Harley History Harley Davidson was seen in America as a company that produced motorcycles with “raw power. ” The company was founded by Arthur and Walter Davidson and William Harley in 1903. In 1918, Harley Davidson had become the largest motorcycle producing company in the world. Their production totaled 28,000 motorcycles. Production continued to increase with the onset of World War II and the military use of Harley’s motorcycles. The mystique of the product had a tough sense to it with famous actors such as James Dean and Marlin Brando sporting the bikes.
After World War II, foreign competitors became interested in the motorcycle market. Japanese competitors entered the market in 1959; Harley Davidson executives did nothing to counter the advance of the competition. Harley Davidson’s share of the industry began dropping while Japanese competitors introduced high quality products. The confidence in Harley’s reputation was causing the firm’s market share to decline steadily. AMF Years Harley Davidson lacked resources to finance new products and designs to expand their production. They were taken over by AMF, a heavy-industrial conglomerate.
At this time there was high demand for motorcycles in the U. S. The AMF team thought that they would be able to sell anything they produced, even without taking quality into consideration. After the take over, production was increased drastically at the cost of the quality of the product. AMF began spending large amounts of money on Harley’s manufacturing plants. Production increased from 15,475 units in 1969 to 70,000 units in 1973 due to these new expenditures on capital. To make things worse for Harley, the Japanese firm Honda introduced the “Goldwing. This was the first introduction of a foreign “heavy weight” motorcycle that would directly compete with Harley’s market share. With Harley Davidson’s share of the heavyweight market beginning to decrease, the quality of their products also decreased because they were becoming outdated compared to the new advanced Japanese products. Vaughn Beals was brought into the picture by Harley executives to lead the firm. Vaughn Beals Saves the Day Vaughn Beals’ ideals were different than those of AMF its top management. It became clear that AMF did not have the same amount of concern for Harley’s success as Beals, so AMF began looking for a buyer.
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With Harley Davidson’s profitability down, Beals and some other Harley Davidson managers orchestrated a highly leveraged buyout. This large amount of debt for the buyout forced Harley Davidson’s managers to adopt a new strategy: survival. Vaughn Beals realized that his firm needed to change to become a more competitive force within the motorcycle industry. Change Many things at Harley Davidson were going wrong. The motorcycles were being made at a low level of quality and the focus was too much driven by quantity rather than quality. The organization was formed around the traditional top thinks and everybody acts.
It was very apparent that if nothing changed, Harley Davidson’s reputation would be forever tarnished due to low quality products. Forces for Change: Competition (chapter 19) Competition for business is changing. Competitors can come from across the ocean or from across town. For Vaughn Beals, his main force for change was the Japanese competition that was continuing to decrease Harley Davidson’s share of the market. He realized that something had to be done. While visiting the Honda plant, he learned many things that the Japanese did better than Harley Davidson. The differences between Harley Davidson and Honda were striking. For example, only 5 percent of Honda’s motorcycles failed to pass final quality inspection; over 50 percent of Harley’s failed during the same test” (Buller & Schuler 2006). Job Design Instead of allowing manufacturers to keep producing the products at a high pace, with little attention to quality, Beals and his top management wanted to change the way the elements in an employees job was organized. Harley Davidson initiated this new job design through the productivity triad. The Productivity Triad
After the visit, Beals and his team realized the only way to compete with the very effective management of the Japanese was to improve the quality of their product and the production process that was necessary to produce it. The productivity triad was based on Japanese methods of manufacturing and production. “This new approach involved (a) employee involvement, (b) use of JIT inventory practices, and (c) statistical operator control (SOC). Organizational Structure (chapter 16) To improve the quality of Harley Davidson’s motorcycles, a complete change of the organizations structure was necessary.
Job tasks would be divided, grouped, and coordinated much differently under the productivity triad. To change the structure, Beals and his management introduced many new aspects to the employee’s average day at work. Employee Involvement (chapter 7) Harley Davidson executives realized that using the input of employees would increase their commitment to the much-needed new success of Harley Davidson. They “reasoned that full participation of employees at all levels was the key to successful improvement of both the product quality and the production process” (Buller & Schuler 2006).
