Ford CEO Jim Farley is taking the iconic company back to its roots, so to speak. In his May 22 announcement, as reported by the Associated Press (AP), Farley stated that the enterprise is “remaking itself by cutting costs, raising quality and offering software, services and new vehicles that will make profit margins among the best in the industry.” Farley intimated a return to the original tenets of the company: quality, efficiency, productivity, people. With a strict focus on core products and services, and revisiting the nature of supplier relationships, Farley intends on cutting waste without cutting people or corners. And many of Farley’s strategies offer strong leadership lessons for MSPs and staffing providers.
Ford: Not Leveraging Legacy but Heeding Its Lessons
Legendary industrialist Henry Ford significantly influenced the modern workforce in profound ways. People often remember Ford as the pioneer of assembly line manufacturing, but his employment innovations and approach to business process optimization defined the standard by which labor continues to function to this day. The 8-hour workday? Henry Ford. Employer sponsored benefits, retirement savings, and vacations? Henry Ford. Competitive pay and profit-sharing? Henry. Increasing employees’ purchasing power so they could join the ranks of consumers and strengthen the economy? Henry again.
Yet as all businesses that endure and grow, Ford Motor Company strayed from its founding principles to maintain its position in an increasingly competitive industry. Current CEO Jim Farley is about to change that.
As the article explained, “Ford, Farley said, will emphasize software and services as well as iconic vehicles such as pickup trucks, large SUVs, commercial vehicles and advanced second-generation electric vehicles. He said the company is eliminating waste to close a cost gap with the best in the industry with a ‘lean disciplined operating system’ that reaches into all Ford factories.”
Ford’s decision to narrow in on the business’ primary strengths, while streamlining processes to bolster those strengths and satisfy its customers main demands, is the hallmark of robust business leadership. And Farley is following the lead of other groundbreaking visionaries.
When Steve Jobs returned to Apple after a 12-year absence, the company was barely afloat. The damage had reached such proportions that Apple had to change its licensing structure to secure a controversial $150 million investment from its rival, Microsoft. At that time, Michael Dell was asked what he would do if he were Jobs. His advice was to shutter the company and return the money to shareholders.
Instead, Jobs eliminated 70% of Apple’s hardware and software products — extraneous “features” that had strayed from the company’s core offering. He redesigned everything around the Mac, which took its place as the “digital hub” around which all innovation efforts would revolve. Upcoming software developments adhered to this philosophy — iMovie, GarageBand, iPhoto, and others all focused their digital capabilities on the needs of Mac users. Even the introduction of the iPod and iTunes honored this commitment, working exclusively on Macs at the time of their inception.
Howard Schultz fulfilled a similar obligation when he was asked to return to Starbucks after seven years away. In 2007, following two decades of steady growth, the business plateaued. Stocks had dropped by 50% in a single year. Schultz’s “transformation agenda,” like Jobs’, was predicated on fixing the problems caused by “feature shock.” He emphasized a return to the company’s mission — its primary and inextricable value to customers. So in 2008, Schultz told employees that he was going to reassert the company’s “coffee authority.”
One change was eliminating breakfast sandwiches. Customers loved them, but these “features” accounted for roughly 3% of Starbucks’ annual profits. When preparing the food, pieces would often melt onto the toaster, filling the stores with the aroma of burned cheese rather than freshly roasted coffee beans. After returning the company’s focus back to its core, Starbucks resumed its progress. The iconic coffee chain realized historically high earnings within three years.
Farley’s course change with Ford represents similar thinking. He’s weeding out unnecessary products that deliver low returns; he’s shifting offerings back to what customers most desire; he’s creating a nexus of solutions that revolve around core products; he’s refining supplier relationships; and he’s reasserting Ford Motor Company’s “automobile authority.”
How Ford Is Reshaping Its Business Strategy and How MSPs Can Do the Same
Back to Basics
Ford is reducing investment in hypercompetitive market segments such as two-row smaller SUVs to focus on manufacturing the vehicles Ford is famous for.
“By focusing on software and Ford’s strengths in products,” the AP explained, “the company won't be as vulnerable to a downturn as in the past. [Farley] said the company has let complexity ‘overrun our business as we tried to be all things to all people.’”
Ford’s mission is to create a tailored ownership experience rather than “jockeying for slivers of market share.” And although this progress indicates a return of sorts, that doesn’t mean new innovations won’t be part of the transformation. As with Steve Jobs’ renaissance at Apple, the new technology will center on and complement the core product. Ford software, therefore, will include some of the following.
- Systems for its electric vehicles, such as the F-150 Lightning and Mustang Mach-E, which will allow for over-the-air updates and new features.
- Software for its connected vehicles, which will allow for things like remote start, climate control, and lock/unlock.
- In-vehicle infotainment systems, which will offer a more personalized and engaging experience for drivers and passengers.
Boosting Quality to Cut Costs
The cheapest supplies seldom translate to higher profits over the long run. Here’s a case in point from a conversation with a colleague. In his state, a contractor won a construction bid to resurface a highway by low-balling its competitors. The award was over $600,000. The next lowest bid was over $850,000. But things didn’t go as planned. The contractor was sued by the state’s Department of Transportation for using substandard materials and generally poor workmanship, which resulted in the premature failure of the new surface. The state’s cost to repair the damage was $1 million.
Vehicle manufacturers face similar problems. When less expensive but less durable parts are used, they don’t actually curb costs and drive profits. Failures occur, which ultimately lead to recall expenses and eating repair costs that arise from honoring warranty terms. All said and done, the company loses more money by relying on cheaper materials.
Ford’s new direction involves reducing the number of extraneous parts in vehicles, increasing quality through better materials, and improving margins by mitigating the costs that come with warranty and recall expenses. By the time Ford rolls out a new version of the F-150 pickup this year, it will have cut 2,400 parts from the existing model.
