The 2008 global financial crisis is thought to be the worst in the recent years, especially after the Great Depression that occurred in the 1930s. Specifically, the crisis affected different industries in the US that ranged from real estate to service, to manufacturing among others. Ford Motor Company is one of the companies in the automobile industry that was affected by the economic crisis. The automobile industry of the nation had been affected by a global rise in gasoline prices, which meant that the specialization of some of the biggest automobile industries such as Chrysler, Ford, and General motors had been challenged greatly. The companies had specialized in the production of pickup trucks and sport utility vehicles that relied on heavy consumption of gasoline. The market dynamics meant that the clients would soon move to vehicles that consumed less gasoline, setting in the economic crisis. Ford Motors is the only domestic automobile firm that stood the pressure of economic crisis, which is attributed to change management practices of its then CEO, Alan Mulally (Baker, 2015). Mulally enabled the company to recover from a looming bankruptcy to one of the most profitable American organizations, and this essay analyzes his approach to change management in the lens of Kotter’s model of change management.
Kotter’s first step in change management is the establishment of a sense of urgency. At Ford Motors, the CEO realized that the company was in a need for an urgent improvement of its approach to operations. Specifically, the company was faced with an urgent need to change its production style and ensure that the vehicles that started producing were focused on the needs of the market. This realization was engraved in the One Ford strategy that the CEO had coined to revive the status of the company (Hoffman, 2012). Under this approach, the CEO required immediate and regular updates from all of the managers of the company worldwide to communicate the statuses of their progress towards rebuilding.
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Kotter describes the second step in his model of change management as creating a coalition. Ford Motors embraced this step through the One Ford strategy. The CEO realized that he could not manage the situation at the company alone, which is why he required assembling all the employees of the company from all the global branches. He did not do so through meeting each respective worker, but through meeting his or her branch managers weekly to discuss what was required for the organization (Miller, 2013). Therefore, he managed to forge reputation amongst the workers that he wanted them to work as a single unit to rediscover the path to success.
The development of a vision and strategy is the third step in Kotter’s change management approach. The vision of the change management strategy that Ford Motors adopted was to improve the quality of the automobiles, their desirability, and durability (Baker, 2015). The strategy used in the attainment of the vision was to analyze the market, the economic trends around the industry, and the capabilities of the company to challenge the trends and gain prominence once more. The CEO raised $23.6 billion from banks using the company asserts as mortgage and restructure the organization’s production approach to start the production of low gasoline consumption vehicles.
As the Kotter change management model describes, the One Ford approach required proper communication of the vision and strategy that the CEO and the global branch managers had created. It has already been mentioned that Mulally organized weekly meetings with each of the head of the firm’s production units around the globe during which he communicated the status and purpose of the strategy. To ensure that each of the employees of the firm was informed about what he wanted, the CEO utilized prominent bar charts with different colors to indicate the different levels of success or failure of the project as well as the threats to success (Kirkland, 2013). Therefore, each employee developed a picture of both the present and desired state of the company.
Managers who adopt the Kotter change management model are required to empower a broad-based action as their fifth step in the process. An analysis of Ford Motor Company and their state indicates that the CEO embraced this step. For instance, the borrowed finances and the focus on strategy adopted by the top management of the firm ensured an aggressive restructuring of the company to operate profitably at the prevailing market demand as well as the changing model mix (Baker, 2015). The firm consolidated its platforms of vehicle manufacturing promptly and purposed to have over eighty-five percent of its worldwide sales from nine platforms towards the end of 2016.
The change management model described by Kotter also required that the management at Ford Motor Company generate short-term wins, which helps in shaping the attainment of the overall vision. Ford generated three short-term wins. The first one aimed at reversing loses in Europe through ensuring that it operated break-even (Miller, 2013). The second was to return the Lincoln brand of the firm to relevance and improve the company’s brand reputation. Lastly, the firm purposed to enter into the luxury line of production, which had become quite appealing to the US market.
The second last step of Kotter’s change management approach involves the consolidation of gains and the production of more change. Once the company started operating break-even in Europe, the management focused on exploring the market gaps and produce the vehicles that were on demand, which enabled the institution to start gaining profits from its operations in the continent. This achievement was leveraged with the company’s return to prominence in the domestic market of the US. The combined strategy reversed the losses of more than $30 billion that the company was struggling with in 2006 to profits by 2009 when its former competitor, General Motors Company filed for bankruptcy.
Lastly, having managed the situation successfully, Kotler directs that the new changes be anchored into an organizational culture at the respective institutions. Ford Motors did exactly that. The One Ford strategy still exists at the company to both to remind the employees of the situation that the firm survived during the financial crisis and to remind them of the need to keep improving. Today, the company is in its best financial shape in a decade, and the management has since become innovative to avoid the managerial and production issues that might result in another crisis.
In conclusion, the application of all the eight steps of the change management approach developed by John Kotter enabled Ford Motor Company to survive the biggest scare to its existence. In fact, the One Ford strategy developed by its CEO at the hike of the financial crisis of 2008 has been identified as one of the biggest miracles in American industrial history. Specifically, the strategy helped Ford Motor Company to reverse its loss trend of $30 billion in 2006 to profits by 2009 when its competitors had failed completely.
References
Baker, C. R. (2015). Organizational change at Ford Motor Company in the face of international financial crisis. Recherches en Sciences de Gestion , (5), 23-35.
Hoffman, B. G. (2012). American icon: Alan Mulally and the fight to save Ford Motor Company . Three Rivers Press.
Kirkland, R. (2013). Leading in the 21st century: an interview with Ford’s Alan Mulally. McKinsey Quarterly . (4), 29-35.
Miller, D. (2013). The Sole Reason Behind Ford Motor Company's Resurgence . The Motley Fool . Retrieved 6 February 2018, from https://www.fool.com/investing/general/2013/11/14/the-sole-reason-behind-ford-motor-companys-resurge.aspx
