In 1969 Ford Motor Company was getting crushed by small fuel efficient Asian imports (sound familiar?). In response, then CEO Lee Iacocca, set a goal of designing a car under two thousand pounds, under two thousand dollars and ready for sale in one year. What resulted was a huge lesson in “be careful what you ask for”.
To get the car to market on time and on budget the design team cut a few corners. One notorious short cut was the placement of the gas tank just behind the car’s rear axle. This meant that in a rear end collision (even minor ones) the gas tank could easily rupture and explode. Clearly feeling the pressure to reach their goal the Ford production team stuck with their ill conceived design – a design that eventually lead to numerous deaths and injuries. Still focused on profits Ford refused to recall the car. They decided it was cheaper to payout the lawsuits of the injured and killed than it was to fix the car!
Incentives and goals are strong drivers of behavior and need to be planned carefully and diligently managed. Done well they can drive very positive outcomes. Done poorly, as in Ford’s case, unintended consequences can result. Setting the goal of “two thousand pounds, under two thousand dollars and under one year”, caused a chain reaction of decisions – some good and many bad. With their objective in mind, well meaning Ford managers felt empowered to run roughshod over any previously established principles of business to get the job done and stem the Asian tide. What can we learn from Ford?
- Establish goals and incentives that support your business strategy: Ford didn’t have a strategy; they were reacting to the loss of market share to Asia’s manufactures.
- Be careful what you ask for: Goals and incentives are powerful motivators of behavior. In Ford’s case, well meaning managers felt they were given a mandate to ignore established corporate principles to get the job done.
- Always keep the customer in mind: Setting goals and incentives that only drive corporate financial goals can often lead to unintended negative customer consequences. You may not be able to predict the consequences of all goals and incentives but be sure that no decision taken at any level of the corporation will ever damage your customer’s experience with your brand.
In today’s economic environment many may feel pressured to react to their immediate situation. Think carefully before setting new goals and incentives that may sabotage your long term strategy – be careful what you ask for.
For the full story see Charles Fleddermann Engineering Ethics 2d ed Prentice Hall 2004 pp. 72-73