Quality Assurance and Testing
Six Sigma, the famed process improvement methodology that gained an almost cultish following of corporate executives in the 2000s, was designed for manufacturing environments. It emphasizes rigorous testing and actively seeking defects, as expressed in the DMAIC model: Define, Measure, Analyze, Improve, and Control.
Six Sigma works because it encourages failure — or at least identifying failure and correcting those issues before releasing a product to the public. Unfortunately, that’s become a lost art as companies rush to market in the hopes of beating their competitors. There are a couple of problems with that philosophy. First, we have the old adage of “if it ain’t broke, don’t fix it.” The logical fallacy being: if you’re not looking, how do you know it ain’t broke? The answer: when it breaks. The second problem is that being first to market with an inferior product means you’re the first name that becomes associated with an inferior product.
Indeed, there was an era, usually beginning around the late 1970s, when Ford’s name was synonymous with failures. Jokes often cited Ford as an acronym for “Fix or Repair Daily” or even “Found on Road Dead.”
Farley understands the value of quality as the measure of brand reputation. So, he’s changing the way vehicles are tested: “Rather than testing the new Super Duty pickup to a particular standard, the company tested it until parts and systems failed, he said. Now Ford is finding the eventual weak point and eliminating it, prolonging vehicle life.”
It’s generally estimated that a modern vehicle can involve hundreds to thousands of suppliers. A car consists of numerous parts and subsystems, each of which may be supplied by different manufacturers. Some of the major components typically sourced from external suppliers include:
- Engine and powertrain components
- Electrical components
- Chassis and suspension components
- Interior components such as seatbelts, upholstery, airbags, audio systems, and more
- External components such as lights, mirrors, glass, trim, and others
- Safety and braking systems
- HVAC systems
It’s clear that vendors play an integral role in automobile manufacturing, just as they do in modern contingent workforce solutions. But similar pitfalls exist for both industries.
“We have some chronically inefficient tier one and tier two suppliers,” said Kumar Galhotra, president of Ford Blue, the company's internal combustion unit. Some have caused an unstable flow of parts, he added, pointing out that Ford has worked with 125 key suppliers to stabilize their operations. "If the present supplier is not on a path to a permanent solution, we’re re-sourcing the business," he said.
Despite cutting waste and streamlining operations to maximize returns, Farley’s strategy departs dramatically from those in the tech space, where mass layoffs have been a key aspect of attempting to boost margins. Ford has no plans to displace its workforce.
“Farley said he doesn't see reductions in the number of factory employees or among engineers and other office workers,” the AP wrote. “The company predicted it would sell 5.6 million vehicles in 2026 as global sales recover, and it will need workers to design and produce them, Farley said.”
This extends to the company’s electrical vehicle manufacturing plants, which Farley asserted would be more efficient and with 30% less labor overhead than Ford’s internal combustion plants. Automation will definitely play a role, but Farley said “that doesn't mean fewer factory workers because they'll be needed to make batteries and other EV parts.”
The Lesson for Staffing Providers and MSPs
Few individuals start a business predicated on the idea of being all things to all customers. They begin with a foundational vision, based on what they believe their biggest strengths and advantages are. But scrambling to compete can lead to fighting for “slivers of market share,” which dilutes the brand, takes focus away from the company’s main objective, reduces attention on key accounts, and risks wasting money on additional resources to support a segment that may not generate meaningful returns.
As an example, if your organization is successful at and known for specific job categories or offerings, concentrate on enhancing and expanding those workforce solutions. If you excel at cybersecurity, keep honing and promoting that service rather than jumping into light industrial because a client asked about it. You could end up spending a lot of money in high hazard insurance coverage, additional recruiters, and marketing for a solution that doesn’t fit your brand. Prospective customers could become confused. Or, if you’re trying to contain costs and decide to throw these new roles to your existing resources instead of hiring others, you could be detracting from the otherwise excellent support you deliver to your primary accounts.
Yet as Ford demonstrates, innovations can take your business to new heights — but they must be relevant and beneficial to your core solutions.
- Today’s talent rarely spend much time on job boards. They expect different approaches to outreach and engagement via social media, video, mobile apps, texts, and self-service platforms. Their values have shifted. Employment branding and corporate culture are imperative marketing strategies. Has your staffing organization progressed to embrace and capitalize on these new dynamics?
- More in-demand candidates are passive, rather than active job seekers. Have you innovated ways to discover and captivate these workers?
- If you build workforce technology, is it relevant and intuitive? Adding more and more features to suit every need may be complicating the process for users or wandering away from your company’s core. For example, why spend time and resources localizing foreign currencies in the system if you and your clients have no need to staff internationally?
- If you’re running an MSP that’s having trouble filling new or niche positions, are you engaging innovative staffing partners who have discovered unique ways to expand their recruiting networks? Simply adding suppliers to the mix only augments the complexities and overhead of managing more partners who may see no value in responding to one-off requests.
- Are you pricing your solutions in a way that brings value to the client and your own organization?
Clients are also trying to innovate, and that generally means optimizing their operational and financial efficiencies. Like Ford, they’re cutting back on extraneous parts. You want to be one of the essential parts. By straying too far from your brand, your culture, and your strengths, you could lose that edge. At the end of the day, spending more money on increasing your performance and quality in your leading solutions, which includes the talent you employ, will yield stronger returns for you and your customers than cutting corners for a temporary bump in margin.
Take a look at your metrics, scorecards, revenues, and satisfaction ratings. Actively seek out defects and potential defects to resolve them before they blossom into problems. Be the best at what you’re best at. Reputation is part of your organization’s currency too, and it goes a long way in evolving your business.
Photo by Suzanne D. Williams on Unsplash