Job 1?

by John Y. Shook
May 18, 2017

Job 1?

by John Y. Shook
May 18, 2017 | Comments (29)

Ford CEO Mark Fields just decided he needed to cut costs. Then he suddenly realized he had 1400 people he didn't need so decided to eliminate their jobs. Did he need those people two weeks ago? Will he need them two weeks from now? 

Who knows? I certainly don't. I don’t think Mark knows either. Do you?

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29 Comments | Post a Comment
Mark Graban May 18, 2017
7 People AGREE with this comment

I've read that investors are concerned about a lack of vision for the future. Slashing and burning, cutting heads, wouldn't do anything to inspire confidence about vision.

Worse, Ford has talked in the press using "lean" in ways that have nothing to do with TPS or what Henry Ford supposedly gets credit for....

"...reducing costs and becoming as lean and efficient as possible"

Thanks, Ford, for associating "lean" with layoffs.

Sigh.

 



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Mark Graban May 18, 2017
3 People AGREE with this reply

This is the same Mark Fields who used to fly back and forth from Florida to Michigan on a private jet because he didn't want to move... until he finally quit doing that.

http://www.leanblog.org/2007/01/fords-fields-finally-sacrifices/

“He said he has made a decision to stop using the company aircraft for his personal use,” Ford spokesman Tom Hoyt said. “He doesn’t want this or any other issue to distract the team from its main mission, which is to deliver the Way Forward plan and return our North American business to profitability.”

And they made him CEO.

And he's been trying to return them to profitability for how long now?



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Bryan Coats May 18, 2017

"He's been trying to return them to profitability for how long now?"

Ford was profitable in 2005, unprofitable in 2006-2009, and has been profitable each year from 2010-2016 and in the first quarter of 2017.  Fields replaced Alan Mulally in mid-2014.  So, Mullaly returned Ford to profitability in 2010, following the "great recession", the worst recession since the "great depression, and has remained profitable for the last 3 years.  Fields was COO prior to succeeding Mulally.  So, you could say he played a significant roll in returning Ford to profitability and keeping it that way for the last 7 plus years.



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Mark Graban May 18, 2017

So if Ford is really that overstaffed in the salaried ranks, how is that not Mark Fields' fault?



John May 18, 2017

I was thinkin the same thing when I heard that quote on the radio.  Giving lean a bad name.



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Cam Ford May 18, 2017

Hi John, the exact quote was "Reducing costs and becoming as lean and efficient as possible remain part of [Ford's efficiency plan]."



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Mark Graban May 18, 2017
4 People AGREE with this reply

Their efficiency plan includes being more efficient. Brilliant.



Lawrence Mossman May 25, 2017
2 People AGREE with this reply

I agree he has given LEAN a bad name and poor representation overall.



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Bryan Coats May 18, 2017

Wasn't it Shingo who said the four goals of continuous improvement were easier, better, faster, and cheaper, in that order.  Isn't cutting costs making it cheaper?  So, isn't cutting cost associated with lean?

Many companies say they want to be "lean" or "leaner" and really mean they intend to cut heads.  And, I realize cutting heads isn't the best way and shouldn't be the first choice to cut costs.  But, at some point many companies who are or want to truly be lean may eventually reach the point where business dictates head count reduction.

So, even though Ford might not be the best example of a lean company, it's not too surprising that someone in the PR department used lean and reducing cost in a statement about layoffs.



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Mark Graban May 22, 2017
5 People AGREE with this reply

Cheaper is the end result of easier, better, and faster.

That's a very different mindset than "cost cutting" which reduces heads or resources. That often makes things harder, worse, and slower.

 



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Pat Pope May 22, 2017

And as of this morning, it's being reported that he's due to be replaced. Oh, the irony. 



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Mark Graban May 22, 2017

1400 white collar reductions.... or 1401?

He was trying to save his own job with that announcement. Didn't work.

Question is... did the board want MORE layoffs or were they unhappy with his announcement?



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John Shook May 18, 2017
8 People AGREE with this comment

Thanks, Mark G (not Mark F). If the company needs to "downsize" or rightsize, then, okay, get rightsized. But, keep your eyes on the prize(s), which means looking at the business - and the people who work in it - with a long-term perpective, in a responsive yet planful way. Can't win in that business with knee-jerk response to quarterly earnings reports. - john



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Mike Thelen May 18, 2017

True Lean thinking would have utilized attrition to make rational reductions.  Funny how Leader Standard Work, Authority and Accountability can help 'weed out' those who aren't value-driven, thus keeping those with the cultural ethics you want, while being relieved of those who don't/won't drive change and respect for people.



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Bryan Coats May 18, 2017

Layoffs?  Statments that I read from articles about the announcement:

"10% cuts are under consideration"

"reduce costs by $3 billion in order to offset efforts to invest in "emerging opportunities"

Only mention of layoffs I've seen were statements by people reporting the news.

As Ford seems to be moving into related areas, like "self-driving" cars, isn't it possible that some salaried jobs will no longer be needed while there will be increased demand for others? 

