Ford

Q1.

In his effort to turn around Ford’s heavy losses and poor managerial controls Bill for the most part followed the basic framework of the four step process of establishing standards, measuring performance, comparing performance against standards, and evaluating results and taking action. The first task that Bill Ford and his new team of managers set about creating tighter and more efficient controls by first establishing clear and definitive targets of performance. The overall goal of all of the standards set for different divisions was fundamentally to “slash costs” and increasing profit. Below this overarching goal Ford set clear quantifiable goals such as laying off 35,000 workers, slashing costs by $4.5 Billion, and increasing fuel efficiency of SUVs by 25 % in 3 years. In addition, Ford made unquantifiable, but equally specific standards to be met such as standardization of production, imposing higher credit worthiness to address the specific problem loose loan standards. The goals are specific and the results which following the standards should achieve are also well laid out. Having created fairly specific and concrete standards to cut costs by $4.5 Billion, the measurement of performance is to follow through planned cost cutting strategies and meeting the target of performance. The measurements are relatively comprehensive, though statements such as “fine-tuning production” does not allow for easy measurements, the plan does cover most basis. Yet, the measurement system is also very specific to cut cost in areas that were causing losses. Bill Ford and his management team moved on to the step of comparing performance against standards to his company. Because the fundamentally important goal of his strategies was to cut costs, also to raise profits through increasing fuel efficiency, the measurement was fairly strict and clear. Specifically in the case of the Jaguar and Mustang division, Bill Ford simply measured the necessary cost reductions with the new plans. The difference in expected and actual performance led Ford to refuse these plans. In doing this Ford was evaluating results and taking action. Ford also did this in the case of engineers attempting to increase fuel efficiency. When he found the actual performance missed the expected performance of increasing fuel efficiency by 25 %, he decided that the gap detected was big enough and important enough that he took action and had the engineers fix the discrepancy. Though Bill Ford had, for the most part, successfully carried all the necessary steps of establishing efficient managerial controls there are still a few things that are ignored and left undone. First of all most of the standards established were dictated almost exclusively by Ford and his managerial team. There was little input from the people affected by the standards. Also the means of measuring whether standards have been met are also perhaps stricter than it should be. Though the costs for the new plans for the Mustang will resolve cost sapping, Ford dismissed the plan for not reaching immediate goals.

Q2.

            The establishment of controls made by Bill Ford is, like many organizational controls, a combination of tactical and strategic controls. However, the changes made to the Ford Motor Company made by Bill Ford is largely tactical in order to as he says, “We’ve got to stop it before we can turn it around”. The core of the controls put into place by Bill Ford and his managers are financial and budgetary tactical controls carried out through the bureaucratic control approach and some clan control. Bill Ford’s primary goal is to cut costs as quickly as possible and to stop losses immediately before any long term planning. In order to improve profitability and return on investment, as well as efficiency, Ford implemented financial controls, such as reducing payroll costs and canceling company paid magazine subscriptions. Such day-to-day implementations are clearly reflective of tactical controls. Also, Bill Ford most likely used the break-even point in his decision to reject the Jaguar and Mustang plans which would fix profit-sapping issues in the long term but not in the short term.  Budgetary controls were a key part most of all the new strategies implemented by Ford. Specific financial targets were set for the company, cutting 4.5 billion dollars, and for individual units of the company. The controls are largely aimed at short term solutions such as speeding up new products “to generate more cash more quickly”. The reduction of credit losses, and revamping both rebates and low-interest-rate loans are all means of controlling the budget of the credit management unit of Ford. However, there are also certain long term, strategic aspects to Fords newly implemented controls. The 3 year goal of increasing gas efficiency, though it does only affect one unit of the organization, does have long term implications. In response to higher quality foreign cars Ford wants to increase its overall quality. In addition, the commitment to setting standards of helping the environment is certainly a long term strategic control that affects the entire organization. On the operational level of lower managers, the strategic and tactical changes made by Ford will have significant influence. First, in fine tuning production to increase quality and efficiency, lower managers must implement more stringent pre, concurrent, and post controls of operations for vehicles. The increase in control and reduction of credit losses means much more stringent controls on the ease with the which managers of that unit had handled loans. More work must certainly be put in by managers who must now meet budgetary and financial controls, as well as long term strategic goals of cost reduction and environmental efficiency.

Q3.

            The effect of the lack of efficient controls in the credit managing unit of Ford can have a negative affect of the tactical and strategic controls of the company as a whole. By reducing the guidelines for qualifying customers for loans the efficiency and budgetary tactical controls of the company falters in general. By having such a profit-sapping unit of the company the budget limits, profitability, efficiency, and return on investment are all hurt and fail to meet the expected results. In addition, long term strategic controls such as increasing competitiveness against other motor companies are hurt by undercontrol in the credit managing sector. Because the Ford Motor Company clearly operates on a more bureaucratic control system, the problem will not be fixed other than by the actions of upper management. Thus the top managers must fix this performance gap by taking corrective action. The ineffective controls of the credit sector of the company can cause the parent company to attempt to correct the problem by implementing stricter tactical controls on other aspects of the company such as production or design. This incorrect focus of controls could easily cost the company even more money and lead to further breakdown and inefficiency of controls for the company as a whole. The break-even point is also disrupted on the tactical level as the amount of product needed to be sold is higher because of the lack of control in another unit that is draining company profits and increasing costs.

Q4.

            What had originally caused problems under ex-CEOs such as Jacques Nasser was a chronic problem of undercontrol on the tactical and operational level. One of the main problems of the Ford Company before Bill Ford took over was that there was poor operational control in the quality of cars being produced. Customers were going to foreign producers and rival companies for their business. In addition there was a lack of budget and financial control, as the company poured money into fruitless ventures such as acquiring Volvo. Operational control was poor as car designers and engineers were not held to strict standards. The basic ordering correct numbers of parts for the correct number of cars produced, through a lack of effective operational control, led to massive losses. Then the Ford Company attempted to fix the problems caused by inefficient tactical and operational controls by further relaxing controls on loans. To fix this massively inefficient operation Ford’s management operated correctly both to focus and increase controls. First, Bill Ford and his managers focused on the main tactical problem of budgetary and financial controls. They focused and tightened controls by dropping unprofitable vehicle models and setting strict budgets and expected outcomes in cutting costs. Ford’s new managers increased operational control and efficiency by revamping the production process to cut costs to meet tactical financial controls, reducing payroll costs, raising quality to cut costs and increase competitiveness. The Ford managers also focused on the tactical problems of the credit area of the company and moved to tighten controls. The only fault in their increase of control is perhaps controls are so tight that they affect certain aspects of long term growth, as is exemplified by the dismissing of plans for new Mustang models which would increase profits in the long run in order to maintain budget controls. However, Ford did also focus controls on dealing with the competition. Using strategic and operational controls, Ford set long term goals to increase fuel efficiency to compete with other companies. Thus by focusing on specific control problems and tightening controls, Ford’s profits were rebounding and measurement of the effectiveness of controls have been positive.