What Small Business Owners Can Learn from a Big Three CEO

When Ford Motor Co. chief executive Alan Mulally arrived at the automaker in September 2006, he was greeted with a lot of skepticism inside the company. He was an outsider, from Boeing Co., who was skipped over twice for the CEO job there. Ford was in the tank, working on its second restructuring plan in a year. The previous CEO, once seen as a savior of the company, worked for five years with no sign of black ink in sight.

Mulally has since navigated the Dearborn, Michigan, automaker through the financial meltdown of 2008 and 2009, avoided the bankruptcy that claimed both GM and Chrysler, and posted $6.6 billion in profit for 2010, the most Ford has earned in 11 years.

While Ford is a huge company with $121 billion in revenue, operating in dozens of countries, its successes can translate to small and medium-size businesses by using Mulally's strategies. One reason: Mulally brought more simplicity to Ford than it had known since the days when the company was giving people one choice, the Model T, in one color, black. Here are Mulally’s top five axioms for keeping it simple:

1. Focus on the basics: When Mulally arrived, he found a company that had largely independent operating units in Europe, Asia, and South America, in addition to the North America operation. It had also acquired Land Rover, Jaguar, Volvo, and Aston Martin. The company had been losing money since 2000. Mulally got back to basics. He sold the European luxury brands. And he broke down the fiefdoms that had needless duplication of efforts in each of the geographic operating units across the globe. Today, Ford is making billions having stripped away the complexity of the operation to one focus.
2. Demand respect among colleagues: In many companies, small and large, people sometimes think the only way to get ahead is to tear down other colleagues. Mulally doesn't stand for it and drills into his subordinates that respect for others’ contributions and efforts is essential to an effective team. Mulally himself got called on it once and made sure everyone knew. He doesn't mess around on this.
3. Make sure you have adequate capital: After Mulally arrived at Ford, he refinanced existing debt and mortgaged assets, including the value of the Ford blue-oval logo, borrowing $23.4 billion. That cash is what kept Ford out of bankruptcy when rivals GM and Chrysler could not avoid it. Today Ford has more cash than debt and continues to pay down its long-term debt. In small businesses and startups, the best ideas can get stalled or derailed without adequate capital and credit lines. Don't underestimate the time and effort needed to cultivate a relationship with a local banker and the importance of maintaining surplus credit lines, especially in this economic climate, when clients and suppliers can be slow to pay.
4. Be transparent: Mulally is fond of saying, "You can't manage a secret." At a weekly meeting of senior managers, every attendee gives an update of where their business results are. If something has gone wrong, that person has to share the problem with the group. This approach prevents business unit leaders from hiding serious problems until the end of the quarter and makes them be hyper-accountable for the results, but it also makes the group codependent on each other’s success. It's not easy to tell your colleagues, with whom you are competing for advancement, that your results aren't coming together. It was a difficult tactic to learn; but ask today, and senior management wouldn't have it any other way.
5. Be inclusive: Nothing makes rank-and-file employees feel more disconnected from the success of a company than the thought that everything that matters takes place behind closed doors among a small cadre of managers who have their own interests at heart before that of the company. Mulally invites a different employee each week to the senior management meeting to observe the decision-making process. Employees who have been in the meetings take what they have learned back to their peers and co-workers to share the experience.

Running a global automotive company is one of the most complex operations in all of business. Each vehicle requires thousands of parts that must be manufactured or purchased, and the cars require different certifications before they can be sold in dozens of different countries. Mulally is succeeding precisely because he has not gotten caught up in the complexity and manages to a simple set of principles that can be applied to firms of just a few people as easily as to a company with tens of thousands of employees.