Harley Davidson’s Process Of Change

Harley Davidson celebrates their 107 years anniversary this year. In their long journey, they have faced many bumps. One of the biggest challenges was in 1980’s where Japanese motor cycle company joins the competition in United States. It gaves a huge impact to Harley. The Harley almost becomes history that day. Until some important person came and initiated change of every single aspect.. Rich Teerlink and Lee Ozley were two of the key person behind the change. Rich Teerlink was CEO of Harley Davidson, Inc and Lee Ozley was consultant for the company. In the year 2000, they wrote a book called ” More than a motorcycle: the leadership journey at Harley”. The book tells stories about more than 12 years journey of change. How they analyze the problems, failure they made, challenge to change, until they succeed in changing Harley Davidson become better company. In this research paper, the authors try to see their journey from knowledge management perspective. The authors will draw important components that could affect implementation of knowledge management initiative. Leadership, business process, organizational structure, lifelong learning, culture and employee participation, are some components that lead successfulness of Harley Davidson s journey.

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Keywords: Knowledge Management, Leadership

Introduction

On the edge of bankruptcy, Harley was acquired by American Machine and Foundry (AMF) in1969, but still not revolving well until 1980. Worse is that the independence of Harley, Inc. put Harley people from honeymoon to hard times because of capital deficit. The arrival of crisis in the early 1980s, when many of Harley’s employees lost their jobs or opportunities for career advancement, turned into a driving force of adopting the traditional “command-and control” hierarchies to remove the crunch.

It seemed safe and steady after the crisis, nevertheless, the tree leaders, Rich, Tom Gelb, vice president of manufacturing, and John Campbell, vice president of human resources, started to take into account the survival and prosperity of the company in the long run. Decisive, top-down leadership style no longer could afford the future with limited effectiveness and durability. Commitment, rather than compliance, together with appropriate leadership were put on the agenda in view of Employee involvement (EI).

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This revolution started with information flow for knowledge sharing within the organization, supported by strategy thrust in stair-step. Leadership played a vital role in articulating a vision of collaboration during the whole business process while emphasis on human capital through awareness expansion, commitment extension and two-way communication helped building the life-long learning culture of the company. Best Practices originated from the “Operational Committee” —the behavior model, also contributed to one of the core advantages of Harley—“world class” system.

Preparation of Journey

Getting There from Here

Strategic thrust (Figure 1) for change rises from comparison between where we are today and vision of ideal future with power derives from the stair-step idea (Figure 2), which stimulated the forward information flow in that a shared vision help people on the stair to tolerate the near-term unknowns.

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Making Change Popular

The conceptual framework (Teerlink, 2000) Lee outlined was based on the mathematics of change, providing an approach to making change welcome.

Change = (E*M*P) > Resistance

E=Engagement, M=Model, P=Process

The need to do things differently drives people’s engagement.(E) The Vision of ideal future provides a clear goal with the proper model giving the reality-transformation.(M) Approaches to make change welcome ,stepping toward the clear goal.(P)

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Structure for Information Flow

With the fact that Harley could not afford another three years of only incremental change, management team agreed to adopt the one-year contract that afterwards proved to be beneficial for both the union and management to take the risk. Demanding for establishing the appropriate relationship among the unions, between the union and the company together with feedbacks from the stakeholder, customer, shop floor worker along the tree dimensions: quality, financial performance, interpersonal relations turned into the catalyst of producing the Joint Vision Process.

The information flow unfold the process by combining the two perspectives from both union and nonunion together, with negative and positive pressures, limited time but also stimulus to the process, brought by the one-year contract.

Joint Vision Process

Joint Vision Process (Figure 3) was the first step in the journey. The purpose is to jointly create the company s vision between the Union and Management. Individuals from the two groups formed their own perspectives toward vision for the company and the union-management relationship which then combined into a joint vision.

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In producing a final Joint Vision, a three-day session called “the May Big One” was held at the Ramada Inn in May 1988. There is one and only rule that nothing would be included in the final vision statement that wasn’t the product of complete consensus. This rewarding process carried out through a continuing dialogue, with participants showing a sense of personal ownership in company matters, enabled this switch, rather than change from Point A (my ideas) to point B(my company’s ideas) through a series of steps (“my institution’s ideas”, “my site’s ideas”).

The proxy is community since local and specific cannot be generally accepted. The “conference committees”, set up by ROI with members including the most senior managers and labor leaders from both union and nonunion, aimed to address apparent disagreement. What continued was the setup of the Joint Leadership Group, which was created as a network of temporary structures, composing union and management leaders, to help move the Joint Vision Process forward. And Local Site Committees, responsible for the identification of “barriers” had three guidelines to decide the work of problem solving, which are

1. Problems and issues would be dealt with by the people most directly affected and knowledgeable.

2. Only the top-level joint group could identify issues as off limits to the Joint Vision Process.

3. Any joint group could form task forces to do pieces of work within the charter of that joint group.

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Temporary governance structure (Figure 4) of the process was then seated to hunt down barriers, giving fairness to those people who have not yet been directly involved by reaching a numerical balance between unions and management.

Modeling Appropriate Behaviors

The “Operational Committee” was established by individuals reporting directly to members of the Executive Committee to make executives’ actions visible and support a culture of collaboration in the embryonic form of Best Practices, enabling combination of Tacit knowledge interaction from different levels.

The two consultants, Bob and Lee, provided a series of recommendation after observing a number of committee meetings. They pointed out that one facilitator was needed in the committee to help train the members with the guidelines and ground rules, and those participants should contribute to the topic only at the meeting, and also third-party attributions had to be avoided.

