In the figure below leadership styles are explained in terms of control over decisions.
Fig 1. Leadership styles
Another very important aspect into Ford's case is the way decisions were made. The Vroom and Yetton model “describes the different ways in which leaders can make decisions and guides leaders in determining the extent to which subordinates should participate in decision making.” This model defines 4 decision making styles, which “vary in the extent to which subordinates participate in making the decision:
- Autocratic: The leader makes the decision without input from subordinates
- Consultative: Subordinates have some input, but the leader makes the decision
- Group: The group makes the decision; the leader is just another group member.
- Delegated: the leader makes subordinates solely responsible for making the decision.”
Source: Understanding and managing organizational behavior, Pearson(2012)
2.2 Organisational Culture and Leadership Style in Ford
Nowadays, nearly half of executive teams lack the information they need to manage effectively because employees withhold vital input out of fear that doing otherwise will reflect poorly on them. This restricted information flow can cripple a company's ability to identify and respond to internal and external threats. A recent survey by the Corporate Executive Board of more than 400,000 employees across various industries reveals that companies that break down two key barriers to honest feedback not only reduce fraud and misconduct, but also deliver peer-beating shareholder returns by a substantial margin. (Griffin, Bradley 2010)
Ford, as each contemporary company, aims at delivering its customers satisfaction through innovative products and by doing so the company could reach another aim – realization of profit.
But according to the case the actual situation was different. It turns out that instead of divisions managers working together to achieve company goals everyone worked for himself or herself by keeping information a secret. Such actions contradict to definitions for modern and healthy company culture that emphasize on teamwork, flat structure and low level of bureaucracy. Instead, leaders stood high above followers, intentionally avoiding meetings with subordinates and other division managers. The reason for this was that managers believed they can avoid taking the blame for decreasing sales. Such actions by management could not it any way result into improved products, satisfied customers or profit. They naturally led to decreased sales because of car design and quality issues.
The major problem was the leadership style adopted by top managers – they used the authoritarian style where subordinates did not participate into decision making, so that information on actual problems could remain a well-kept secret.
2.3 Outcomes
In result of discrepancies between company goals and company culture Ford declared a $13 billion loss in 2006. At this point William Ford III realized he was an ineffective leader who can't motivate people to pursue company goals and started looking for an inside change instead of blaming outside factors for the company's problems.
- Company Culture vs. National Culture
- Background
The influence of culture - national or corporate - on organisations and growing national diversity in today’s businesses makes culture an important factor. Hofstede’s study of IBM has highlighted some important facts about culture that impact on organisational performance.
National culture and company culture are important topics in business. National culture refers to the general attitudes, belief systems, values, and traditions that characterise a nation. Company culture is the pattern of arrangement, material or behaviour which has been adopted by a society - company, group, or team - as the accepted way of solving problems.
Company culture can be defined as the beliefs and behaviours that determine how a company's employees and management interact and handle outside business transactions. (). National culture is a set of shared and enduring meaning, values, and beliefs that characterize national, ethnic, or other groups and orient their behaviour (Mulholland 1991).
A positive corporate culture typically includes several key elements. It is fostered not merely by a mission statement, but by a clear corporate vision. Corporate visions are most effective when clearly communicated by leaders.
Hofstede postulated that a national culture can be defined in five dimensions. I would point out four of them as I think they are in greater importance to Ford's case. These dimensions, as explained below, form the foundation to the discussion on the impact of national culture on company cultures:
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Individualism vs collectivism. The dimension that Hofstede called individualism versus collectivism focuses on the values that govern the relationship between individuals and groups. In countries where individualism prevails, values of individual achievement, freedom and competition are stressed. In countries where collectivism prevails, values of group harmony, cohesiveness, and consensus are very strong, and the importance of cooperation and agreement between individuals is stressed.
