Asleep at the Wheel: Ford Motor Company’s Exclusion of the Older Worker

Case Studies: Using concepts from the chapter readings students will provide their own in depth analysis of each assigned case and answer all questions at the end of each case study. Each analysis should include an in-text citation and end of paper reference (from the chapter with a page number) that relates to the case study. In addition, an Assignment Cover Sheet is required with each analysis (see Appendix).

Case studies are listed in the course syllabus

Case 3: Asleep at the Wheel: Ford Motor Company’s Exclusion of the Older Worker

pg 109-113 – Answer questions 1-4 pg 189-195.

Text book name is Canas, K. A. & Sondak, H. Opportunities and Challenges of Workplace Diversity (3rd Edition). Pearson.

Please answer the four  discussion questions below. Please number your answers individually.  APA 2 page is required.

Case Study: Asleep at the Wheel: Ford Motor Company’s Exclusion of the Older Worker

Ford Motor Company—founded by Henry Ford in 1903 with 11 associates, $28,000, and the slogan “I will build a motorcar for the great multitude”—was sued for age discrimination in 2001 and again in 2003.

Jacques Nasser, who became chief executive officer of the multibillion-dollar automaker in January 1999, quickly began an aggressive crusade to infuse diversity into the tradition-based Ford. Two years later, Nasser was ousted and replaced by Henry Ford’s great-grandson, Chairman William Clay Ford, Jr. One of the primary reasons for Nasser’s fall from power was his well-intentioned diversity initiative that ironically became a method of exclusion of and discrimination against older workers.

In a 2000 address to top executives, Nasser complained: “I do not like the sea of white faces in the audience and Ford Motor Co. must ensure that in the future the company reflects the broad spectrum of Ford’s customers.”34These words reflected his seemingly aggressive position on workplace diversity—Ford must diversify to maintain its competitive edge. Taking the conventional Ford Company on an unconventional journey, Nasser pushed his employees full speed ahead: “While we honor our traditions, we are not bound by them. The energy and ambition of the Ford team to create new ways is almost limitless. As long as they keep their eyes on the road and their hands on the wheel.”35

Despite his efforts to increase diversity at Ford, Nasser found his company facing two class-action age-discrimination lawsuits in addition to a number of individual discrimination lawsuits. The story of how a revolutionary crusade for diversity led to serious charges of age discrimination begins with an understanding of the dynamic yet polarizing leadership style of former Ford CEO Jacques Nasser.

Jacques Nasser

Nasser’s impressive career with Ford began in 1968 when, at age 20, he accepted a job as a financial analyst with Ford of Australia. Accepting international assignments—that some may have found unappealing—enabled Nasser to move up in the company as he found himself working in Thailand, Venezuela, Argentina, and the Philippines. Nasser had a reputation for being a “rising star” and “ahead of his time,” for example, when he encouraged “suppliers to cooperate and piece parts together into modules before shipping them to Ford assembly plants.”36 Just as Nasser was known for his creative problem-solving skills, he was also known for his toughness. While working in Argentina in 1985, Nasser was held hostage for three days when a Ford plant was seized during a political uprising; he eventually collapsed from exhaustion.37

In 1990, Nasser returned to his homeland to help salvage the deteriorating Ford of Australia by cutting the 15,000-person workforce in half and improving productivity by 40 percent. In 1996 he became Ford’s head of automotive operations in Detroit; he helped Ford reduce costs by $3 billion, in part by eliminating weak vehicles like the Aspire, Aerostar, and Thunderbird.38 In 1999, when he became Ford’s CEO, he was viewed as a unique leader known for his involvement with employees and direct, immediate feedback on issues ranging from employee presentation skills to car design.

