Ford Motor Company Management

Keywords: ford motivation strategies, ford company management

From financial support to corporate governance and culture, today’s organisations have to adapt to the society they operate in. Moreover, they have to respond to unique situations and resolve problems as they progress towards goals and strategic objectives to survive within the industry. Competition is no longer dependent on tangible product features but refers to dynamic approach to operations and management, which complement the demand of the market, stakeholders and shareholders. Performance has become the priority element for developing competitiveness and efficiency. That is why industrialists and scholars alike, emphasize on tuning up resources, especially human resources, in order to achieve high efficiency levels. Employees, if provided the right balance of remuneration, rewards, motivation and drive, their performance can far exceed performance, according to scholars (Stredwick 2005).

On the other hand, employee psych is a very sensitive aspect of management which is influenced by communication, relationships, trust, and expectations. If any of these elements are removed or damaged, it has dire consequences on their performance. This has been the case of Ford Motor Company, whose employees have been subjected to a series of change management without much indication of their participation by their employers. Inevitably, its demoralised workforce led to poor performance.

Rationale

The researcher is of the view that employees’ motivation is a very critical area for achieving desired organisational goals and objectives. In highly competitive industries, like the automobile industry, employees are strength. Their motivation is as critical for development as financial remunerations. Theorists explain that employees have as much expectations from their employers as employers expect from them. It is the collaborative force of both the employers and employees that make the organisation competitive and efficient. Understanding the human side to management, as well as factors that drive them, is important and of interest to the researcher because they are the core of the organisation’s existence. Scholars like Maslow (Goble 2004), Taylor (2007) and McClelland (1987) have studied human motivation in detail, and established that human beings work best when they are motivated by personal goals. Inevitably this leads to achievement of organisational goals if both goals are aligned. Moreover, given the right direction through effective leadership, employees can be convinced to progress and extend the life of the company.

Scope and Objectives

In the following study, the researcher plans to explore theories of motivation with a view to identify the importance of motivation in today’s corporate structure and for evaluating the case of Ford Motor Company. The objective is to evaluate the problem and discover how Ford can avoid making the same mistakes made during Jacque Nasser’s tenure in its present management.

SECTION TWO: LITERATURE REVIEW

What is motivation?

Motivation has many aspects to it – psychological, behavioural, and sociological. Motivation can be explained as the “variability of human behaviour” given identical external circumstances. Humans may be motivated to achieve certain goals or desirable outcomes – whether these are for physical needs or psychological needs (Beck 2000). Based on this, philosophical view motivation theories have been developed over the centuries.

Historical Development

Rational-economic theory

Early motivation theories were based on economic perspectives. The rational-economic theory of motivation assumed that people were basically lazy; they were only motivated by economic gains. People will only work if they were paid. Wages and incentives were the real motivating factors which could be used to control people. However, this theory did not address why some people under similar circumstances would work overtime or take active interests in what happens to their peers or neighbours (Makin and Hoyle 1993).

Theory X and Theory Y

Based on the above premise, Douglas McGregor (1960) had established that there were two approaches to management. Theory X assumed that people disliked work, and needed to be coerced or directed towards organisational goals. People will always avoid responsibility. Alternatively, Theory Y assumed that people were interested in their work. They did not need to be directed and they took on responsibility to solve business problems voluntarily because they were genuinely interested in the organisation’s progress (McGregor 1960).

Social Person theory – The Hawthorne Experiment

McGregor’s Theory Y obviously had been revolutionary in the context of understanding human behaviour. However, it was limited in addressing the human needs and why people were motivated to work. His work was furthered by Elton Mayo in his famous Hawthorne studies (Dickson 1973). The Hawthorne Experiments were a series of workforce studies which indicated that people were affected by socialisation factors such as job satisfaction, social groupings and standing. The work environment clearly influenced the rate of productivity of employees; they responded to peers, rather than to line managers (Beck 2000; Dickson 1973).

Self Actualisation

Mayo’s experimented demonstrated people were by and large social animals, with the need to interact and become influenced by external forces. Based on these social needs, Abraham Maslow (Goble 2004) presented his famous Hierarchy of Needs theory (See Appendix 1). According to Maslow, people were “motivated by a number of basic needs which are species-wide…” (Goble 2004: 50). They were driven by basic needs, growth needs and self actualisation needs. Basic needs were the physiological needs for survival such as food, shelter, sleep, and so on. When these were satisfied, man turned to the safety needs which referred to the need to be healthy and normal physically. In the context of business it referred to job security as well. Then came the need for belonging and love which were necessary for growth. People needed to socialise and develop trustful relationships in order to function in their circle. Furthermore, they needed esteem-building factors like self-respect, confidence, competence, mastery, appreciation and independence. And lastly, people have the desire to know and understand the environment around them, which were critical for their mental health (Goble 2004).

