Brief Background & History of Ford Motor Co.
Ford Motor Company was started in 1903 by Henry Ford, a farmer’s son born in Michigan. He built his first vehicle in 1896 and just two years later founded the Detroit Automobile Company (DAC). In 1900 DAC had dissolved and Ford was able to concentrate on starting his own company. Ford Motor Company started out small but quickly grew to be one of the most successful and profitable companies in the world. They started off with a small series of vehicles and in 1909 were producing roughly 18,000 vehicles a year. By the end of 1920, Ford was producing over a million vehicles every year. In 1911 he expanded Ford Motor Company overseas and by 1925 in addition to their factories in the United States, they had factories in Canada, England, France, Denmark, Germany, Austria, South Africa and Australia (www.ford.com).
Today, Ford Motor Company is ranked third highest in automobile sales throughout the world. The company has expanded throughout the years and currently includes Lincoln, Mercury, Volvo, Jaguar and Mazda brands. “While value for money has always been a top priority in developing Ford vehicles, that concern has never compromised quality or the pursuit of quality solutions” (www.ford.com). Ford strives to be innovative and continually offers vehicles that suit the needs of their consumers. The line today includes smaller cars and “smart cars” to help with the changing needs of the environment.
Corporate Leadership Shown
Ford has had many corporate leaders throughout their years of service and it appears that the majority of those leaders spent more time leading the business, versus leading their employees. Ford experiences a high turnover rate in employment, which has a small effect on the profits they receive. Ford leaders focus on leading the business towards success. William C. Ford Jr, CEO of Ford Motor Company from October of 2001 to September of 2006. During his five years as CEO, W. Ford spoke at a leadership series convention for the U.S Chamber of Commerce in November of 1994. Ford was seen as an innovative leader in the concern for the healthcare and environmental fields. He spoke on government policies and what needed to be done in order to improve America’s competitiveness (www.uschamber.com).
In May of 2000, Ford spoke at the Ford Motor Company Annual Meeting of Shareholders. Here he spoke about leadership involving Ford employees. “We encourage that kind of concern, involvement, and leadership among our employees. We want people on the Ford team who act, and who inspire others to act. They build goodwill, strengthen our corporate reputation, and help us recruit and retain the best and the brightest. They also create the greatest added value for shareholders” (www.media.ford.com).
Ford employees also follow corporate leaders in their mission to help the environment. W. Ford tells stockholders of employee involvement in their efforts “to help victims of earthquakes in Turkey, mudslides in Venezuela, floods in Poland and China, and tornadoes and hurricanes here in the United States. They also supported education and the arts, preserved and protected the environment, and gave their time and money to those less fortunate than themselves” (www.media.ford.com).
Reason for Change or Problem
The Ford Motor Company has been a leader in the automobile industry for over 28 years, which focused and succeeded to some degree on cost reduction, increase market share, as well as the quality of its products. In recent years, Ford Motor Company saw an error in the quality of its products, which cause detrimental effects in two areas; customer satisfaction and market share (Paton,2004). It appears that customers were dissatisfied with the structural make up of the automobile, as well as the deficits. For instance, “many Ford Mustang owners expressed dissatisfaction with the amount of effect it took to close the hoods on their vehicles” (Paton, 2004). It is believed that the problem affected all levels of the organization. Car owners were hesitant to purchase a Ford Motor Company vehicle, which had a negative effect on the company’s market share.
In response to the decline, Ford’s CEO Jacques Nasser knew that an organizational change needs to occur to withstand the decrease in profits and customer satisfaction. The company adopted a new vision “to become the world’s leading consumer company for automotive products and services” (Paton, 2004). Additionally, CEO Nasser told his employees at an internal meeting that, “we are focusing intensely on our customers and have made customer satisfaction our highest priority” (Paton, 2004). CEO Nasser speech about organizational change reinforced the notion of the importance of the company adoption of Six Sigma and the impact change will have on the company.
Describe the Change
Ford introduced Six Sigma as their means to change the current dynamics of the organization in many ways. It affected all parts of the business and resulted in many positive results. Ford applied the results of each change process by department. Ford selects which projects will involve Six Sigma based on three different criteria. “They must relate to customer satisfaction, the results must reduce defects by at least 70 percent, and each project should average $250,000 in cost savings” (Paton). Each time Ford identifies a problem, a commitment of two years is expected from “Black Belts” or middle management.