Job Characteristics Model Harley Davidson uses 3 out of 5 of the characteristics in the model developed by J. Richard Hackman. This model proposes that any job can be described in terms of these core dimensions. Autonomy (chapter 7) Since the line workers were more knowledgeable about what techniques would work and not work in the production process, they were encouraged to make decisions about the production process. This provided a substantial amount of freedom in determining the procedures to be carried out for producing the product. Skill Variety (chapter 7)
Instead of just relying on the line workers to construct the product, Beals and his team wanted to make sure that the motorcycles were going to be of a much higher quality than in the past. To avoid catastrophes, such as oil leaking onto a showroom floor, “top management reasoned that training and empowering employees to measure quality and recommend change was essential for improvement” (Buller & Schuler 2006). Using the Statistical Operator Control method, employees could now see how problems developed and how they could fix them during the production process.
Task Identity (chapter 7) The same employees that were measuring the products for quality issues were also manufacturing the product. This would allow the employee to really become part of his/her product. It would also allow for a more efficient method of production. Creating a Learning Organization Learning Organization (chapter 19) To have a continuous ability to adapt and change would allow Harley Davidson to keep up with the competition and provide its employees with the knowledge to continue to produce quality products.
In the 1990’s, Harley Davidson “began emphasizing organizational and individual learning at all levels through a program it termed the Leadership Institute” (Buller & Schuler 2006). The organization took on a strong belief that anyone could learn more. The traditional top thinks and everyone else acts was merged into thinking and acting in all jobs. Along with all this learning, the firm began to change many core aspects of its operations. New Design Options To help Harley Davidson compete more effectively, top management began to mphasize teamwork at all levels. This would allow for easy information sharing and constant learning throughout the organization. To enhance the effectiveness of teams, Harley Davidson wanted to break down any barriers that would prevent employees from sharing information, developing new ideas, or catching current production problems. To do this, they needed to get away from the traditional roles that employees and managers play. Team Structure (chapter 16) Harley Davidson eliminated the positions of senior vice president in marketing and operations.
They observed that these jobs did not add any value to the motorcycles. A create demand team, a team that was in charge of producing the products, and a product support team were introduced to help employees. Instead of having to approach one top manager for help and get sent to another department to solve the problem, Harley executives realized these teams would be more efficient. Boundaryless Organization (chapter 16) For all of these new changes to actually work, executives in a sense had to let employees become their own managers.
To make the changes the most effective, Harley Davidson eliminated the chain of command, allowed the employees to have limitless ps of control, and replaced departments with empowered teams. Types of Teams Self Managed Work Teams (chapter 10) Harley-Davidson employees were put into work teams and encouraged to participate in the decision making process because they knew better than management what worked and what did not. Because the productivity triad emphasized employee involvement so much, the logical way to form teams would be to allow the members to make most decisions. Types of Training
Most of the training that the employees would go through when they sought new knowledge was technical based. They would be taught about any aspect of the firm they felt would benefit production or quality. Technical Training (chapter 18) At Harley-Davidson top management saw that as technology became a larger part of the production process their employees needed to have better training to be able to operate productively. Also, after benchmarking itself against Japanese competitors Harley-Davidson saw that learning about all fields within the organization would benefit everyone.
This led to the invention of the “Leadership Institute”, which encouraged employees to seek out training when they needed it. They wanted to create a program that would allow employees to have the opportunity to do a quality job every time. This included learning more about the theories behind the latest technologies and learning about related fields. Since Harley-Davidson was now using empowered teams to make important decisions throughout the organization, each team member needed to have a good handle on technical aspects involved with their responsibilities. Culture
With all of these changes underway, Harley Davidson began to develop its own sense of internal culture that became a system of shared meaning held by the employees. The productivity triad and the Learning Institute both helped pave the way for a unique new culture at Harley Davidson. Organizational Culture (chapter 17) It is not hard to assume that with such drastic changes in an organization’s structure, there could be changes in the culture as well. Since employees were allowed to make a lot more of their own decisions and management was not seen as so much of an authority, gaining knowledge in the organization became more of a choice. An employee must make the decision that he or she wants more training - no one will tap you on the shoulder - but once you are there, we will help you” (Buller & Schuler 2006). The executive committee wanted to heavily emphasize that they too had much to learn. This became the norm for employees and managers throughout the firm. A willingness to learn about all fields within the production of a motorcycle was seen as a very desirable trait within Harley Davidson.