Although Nasser was described by many as pioneering and charming, he was also perceived, by others, as polarizing. And while his fearless leadership style won him prestigious honors such as the 1999 Automobile Industries Man of the Year, this same quality led to the creation of his nickname, “Jac the Knife,” which reflected his reputation as a “bare-knuckle” cost cutter, unafraid to eliminate superfluous workers.39 According to David E. Cole, director of the University of Michigan’s Office for the Study of Automotive Transportation, “He is a very polarizing figure … People have strong emotions about him one way or the other. He’s a compelling guy.”40

Nasser never tried to hide his unique style or his four-tier plan for Ford’s transformation: to improve Ford’s customer focus, to develop leaders at every level, to embrace the digital consumer age, and to diversify his workforce. While Ford executives and employees embraced Nasser’s goals, they slowly began to question his methods for achieving them. The main concern ultimately became his aggressive campaign—what was often described as a revolution—to diversify Ford’s workforce.

Nasser’s Diversity Crusade

Passion was, perhaps, Nasser’s most captivating quality. It was this passion—stemming from his personal experience—being born in Lebanon and then emigrating with his parents to Australia—that functioned as the catalyst behind his diversity initiative. Nasser’s history, which he openly shared with his employees, illuminated the source of his desire to make diversity thrive on a systemic level within Ford.

Telling his personal story to Wharton Business School students, Nasser said: “I didn’t look Australian, and when I went to school, I was different than the kids in my class. I spoke Arabic, not English. My lunch was tabouli and flat bread, and kids would laugh at me. But I stayed with my food. The lesson I learned was, it’s okay to be different. Be yourself. Be your own brand. Stand up for what you believe in.”41

One would assume that Nasser’s philosophy would not conflict with a company that has identified diversity as “one of our founding principles” since early in its history. In 1913, for example, Henry Ford’s offer to pay $5 a day attracted thousands of immigrants and African Americans drawn to the prospect of earning twice the typical daily wage—a wage proudly claimed by Ford as being “credited with helping to create the black middle class.”42 By 1916, Ford employed people who represented 62 nationalities and more than 900 people with disabilities.43 Additionally, Ford hired many disabled veterans returning from World War I in 1919, thus “making the automaker one of the first companies to hire people with disabilities and to adapt work environments to their specific needs.”44

Nasser viewed excellence in diversity management not only as a continuation of and respect for Ford’s long-standing traditions but also as a competitive advantage. Specifically, he desired the best possible reputation for diversity management so that Ford could recruit and retain the best minority employees. The value of a diverse workforce was, for Nasser, obvious: “Greater inclusion of minorities is a priority for two reasons. It’s the right thing to do. It’s also good business.”45 Impressively, in 1999, Ford made 30 percent of its new hires minorities and raised the percentage of minority managers to 15 percent. In its July 2000 issue, Fortune magazine rated Ford the country’s thirtieth best company for minorities—no other automaker made the top fifty.46

Ford’s diversity numbers are indeed notable. According to the company’s annual report, the number of women and minorities working for Ford was 47.5 percent of its workforce in 2001. African Americans accounted for 19 percent of Ford employees, and the percentage of Latinos working for Ford was 3.1. The percentage of women and people of color in management positions at Ford was 34.9 in 2001.47

In an effort to tap into African American, Hispanic, and Asian markets, Ford actively recruited and trained minority dealers. Under the program, the candidates completed two years of business classes, and as a way to reciprocate, Ford helped finance their dealerships.48

The Performance Management Process (PMP)

As Nasser pushed Ford in ambitious new directions—embracing diversity, urging employees to get closer to customers, hiring outsiders to shake up Ford’s culture, expanding Ford’s luxury-car portfolio, and overhauling management pay and performance practices—Ford’s bottom line was taking a hit. Net losses in 2001 totaled $5.5 billion, down from earnings of $3.5 billion the previous year.49Of course, although it is impossible to ignore external forces such as September 11 and the Firestone tire debacle, some observers charged that Nasser simply ignored the basics, citing for example, “quality gaffes” found in vehicles such as the 2002 Explorer50 and the misuse of the performance evaluation system he initiated.