Maslow’s Hierarchy of Needs (Goble 2004) has been a valuable contribution to the field of motivation as it helped theorists to understand the tangible and intangible nature of people’s motives. However, the theory did not address what the motivating factors were and which were not. For this, Herzberg’s Two Factor Theory proved enlightening.

According to Frederick Herzberg (1968), working individuals were satisfied by different levels of needs. These were called satisfiers or motivators. He was of the view that people craved for recognition, responsibility, prestige, social interactions, and the sense of achievements (satisfiers), in order to work. On the other hand, they were resistant to dissatisfiers which he referred to external conditions such as company policy, administration, supervision, work environment and job security (Beck 2000). These historical developments in motivation theories became the ground rules for modern motivation concepts and practices.

Current Concepts of Motivation

Thus, by understanding what motivates or satisfies human beings, theorists have been able to identify the type of incentives to motivate individuals to carry out their jobs and perform in the desired manner. McClelland (1987) has, for example, presented the concept that people are complex; they are governed by their cognitive arousal. They can be aroused to perform certain tasks, if their personal needs conjunct. In this context, modern theorists define motivation as follows:

“People are motivated when they expect that a course of action is likely to lead to the attainment of a goal – a valued reward that satisfies their particular needs.” (Armstrong and Stephens 2005: 70). From this definition, one understands that there must be recognition of unsatisfied needs and wants for establishing goals for attainment. Goals are thus established to influence the behaviour of the individual (Armstrong and Stephens 2005) (See Appendix 2).

Furthermore, in the new generation organisations, concentration is given to valuing employees and encouraging them to contribute positively to the organisation. Remuneration is no longer given priority (Byrnes 2006). In fact, the latest developments in motivation are based on social innovation concepts presented by Pot and Vaas (2008). Social innovation refers to the process of innovation in an organisation that includes dynamic management practices, flexible organisational structure, smart working techniques, emphasis on development of skills and competences, and networking between organisations along with technological and product innovation (Pot and Vaas 2008). The basic premise for this theory is to enhance labour productivity and establish welfare and social security to motivate a smaller workforce to optimise in productivity (See Appendix 3).

Motivation in Engineering

However, the problem with today’s industrial organisations is profound knowledge. According to Deming (Anjard 1995), organisations today are challenged by extreme competition from foreign markets, for which reason their managers are bombarded with profound knowledge to understand processes, innovations, technologies, and management of the competition. This process requires transformation in terms of motivation, innovation and learned skills. When such transformation occurs, cultural forces, human behaviour and motivation – all change too. To manage this transformation, a holistic thinking approach is required, which includes understanding of the system, appreciating it, understanding human behaviour and dissemination of knowledge (Anjard 1995).

In engineering organisations, especially, knowledge is imperative for performance, and engineers or technologists are constantly bombarded with it. The difficulty lies in the clash between management and engineers. Management are profit focussed, while engineers are focussed on consistency in data flow, processes and systems to perform well (Wearne 1981). When transformation of technological or organisational nature takes place, engineers tend to resist change because of the diffusion of knowledge; they are given limited understanding of details, process improvement standards, criteria for performance, and replacement strategy. For this reason, often innovation resistance is observed in engineering organisations, which inevitably leads to high turnover and voluntary separation even by the most skilled engineers (Bao 2009; Bigliardi, Petroni and Dormio 2005a). Their satisfaction is affected by managerial policies, supervisory practices, management perception of engineers’ role in the organisation, and job-related motivation factors (Petroni 2000).

However, there are solutions to such motivation problems. Petroni (2000) suggests inclusion of engineers in management processes to learn about the function of management, and how they complement the engineers’ roles. Alternatively, Amar (2004) recommends establishing knowledge work environment that would allow workers to share knowledge and experiences in order to achieve organisational goals. The direction of the knowledge diffusion process, however, must be controlled by the employers, without limiting the employees’ freedom to explore and interact with each other (Amar 2000). Moreover, the organisation’s shortcomings in its remuneration, promotion and succession planning system should be covered with the development of technical and managerial careers to attract individuals of different calibres. For example, technical positions should be separated from managerial positions in terms of prestige, salary and status; and promotions should be based on career development (Bigliardi, Petroni and Domino 2005b).

