Transcript: Ford CEO on making errors visible

Steven Pearlstein:Let's talk about those weekly meetings you have with your direct reports -- about what, 15 people?

Alan Mulally: The business plan review? Yes.

Pearlstein: You call them "the business plan reviews," you have them every Thursday; tell me about how that has changed the way the top team works.

Mulally: At Ford they would develop a business plan, then maybe two or three times a year they would revisit that fundamental business plan. And the process that I have always used over the years was to have a weekly meeting. We go through a lot of data because you can imagine, the seventh-largest corporation in the United States, the 17th largest in the world: this is a very big enterprise.

So what's really important to cover everything about the business in two-and-a-half hours, is not only do you have all of the data, but you also color code how it's going. So if you're off the plan, say on a launch of a vehicle, you would put up a yellow or a red depending how far off you are. If you are on plan, it's a green, and we go right on by it.

Pearlstein: Now when you started, I hear all the folders were green.

Mulally: Well this is a very interesting thing. When we started this process, we had gone a couple of weeks, and I just stopped the meeting because all the metrics were green, and the year before we had lost over 14 billion dollars. So I said in my nicest way, "Is there anything that's not going very well here, you know when we lost 14 billion dollars?"

And so we had a conversation about that because it had to be okay for you to color your area of responsibility, not yourself, but color your area of responsibility, a yellow or a red. And I'll never forget, maybe it was the next week where I think it was Mark Fields, who was leading the Americas, and he had a launch, I think of the new Edge, and they had an issue with the hinge on a back door that wasn't exactly right. So we needed to work with the suppliers to figure out how to get that fixed. So up comes this chart, and it was delaying the production. It was very close to launch, and so he had colored it a bright red.

The room got silent. What was Alan going to do? Here was a red. Was a hook going to come out, was Mark going to disappear? So I started to clap. And I said, "This is tremendous visibility, Mark. What can we all do to help you?" Within 30 seconds, the manufacturing engineer had an idea, the procurement leader had an idea about this part he was working with, and next week I think the red turned into a yellow. The week after that the yellow turned to a green. But the neatest thing was, that following week all the charts now became a rainbow because it was okay and expected that each of us should share where we really are.

So it has to be a safe environment, but also you can imagine the accountability that goes with that. And what I have found is that the more that you can create an environment where everybody knows everything, then the faster you're going to be able to bring help to bear. So it's not a punitive thing, it's not that you are red, it's just your area of responsibility you're sharing with us and [telling] the team that you need help. So it was just a different kind of culture that we were going to implement. And of course with all the vehicles that we're working on at one time, as big as Ford is worldwide, then everybody really embraced this new system because then they were getting help and visibility that they could never have gotten if they didn't bring the issues forward.

Transcribed by Fahima Haque.

WATCH ALSO: Mulally talks about the 'liberating clarity' of Ford's mission

By On Leadership video transcripts

 |  March 17, 2010; 5:30 AM ET
Category:  CEOs Save & Share:                 
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