Isn't it also possible that some cuts will be contractors or part timers, and that some will be eliminated as attrition occurs?  Even Toyota has "laid off" temporary workers when business dropped dramatically.



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Mark Graban May 18, 2017
1 Person AGREES with this reply

Have Ford sales or production dropped "dramatically?"

If Ford is doing this through attrition and buyouts, that's probably less damaging to morale and the company. But if the company ends up understaffed and without enough capability, then that's a concern.



Bryan Coats May 19, 2017

Sales have been relatively flat in the US, but US monthly sales rates in 2017 are lower than 2016 & 2015 so far.  Ford is also predicting slightly lower sales going forward than in previous years.

Also, Ford announced Wednesday it will rely on voluntary early retirement and separation packages. 

They're looking for 1,400 salaried workers to leave the payroll by Oct. 1, much less drastic than the 20,000 number floating around earlier in the week. Ten percent of roughly 9,600 salaried workers in the U.S., 1,000 in Mexico, 600 in Canada and 4,141 in the Asia Pacific and China region will be offered buyouts. Not all will take them.

So, not as many cuts as were being talked about, layoffs not being talked about by Ford at this point, and investing in related businesses on top of new product launches, with more still in the works (Bronco, Ranger p/u).  A lot of change going on in an industry where there is always a lot of change going on.

 

 



Anthony DeCaria May 18, 2017
3 People AGREE with this comment

Clearly we don't have the inside intel here to pass full judgement on Fields' announcement.  I think the point is that laying off a bunch of people "in the name of lean" is bad for lean. Aside from the impact to the lean brand, there's the impact to the local Detroit economy, the stock price, the remaining Ford employees, etc.  Too much to debate here.  If we're sticking to the impact to the lean brand, I say while Fields' sentiment kinda sucks, it's commonplace on Wall Street at this point.  Maybe a rebranding of lean is in order to disassociate?  (Because THAT'S always a fun debate on website comments.)



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Hal Moran May 19, 2017

This is coming from a company who advertizes, "We are America's #1 selling brand."

Hmm? Something is a kilter indeed.



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Mark Graban May 22, 2017

John, what are your thoughts on this article about Toyota from 2009?

https://usatoday30.usatoday.com/money/autos/2009-01-23-toyota-considers-cuts_N.htm

"Report: Toyota considers cutting 1,000 jobs"



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Lev Ono May 23, 2017

In 1950 Toyota laid off 25% of workers in Japan, including company founder Kiichiro. In 2009 Toyota closed NUMMI, 4500 jobs lost. In 2016 laid off 650 people in Kentucky. They use some temporary contract workers that get laid off frequently. But, regular full time employees almost never lay off except a few times. Even when sales are down, Provides training and keeps full time regular employees on the job. Just few exceptions. 



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John Shook May 23, 2017
1 Person AGREES with this comment

So, in the meantime, Ford's BoD fired Mark Fields.

Bryan, to your helpful observations, it's important to note that in this case, Ford was not firing people or even laying off and it appears (as far as I know) they were going about the elimination of 1400 jobs (salaried positions) in the right way via reasonable buy-out packages. My reason for raising the issue was not that they were doing it the wrong way or (to restate my previous reply above) that there are never occasions for a company to assess that it needs to rightsize itself.

My reason for raising the issue was an ongoing pattern in Ford, and many traditional companies, of a lack of long-term capacity planning especially when it comes to capacity in the form of people. True, we can never know the future, and forecasts are never perfect. And, full disclosure, I am a longtime Ford shareholder (very small time, holding mostly for fun) and, fuller disclosure, I can’t help but love the company (hence holding a few shares for fun). How can you not love the company founded by Henry that kick-started this crazy, amazing industry? The complaint in my short Post was that the company seemed to be making longer-term people and capacity decisions based mainly on stock price.

Also, yes, reducing cost is very much a core concern of lean thinking. But, hopefully we're thinking about systematic cost reduction over time, not narrow cost cutting that can hurt in the long (or even medium) run. My sense in this case was that the job elimination announcement was a desperation play on Fields' part. Too little, too late, too superficial, not getting to the core matters that need attention. Clearly the company BoD felt the same way.

I think working for the Ford BoD, with intense scrutiny from the extended Ford family as well as independent board members, is not an easy job. In this case, Fields seemed to be caught between a rock and a hard place: family members who wanted him to focus on profits (more SUVs please) and share price (“We’re valued less than Tesla?!”) versus outside board members who wanted him to invest in new auto industry darlings such as autonomy, sharing platforms, and alternative powertrains. Fields was trying to do it all, as all auto companies are to some degree. A tough job; that's why he was getting paid the big bucks. No more. ,Speaking of buyout packages, I'm sure his own package will keep him off welfare for a long time to come. 