These should be holistically planned and evaluated on their efficacy in motivating workers. Broadly, there are seven strategies which organisations can adopt to motivate their employees:

Positive reinforcement / high expectations

Effective discipline and punishment

Treating people fairly

Satisfying employees needs

Setting work related goals

Restructuring jobs

Base rewards on job performance (Accel-Team 2009)

However, these strategies should not be adopted singularly, but can be mixed and integrated within the individual organisation’s strategies to achieve its transformation objectives.

SECTION THREE: EMPIRICAL CASE STUDY

Ford Motor Company

Ford Motor Company (F) is a US-based company which has a history as old as the auto vehicle itself. Henry Ford, its founder, had been the pioneer in auto vehicle production. Throughout its history, Ford has revolutionised mass production assembly lines, as well as vehicle designs and technologies. Today the company is considered to be one of the largest cars- and trucks-makers in the world with famous brands like Ford, Lincoln, Mercury, Mustang, F-Series pickup, and has stakes in Mazda and Volvo. Its business has diversified to include production of cars, as well as provision of financial services and real-estate. The company has subsidiaries across the Americas, and over Europe and Asia (Hoovers 2009).

During 2007-08, Ford has experienced unprecedented loss that the company’s management attributed to the economic crunch across the globe, which has lessened disposable income of individuals for purchase of luxury cars, and to price pressure due to tough competition. The estimated loss for the year 2007-08 had been $14,672m despite a net sale of $146,277m. Its losses can be traced as far back as 2006, which the management attributed to cost of idle plant operations, energy prices, currency exchange volatility, consumer spending trends, price pressure and carbon dioxide emissions standards established by the authority for all vehicles. For this reason, the company had to divest its subsidiaries, plants and employees (Financial Report 2008).

Restructuring

In 2006, Ford announced restructuring plans including reduction in operating costs and increased product flow into the market. This meant that Ford would have to reduce personnel of approximately 5,000 positions in addition to early retirements, voluntary separations, and so on (Financial Report 2006). This was not the first time that Ford’s personnel would be experiencing the brunt of the blow.

Since the 1990s, Ford had been experiencing change measures. In 1999 when Jacques A. Nasser became the CEO of the company, he took quite a few measures that aimed to alter the course of the ailing company (Muller 2001a). Nasser’s management style was characterised by swift decisions, instinctive choices and action-taking. Considering the slow industry trends, Nasser’s solution for Ford was to transform and extricate it from the Old Economy style of operation (Muller 2001b). His strategies included:

i. Partnering with technology companies like Microsoft and Yahoo! to boost Ford’s online presence.

ii. Changing the bureaucratic management structure by shuffling senior managers and regional executives, and tying their performance to bonuses.

iii. Removing entitlements and automatic promotions, based on seniority.

iv. .Measuring employee performance according to peer performance (Muller 2001b).

Nasser’s intense drive for a new performance-review system stemmed from the low efficiency and quality rating of Ford in 2000 among top auto companies. Since price pressure mandated that product prices be similar to competitors, the only edge that companies within the industry could harness was through efficient production. Moreover, quality was of high importance if Ford wanted to compete among giants like GM, Chrysler, Toyota, and Honda. When Ford did not possess these factors, it began to lose out in the competition. However, Nasser’s drastic steps, to force the company towards change, were aimed to change this status quo, even though they were not received positively (Muller 2001a; Muller 2001b).

Impact on Employees

Customers, shareholders and, more importantly, employees were resistant to Nasser’s ideas. Many in the company considered Nasser’s approach to change too quick and too fast for its people to follow. Others were outright resistant to change. “It’s all these things being jammed down our throats,” says John Wyrwas, 61, a power-train engineer who got retired during the programme (Muller 2001b). At the executive level, major executives, fearful of their positions being removed, left the company to go to Chrysler and other rivals. While at the Board level, Nasser did not receive friendly or supportive vibes either. It was rumoured that Nasser did not get along with the Board or the Chairman (Muller 2001b; Automotive News 2002).

The uncertain environment created by change management resulted in a cultural revolution. People began to lose focus of what was really important for the company to make the required turnaround. Instead, they became more concerned with the mergers and buyouts that Ford was undergoing, which translated into employee reduction, retirements and voluntary separations. Employee morale went to the lowest level at Ford when Nasser chose to recruit external executives for key management posts – J Mays for design studio; Wolfgang Reitzle for luxury car business (Muller 2001b; Automotive News 2002).

