finally got to be a CO, I followed the example of the first CO. It seemed to work. Morale was high and no one was loathe to bring problems to my attention.

  6. A modern day Westinghouse was the old Hewlett-Packard, when ‘Bill & Dave” still ran the company.

    Lots of stories about them, but one of my favorites involved a visitor to a plant asking a workman cleaning a small room directions.

    The “workman” was Bill Hewlett.

    Another HP story to coincide with the Ford story – when the HP 3000 was first introduced in the early 70s, it had some critical flaws. Story is that HP recalled every single one from the customer sites, loaned the customers their 2000 model for the interim, and said that we will return the 3000 to you when the problem is solved. In gthe meantime here is a loaner, no charge.

    Small wonder for years users of the 3000 were a fanatically loyal.

    And in today’s auto news compare the handling of Alan Mulally and the Edge to GM’s handling of the Cobalt ignition switch – 2 million cars now affected.

    What is the public’s perception of GM quality and attitude towards its customers?

  7. Knowing the right thing to do…and doing the right thing are different animals.

    I’ve decided to do the right thing, in my judgment, 100% of time and live with consequences. Actually easier than 98% of the time. Doing my best to teach my 2 kids there will be consequences and not all of them pleasant. When my kid calls me and says she is told to lie to customers and she needs the job. That’s a moment of truth.

    Speak up, be heard, support decisions. If you can’t live with them, then go find a new employer.

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