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Power distance. Hofstede used power distance to refer to the degree to which a country accepts the fact that differences in its citizens’ physical and intellectual capabilities give rise to inequalities in their well-being. Countries that allow inequalities to persist or increase are said to have high power distance. Professionally successful workers in high-power-distance countries amass wealth and pass it on to their children. In these countries, inequalities increase over time; the gap between rich and poor, with all the attendant political and social consequences, grows very large. In contrast, countries that dislike the development of large inequality gaps between their citizens are said to have low power distance.
- Achievement versus nurturing orientation. Countries that are achievement oriented value assertiveness, performance, success, and competition and are results oriented. Countries that are nurturing oriented value the quality of life, warm personal relationships, and service and care for the weak.
- Long-term versus short-term orientation. The last dimension that Hofstede identified concerns whether citizens of a country have a long- or a short-term orientation toward life and work. A long-term orientation is likely to be the result of values that include thrift and persistence. A short-term orientation is likely to be the result of values that express a concern for maintaining personal stability or happiness and for living in the present.
Source: Understanding and managing organizational behavior, Pearson(2012)
3.2 Ford's company culture compared to USA national culture
In order to describe the impact of USA national culture on Ford's company culture, I will guide my argument by Hofstede’s four dimensions of national culture discussed above.
Table 1: Culture Dimension Scores for 10 Countries
Source: Geert Hofstede, Gert Jan Hofstede, Michael Minkov, "Cultures and Organizations, Software of the Mind", McGrawHill 2010, 3rd edition
I included Table 1 in this part of my work in order to compare Ford's organisational culture to USA national culture's characteristics according to Hofstede's research:
- USA scores low on Power Distance meaning that in general inequalities in companies do not exist. But the situation in Ford was different: employees were kept aside from important for the company's development information. They were not even allowed to ask for meetings with their superiors. This created problems in the company on all levels since Ford is a genuine American brand and it is supposed to be a symbol of American values but on the inside it turned out it was not.
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USA scores high on Achievement Orientation meaning that all efforts a person makes are oriented towards achieving better results. On the contrary, leaders in Ford focused on “increasing their power and protecting of their corporate “empires”. This might be resulting from the high score of USA on Individualism but individualism pointed into such direction was not useful for the achievement of corporate goals, which should always be the most important when working in an organisation.
- USA scores low on Long-term Orientation meaning that people are focused on their present rather then their future. The top managers in Ford were focused on keeping their jobs at the moment by hiding the real problems and didn't think about the threatened company future.
3.3 Conclusion
The conclusion I can draw from the topics discussed above - Hofstede's research on national culture and the particular case of Ford's company culture – is that companies should be aware of the national cultures of the countries they operate in but even more important is to direct culture's particularities in a positive directions. That appeared to be wrong in Ford – Individualism was pointed towards achieving personal goals and not company goals. Power Distance, which is uncommon in USA was used to shape most of the managers' leadership style.
- Values. Change of Values in Companies
- Definitions
Values are general criteria, standards, or guiding principles people use to determine which types of behaviors, events, situations, and outcomes are desirable or undesirable. There are two kinds of values - terminal and instrumental:
- A terminal value is a desired end state or outcome that people seek to achieve. Organizations might adopt any of the following as terminal values, or guiding principles: quality, responsibility, innovativeness, excellence, economy, morality, and profitability.
- An instrumental value is a desired mode or type of behavior. Modes of behavior that organizations advocate include working hard, respecting traditions and authority, being conservative and cautious, being frugal, being creative and courageous, being honest, taking risks, and maintaining high standards.