But, most of all, analysts and managers within the company believed the most upsetting blow was the introduction of the new employee-evaluation system. The evaluation program entailed ranking of employees based on performance curves 10% A, 80% B and 10% C. It was mandatory that all employees fall within these brackets. A ‘C’ performance meant no bonus, and if it continued for two consecutive years, it meant dismissal or demotion. Moreover, employees were appraised against peers rather than industry standards or company performance criteria. This created a sense of distrust among employees, and against managers who rated them. Employees found the environment they worked in highly stressed, while many rated Ford as having high rate of dissatisfaction (Connelly 2002). In fact, employees became so dissatisfied with the performance system that they sued Ford for termination based on the ABC grading system (Connelly 2001).

The demoralised work force not only set the company backward in performance, but also created bottlenecks in management, as many were frustrated because they were not recognised for their work, got advancement or even got reviewed properly. Since career-development plans came to a halt, compensations, promotions and succession plans also came to a halt. With restricted compensation for overtime, lesser health care provisions, and no 401K contributions or bonuses for managers, the company was operating on minimal operating costs (Connelly 2002).

The employees’ debacle, along with negative industry trends, resulted in Ford’s poor performance, which led to the ouster of Jacques Nasser. However, the problem was far from over. Internal strife has proliferated to external performance, which greatly affected Ford’s performance later on as well. Analysts (Keller 2002) believe that the company needed major overhauling before it could revive its previous status. But more importantly, it needed consistent leadership, an individual who was sympathetic towards the employees and yet had the head for turning the business around – from being debt entrenched to profitability (Kiley 2006; Kiley 2007; Eisenstein 2001).

SECTION FOUR: DISCUSSION

Leadership

The competitive environment in the auto vehicle industry of the world mandates that firms develop new products with more varieties for attracting the consumers. This drive for innovation for new products means that organisations such as Ford have to come up with new and improved products, constantly. Its internal operation has to keep up with the pace of change and competition in its external environment (Brissaud, Tichkiewitch and Zwolinski 2006). When Nasser had stepped into the leadership role, he immediately recognised Ford’s weaknesses and tried to turn it around through transformation strategies. From his point of view, the organisation needed to quickly be at par with competitors in order to survive in the industry. However, in his endeavour, he neglected the people factor, and inevitably stumbled in his stride towards transformation. His problems can be evaluated by using the motivation theories and concepts discussed in the previous section.

People’s Pace of Transformation

Clearly, the people at Ford at the time were not prepared for the major restructuring of the organisation. At the time, people at Ford were used to the rational-economic perspectives of operation. They were more inclined towards wages, bonuses, seniority promotion and fringe benefits, which came with their jobs at Ford. When Nasser removed these elements from their jobs, they were disinclined to work – as indicated by McGregor’s Theory X (McGregor 1960). They were used to the social environment that was cultivated over the centuries. Their job satisfaction came from socialisation within the Ford community and their trust in the management to make the right decision (Theory Y). When, again, these were changed, they felt displaced and uncertain, and instead of trusting their peers and managers, they became against the management.

One understood their behaviour from Maslow’s Hierarchy of Needs theory – the employees were satisfied with their basic and growth needs at Ford (Goble 2004). When Nasser implemented the ABC evaluation programme, he eliminated their actualisation and growth satisfiers. They no longer felt they belong to the group they have been working with for a long time. There was no job security, as well as no growth opportunities. When they were forced to be graded against their peers, their lifeline in the company was also removed. As a result, self-actualisation needs were dissatisfied, resulting in under-confidence, distrustful environment, and no appreciation was forthcoming to boost them out of their status quo. As Herzberg (1968) has indicated, people craved for satisfiers or motivators – recognition, responsibility, social interactions and achievements. When these were absent, they became resistant to change.

What really was needed was a replacement programme. Nasser needed to define goals for his people to achieve (satisfiers) by first identifying their need to focus and participate. They needed to be included in the planning and implementation processes. By excluding them from the grand plan, they felt devalued. In an age when employee valuation and recognition were important elements (Armstrong and Stephens 2005), Nasser made the mistake of putting his employees at the bottom rung of the ladder instead of at the top to further his goals for organisational transformation. If he had adopted a holistic approach, he would have been able to influence their behaviour, as well as motivate them to achieve his goals.

