Enterprise Compliance Today

Ford's Mediocre Risk Management Led to Australian Plant Closures

Posted by Greg Carroll on Thu, May 30, 2013 @ 03:54 AM

Ford is closing plants in Australia. So how come BMW, Mercedes, Audi, and Volkswagen can handle it?


poor risk management

Ford has been an iconic brand in Australia for nearly 100 years. Supporter rivalry of Ford vs. GM was the stuff of legends -- the automotive equivalent to Liverpool vs Manchester United fans. Above: A still from Road Warrior of Mad Max's wrecked 1970s Ford Interceptor. Below: a replica in Broken Hills.

poor risk management

(replica photo: Steffen Wienhold via Peter Barton)

The greatest threat to your business is mediocre managers. Mediocre management can be easily identified due to their contempt for compliance and risk management (see another ugly example here; and an example of better practices here). They prefer frenetic activity (aka fire-fighting) to prevention and planning.

Ford Motor Co. management claim it is no longer economical to manufacture in Australia due to the high labour costs. However, German manufacturers like BMW, Mercedes, Audi and Volkswagen somehow seem to be able to compete. All of them face similar labour costs, environmental controls, and taxes. So maybe there's something else going on at Ford.

Writing about Ford's decision in The AustralianMaurice Newman argues that government needs to "work urgently to restore our international competitiveness." He writes, "...why invest billions in modernising? The decision to shut down in October 2016 was the only rational one."

I believe the fault can be firmly placed at the feet of Ford's management. Their purpose is to cater for the push and pull of the business environment and ensure not just survival but growth. 

When management sleeps on the job

Ford has been an iconic brand in Australia for nearly 100 years. Supporter rivalry of Ford vs. GM was the stuff of legends, the automotive equivalent to Liverpool vs Manchester United fans. No other product could dream of this level of consumer advocacy. In the 1970’s Ford produced the ultimate “muscle car” still talked about today, and its luxury models were used as limos for visiting heads of state.

Of course, Ford didn't jump straight from dominance to closing up shop. Ford “slipped” from selling 84,000 vehicles in Australia 10 years ago to only 14,000 last year. I think free-fall is a more apt description. An 84% drop in sales?

Has management at Ford been asleep the last 10 years? There is a dire lesson in this for anyone in business.

Death by 1,000 cuts

In my option, Ford’s product is stuck in the ‘80s. Marketing is non-existent. Customer service is laissez-faire. But where were Ford’s executives, and should they have acted? They had 10 years, and that's the key. Ford suffered death by a 1,000 cuts. Too many managers accepted poor results as being out of their control. They kept using last year's results to budget for next year, which only breeds decreasing performance. Those approaches, along with cost cutting to shore-up the dwindling bottom line, may feed executive short-term bonuses but lock in long-term failure. 

Simple good governance consists of proactive risk management plans with mitigation strategies, not charts. Customer feedback must be tied to hard corporate objectives, not soft feel-good values. Product development must be oriented to advancing customer expectations, not cost cutting. Marketing must be aimed at developing the market, not merely beating last year's results.  Good governance should no longer be considered a luxury for just large profitable companies but a survival skill for all business.

Who am I to pass judgement? 

You might ask what makes me such an authority on risk management -- and confident passing judgment on Ford? At Fast Track we studied the subject closely to create the Risk Management Module of our Fast Track software. Both potential and actual risks are tracked in real time through enforced reviews, automatic event notification, assessment templates, and multiple risk calculators.

Our Risk Calculator allows inclusion on indirect effects such as political or press involvement. Users can define lists of all control categories for risk mitigation in the workplace or organisation including equipment, processes, environment, safeguards, etc.

Risk is part of any business. You can pretend it isn't there, or you can manage it. Ten years from now, when people look back on how you managed risk at your company, how do you think you will be rated?

Tags: risk management, corporate governance