Source: Understanding and managing organizational behavior, Pearson(2012)
Corporate values should be:
- Personified within the business from the top down
- Considered more important than making profits
- The cornerstone of corporate culture
- Reflected in all you do and your employees should willingly embrace them (Edwards A. 2012)
- Old values in Ford
Nowadays Alan Mulally writes: “At today’s Ford Motor Company, we are truly driving change. In the past few years, we have restructured and revitalized the Company under extremely challenging economic conditions. Throughout the global recession, we never lost sight of the environmental and social goals that are key elements of our business strategy. Indeed, our focus on those goals was an important factor in our financial recovery. By delivering cars that are greener, safer and smarter, we enhanced our competitiveness and built stronger relationships with our customers.” (http://corporate.ford.com/)
But the situation before him was different: “The values and norms in Ford's culture led the managers of its different divisions and functions to believe that the best way to maintain their jobs, salaries, and status was to hoard, rather than share, information.” Instead of all Ford employees working together managers were high and hardly reachable. That led to problems in communication, poor decision making and at the end to inability of the company to reach its goals: quality, innovation, profitability.
4.3 New values in Ford. Ways of implementation.
When William Ford III realized the problems in the company were serious and that he as a leader is a part of them, he decided to look for a change from inside. He hired Alan Mulally who could get a picture of the company as an outsider. This turned out to be the right action as most of the top managers in Ford used to look for problems outside of them and outside of the company.
Mulally “issued a direct order that the managers of every division should share with every other Ford division detailed information about the costs incurred to build each of its vehicles.” The new CEO wanted to change the value of hiding information to a value of sharing information, thus making communication easier, which led to pointing out real problems and looking for their solutions. He also “insisted that each of the heads of Ford's vehicle divisions should attend a weekly (rather than a monthly) meeting to openly share and discuss the problems each of the divisions faced. He also told them to bring
a different subordinate with them to each meeting so that eventually all managers in the hierarchy would learn about the problems each division had tried to hide.” By changing this, Mulally looked for a change in the leadership style of top managers from authoritarian to democratic style by making followers a part of the problems' solution. He also aimed at changing the tall hierarchy that was built, so that Ford became a modern, flat structure with less bureaucracy.
- Outcomes
The final outcome of changing values was that Ford accomplished its goals of being profitable, quality driven and innovative. Mulally achieved this through creating culture based norms that emphasized cooperation both within and among divisions.
5. Reasons for Organisational Culture Change
5.1 Factors affecting organisational culture
Here are some of the factors affecting the organisational culture:
- People working in the organization are the most important factor that can lead to change. The employees contribute to the culture of the company through their personalities, interests, perception of the world and point of view.
- Nature of business also affects the culture the organisation. All companies depend on external factors like demand and supply, markets, etc. When these factors change, companies also have to change their organisational culture.
- As mentioned above culture of organisation is shaped by its goals and objectives.
- The leaders and their leadership style are of great importance to the organisational culture and its change.
5.2 What made the change in Ford's organisational culture possible
Fig. 2 The infrastructure of every organization
Changing organisational culture is probably the toughest task a company might start as its culture was formed over years of interaction between owner, managers and employees.
Ford's old organisational culture formed for a reason. It probably matched the style of William Ford III or previous CEOs and founders. Top managers adopted his management style and since managers tend to hire people similar to them, the old, inefficient organisational culture was reinforced by new employees too.
The loss of more than $13 billion in 2006 triggered a process of culture change started by William Ford III with the hiring of Alan Mulally.
What happened was William Ford III understood the current culture of Ford and saw the problems in himself as an ineffective leader and in his top managers hiding information about the real problems the company had.
Hiring Alan Mulally was a wise decision as he could understand Ford's old organisational culture as an outsider. Then, by analysing old values and changing them with concrete actions, he helped the company change its organisational culture, so that it can lead to success.
6. Conclusions
The general conclusions that can be made from the arguments above and from the particular case of Ford is that organisational culture, leadership style, values, national culture are all vital to each company's development.
Companies should closely monitor the environment they work in and adapt when changes occur. The most valuable asset companies have is their workforce regardless of position in the company, gender, age, etc. This is so because employees perception of the world, way of thinking, behaviour towards others related in one way or another to the company shape a company's organisational culture.
In Ford's case, it turned out that actual values shared in the company led to an ineffective leadership style and finally to serious deviations from the goals set by owners and founders.
The solution came when leaders took a deeper look into company culture and decided to go through the tough process of change of values and leadership style.
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