UM-Dearborn study helps guide Ford’s successful employee buy-out program

December 5, 2006

DEARBORN / Dec. 5, 2006---Ford Motor Company’s recent employee buyout program was a bigger success than the company anticipated, and part of its success is thanks to a study conducted by faculty members and researchers at the University of Michigan-Dearborn School of Management.

When Ford, in collaboration with the UAW, began offering buyouts in 2005 to workers at former Visteon plants and Ford plants scheduled for shutdown, they found far fewer employees accepting the offers than they had expected.

“Ford decided to inject some science into the process and asked researchers at the University of Michigan-Dearborn to help,” according to a story in the Dec. 4 Detroit News.

As part of a joint effort by Ford and the UAW, a study was conducted by iLabs, the University of Michigan-Dearborn’s Center for Innovation Research, to better understand what factors influenced Ford’s hourly employees to accept or reject the buyout packages. A team of faculty and student researchers, led by iLabs’ director, Prof. Kim Schatzel, surveyed more than 1,500 hourly employees at Ford plants in St. Louis and Edison, N.J.

Prof. Thomas Callahan led the development, administration and analysis of the survey with the assistance of Christopher Jimenez, iLabs research coordinator, and two students, Jonathan Fuhrman and Steven George.

The research team presented the study to Ford executives early this fall, and Ford made major modifications to its buyout program based on the study, according to company executives involved in the effort.

“We wanted to look at the factors motivating employees to accept or reject the offer, find out where the employees got their information about the buyouts, and see how to enhance the plan to improve its effectiveness,” Schatzel said.

Using the results of the UM-Dearborn study, Ford was able to craft a plan that resulted in nearly half of its U.S. factory workforce – the largest employee exodus in automotive history – to accept special retirement or separation offerings by the Nov. 30 deadline.

Trimming its American work force is key to the success of Ford’s “Way Forward” restructuring plan, and most auto analysts agree that the buyout program will help the company get back on track to profitability.

One of the most important findings of the UM-Dearborn’s iLabs’ study was that employees who believed they were provided adequate information by Ford and the UAW were more likely to accept the buyout offers than employees who felt they did not have adequate information.

“We recommended that Ford develop more personalized methods of communication, involving each employee individually,” Schatzel said.

Another significant finding of the UM-Dearborn study was that employees were more likely to take the buyout if they thought they’d be able to find acceptable alternative employment after leaving Ford.

In response, Ford hosted career fairs for their hourly workers at every manufacturing location to learn about other employment opportunities.

Approximately half of the Ford employees accepting the recent buyout offers accepted a plan that included financial support for education, according to news reports, but the UM-Dearborn researchers found that many workers were not interested in traditional four-year degree programs. So Ford offered a package supporting two-years of educational support as well as a four-year package.

“And because the UM-Dearborn researchers discovered that workers who met with a financial adviser were more likely to take a buyout, Ford decided to make them available to all skilled-trades employees,” according to the Detroit News story. “The number of skilled-trades workers signing up soared.”

“The mission of iLabs is to assist businesses to answer their toughest questions and tackle their toughest challenges,” Schatzel said. “Our joint effort with Ford is just one way UM-Dearborn is working with business to advance the economic growth and competitiveness of the metropolitan Detroit region and the state of Michigan.”

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CONTACT: Terry Gallagher
PHONE: 313-593-5518
The Office of University Relations
Room 1040, Administration Building
University of Michigan-Dearborn