The initial change principles that have been instituted at Ford have been to focus on continuous problems with vehicle lines. Using Six-Sigma statistical tools, Davis traced the source of vibrations in 2000 Super Duty F-series trucks and Excursion sport utility vehicles to subtle design alterations in some parts from previous models. The flaw was fixed, but had Ford engineers relied on their initial hunch and realigned the front-end suspension, it would have persisted” (SME). Once Ford feels all possible change principles are completed in relation to vehicle lines, they are then to readjust their focus to supply chain management.
Actions taken to effect change
The company took an interesting course of action to deal with the decline in market share and customer satisfaction. The CEO Nasser altered the vision of the company to incorporate a focus on consumer preference. In order to implement change, the company selected Six Sigma, a program established by Motorola, which will help in achieving the desired increase in customer satisfaction and cause a positive increase in sales. Phong Vu, Director of Quality, was an instrumental player in acquiring the six sigma program. Vu stated that, “I did research, visited with Mike Harry of Six Sigma Academy, and benchmarked with GE and other large companies that were using Six Sigma (Paton, 2004). The CEO Nasser was an important player by providing funds to support the program. In addition, he played an active role in the development of the program by making sure the system can accelerate their quality improvement effects.
Vision and Mission Statement
Ford’s vision “is to become the world’s leading consumer company for automotive products and services” (www.ford.com). The company has had a successful track record and seems to be following the path towards reaching their vision. Their mission states: “We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve people’s lives” (www.ford.com).
In addition to having a vision and mission statement, Ford has four values that they abide by: “1. our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. 2. We are an inspired, diverse team. We respect and value everyone’s contribution. The health and safety of our people are paramount. 3. We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. 4. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders” (www.ford.com). These values are a key part to the success that Ford has achieved today.
Expected Outcomes
Ford’s expected outcome of the Six-Sigma process is increased customer satisfaction. In order to increase customer satisfaction, Ford must focus on their supply chain and flow. “Ford has indicated that Six Sigma will play an essential role in helping the company achieve its goal of becoming a leading automotive company in quality, efficiency, and the development of great products” (Moore). Six Sigma also provides Ford with an excellent technique to reduce waste and receive statistical information.
Ford plans on the entire company attacking problems in the same manner. Using business language, skills, and measuring successes allows everyone at Ford to attack problems with the same desire and passion. This Six Sigma plan allows for all parts of Ford to be continuously worked on.
Communications Plan
It appears that the company was able to articulate and dispense the information to its entire global operations in an effective manner. Ford, unlike other company, knew how they would use the Six Sigma to affect change, which will allow them to benefit in the long run. There were three stages in its communication plan. In stage 1, three hundred fifty people were trained, which were comprised of people who were top management, officers, and leadership groups. The three groups were given extensive training on the application and how it can save capital. Stage 2 identified people within the organization that will serve as the “backbone of the six sigma process” (Paton, 2004). In stage 3, the employees were split into three categories, which were Master Black Belts, Black Belts, and Green Belts. It appears that each belt had a different responsibility in the six sigma process, which ensure that continuous effect of cost reduction and customer satisfaction is achieved.
According to our research, Ford did an excellent job in its communication plan. It seem as though, everyone in the organization was on-board with the six sigma initiative. We can assume that all levels of the organization wanted the program because job security was at stake. Moreover, CEO Nasser continuous communication about the six sigma initiative could have bought buy-in with some members of the top management and the employees. Therefore, we unanimously believe the communication plan was well carried out.
Action Plan
Six- Sigma has been in process at Ford since 1999. There is no evidence that Ford will ever veer away from using the Six Sigma plan in the future. Since its inception at Ford, Six Sigma has “saved about $1 billion in waste elimination globally. Year-over-year savings worldwide was $359 million last year. Moreover, customer satisfaction has risen five percentage points in the company’s internal customer satisfaction survey” (Smith). All employees of Ford have either totally accepted Six Sigma or are in the process of learning all the benefits of each project resulting from the Six Sigma initiatives. Therefore the action plan for Ford is to continue with the successful program that Six Sigma is for them. Their corporate culture is extremely positive in regards to the implementation.
