Strategic Leadership in Ford Motor Co Introduction Every time, if somebody mentions words like turnaround, transformation and changes, Ford Motor Company comes instantly in mind. Donald Petersen and Harold “Red” Poling, former Chief Executive Officers in the firm set a milestone in business in the sass and sass; its successful transformation from functional into strategic management thinking and the most spectacular turnaround in economy’s history. A few years before Ford had achieved industry records for profitability, they were standing literally in front of a wall.
Neither the manufactured cars’ design went down ell with the consumers nor the quality of their products or factories’ efficiency. As innovation was sacrificed in its favor, they had to aim for a new track and change, and they did (Wall Street Journal, 30 October, Pl; Starkey, 1996). The leader’s – Don Petersen – clear statement was: You have to create a sense of urgency that will dramatist what you’re up against and convince everyone that important changes must be made in order to improve’. It shows how they as top managers initiated change (Petersen, 1991).
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Fluently, the transformation worked in the US, but why did Ford Europe with Bill Hayden as Vice President of Manufacturing fail to succeed similarly? Were the challenges too big? The purpose of this report is to identify some of the contextual issues that impact on strategic leadership in Ford in the US as well as Europe and further critically analyses significant challenges Ford leaders had to face. Starting with basic literature about culture, power, gender, sector, crucial similarities and differences are going to be looked through.
Afterwards, the contextual challenges, which arise with introducing the strategically change like employee involvement (E’) and participative management (PM) will be analyses. 1 Ford’s transformation 1. 1 Impact – strategic leadership US/Europe The following issues like culture, power, leadership styles, and sector can have an impact on strategic management. Culture has always played a big role in business. But what is culture exactly and what contributes or rather influences it in a company?
Beck, Moore (1985) and Hefted (1991) define national culture as the values, beliefs and assumptions learned in early childhood that distinguish one group of people from another. The most well-known and used approach, classification, and possibility of comparability between different nations are Hypotheses (1980) five dimensions: Power Distance, Uncertainty Avoidance, Individualism-collectivism, Masculinity- Femininity, and Future Orientation. Despite years of studious research, a lot of criticism about his definitions exist. The most powerful argument is that culture is not static, it changes over time.
Likewise, his work is based on a single multinational corporation (MM) and his measures are not valid. Moreover, he ignores cultural angel of countries and popularity of the framework it can be adopted for the analysis later on. Overlapping with and categorized under national culture is organizational culture. It is defined as organization’s social and psychological climate, the system of shared values, beliefs and habits within an organization that interacts with the formal structure to produce behavioral norms defines organizational culture (Sharing, 1985).
Whereas Brown (1995) theorizes it as a set of norms, beliefs, principles and ways of behaving that together give each organization a distinctive harasser. Moreover, some might argue that there is only one culture existing in an organization while others have a pluralistic perspective and assume that sub- cultures exist. It is likely for sub-cultures to affect the top-down leadership in the international companies, where a leader can shape or control the organizational direction effectively (Handy, 1993).
On the other hand, Bossier and Chatham (2002) argue that they can be present without weakening the all-embracing organizational culture. Overall, Hypotheses (1998) suggestion takes to the point of managers’ wariness of sub-cultures as they reveal employees’ perceptions about the organization and therefore it can be damaging. Subsuming, transforming overarching culture is leaders’ responsibility; supporting cultural shape and the organizational members are finally shaped by the culture. But what if this transformation starts from a person who is unable to influence somebody?
And that is where power comes into play. French and Raven (1959) defined five basic sorts of power, based on the concept that a person can influence and be influenced: referent, expert, legitimate, reward, and coercive power. Furthermore, referent and expert power are categorized under personal power, manifested in knowledge and followers’ likeability. Referent power can be misinterpreted as coercive power because of a member’s attraction to a group as he or she fears to be isolated by the group (French and Raven, 1959).
