Ford Announces 7,000 Layoffs to Flatten Bureaucratic Management Structure

Mirroring some of the actions of its competitor GM, Ford Motor Company announced this week that it will be trimming 7,000 white-collar jobs in total – approximately 10 percent of its current salaried workforce across the world — in an effort to save about $600 million a year. The layoffs, which will be both voluntary and involuntary, will happen in waves, according to Ford CEO James Hackett, with 900 management workers to be notified by the end of this week (500 of those in the U.S.). The waves of layoffs will continue through August.

Earlier this year, the company cut thousands of jobs from its workforce in Europe. The global restructuring is an effort to trim the management structure and cut unnecessary bureaucracy, according to Ford. In a memo to employees, Hackett referred to the structuring as Ford’s “Smart Redesign” plan, which will “reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs.”

Many of the long-term plans involve increasing the “span of control” for the managers who are left standing. Currently, only 35 percent of Ford managers have “spans of control of six or more direct reports.” Once the restructuring is finished, 80 percent of managers will have six or more direct reports. Ford’s management hierarchy will also become slimmer. By the end of this year, according to the company, most of the organization will be structured with nine layers or less (down from an average of 14), resulting in a flatter and more agile team.

Ford says it needs the layoffs to reposition itself competitively in a changing auto sales landscape.

“The business imperatives behind Smart Redesign were compelling,” wrote Hackett. “To succeed in our competitive industry, and position Ford to win in a fast-changing future, we must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work, and cut costs.”

Ford’s shares climbed briefly before the start of regular trading on Monday but dropped 0.3 percent to $10.26 as of 10:15 a.m. Ford stock has climbed 34 percent this year after steep drops in 2018.