The “tipping point” in Ford’s turnaround

December 20, 2010, 10:32 PM UTC

by Patricia Sellers

The best bosses tend to be those who welcome bad news — “Hit me with your best shot!” — and keep hope alive.

That balance is at the heart of the remarkable turnaround at Ford . Last week at the Yale CEO Summit, a gathering of corporate chiefs and other influentials led by Yale professor Jeff Sonnenfeld, Ford Americas President Mark Fields told a story that conveys how Ford CEO Alan Mulally set the stage for the automaker’s recovery.

“We had a culture where, if you reported bad news, you were done,” explained Fields, recalling a 2006 meeting with Ford’s senior global executives at headquarters in Dearborn, Michigan.

Ford Americas President Mark Fields

At Ford, the standard  practice in these meetings is to use red, yellow and green charts to report on the status of projects. At this particular meeting — like at most Ford meetings back in the days — “All the charts were green,” Fields said.

“I showed a chart with red on it. All the chairs moved away from me. I thought, ‘What the hell—this is the reality.'”

Fields’ red chart signaled problems with Ford’s soon-to-be-introduced Edge crossover vehicle. “I said, ’We have a problem with this launch.’ There was dead silence…

“And then Alan starts clapping.”

At the break, I asked Fields if I could share his anecdote. He said sure and explained that Mulally, who had joined Ford from Boeing shortly before that meeting took place, made an indelible impression with his simple gesture. “You know the book The Tipping Point?” Fields asked me. “That meeting was a tipping point at Ford.”

This fall, Mulally topped readers’ votes for Fortune‘s 2010 Business Person of the Year. The editors ended up naming Netflix founder-CEO Reed Hastings No. 1 because he is shaking up the media and cable industries in Steve Jobs-ian fashion. It’s worth noting that Hastings and Mulally are very different guys in very different industries, but both are gutsy visionaries, not just optimistic but perpetually paranoid enough to thrive even in the most challenging times.