Mark and Lev Ono, to questions of Toyota laying off, yes – Toyota has reduced its workforce a few times and 2009 was a tough year for the company. That was the time of the company's first reporting period loss in 70 years. Long-term planning and executing had served the company well. If we go back to that turbulent period of 2009, no one knew when or even IF the industry would turn around. Every company HAD to question its every assumption, turn over every stone as it looked to survive. As we know, several had to turn to bankruptcy, As we also know, in the end the industry rebounded like gangbusters. Still, those were dark times, and, as Lev Ono pointed out and to my eternal dismay, Toyota closed NUMMI.

Toyota never promises "life time employment" or makes job security guarantees. No one can predict the future, so you can't make that guarantee. But, even if no guarantee, what a company CAN say is that it will do everything within its power to TRY to never lay off or make workforce cuts. What is needed, of course, is a mutual commitment between employer and employees to work together for mutual prosperity. And some good planning and execution to go with it.

That means companies that are sincere in their commitments to employees are well-advised to plan and act accordingly, planning manpower capacity requirements (salary and hourly) with a long-term view. The apparent lack of that in Fields' actions is what what prompted my expression of annoyance. Looked to me like he was flailing about, an act of desperation (and in hindsight it seems to have been exactly that).

Now, all eyes on the new outside-the-industry CEO! It certainly worked last time, with former Boeing exec Alan Mullaly. Can Ford hit the jackpot twice with another legend-to-be-transformational CEO? I hope so. We shall see. I'm neither buying nor selling. - john



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Laura W. May 25, 2017

I do not think that Fields made the decision to reduce salaried heads without BOD approval. You seem to link that announcement with him being replaced soon after, but again, I doubt that the hiring of Hackett was managed all in a week.

 



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Ralf Lippold May 25, 2017
2 People AGREE with this comment

Thanks a lot John for bringing up an issue that is recurring (not only in the big OEMs but any company of quite some size of several hundreds of people), often has similar patterns and is often connected with the person at the very top (CEO).

I had been following Ford's course right after the financial crisis in 2009 and it was great to see how they got not only their customers (passionate ones) engaged, and also listened intensively to what they said and needed/surfaced. The issue that their former head of social media, Scott Monty, resolved so beautifully via the social media channels resonates a lot while reading through what is currently at stake (downsizing).

Missing the long-term systemic view may bring things (numbers wise) to a better level (in the short-term) only to suffer severely in the mid- and long-term. 

Once company is downsizing (putting people off due to recommendations by outside consultants, often pushed by the board to do something), things get right as all are aiming to get the ship around and suddenly demand is overwhelming capacity to deliver. 

Jay W. Forrester, the "father" of the field system dynamics, would have been the right person to surface the dynamics of what is really happening. 

I wish Ford and its management team that they move into the future with a positive mood, despite the challenges (electric car, scaling production and sales in this domain, as well as retraining staff). May they also read what thoughts go through people's minds commenting on your initial article, John. 

Greets from Dresden, Saxony (where we cope with similar issues, only to name Globalfoundries and Solarworld).

As we say in the lean community, "Respect for People is key!"



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Mike Warner May 25, 2017
2 People AGREE with this comment

I may be the wrong person to ask. Retired from Kodak where we went from 87,000 empoyees worldwide to under 6,000 today. Ignoring new R&D projects. Laying off Divisions to make the bottom line look good. "What do you mean we have no scientists that can do pigments anymore - we laid them ALL off?" Lean translated into slash and burn. Green Belt and Black Belt were the first educational programs to go. So many western New York industries that could have been saved are memories. Sigh as well.



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Mark Graban May 26, 2017

As they used to say when I worked at GM (and maybe they still say it):

"We'll save money, no matter how much it costs us!"

Or, as the quote attributed to many different people says:

"Any idiot can cut costs!"



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John Hamalian May 26, 2017
2 People AGREE with this comment

Great Conversation, this topic of traditional Cost-Cutting versus Lean Thinking.  I often use this video as a humorous way of illustrating the very real silliness of traditional cost-cutting techniques (of course in reality the effects on humans are far from funny):

 

https://www.youtube.com/watch?v=32WjO7IiHpI



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Maximo Moore May 26, 2017
3 People AGREE with this comment

I certainly could not agree more with John Shook. It seems that many companies do not want to device an improvement strategy and rigorously implement it, only to fall back to the time honored practice of when in trouble, lay-off.

They will be hiring again in the future and laying-off again in the future unless they take their improvement startegy seriously.



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Owen Berkeley-Hill May 29, 2017

I joined the Ford Production System (FPS) at the start of its launch in Europe. The training was excellent, but its impact on Ford was severely limited to just the in-bound supply chain: up to the point-of-fit.

Another (so-called) "reengineeering" project, Order-to-Delivery (OTD) was responsible for the out-bound chain and strutted around promising the 15-day car. The cultures of these two projects were chalk and cheese. I can remember an incident, walking back from lunch at the other end of the site, when one of my OTD colleagues had a severe coughing fit. He had a pale skin which turned to a deep shade of red. One of his OTD colleagues then asked the rest of us what was the colour of his face. The immediate, gleeful response was green. OTD was using traffic-lights to report project progress and no one had the cojones to report anything that was not green. 

It takes years to change that culture and we lost the opportunity by boxing FPS to just the manufacturing process.



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