Ash Wednesday

The automotive industry has seen this movie before.  At Ford, this scheme was tried during Jac Nasser’s storied tenure.  It added to Mr. Nasser’s status as a destroyer of all that Ford has built up during the eighties and nineties.  Mr. Nasser had a gift for antagonizing the very stakeholders that created Ford’s enviable record until the early 1990’s.  His tasking of supplier pricing antagonized the supply community at a time when Ford was bidding the supply base to do more of the basic design and release engineering function.  His efforts to restructure the dealer body only added suspicion and distrust among the very people Ford depended upon to sell its vehicles.  The GE-inspired moves to both tier and rank Ford’s employees only spread fear and panic among the managers and staff.  Organizational chimneys stiffened and solidified.  Teamwork was abandoned.  Product Quality was sacrificed.  A culture of “CYA” and dependence on management approval rather than individual initiative was fostered.  The message to everyone, the Ford Everyman, was clear, “Look, we tried all that Japanese stuff – Statistical Process Control, Quality Circles, Workplace Involvement, etc., etc. – but we know what the problem is, it’s you people and there are just too damn many of you.”  Once afraid for their livelihood, Ford’s once swaggering and winning culture changed.

This was all predictable.  Here we have Deming saying:

Evaluation of performance, merit rating, or annual review... The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise.

- W. Edwards Deming  “Out of the Crisis”

Deming had many positive messages about applying quality to products and manufacturing, but one strong message in a negative vein, that is, in a “thou shalt not” voice, is “drive fear from your organization”.   

Let’s take a look at the implications of paying the best people for good performance.  It is easy and tempting to think of this as uni-dimensional.  That is, naturally, the higher the performance, the higher reward ought to be.  “Performance” might be defined under any number of metrics, most commonly revenue, profit, or value added.  But implied in the phrase “best people and good performance” is a matrix – best people, bad people and good performance, bad performance.

It is not too hard to imagine “poor performing people” creating “poor performance”, by any measure.  It is not too hard to envision the “best” people generating the “best” performance.  But those of us with more than cursory bit of experience can imagine “good people” with “poor” performance.  We’ve all been in situations were good ideas and initiatives are stymied by unsupportive or incompetent management.  Unwise management can prevent through jealousy or insufficient imagination the best ideas of their people from being implemented.  Hence the “best” people can be tagged with poor performance.  In one early assignment while visiting one of GM’s Divisions I was told of Divisional Managers who scrimped on preventive maintenance and other investments in order to pump up temporary profitability figures, obtained promotions, only to leave behind a huge underfunded mess for the next guy.  In this case, overly ambitious “bad” people created temporarily “good” results, and reaped rewards.

In Ford’s case, the ranking system allowed Ford’s careerist worst tendencies to flourish.  Organizational fear was rampant.  Individuals and organizations became more and more distrustful of each other, and as global competition became more and more keen, learning how to work more and more closely within their own organizations finding more and more synergies, Ford became more and more disjointed.  When he took over, Alan Mulally was quoted as saying that he didn’t take over one company, but six.

One of Mr. Mulally’s reforms was to institute a culture of “One Ford”, and has labored mightily to get each Ford entity to all row in unison.  In many ways, the Ford culture is undergoing its own Lenten season, atoning for past sins and cleansing itself of unworthy behavior.  For example, the company’s sacrifice in saying “no thanks” to government largesse has paid dividends for its public virtue.  Thus we are redeemed.

One hopes that the temptation to return to performance appraisal systems based on individual measures is something that Ford, as well as other firms, refuse to follow.  The Devil’s siren sound has seduced AIG.  That’s bad enough, as the subsequent cost to the economy and taxpayers will something that legions of angels (from China, no doubt) will not be able save us from.  Those of you who attended services this morning will know what I’m talking about.

But as brought out in literature and our culture’s spiritual heritage, we all pray and work for redemption like the Peter O’Toole character in “My Favorite Year” despite our past transgressions.  Because, deserved or not, our time on this planet is all too short, as we see in the early death of the Robert DeNiro character in “Bang the Drum Slowly”.  The season of Lent is our chance for reflection, repentance and reconciliation in preparation of whatever final scenes we, as mortals, play.  I wonder if Ted Turner realized that as Turner Classic movies selected the films this past Ash Wednesday.

In the end, our reward for sacrifice lies in renewal and resurrection.   For individuals, we only have a very span to come to this renewal.  Organizations may have opportunities for many renewals, perhaps a resurrection or two.  Those that learn from the past and don’t repeat the same failures have that opportunity.  AIG’s move may placate U.S. Pay Czar Kenneth Feinberg, in that it seems to be standard industry practice.

I suspect Ford, though, and maybe even the rest of the Detroit 3, government and union ownership aside, will recognize a deal with the Devil when they see it.