Nasser’s evaluation system was called the Performance Management Process (PMP) and was modeled after systems used by such companies as General Electric and Microsoft. Used specifically to rank Ford’s 18,000 top managers, the PMP was a type of grading system that evaluated employees on a curve. More specifically, 10 percent of the employees were rated by management as “A”; 80 percent as “B”; and 10 percent as “C.” “B” employees were divided into two categories, “B-1” and “B-2,” with “B-2” employees considered less productive. All “A” and “B” performers were eligible for bonuses and pay increases, although lower-level “B” employees received fewer benefits than higher-rated employees and were in jeopardy of being downgraded to “C” performer status. Those who did not improve after two years could be demoted or fired.51

Under Nasser, part of top managers’ bonuses hinged on how well they accomplished their diversity goals. Ford set specific goals for hiring and promoting minorities and women and tied executive compensation to meeting those objectives. This tie-in to promotions was one of Nasser’s diversity initiatives that ultimately helped employees—mostly older white men—successfully sue Ford for age discrimination.

Older Workers Sue

At the same time that Ford was attempting to recruit, train, and retain diverse employees, it faced two class-action discrimination lawsuits: Siegel v. Ford Motor Co. and Streeter v. Ford Motor Co. Both lawsuits accused the company of age discrimination, but whereas Siegel was brought by older workers of both sexes and several ethnicities, the Streeter plaintiffs were all white men.52 Interestingly, the Streeter plaintiffs at first claimed “reverse discrimination” but ultimately dropped the race and gender discrimination charges, thereby focusing only on age discrimination.

The Siegel suit gained national recognition because the AARP—formerly known as the American Association of Retired Persons—supported the lawsuit both financially and with staff time.53 In the Siegel lawsuit, the plaintiffs charged that the PMP “was part of senior management’s plan to eliminate older employees from Ford Motor Company’s salaried workforce” in violation of the Michigan Civil Rights Act.54 According to the lawsuit, a preliminary review of the statistics demonstrated that older workers disproportionately received “C” ratings. Plaintiffs alleged that the performance criteria were “rooted, in part, on the negative stereotypical assumptions about older employees.”55

Further, the plaintiffs charged that Ford managers had worked aggressively to promote minorities and women while eliminating white male employees because their “compensation and upward mobility” were “contingent upon meeting diversity goals.”56 More specifically, the complaint explained how 10 percent of executives’ bonuses were contingent on their reaching diversity goals, in other words, certain percentages of minorities and females at the various levels of Ford management.57

Fueling the discrimination lawsuit fire was the damaging testimony, as described in the complaint, from Ford executives. For example, David Murphy, Ford’s former human resources vice president, said: “We are in the middle of transforming one of the biggest companies in the world. You aren’t going to do that by pleasing everybody, by having some kind of consensus. We know we are going to upset some people. Maybe they shouldn’t be a part of Ford Motor Co.”58

As noted in the complaint, Richard Parry-Jones, vice president of product development and quality, said: “We are trapped in a mono-cultural environment that is dominated by old white males. We need to change. We need more employees who are more reflective of our consumer base.”59 Echoing similar sentiments was head of Ford Credit, Don Winkler, who said: “We went to headhunters who didn’t find us fifty-one-year-old white males.” Regarding the replacement of white males by minorities and women, he said, “Some people had to take packages and go.”60 The combination of the Nasser-initiated PMP and bold testimony from Ford executives worked together to shape the image of Ford as a company guilty of age discrimination.

