The Business Enterprise Trust DO MOTOROLA

The Business Enterprise Trust DO MOTOROLA (A) T he vote was eleven to one and Robert Galvin stood alone. It was 1979 and Galvin, the CEO and President of electronics giant Motorola, had just proposed to his Board of Directors that the firm make an extraordinary commitment to training its workers — from executives to shop floor employees. He recommended establishing a department devoted to educating employees with one major goal: improving product quality. Galvin had made the proposal in response to the rapid change and increasing competitiveness that engulfed the electronics industry in the late 1970s.

The rate of innovation was staggering; most technical knowledge became obsolete within five years. International firms, most notably from Japan, were emerging as formidable competitors to U. S. companies such as Motorola. But the Motorola Board, concerned with the time and financial resources such training would require, was not swayed by Galvin’s arguments. With Motorola still competitive in the industry and budgets tight, the other eleven Directors all voted against the expansion in training. As Chairman, Galvin knew he had the power to overturn the Board’s decision.

Training was something he felt strongly about, but was this a battle worth fighting? T NO This case was researched by Stephanie Weiss and written by Matt Kelemen, under the supervision of Kathleen A. Meyer, executive director of The Business Enterprise Trust. 9-996-051 CO PY Motorola In 1979, Motorola was one of the world’s leading manufacturers of electronic equipment and components with $2. 7 billion in sales (Exhibit 1: 1979 Earnings Statement). The company designed, manufactured and sold products ranging from semiconductors to stereo tape players. Copyright © 1997 by The Business Enterprise Trust.

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The Business Enterprise Trust is a national non-profit organization that honors exemplary acts of courage, integrity and social vision in business. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means – electronic, mechanical, recording, or otherwise – without the permission of The Business Enterprise Trust. Please call (415) 321-5100 or write The Business Enterprise Trust, 204 Junipero Serra Blvd. , Stanford, CA 94305. Harvard Business School Publishing is the exclusive distributor of this publication.

To order copies or to request permission to photocopy, please call (800) 545-7685 or write Harvard Business School Publishing, Customer Service Dept. , 60 Harvard Way, Boston, MA 02163. Motorola (A) 9-996-051 immortal words of Neil Armstrong — “That’s one small step for man, one giant leap for mankind. ” The younger Galvin’s approach to Motorola’s growth mirrored that of his father. Always trying to anticipate change in the industry, Robert Galvin believed that the company’s employees were its biggest asset. Well before the Japanese concept of “teaming” was in vogue in other American ompanies, Galvin put teams of employees in charge of their own work, requiring them to monitor productivity, service and costs, and then rewarding them for improvements. Motorola was one of the first large U. S. manufacturing companies to give employees significant leadership responsibility. In so doing, it abandoned the classic, hierarchical factory organization. Managers encouraged openness and participation on the shop floor. Motorola invested heavily in research and development and gave workers the responsibility to fix problems as they arose. As Motorolan Orhan Karaali, Senior Staff

Engineer, explained: DO Employer to over 75,000 “Motorolans,” the company operated 27 major facilities around the globe. The multinational powerhouse had been created a half-century earlier as Galvin Manufacturing, a start-up battery business that Paul Galvin and his brother Joseph launched in Schaumburg, Illinois in 1928. By 1930, the team had made their first breakthrough developing affordable car radios. Over the next 25 years, Paul led the company into new markets, patenting the first portable two-way FM radio, better known as the walkie-talkie. In 1947, he changed the company’s name to Motorola n recognition of the car radios that remained the flagship product. At the same time, he was envisioning new frontiers, initiating semiconductor research long before Motorola’s competitors realized their importance. While bolstering the product line, Paul Galvin also nurtured an “industrial family” within his company. In 1937, six years before Galvin Manufacturing’s first public stock offering (at $8. 50 per share), the founder offered factory workers the chance to buy company stock. Galvin even rewarded workers who used their annual bonuses to purchase company stock with an extra stock bonus.

He provided good benefits for his employees and looked out for their well-being. The result was a loyal and trusting workforce who saw no need to unionize. In 1956, Paul Galvin turned over the presidency of Motorola to his son Robert. When the elder Galvin died three years later, Robert became CEO, a post he would hold for three decades. Robert Galvin oversaw Motorola’s entry into numerous new businesses, including television, 8-track tapes, remote paging, microprocessors and cellular telephones. Still a pioneer, Motorola developed the first radio pager in 1969, the first television priced nder $200 and technology that made the automobile alternator possible. Under Robert Galvin’s leadership, Motorola’s sales and profits soared as the company became an international leader in the electronics market. As a crowning achievement to the firm’s ascendancy, a Motorola transponder relayed to the world the NO T “At Motorola, you do whatever is necessary to get the job done. Not too many memos flying around. Not too much politics. It is more concentrated on our goals. ” CO With this culture firmly established, Galvin focused next on training to give employees the skills nd confidence needed to excel in a participatory environment. PY Corporate Training In the 1970s, most corporate training opportunities were reserved for senior management. Companies tended to use training as a reward for executives who already performed well. These executive education programs, which mimicked MBA programs, typically were contracted out to universities. Using a case-study approach, they focused on management basics like strategy, finance and marketing. Motorola’s training effort at the time was no exception. The Motorola Executive Institute, launched in the late 1960s, sent a handful of ompany executives to an intensive, month-long 2 Motorola (A) 9-996-051 program focused on business administration skills. Ultimately, however, Galvin was disappointed with the Institute’s results, as the firm’s practices remained largely unchanged. Galvin realized that these executive training efforts did not “touch” the whole workforce and did not create a culture of constant change and renewal. He explained: DO “We realized we had to be competitive one person at a time, counterpart to counterpart, to be the best in our specific function versus anyone else in our business. ” T NO Increasing Competition

Galvin’s desire to bring competitiveness to each and every employee stemmed from his understanding of the changing nature of the electronics industry. In the 1970s, the industry was growing and diversifying rapidly. New competitors, primarily from Asia, but from European countries as well, were entering the market. Other U. S. companies like Texas Instruments, General Electric and National Semiconductor were all jockeying for a larger share of the increasingly competitive export market. New consumer and communications products were being introduced each year. To compete and prosper in the technology sector,

Galvin knew that his workers needed more — and better — training. When Motorola’s Board members voiced their reservations to Galvin’s plan for expanded employee training, Galvin faced a dilemma. If he accepted the Board’s counsel, the company might waste critical resources — both time and money — and fall behind as the pace of technological change increased. If he pushed for investment in training, he might jeopardize Motorola’s short-term performance and competitive position. As both CEO and the largest individual shareholder, the final decision was his alone. PY CO 3 Motorola (A) 9-996-051 Exhibit 1 DO T NO PY CO 4

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