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Lessons in Strategy from Ford Motor Company

Company’s success despite market turbulence is example for nonprofit organizations

This is the second article in a four-part series on strategic governance. Part one is available online.



It is widely accepted that strategic considerations should be the primary focus of nonprofit boards of directors and executive staff. Most organizations have conducted strategic planning processes with their boards. But, all too often, this is an exercise that is isolated from the ongoing work of the board.

As discussed in part one of this four-part series, I have worked with several organizations to take a long, hard look at their board meetings’ agendas and minutes. Ultimately, the majority of them indicate that 80 percent of board time is focused on operational matters that relate to current day-to-day performance. Often contrary to leaders’ perceptions, very little time is spent navigating emerging trends and challenges, or preparing the organization to meet them.

When the focus is placed primarily on reacting to the challenges of today, the only assurance an organization has is that there will be new challenges to confront tomorrow and in the following days. A strategic orientation shifts the focus from managing today’s problems to anticipating future events and planning to successfully address them as they arise.

Strategy Is a Deciding Factor

Very little is written about the application of strategic principles in nonprofit organizations. It is difficult to identify examples that can serve as models for others to follow. However, a book describing the turnaround of the Ford Motor Company provides a clear example of how an acute focus on strategic goals and objectives can have significant positive impact.

The book, American Icon: Alan Mulally and the Fight to Save Ford Motor Company, was written by Bryce Hoffman, a reporter for the Detroit News. (1) Alan Mulally was recruited in 2006 to revive the company, which, like other American automakers, suffered serious setbacks when the economy declined and foreign automakers took a greater share of the U.S. market.

Under Mulally’s leadership, Ford prevailed as the most profitable automaker in the world, while other automakers sought government bailouts and filed for bankruptcy.

How was Mulally able to accomplish this? The answer is deceptively simple:

  • clear goals and objectives focused on the problem at hand,
  • a strategic understanding of the industry, and
  • an ability to accurately predict future conditions.

Objectives Make Goals Attainable

At the time of Mulally’s appointment, William C. Ford Jr., the company’s chairman, identified three goals that needed to be accomplished:

  • return the company to profitability,
  • achieve a competitive share price and dividend, and
  • restore the brand identity to its previously-held position

With clear direction from the board, Mulally identified six objectives that must be met to achieve the three goals:

  • build cash reserves of $15 billion (ultimately $23 billion) to allow the company to weather the storm and make targeted investments in long-term viability,
  • temporarily eliminate dividends to guarantee that all available cash is directed at assuring the future of the company,
  • limit production to market demand to eliminate expenses associated with manufacturing models that are inventoried because they can’t be sold,
  • downsize operations to production requirement levels to adjust production costs to market demand,
  • eliminate management silos to increase effectiveness by eliminating redundancy and encouraging the collaborative use of resources, and
  • sell off non-Ford brands to focus attention on Ford products.

Mulally believed that achieving these six objectives would assure Ford’s future and propel it toward meeting the three big-picture goals laid out for him by the chairman—and he was right.

Takeaways for Nonprofit Organizations

As Bill Vlasic reported in the March 16, 2013 edition of the New York Times, “Ford survived without federal help and has thrived since, posting pretax profits for 14 consecutive quarters through the end of 2012, while improving revenue and market share.” (2)

I think this example includes several lessons that can be applied to nonprofit organizations, including those in the Alliance for Children and Families network.

Goals. The goals put forth by Ford’s chairman are few in number and they are unambiguously clear. They provide a high-level focus for the entire company, not individual pieces of it. Each has an impact on the entire organization. They address immediate challenges the company was experiencing, but in the context of the desired future state.

Measurable Objectives. There is clarity in how the objectives relate to the goals. The results to be achieved can be clearly measured, and benchmarks can be established to measure incremental progress. If progress isn’t being made, corrective action can be taken before significant deviation occurs.

Future Focus. The goals and objectives all relate to assuring a future state of affairs. The strategies are not intended to resolve an immediate problem in isolation from longer-term interests. Immediate challenges are addressed in the context of creating a long-term solution.

Products. Not all products and services have relevance to the future, even though they have had meaning and value in the past. While there was a sound rationale for acquiring non-Ford products earlier, it came time to relinquish them in the interest of strengthening brand identity. Maintaining programs and services for historical or emotional reasons can jeopardize an organization’s future viability.

Organization Structure. Each organization must constantly assess its structure and be prepared to change it to increase efficiency and effectiveness. Static organizational structures limit future effectiveness. During any strategic planning process, board directors should ask whether or not the organization is set up in the most effective way to achieve its specific goals and objectives.

Effective strategic plans are big, bold, and include some level of risk. Alliance member organizations are not as large as the Ford Motor Company, and their products and services are very different; however, the Ford’s story tells us that strategic planning can provide a very valuable road map when trying to navigate uncharted territory.


ENDNOTES:
1. American Icon: Alan Mulally and the Fight to Save Ford Motor Company by Bryce Hoffman was published by Crown Business in 2012.
2.  The article “Ford Chief Benefits From Auto Comeback,” which was published by the New York Times March 16, 2013, is available online.
 

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