DETROIT — Ford CEO Alan Mulally, who orchestrated a financial, cultural and product-led turnaround at Ford, turns 67 next month.
Mulally is not expected to retire for at least 18 months and Executive Chairman Bill Ford jokes that the architect of Ford’s turnaround can continue to work as long as he likes.
When Mulally — who came to Ford from Boeing where he served as CEO of Boeing Commercial Airplanes — steps down, the board is expected to replace him with a carefully groomed successor from within as part of succession planning by Ford and its board of directors.
Unlike 2006, when Ford faced a gathering economic storm and then-Chairman and CEO Bill Ford decided to seek an outsider to take the CEO title, Ford today is on a path of sustainable global profitability. Rather than parachute another outsider into the Glass House, insiders and corporate governance experts told the Detroit Free Press, promoting from within is much more likely.
Speculation about Mulally’s replacement started bubbling when the CEO turned 65. It gathered steam this spring when Ford restored its investment-grade credit score, reclaiming assets pledged as collateral when it took out what Mulally called a $23.5-billion “home improvement loan.”
“The successor should come from within because Ford has made such radical change in its culture and needs someone who has been there before, during and after the turnaround,” said analyst Rebecca Lindland of IHS Automotive.
The most frequently mentioned contenders are the regional chiefs: Mark Fields in North and South America, Stephen Odell in Europe, and Joe Hinrichs in Asia Pacific.
“Mulally has done a good job. You can’t ignore that,” said Bob Schulz, managing director at Standard &Poor’s Ratings Services. “Under his tenure, there is a track record of where Ford wants to go. That provides a base for succession.”
Ford has developed multiple candidates for about 100 top positions, including CEO, said Felicia Fields, group vice president in charge of human resources and corporate services, in a rare interview (she is not related to Mark Fields).
“It’s not something we do sporadically and not something we do just at the top of the house,” Felicia Fields said. “It’s an ingrained process. We do succession planning in all levels of management,” including vice presidents, directors and senior managers worldwide.
Ford’s board of directors has several former CEOs, including lead director Irvine Hockaday, a succession expert and driving force in recruiting Mulally. Bill Ford has his own views, and he gets input from other members of the Ford family.
Under Mulally, Ford has become a process-driven company with “personnel development committees” to groom multiple candidates for openings.
Two key positions were recently filled: Bob Shanks, 59, took over as chief financial officer April 1 from the retiring Lewis Booth. And Raj Nair, 47, replaced Derrick Kuzak, who retired, as head of product development.
Mulally casts a big shadow, but he also created a culture that has drummed his “One Ford” mantra into the subconscious of potential CEOs.
The odds-on favorite appears to be Mark Fields, 51, who oversaw the turnaround in North America to have it become the most profitable region.
He is the most recognizable face after Mulally.
Odell, 57, is tackling overcapacity and losses in Europe.
Hinrichs, 45, is leading an aggressive growth plan in Asia Pacific, and China specifically, where Ford is hustling to catch up in the world’s largest auto market.
“It makes sense to reward someone who has turned around a region,” said Lindland.
There are strong reasons to replace Mulally internally.
“We do see benefits to developing internal candidates because you can see them, develop them, have control over their development,” Felicia Fields said. “We tend to prefer internal candidates,” she said, but they will always be gauged against outside talent.
Recruiting from the outside is more expensive and risky.
“Research shows quite clearly it is more dangerous to parachute someone in from outside,” said David Jackson, founder of Jackson Leadership Systems, leadership consultants in Indianapolis and Toronto.
Outside hires can hurt morale. A higher percentage of newcomers leave within a year.
A Korn Ferry study shows it costs about $500,000 to find and hire someone from outside the company, Jackson said.
But sometimes new blood is essential to a turnaround. That was the case six years ago when Bill Ford wanted to step down as CEO and needed an outside replacement fast. The housing bubble grew fragile and Ford was caught with a product lineup that was overly dependent on pickup trucks and large SUVs.
More troubling, there was a reluctance throughout the company to communicate bad news up the organizational chart.
Mulally shook up a culture often plagued by infighting, and rewarded those who spoke up when problems arose.
The outsider from Boeing started as a one-man band as he implemented his ideas and processes. Although journalists grew weary of the “One Ford” liturgy and his disciplined adherence to talking points, Mulally today is a hard act to follow.
The board, with counsel from Bill Ford and Mulally, will choose the successor with little help from outside consultants.
Ford relies “very little” on headhunting firms, Felicia Fields said, tapping them when there is no strong internal candidate.
Even when Mulally was courted, Bill Ford and the board’s special committee did most of the legwork. An outside firm was brought in near the end to confirm the choice.
Fields would not say whether the board has a committee in place now. “Our full board was involved (in hiring Mulally) and they continue to be involved,” she said.
As CEO, Mulally is expected to present multiple candidates to the board for consideration.
Fields said the goal is to have several choices for all key positions. “You never want to rely on just one. One person could leave or something could happen.” The idea is to always have employees as works in progress, gaining experience in other parts of the company or regions, to be future candidates.
Many companies don’t tell executives where they are on the succession list for fear of losing disappointed candidates, said Dan Farrell, a management professor at Western Michigan University, who has written about CEO succession.
“Succession plans are often hush-hush, lock-and-key kind of stuff,” Farrell said. “It’s not in the company’s best interests if it leads to infighting and instability. It is best to keep (candidates) hungry and uncertain.”
Jackson said only 50 percent of companies tell high potential people they are candidates for a top job to avoid the risk of losing the ones passed over. “Headhunters go after those people. They are embarrassed and it is easy for another big company to woo them away.”
But Ford lets its leaders know they are on a career path.
“People don’t necessarily know specific timing, but we have good conversations,” Felicia Fields said, “because we need to know if people are willing to work in other regions. Are they interested in staying in a skill team or going into general management?”
For now, Mulally is having fun staying where he is.
“He’s not ready to move on,” Lindland said “He doesn’t do it for the money. He’s not a turnaround specialist or job jumper. After getting through the hard time, why not stay around and enjoy some of it?”
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&Copy;2012 Detroit Free Press
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