The Age Discrimination in Employment Act

The main argument in the lawsuits was that Ford violated the Age Discrimination in Employment Act (ADEA)—signed into law in 1967 by President Lyndon B. Johnson—which required Americans to refrain from the adverse treatment of workers over 40. The ADEA made it unlawful for an employer to refuse to hire, to fire, or to take any other adverse action against a worker because of his or her age.61

The language Congress used in the ADEA to define unlawful age discrimination is as follows:

It shall be unlawful for an employer:

  1. to fail to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age;
  2. to limit, segregate, or classify its employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age; or
  3. to reduce the wage rate of any employee in order to comply with this Act.62

Age discrimination is gaining increased attention because of the influential baby-boomer generation. According to Raymond F. Gregory, author of Age Discrimination in the American Workplace: Old at a Young Age, the baby boomers account for more than 70 million workers in the US workplace—just under 50 percent of the entire workforce. In 2006, the entire baby-boomer generation fell within the protections of the federal laws against acts of age discrimination. As Gregory explains: “[A] vast army of workers”—known for its education, independence, and work savvy—“stands ready to contest employer acts of age discrimination.”63

The baby-boomer generation will be forced to confront the pervasive, damaging stereotypes of the older worker. Glen Lenhoff, a lawyer who represented the Ford plaintiffs, spoke to the issue of stereotypes: “I think there is a significant increase in the perception within many large corporations that people over 45 lack energy and aren’t receptive to new ideas … I think some corporations feel that such a person is not consistent with a dynamic and evolving company.”64

According to Gregory, “the sources of age discrimination are inaccurate, stereotypical conceptions of the abilities of older workers in general.”65 Older workers are often stereotyped as stubborn, inflexible, resistant to change, unproductive, slow learners, more expensive, and eager to retire at the earliest opportunity.66 The result of such stereotyping is how the “[u]njustified views of the diminished abilities of older workers coalesce or merge into stereotypical beliefs that form the basis for employer decisions affecting older workers.”67

Such damaging stereotypes negatively affected both men and women in the Ford workplace. Making it clear that the discrimination lawsuits were not just about men was fifty-four-year-old Dr. Sanaa Taraman, an Egyptian-born advanced program engineer, who maintained that she was targeted primarily because of her age. “I’m only 54 and I planned to work another 10 years … now they are forcing us to leave.”68

James Brazin, 55, a mechanical engineer at Ford’s Livonia transmission technical center and plant, had a streak of 32 positive annual performance reviews in a row oddly broken by a “C” grade for 2000. Brazin expressed his frustration: “My work had always been exceptional and now all of a sudden I’m at the bottom.” Brazin described how his supervisor explained his “C” rating by saying “you’re an old guy just like me.”69

Angelo Guido, 52, formerly a chief engineer with Ford, said the policy played a role in his decision to retire from the company after 31 years. “I didn’t like it but it was a method they were going to use. It didn’t seem right. Everybody felt lousy about it.”70

Ford Settles and Looks Toward the Future

In December 2001, Ford Motor Co. agreed to pay $10.5 million, including $2.6 million in attorneys’ fees, to settle two class-action lawsuits alleging that Ford’s performance evaluation policy discriminated against older employees;71the settlement benefited more than 425 managers.72Had the lawsuits gone to trial, plaintiffs’ lawyers planned to present studies that illustrated how older Ford managers were far more likely to receive poor job evaluations in 2000 than their younger counterparts.73

According to AARP CEO Bill Novelli: “This is a major victory not only for the employees but for all those who are fighting against workplace age discrimination in any form, whether it involves direct layoffs or, as in this case, sham job ratings.”74 Laurie McCann, senior attorney with AARP foundation litigation, maintained: “The message here is that age discrimination will not be tolerated. Employers shouldn’t balance their books on the backs of older employees and they can’t try to force out older workers and get away with it.”75

In response to the suits, Ford made changes to its evaluation policy. Spokesperson Anne Gattari backtracked from Ford’s original assertions about the PMP policy. She said that Ford would now rank its employees as “top achievers,” “achievers,” or “improvement required” responding to the fact that “some managers expressed concern that the system has been having an adverse effect on teamwork and morale.”76 Further, Ford has abandoned forcing supervisors to rank a certain percentage of employees in the lowest tier and has initiated giving supervisors more discretion in awarding bonuses or merit raises.77

Joe Laymon, the new vice president of corporate human resources, said: “The new program will drop the PMP moniker and focus more on building bonds between supervisors and workers.” Laymon continued: “We have a system that has objectives built in it. We have a system that has periodical reviews. We have a system that has very strong coaching and counseling features built in. We have a performance system that has a final appraisal.”78 In short, the company claims that it is making progress at diversifying the automaker’s workforce but not at the expense of older employees.

