How the Ford board recruited Alan Mulally: this was a textbook case of world-class collaboration by seasoned directors, a passionate governance expert and board leader, and a powerful, determined chairman.

• Author: Carey, Dennis
• Position: CEO RECRUITMENT - Company overview

BIG ICONIC CORPORATIONS often struggle in times of terrible business stress with having to hurry up and pick a great new CEO. Choosing the right approach and being prepared is one of the most important responsibilities the board of a public company can have.

The scenarios that catalyze the need to find a new CEO are always different, but the urgency is nearly always the same. The new leader usually has to pick up quickly from where the last one left off and take the business forward without loss of momentum. Sometimes the stakes are epic, and the new CEO may have to take the business through a crushing crisis and turnaround, lest the company vaporize (like what happened to Enron). Could Ford Motor Co. find such a leader?

That was a challenge posed to its board of directors several years ago, and most today would say they rose to the challenge in finding Alan Mulally. Ford was in decline and skirting irrelevance just as the global economy was about to collapse and take major companies with it. How out of all the great CEOs out there was Mulally picked? How did Ford's board know--indeed, a direct descendant of Henry Ford among them!--that Alan Mulally would be the right choice?

It is the very question boards and CEO search committees are faced with every day. The question becomes monumentally critical when a search must be conducted in haste and under tremendous existing stress on the business.

Some of the best companies have conditioned themselves methodically to avoid the last-minute succession crisis and mint their CEOs. Other companies aren't so prepared or prescient to have the CEO solution readily available in-house. When faced with having to go external, the CEO recruitment can take several forms. Ford's process involved key directors, an encouraging chairman, and an outside search adviser to conduct referencing on the finalist candidate for CEO.

How it began

Ford's recruitment of Alan Mulally is a textbook case of world-class collaboration by seasoned directors, all former CEOs, and led by a passionate governance expert and board leader, Irvine 0. Hockaday, as well as a powerful, determined chairman, William Clay Ford Jr. It was Bill Ford's die-in-the-ditch commitment to saving his company as well as his family legacy that especially and courageously saved the day for Ford and ensured it a prosperous future under a new CEO.

The Ford search story begins in 2006. The road was becoming increasingly treacherous for the American auto industry. Meanwhile Ford's two biggest competitors, GM and Chrysler, were staring at potential bankruptcy, which would end up occurring two years hence. Bill Ford had informally tried to reboot things on his own, even sounding out other auto leaders to take Ford's reins, including reportedly Renault-Nissan's fabled leader Carlos Ghosn. It went nowhere.

There was no way Bill Ford or his directors, led by Hockaday, would allow Ford Motor Co. to run aground let alone go bankrupt. Ford decided to tough it out, but also with an eye toward getting Ford Motor's finances sorted out and bear down hard on finding a new CEO. The board was in full alignment.

Ford's search had to be conducted quickly. The most storied American automaker couldn't afford any hiccups during this most extraordinary time in American economic history. In identifying and finding a new CEO, Hockaday and his directors would have to hit the bull's-eye on the first shot.

Fortunately for Ford, it had on its board exceptional firepower. There was Hockaday, one of the most seasoned CEOs and governance veterans in corporate America. The former CEO who built Hallmark Inc. into a major consumer brand and multimedia powerhouse, Hockaday also is lead director at Estee Lauder and until recently was the lead director at Sprint Nextel. He is characteristically modest about his own contribution to bringing Mulally to Ford, and points out that his search committee partners included John L. Thornton, former president and co-COO of...