What we can learn from Ford

This site has already spoken about the importance of individual behaviors in expanding sustainability and combating climate change.  That article called your attention to “automatic” behaviors — turning the lights on or off when you enter or leave a room, what your thermostat is set to, how you drive your car, the list goes on and on. You are not unique in this — many of these automatic behaviors are shared with others, whether it’s turning on the lights for your roommate or setting your office thermostat to 75 for your coworkers.

There is a word for all of these shared behaviors, but it’s one that’s not typically applied to these kinds of activities — culture. There’s no way around it, the modern world has embraced a culture of waste. Any attempt to cut energy use and limit planet-warming emissions is going to have to attack this culture as much as it attacks coal-fired power plants. While changing culture is incredibly hard, we can take lessons from a successful business turnaround at Ford Motor Company to take a few pointers on how to do it.

We can define culture as the set of shared attitudes, values, goals, and practices that characterizes an institution, organization, or group. In other words, it’s everything you do that marks you as a member of a particular group, whether that group is the company you work for or the people with whom you live. It’s an organic concept rather than a formal structure, captured as much in patterns of speech and social pecking orders as in mission statements or organizational charts.

There are two key features of culture as it impacts behavior.  First, culture can be thought of as automatic because it partly consists of behaviors that are “second nature.” Once culture develops or a newcomer is indoctrinated into it, culture moves from something that is noticed to something that simply happens without notice. Because of this, once you’ve settled into a new job you don’t notice the odd quirks of language that bothered you at first; because of this you don’t think about turning on the light in the morning, you just do it. The implications of this are huge. Because our current “culture of waste” is so all-encompassing, making a handful of wasteful automatic behaviors more efficient could have a massive impact as they take hold.

Second, culture is very “sticky.” Once established, cultural norms can be astonishingly resistant to change. This is largely due to what linguists and sociologists refer to as “the founder’s effect.” According to UCLA sociologist Gabriel Rossman, “If new entrants assimilate to whatever is the majority at the time they enter, and if the new entrants trickle in slowly enough, then the founding culture can persist over time, even if over the long run they make up a tiny minority.” For example, English is the dominant language in the US despite the prevalence of German or Latin American demographic groups. This “founder’s effect” is a powerful barrier to successfully changing culture, even in the smallest sense — any change to culture must come at the result of a massive effort to change even a tiny amount.

Or does it? Recent efforts, in the US auto industry of all places, may suggest otherwise. In the early years of the 21st century, Ford was in a tight spot. A company that had once been at the cutting edge of the auto industry, that had introduced the analytically-rigorous management approach known as “Fordism,” and that was synonymous with American manufacturing had fallen a long way indeed. In 2006 Ford lost $12.7 billion and had to pledge its factories, offices, and rights to its iconic logo to its bondholders in order to raise enough capital to implement a turnaround plan.

That same year the company decided that a corporate insider would be unable to save the company, and turned to a former Boeing executive named Alan Mulally. Recognizing that he had been hired at least partially because he was not steeped in the Ford culture, Mulally made changing Ford’s notoriously hierarchical and stagnant culture a primary component of his efforts to turn the company around, supplementing his decisions to cut struggling brands and standardize production processes and components.

The results have been remarkable. Despite losing $14.6 billion in a terrible 2008 (largely due to the financial crisis), Ford opted out of the government auto bailout plan that has arguably saved GM and allowed Chrysler to labor on. One year later, Ford turned a profit of $2.7 billion. In 2010 it made $6.6 billion. 2011 was even better, with a whopping $20.6 billion profit (partly due to a $12.4 billion accounting profit due to tax offsets). This has outstripped Ford’s domestic rivals, and kept it on pace with the international titans it finds itself in increasingly bitter competition with.

So what did Mulally do, and what can we learn from it? The short answer is “a lot,” which we can summarize into a handful of key points:

  • Target individual behaviors. Mulally found that executives were not well-prepared going into weekly executive briefings. They dealt by brining enormous binders to the meeting with them — if asked a question they didn’t know the answer to, they would flip through the binder while the meeting waited. Tired of the wasted time, Mulally banned the binders from the meeting. If they didn’t have an answer, the executives would have to do their homework and get back to him. Not wanting to be called out in front of their peers, the executive group became much more hands-on and well informed about the day-to-day operations of their segment.
  • Encourage transparency. Ford was traditionally a company where perception was deemed reality. Because of this, executives were unwilling to say “I don’t know” or report bad news, leading to a propensity for groupthink. By including all head executives as well as small groups of outsiders, Mulally changed the biweekly executive briefing from a posturing session to a legitimate briefing where executives would work through thorny issues together, greatly improving transparency and cooperation.
  • Don’t be afraid to critically assess progress, even if things seem to be going well. A year into his tenor, as things were starting to look up, Mulally took a small team of senior engineers to Consumer Report Magazine’s East Haddam, CT testing facility, to get detailed evaluations of Ford products currently on the market. The feedback wasn’t good. Despite initial defensiveness, the Ford team wound up taking the critical feedback to heart and revisiting their design, production, and quality assurance practices. By 2010 Ford had received the highest number of initial quality awards from JD Power and Associates of any major automaker.
  • Give people something to believe in. Mulally made certain that the changes he was making were predicated on more than boosting quarterly profit or shareholder return. He constantly reiterated the fact that they were rebuilding an American icon, returning a fallen giant to glory. This, combined with a new atmosphere of realistic optimism, proved infectious and beneficial to overall productivity.

Overall this is fairly simple advice: target specific behaviors, work cooperatively and transparently, honestly assess progress, and inspire by aiming for a higher purpose. Obviously this is very difficult to do in practice, else we would have countless examples of success. However, it represents a simple roadmap for targeting entrenched organizational behaviors wherever they are found, whether they’re in your workplace, metro area, or apartment building. Such changes are going to be critical if we are to successfully limit our heavy environmental footprint. If we are to successfully get to a more sustainable future, we must go from a culture of waste to one of conservation. Such a transition will not be easy, but as demonstrated at Ford, it’s doable.