Only if conformity is based on identification, regardless how the power source responds, than it is referent power. Whereas position power comprising legitimate, reward, and coercive power, appears in organizations if a top manager has in a hierarchical perspective more power than employees. Criticism exerted by Kips et al. (1984) regarding the inexplicit disposition of the power bases in organizations. French and Raven (1984) mention the source and receiver of power but don’t put any strategies, used by managers, on a level with it.
Gathering a trespassing analysis of strategy personnel, executing with a certain style of power, could create a model of using the appointed power in diverse strategies. Whereas Morehouse (2010) theorizes that managers use their influence with power for achieving their goals complainingly, Burns (1978) considers that the relationships thin power synergies between leaders and followers; foster achievement of common objectives. It also creates a positive way of leading, which makes a leader effective. Referring to this, transformational leadership has to be scrutinized.
A transformational leader has the ability to encourage people’s will to change, to get better, and to be led involving appreciation for associates’ efforts and evaluate what satisfies their needs, motives, and valuing them (Morehouse, 2001). Being a convincing role model, creating a motivational spirit, which let associates commit to the Adding intellectual stimulation and individual consideration e. G. Inspiring to consider things from a different perspective; innovative, supporting problem-solving skills which make the organization better and being a coach or mentor.
This leads to performance beyond expectations (Morehouse, 2001). Overall, criticism aroused that transformational leadership appears elitist also seeing it from the leaders’ perspective, which seems to be heroic and does neglect followers (Morehouse, 2007). Furthermore, their destiny should be connected to the leader’s ambition because they are talented with special leadership skills. This argument is strong as it is difficult to learn to become a good (transformational) leader. In addition, another leadership style could be used.
Transactional leadership is used in many situations such as a bonus offered to employees if they achieve a set objective (Morehouse, 2010). Basically, an exchange between two things takes place (Burns, 1978). Therefore, managers can control followers with sanctions and motivate with rewards, which seems to work efficiently as many leaders in companies use this style of leadership. On the other hand, surpassing expectations like in transformational dervish is rare. The private sector doesn’t really have an impact on strategic leadership as basically the managers can transform what they have in mind.
Only members of the executive committee or board of directors could interfere applied leadership approaches. The aspects mentioned above have an impact on strategic leadership in Ford. Firstly, Use’s national culture includes a low uncertainty avoidance rate referring to approaching risks with open-mindedness. Ford Europe, in contrast, acts in a more controlled environment and is, considering gender issues, rather male dominated than Ford US. Moreover, organizations’ hierarchical structure is connected to the high power distance index in Europe; a lower US index explains the slightly flatter hierarchy.
By using personal and position power in Ford US, transformational complemented with transactional leadership impacts strategic leadership crucially. However, in Ford Europe transactional leadership was applicable. These main issues had been hiding many challenges Ford leaders had to encounter. 1. 2 Challenges Besides the definition of new core values, which were the three up’s’ – people, products and profits, top managements’ strategic agenda included two concepts which also confronted Ford leaders with many challenges: participative management (PM) and employee involvement (E’).
PM basically means the inclusion of expressed ideas by subordinates in the overall decision-making process (Starkey, 1996). They were ahead of the times as in 1992, around 5 years after achieving the highest profits in Ford’s history, a survey conducted by Heaper (1992) showed that about 80% of the responded Coo’s think that participative management is a major factor affecting the firm and improves product quality and efficiency. Nevertheless, for Ford leaders it people in the organization had worked very individually for themselves, scooping their own benefits, which refers to the individualistic culture, mentioned before.
M’s behavior principles include the focus on a team efforts. Forming heterogeneous groups I. E. Teams was challenging for Don Petersen, Harold Poling and the lower management levels (Starkey, 1996). This emerged as more difficult as it sounds. In the ass, Mr. Petersen and Mr. Poling as Ford’s Coos, were confronted with many organizational culture issues. During the ass, mostly every department was comparable with a bamboo shoot standing unaccompanied and functionally introverted, self-seeking in a big vertical oriented bamboo forest which figurate the whole organization.