Evaluation Programme

But the most detrimental factor in Nasser’s change initiatives had been the ABC grading system, and taking actions against employees based on it. There were several problems attached with the programme that impacted the morale of the employees. Firstly, it was a grading system without specific standards of performance or criteria for grading. The only criteria set were the ABC percentages of employees who should fall into these brackets. Instead of evaluating performance based on a scale of set standards or goals, they were put into “pegs” of performance. Thus, a design engineer was as much a B performer as a B management executive. These criteria were no different than the bureaucratic system that Nasser planned to remove. Secondly, people were forced to C grades when, in practice, they may not fall into that category. Moreover, using the C criteria for firing, demotion or cutting bonuses highly de-motivated the workforce. Thirdly, the ABC system used peer reviews as the basis for grading. This created an environment of distrust. On the other hand, through Maslow’s Hierarchy of Needs (Goble 2004), the researcher perceived that in the process of change, it was important for people to feel secure and safe in their position in order to focus on the physical change that was taking place.

Motivation and the engineering organisation

In an industrial organisation like Ford, the major population of the workforce are engineers, technologists and innovators. As discussed by Wearne (1981), these individuals are used to systematic workflow and work environment to enable them to focus on their job and performance. Engineers and technologists tend to resent management intervention as they believe the management hinders their progress. Clearly, this had been the case at Ford. Employees were dissatisfied with their jobs because they were no longer used to the new environment. The extrinsic motivators, such as policies, administration, and performance expectations, all changed with the new transformation strategies. What they needed was a replacement strategy that gradually acclimatised them to the new strategies. This would have been possible by including them in the process of planning, implementation, improvement standards and criteria for performance (Bao 2009; Bigliardi et al 2005a).

Instead, Nasser forced his workforce to accept the cultural change without formal awareness programmes. By not taking onboard his executives, and instead including new ones, he actually violated the Ford culture. No doubt, Nasser’s motives were to recruit new talents and new knowledge, but this knowledge-diffusion method was against the organisation’s embedded culture. Gradual transformation should have been introduced through interactive forums and appreciation of the roles employees played in the change processes.

SECTION FIVE: CONCLUSION

At the beginning of the research, the researcher has established that motivation is critical for achieving desired organisational goals and objectives, especially in competitive industries like the auto vehicle industry, where employees can make the difference of success or failure. An exploration of theories of motivation indicates that motivation has many aspects – psychological, behavioural and sociological. Motivation is the variability of human approach towards achieving goals or desirable outcomes given similar situations. Motivation, in business context, can be controlled. There are intrinsic and extrinsic motivators which could be used to identify individual goals to influence their behaviours. To understand the practical implications of motivation on organisational performance and operations, the researcher has decided to study the Ford Motor Company, a US-based auto vehicle company, during a specific time period. The people at Ford during the tenure of Jacques Nasser experienced one of the lowest morale ever. This study proved to be illuminative and helped the researcher to understand that people were motivated by both extrinsic and intrinsic values.

The theory of rational-economic was based on the extrinsic motivators, which assumed that people were basically lazy and they did not want to take on responsibility. This theory helped the researcher to understand the status quo of the workforce at Ford before Nasser took over. However, it did not provide the full understanding of why people at Ford were demoralised and were not inclined to be onboard with change management.

For this purpose, the researcher found McGregor’s Theory X and Theory Y, as well as Maslow’s Hierarchy of Needs theory enlightening (Goble 2004). They provided the researcher with the rationale behind people’s behaviour such as socialisation nature of people, basic needs, growth needs and actualisation needs, which were absent among Ford employees at the time of Nasser’s transformation drive. Their theories explained the need for satisfiers and why they needed to participate in the process of change.

Moreover, modern motivation theorists implied that valuation and appreciation of employees were more important motivators than salaries and benefits. People, when insecure in their environment, needed to regain their trusts and responsibilities to know their bearing in the social environment they exist in. However, these theories did not explain why people were inclined to leave the company or voluntarily got separations. Bao (2009) and Bigliardi et al (2005a, 2005b) partially explained that engineering professionals tend to resist change and they require knowledge to perform according to expectations. When they feel displaced, they tend to seek new systems and environments to work in.

However, their concepts of social innovation did not help explain why some of the employees remained at Ford, while others left. In addition, these theories did not explain the role of leadership in motivating individuals and retaining them at their workplace. These limitations led the researcher to surmise that future researches can focus on the roles of leaders and their implications on motivation by exploring their links with motivators and strategies.