Programs
The programs that are a direct spin-off from the Six Sigma implementation were things such as the DMIAC Cycle. The DMIAC Cycle is defined as Define, Measure, Analyze, Improve and Control. By using this cycle Ford Motor Company feels no project is successful unless all steps in the DMIAC cycle are completed. It acts as a tool for measurement.
The second phase of Six Sigma for Ford is called Design for Six Sigma. “This phase, which is just beginning, focuses on using Six Sigma in product design processes to prevent problems before they occur” (Paton).
Measurements
Ford Motor Company had an interesting method of determining if the process was successful. The company had two groups of workers, where one was the uncontrolled and the other was the controlled group. The controlled group was given training on how to better install parts on the Ford vehicle, while the uncontrolled did not. The study indicated that the controlled group had a lower defect per vehicle than the uncontrolled group (Minitab, 2002). The change was very successful because the defect per vehicle decrease and the business was able to save over 300 million dollars.
Outcome of Change Strategy
The overall outcome of the change strategy worked well. Customer satisfaction increased over 5% in its inaugural year. Also, because of the implementation of these change strategies, the Ford Company became much leaner in their manufacturing process, saving the company over $350 million. The revamped manufacturing process also decreased the defective part count, limiting additional work needing to be preformed by the Ford employees. Large manufacturing companies constantly struggle with shorting the manufacturing process and time needed to complete a given project, the implementation of Six-Sigma has to this point been an effective way of accomplishing this task.
Recommendations
Our recommendation to Ford would be to continue to mold and develop their Six- Sigma process. Like all large companies, new issues and problems constantly arise, so the process can be varied to meet and facilitate resolution whatever issues may arise. Also, there needs to be more emphasis on trouble shooting and preventing problems before they occur. The Six- Sigma process, if used correctly is a great vehicle to identify a problem before it develops, and creates a plan to solve as quickly as possible. A top performing company is proactive, not reactive so early detection of problems is a must. Ford must also vary their strategies depending on functional department, because each is area is different, not all practices can be used universally. Our final recommendation is to create standard work for the entire company. Standard work is a great vehicle to clearly define the processes required to complete any task. The standard work principal also provides assistance to existing employees on how to handle everyday tasks in the most efficient manner possible.
Works Cited
(2008). About Ford. Retrieved August 3, 2008, from Ford Motor Company Web site: http://www.ford.com/about-ford/company-information/corporate-governance/corporate–governance-policies/governance-policy-803p
(6/3/2001). Ford embraces Six-Sigma Quality Goals. Retrieved August 4, 2008, from Society of Manufacturing Engineers Web site: http://www.sme.org/cgi-bin/get-press.pl?&&20012513&ND;&&SME;&
Ford Six Sigma Busts Surface Flaws. (2002, January). Retrieved August 3, 2008, from Minitab.com: https://www.minitab.com/resources/Stories/QualityFordJan2002.pdf
(2008). National Chamber Foundation. CEO Leadership Series. Retrieved August 3, 2008, from U.S Chamber of Commerce Web site: http://www.uschamber.com/ncf/ceoseries.htm
Paton, Scott No Small Change: Making quality Job!, again. Retrieved August 4, 2008, from Quality Digest Web site: http://www.qualitydigest.com/sept01/html/ford.html
Paton, S. M. (2000). Consumer-driven Six Sigma saves Ford $300 million. Retrieved August 3, 2008, from Quality Digest: http://www.qualitydigest.com/sept01/html/ford.html
Smith, Kenney Six Sigma at Ford Revisited. Retrieved August 4, 2008, from Quality Digest Web site: http://www.qualitydigest.com/june03/articles/02_article.shtml
(2008). William C. Ford, Jr, Ford Motor Company Annual Meeting of Shareholders, Atlanta, GA, May 11, 2000. Retrieved August 3, 2008, from Media Ford Web site: http://media.ford.com/article_display.cfm?article_id=4791
Orginally written: August 6, 2008
