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Organizational culture

Fixing a toxic work culture: Breaking down barriers

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By the time Alan Mulally, SM ’82, arrived at the Ford Motor Co. in 2006, the automaking giant was running on fumes and hemorrhaging billions. But the long-time Boeing executive was determined to refuel and shift gears, and the result was what’s been considered one of the greatest corporate turnaround stories in recent memory.

One of the most significant U-turns that Mulally executed was the one that fixed the company’s discordant organizational work culture, marked by deep rivalries among executives and tribalism between divisions and departments.

“He went in there, and there was red ink everywhere,” said Deborah Ancona, a professor of leadership at MIT Sloan and founder of the MIT Leadership Center. “They were losing billions of dollars each quarter, and there were all these warring factions. There was no ‘Ford’ — everybody was their own little group.”

 

Mulally knew Ford couldn’t make it much longer if the situation went on, so he set himself to work bridging those divisions using a visual  particularly suited to the industry: A traffic light.

In meetings, managers were instructed to describe the progress of their projects. A green light meant the project was on track, a yellow light meant there were some problems, and a red light indicated that things were not going well.

“Every week, everybody held up a green sign and said everything was going great,” Ancona said. “He said ‘Well, that’s interesting. We lost $10 billion last year, but everybody’s green. How does that work?’”

The first time someone came in with a red sign because the factory they were in charge of had gone offline, Mulally erupted in applause, Ancona said. Then he asked everyone what they could contribute to solving the problem.

“He started to create, in that meeting, a focus on collaboration and helping, rather than one of all green signs and everyone at each other’s throats. It was a slow move to get a different set of norms,” she said.

Mulally’s efforts to reduce siloing and eliminate divisions and animosity between different sections of the business, establishing his “One Ford” philosophy, saw the company surge once more as a top global automaker, weathering the storm of the 2008 financial crisis without government assistance.

Ancona said the episode stands as a prime example of how using creative ways of slowly shifting a company’s culture from toxically competitive to collaborative can earn big dividends for your firm.

A similar focus on transforming software giant Microsoft’s culture under CEO Satya Nadella’s leadership, starting in 2014, helped see the once-pioneering company surge from a low point to briefly surpass rival Apple as the world’s most valuable company in 2018.

Microsoft had recently been overtaken by rivals like Apple and Google, famously missing the boat when it came to mobile and smartphone technology. It was also experiencing infighting between departments, similar to what Ford had been dealing with, Ancona said.

Nadella worked to push the company past those divisions, toward embracing a growth mindset, and to shift its focus to forward-looking technologies like cloud computing and artificial intelligence. Pivoting to those technologies also helped keep and attract top talent, Ancona said. He also did away with a controversial and competitive team review system that many saw as unfair and limiting for employees, and began redesigning the campus to encourage collaboration in place of competition.

An annual meeting known as “One Week” gives Microsoft employees the time and freedom to work on projects with groups of other employees outside their norm.

“[Nadella] said, ‘You know what? We need to be a learning culture, not a blaming culture,’” Ancona said. “He got people excited about what the future could bring, while trying to shift cultural norms simultaneously.”

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