Having been sued for age discrimination in 2001 and then again in 2003,79 Ford has seemingly still not found a solution to managing its older workforce. Despite Ford’s troublesome past, DiversityInc’s 2009 Top 50 Companies for Diversity list ranked Ford the twenty-eighth US company for diversity; the year prior Ford was twenty-seventh. DiversityInc hailed Ford as “a long-time leader in supplier diversity and [one that] continues to be innovative, with new efforts focused on firms owned by veterans and veterans with service-acquired disabilities.”80 In addition, DiversityInc ranked Ford as third in its Top 10 Companies for Supplier Diversity. Again praising Ford, the magazine highlighted how Ford “has remained a diversity leader even as its industry is in turmoil. It consistently has been the highest-ranked auto company because of its commitment to an inclusive work force and its strong community philanthropy.”81

In addition to achieving this coveted spot in DiversityIncs 2008 and 2009 rankings, Ford has earned positive recognition from other minority organizations. The Michigan Minority Business Development Council named Ford one of its 2008 Corporate ONE Award winners,82 and the Gay & Lesbian Alliance Against Defamation awarded Ford the “Fairness Award.”83 The Hispanic Business Magazine ranked Ford twenty-ninth in its Diversity Elite 60 Companies in 2008.84 Responding to the need to educate its employees about diversity, Ford developed the Multicultural Alliance. According to Director of Diversity and Worklife Planning and Peer Review Rosalind Cox, the Alliance’s mission is “to educate Ford’s departments on the benefit multicultural markets bring the company.”85 And impressively, Ford leads all other automakers with the largest percentage of minority-owned or minority-operated dealerships in the United States.86

Ford’s diversity initiatives are both innovative and laudable; however, weaknesses remain. In 2006, Ford lost one of the auto industry’s most influential women leaders, Anne Stevens, who was executive vice president and COO of the Americas. Further, in the Ford Motor Company 2008 Annual Report, there is no mention of domestic diversity as an organizational value or as a competitive advantage in the Chairman’s Message from William Clay Ford and the President and CEO’s Message from Alan Mulally. Mulally has yet to show whether Ford will remain as dedicated to diversity initiatives as it has been in the past.87

Ford Motor Company maintains that diversity is a “distinct advantage” and that diversity is one of their “top corporate priorities.”88 With such serious claims of diversity commitment—in light of the company’s historical tie to diversity and its future plans to manage diversity—comes the responsibility of valuing the knowledge and experience of the older worker.

Discussion Questions

  1. Why did Nasser’s progressive goal—to diversify Ford’s workforce—backfire?
  2. How did Nasser’s personal story and work background affect his approach and philosophy on managing diversity?
  3. Why was Ford’s evaluation system, the PMP, the source of contention for Ford employees who felt discriminated against? In moving away from the PMP, what did Ford do to improve this evaluation system? Did these changes create a more accurate system of evaluation?
  4. The number of older workers in the workforce is increasing—many people now work into their late 60s and 70s. How can businesses adapt to and benefit from this trend?

Source: This case was prepared by Dr. Kathryn A. Cañas and Dr. Harris Sondak, The University of Utah.

Diversity Case Update: ford motor company

Although Ford Motor Company has struggled with age discrimination in the past, Ford is moving forward with their current diversity strategy. Diversity is connected throughout Ford with leadership commitment from CEO Alan Mulally, extensive use of Ford’s ten Employee Resource Groups, and hundreds of Local Diversity Councils that are established in all major business units. Perhaps the most impressive achievement occurred in 2011, when Ford purchased a record $5.08 billion and 1.06 billion in goods and services from US minority- and women-owned businesses.

 

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