This would improve the quality of the product because increased knowledge about different aspects of the motorcycle, which were perhaps previously unknown organization wide, would now be put to use. Core Values (chapter 17) The primary or dominant values that were accepted throughout the Learning Institute included the work itself, the supporting systems, and how the work was done. Employees were encouraged to master all the skills necessary to do a quality job every time. To uphold the idea of constant learning, they were expected to learn more of the theories behind the latest technologies of one’s job.
To emphasize the boundaryless aspect, employees were expected to branch out and learn the related fields of work around them. Each employee should also have a high degree of knowledge about how the motorcycle works and how it can be improved. If they have a good handle on how the motorcycle operates and how to fix it, this could drastically improve customer relations. Since employees became empowered to make decisions for the production process, they were also expected to take responsibility for their product.
If there was a quality problem in their product, it was up to them to figure out how to solve it. Having an open mind was important too. An employee was expected to always be looking for new things to learn about improving their work. There were no strict guidelines that employees had to stick to when it came to brainstorming ideas. Creativity and experimentation were encouraged. Conflict Functional (chapter 15) Since Harley Davidson’s new culture involved a lot of participation and independent learning, there were a lot of different opinions from different employees.
This would be a good amount of conflict that would avoid groupthink and promote creativity. Process (chapter 15) After production quality began to increase, the idea of over seas production had come up. There was a lot of debate about whether or not Harley should produce motorcycles abroad, or just increase domestic production for export. Some of the employees thought that the overseas manufacturing of Harley Davidson motorcycles was inconsistent with “buying a piece of the American Dream” (Buller & Schuler 2006). The international market for Harley Davidson is growing.
The firm has subsidiaries across the globe in countries such as: Germany, Japan, and the United Kingdom. The German subsidiary also serves Austria, France, Denmark, the Czech Republic, Hungary, and Poland. Germany, Japan, Canada, and Australia represent the firm’s largest export markets. It is very apparent that Harley Davidson is known worldwide. Europe holds the world’s largest heavyweight motorcycle market and is “expected to become the next battleground for heavyweight motorcycles” (Buller & Schuler 2006). Rewarding Employees
To increase motivation and work performance, Harley Davidson really wanted their employees to understand empowerment. They rewarded them with power and of course pay. Participative Management (chapter 7) At Harley-Davidson top management realized that the employee needed to be utilized as a resource for ideas on how production of motorcycles should work. Harley-Davidson also realized that there were un-needed positions at the corporate level of the company “We eliminated those jobs because they didn’t add value to our products. The people were auditors.
They were checkers” (Buller & Schuler 2006). This led to the company eliminating the Senior Vice President in Marketing and Operations position among other positions. These positions did not add value to the product. Instead of having these jobs, employees were put into teams and were encouraged to use their own expertise in the decision making process. Harley-Davidson wanted their employees to become more like managers and to not feel the need to ask someone above them on how to do things. This is a key tool for increasing job satisfaction and motivation.
Merit Based Pay (chapter 7) Another new program that Harley-Davidson began was a pay for performance pay system. Harley-Davidson wanted their employees to understand empowerment, so they encouraged their employees to learn as much as they could about the company. This would improve quality, which would allow a general wage increase to take place. Task Groups (chapter 9) When Harley-Davidson created these teams it meant that employees had more power in their own decisions. Many of the teams specialized in one aspect of production, so they had very specific tasks.
After the teams were created, these teams would make decisions on production instead of higher ups in the company, “Before Harley established teams, people would go up to one boss and that boss would go over to another boss and he would go to still another boss. And we wondered why the Japanese beat us on the issue of time” (Buller & Schuler 2006). Conclusion Harley Davidson’s market share began to dramatically increase in the late 1980’s and early 1990’s. The structural and cultural change that Vaughn Beals and Harley executives imagined truly did save the firm. Harley Davidson motorcycles today are seen as very high quality machines.
They have become a symbol of status and lifestyle in today’s society. Observing how much customization a consumer can request for his/her bike reflects the creative aspect of the firm’s internal culture. Harley continues to exemplify individuality through its production process and large amount of die hard followers. Contributions to the project: Jared and Scott wrote the paper; everyone did their part for the power point. References: Buller & Schuler. (2006). Managing organizations and people. U. S. : Thomson South Western. Judge, J. A. , & Robbins, S. P. (2008). Organizational behavior (13th edition). New Jersey: Prentice Hall.
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