We're going to lose $17 billion. Is anything not going well here?

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The year Alan Mulally joined Ford Motor Company, 2006, the business was on track to lose 17 billion dollars.

It had a divergent product portfolio, declining sales, and infighting amongst its ego-centric executive leaders.

An icon of American ingenuity, innovation, and manufacturing might was in disrepair, and the company needed to be saved.

Mulally, formerly the CEO of Boeing, knew a thing or two about complexity. An engineer by trade, he joined the airline manufacturer in 1969 and had been a part of every major airplane design team starting with the 727.

He was raised with a midwestern sense of respect, appreciation, and love for his fellow human. A characteristic he not only displayed at home, but brought into his work in what his parents taught him was “one integrated life.”

When he joined Ford, Mulally brought with him an operating model he developed during his time at Boeing. The Working Together system.

Working Together is a set of principles, practices, and expected behaviors for teams. Its foundation was this one-page document:

One of the core practices in the Working Together system is the weekly Business Plan Review (BPR), over which he presided.

The goals of Business Plan Review were simple. Align leadership around the vision. Track progress toward goals. Work together to solve problems.

In the 1-2 hour BPR meeting, Mulally always kicked things off the same way, by reviewing the company’s vision, goals, and plan as outlined on the one-pager above.

From there, each of four profit center heads and 12 functional executives took turns providing updates on their programs and initiatives. The focal point of these updates was a dashboard detailing each initiative and its status, a simple red, yellow, or green indicator.

Like the rest of the Working Together system, and Mulally himself, the criteria for the status color-coding system was straightforward:

• Green - Everything on track, no issues to report
• Yellow - Issues exist but solutions identified
• Red - Issues exist and solutions not yet identified

Mulally insisted each leader bring facts and figures to support their status updates, and held them accountable for knowing the details themselves — their subordinates could attend the meeting, but were not allowed to speak.

During the first few weeks of Business Plan Reviews, the dashboard was filled with Green statuses. Top to bottom.

According to the leaders, everything was on track; nothing to see here, all systems “go.”

And yet, Ford was barreling down the highway toward a $17 billion loss.

In the decades preceding Mulally, Ford had developed an aversion to bad news and an intolerance for opposition to its CEOs. Transparency invited political attacks and executives buried their problems to maintain an appearance of control and stability for their areas of the business.

But Mulally brought a different leadership style to the table. One that would prove to be a key ingredient to Ford’s future success.

When he arrived at Ford, Mulally shared the Working Together system with every employee in the company.

But a once-bitten, twice-shy leadership team needed more than words to convince them that this wasn’t a clever trick to root out under-performers. They needed to see Mulally’s ideals in action.

After the first few weeks of Business Plan Reviews featuring squeaky-clean executive reports, Mulally confronted the elephant in the room with the following question:

The next week Mark Fields, leader of the Ford Escape lauch, came to the BPR with a “red” item on his status report. The only red status in a sea of green.

He shared that there was an issue involving the vehicle’s suspension system which had halted production and put his launch at risk.

His peers assumed the worst. Surely, security would soon usher Fields out of the board room, strip him of his badge, and escort him off the Ford campus.

After several tense moments the silence broke… not with words, but by the sound of clapping.

It was Mulally, applauding Fields for his transparency and commitment in doing what no other executive hadn't yet had the courage to do: openly share a problem.

What happened next set the stage for the one of the greatest corporate turnaround stories in American history.

Mulally said, “Mark, this is great visibility.” And he prompted the other executives, “Who can help Mark with this?”

In a matter of moments, three other executives spoke up. There had been a similar issue on another vehicle launch just months prior. Over the next few minutes, these executives offer engineering and supplier management resources to support Fields's team and get the Escape launch back on track.

Instead of sacking Mark Fields, Mulally demonstrated the values and behaviors of Working Together by holding him up as an example of the transparency he expected from his leaders.

In the next week's BPR, the issue had been moved from red to yellow. And after several more weeks, Fields's suspension issue was highlighted in green amongst many other yellow and red items across the dashboard.

The Ford Escape went on to a successful, on time launch in December of that same year.

By 2011, Ford’s operating profits ballooned to $8.7 billion, up from a loss of $15 billion just five years earlier.

The financial results were the outward sign of an inner transformation that took place at Ford. A Harvard Business Review case study on Ford’s turnaround explains it best:

Here are my takeaways from this story:

1. Great leaders confront the brutal facts of their current reality. The Stockdale Paradox teaches us, “You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.” Mulally understood the gravity of Ford's situation and helped his leadership team see it, too.
2. People accomplish more when they work together. It’s the leader’s job to normalize vulnerability and collaboration, but It’s not about the words they use. Culture changes happens over time as leaders demonstrate their aspirational values. We should never waste an opportunity to be an example of the behaviors we expect from our teams. (This is an area I’m still working on and probably always will be. As a dad, too.)
3. Simplicity is your friend when managing complex systems and programs. Ford’s senior executives didn’t need a cheat sheets to know how to report their status. Just a crazy-simple heuristic for red, yellow, and green. As Einstein said, “Everything should be made as simple as possible, but not one bit simpler.” If a company as complex as Ford can simplify their status reporting, shouldn't we be able to?

Have you confronted your reality, given your people a simple rubric for knowing if they’re on track, and made it safe for them to be vulnerable?

If not, what’s stopping you?

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