Very rare horizontal communication between different departments took place (Starkey, 1996). Many management layers were unrepresentative for US’ national culture, with still 17 levels in 2009 (Tarp). This has a huge influence on the duration of decision-making and followed change as it takes longer to communicate it from top management to the administrative departments. Therefore, transnational skilled managers, who have to operate in a more and more global business environment were highly demanded. Not only traditional international management skills were expected from them, but also a range of other expertise, e. . Global perspective, flexibility I. E. Local responsiveness as well as adaptability (Adler and Bartholomew, 1992). Communication is another very significant activity in the progress of change. Therefore, difficulties might arise if the main points in the new management style are not clearly articulated and explained. Especially, the very conventional thinking decision-making forums of Ford, Don Petersen had to elucidate them in a very convincing but sensitive way as it is hard to hang fundamental thinking, especially from people with high power (Starkey, 1996).
Figure 1 illustrates what kind of power, mentioned above, exists between the main characters in the ‘situation of change’. Figure 1 (self-made, October 2011) With Mr. Petersen personal power, because of staffs’ respect of his high experience and way up over the rows at Ford Motor Company, his main challenge as the transformational leader was to keep them motivated while trying to shape the company. As discussed in 2. 1, personal power should be applied for achieving common goals, what he did.
In addition, Mr. Pilings mission was to balance his position power and connected transactional leadership style well with Mr. Petersen. He was responsible for compliance that the company kept sticking to their defined core values and kept its feet on the ground (Starkey,1996). The transactional leadership theory can be determined as path-goal theory; by keeping behavior aligned with the firm’s vision and core values accomplishing an actual objective (House, 1996). Figure 1 also shows Ford US’ responsibility of Ford Europe.
Its challenge was to provide the necessary support for their European partners, which they approached s follows. In Europe, Bill Hayden was the ‘stability in person’ in an extremely fast- many different positions in the company, he had a disproportionate influence over the staff as well as over the executive team in Europe. But how were the challenges for Ford leaders in Europe different that made transformation not as successful as in the US? First, Mr. Hayden should have managed the change, with his cost-driven thinking and emphasis on efficiency and control, alone.
He didn’t have Mr. Petersen who could motivate staff in a transformational style. Second, getting send executives room the US and using their assignments as a good argument in resumes without getting support from a guiding force, can’t be an efficient approach from US leaders to change management. Plus, Hypotheses uncertainty avoidance index which is very high in United Kingdom and Germany, where Ford’s long-standing subsidiaries were, is one of the factors that explains why Hayden wanted to change, but never did.
He would have had to conquer his one’s weaker self to take the risk of starting the change. Moreover, the focus on cost differences, profit, and the ex-post analysis thin a finance-dominated culture was hiding the ignorance of people in the organization. Referring back to PM, it implies a simplification of management control and focus on peoples’ opinions, neither emphasizing the control of manufacturing costs nor driving them down.
Among others and because of the very hierarchical organizational structure, Bill Hayden along with Ford Europe was not able to handle these challenges. Furthermore, the freedom of change existed, as Ford is a private organization, therefore they could have managed more strategic issues than in the public sector; but didn’t. Overall, the challenges in Europe must have been too big for them. 2 Conclusion Summarizing, it is very difficult and risky to start and accomplish a firms’ transformation in such a successful way like Don Petersen and Harold Poling did.
Overall, Ford’s leaders had to cope with a lot of challenges, starting from the main obstacles of national and organizational culture, including Hypotheses (1998) dimensions and identifying organizational structure issues, finishing with the right application of sorts of power. Mr. Petersen once said, that cars should have integrity (Wall Street Journal, 30 October, Pl). This authentic honest status had to come from somewhere, and it did.
After the successful change of ex-post conventional thinking and giving employees the right impulse, they were motivated to build and especially design cars they wanted to be seen in their own driveways. Therefore, Don and Bill’s working relationship, with all their knowledge sharing and perfectly complementation, balanced as ‘Ford’s yin-yang, led to great success in the US but failed in Europe with Bill Hayden. He and his European colleagues needed a Don Petersen or at least a partner, a second supplementing leader for the people business.