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It is troublesome in the late period of identifying and addressing barriers to the Joint Vision and hundreds of barriers lead to the negotiation between the two sides—union and management, ending with a new two-year labor agreement.

The process went well from mid-1988 to early 1990, and then came the unavoidable suspension because of lacking comprehensive training of leaders from both the union and the management sides, following by the discussion based on six specific issues.

Margaret Crawford, a member of one of the salaried groups, says that going right to the barriers was probably a mistake and that focusing on opportunities could be a better idea. Since it really takes time to build relationship, active steps should be taken to help people in the organization change. All in all, the Joint Vision Process was a painful process but it did give the right direction, setting the foundation of the whole journey.

Leadership involved creating opportunities, Harley’s Executive Committee moved forward to expand awareness of senior management of the two separate organizations, Harley and Holiday-Ramble, through activities mainly focus at debate stimulation, learning sharing and organizational cohesion, which was the first time that all top executives from both HDMC and HRC come together in a working session.

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The “learning organization” began among the groups with the following six objectives (Teerlink, 2000):

Provide insights and concepts to assist senior management in leading their organizations more effectively

Demonstrate continuous learning as a way of life

Get better acquainted

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Exchange ideas and information

Elicit ideas for the content and process of future sessions

Have fun

After an effective icebreaker–the Tinker Toy exercise in which the five-member teams comprising purposely mixed employees from HDMC and HRC, in team, design, build, and “sell” a Tinker toy, all participants came to the next activity, where no challenging ideas were provided by the groups toward the extreme thought given by the guest speaker James Brian Quinn. The participating managers had unexpected flat, one-dimensional reflect in spite that a high level of camaraderie was promoted through the enjoyable experiential learning in which people had energetic and positive responses to the skits.

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Rich was unsatisfied as people’s habits of getting the answers from on high lead no different new ways and the unawareness of ” Participation is an important element of Harley’s long-term success and must be so recognized by the operating units.” (Teerlink, 2000). And Lee compared the awareness expansion to a watershed event, saying that it broke the egg open a little.

The Business Process

Business process is defined as a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. … Taking a process approach implies adopting the customer s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers. (T. Davenport, 1993)

As a brushfire of change, the Joint Vision Process received various feedbacks among different level of participants. Problems exist in both pace and process. Channeling energy released through the awareness expansion sessions, the Joint Vision Process, the beginning of organizational learning together with related initiatives called the need of structures. Business Process (Figure 5) is such a device that predated the Joint Vision Process, helping define much about the way Harley does business today. The distinction between Harley’s previous improvement programs and the Business Process is that the latter automatically expand and extend the productive programs.

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Below are the three components of the Business Process: the corporate “Umbrella”, the operating unit, and the work unit (“My Area”)

Corporate “Umbrella”

In building the umbrella — package of ideas including values, issues, and stakeholders, one-word “signposts” is agreed in the Executive Committee to summarize the following four areas: How will we behave in our interactions with others? (Values) What is truly important to Harley? (Issues) Whom does Harley serve? (Stakeholders) How will we describe success in the future? (Vision) (Teerlink, 2000)

The values to determine our interactions with others are based on the short list presented by Dr. Alex Horniman, an ethics professor at the University of Virginia s Darden School, which are to tell the truth, to be fair, to keep your promises, to respect the individual. And to encourage intellectual curiosity was added as a fifth value by the Executive Committee. Five issues including Quality, Participation, Productivity, Flexibility, and Cash flow are focused by the group to determine what kind of company Harley was supposed to be. Stakeholders, whom the Executive Committee defined as “anyone inside or outside the company who has an interaction with Harley’s products, services, or representatives.” comprise six parts: customers, employees, suppliers, shareholders, government, and society. Shareholders were replaced by investors due to its restriction on unfolding all of those who backed Harley with money and other assets. The vision, including key ideas of the importance of relationships, the imperative for action, and the international nature of the company’s future markets, was defined together by all senior managers and was proved to be the driving force of the forwarding overwhelming business process. Two sentences captured the vision before 1994: “Harley is an action-oriented, international company–a leader in its commitment to continuously improve the quality of profitable relationships with stakeholders(customers, employees, suppliers, shareholders, government and society).” and “Harley believes the key to success is to balance stake holders’ interests through the empowerment of all employees to focus on value-added activities.” and then was changed to “To be a leader in continuous improvement in mutually beneficial relationships with all our stakeholders.”

Operating Unit

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A three-year plan, as an attachment of a cover note Rich prepared for the December 1987 board of directors meeting, including a mission statement, operating philosophy, and selected strategies, was the foundation of the Business Process.

The Executive Committee attached great importance to flexibility on the mission statement: “Preserve and perpetuate the Harley institution through continuous improvement in the quality of our goods and services, and achievement of our financial goals, Provide motorcycles, accessories, and services to motorcycles in selected niches, provide the general public brand-identified products/services to enhance Harley’s image and attract new customers (Teerlink, 2000).

Engage in manufacturing or service ventures that can add value (not only profit) to the motorcycle business (1991) and “We fulfill dreams through the experiences of motorcycling–by providing to motorcyclists and to the general public an expanding line of motorcycles, branded products, and services in selected market segments” (February 1999)

Objectives: How do we measure success?

Operating units are guided in general terms by objectives which are traditionally stated in financial like “develop the global market potential of 100,000 units by December 31, 1996, and develop the capacity to meet that demand while continuously improve quality”. It is suggested by the Executive Committee that no more than five objectives should be adopted in each operating unit within Harley. Strategic plans, guiding operating units in specific terms, are based on a three to five year time horizon, compared with that of objectives, mostly a five to ten year time horizon at Harley and are changed corresponding to different objectives in various periods of time.

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Work Unit (“My Area”)

The philosophy embedded in the mind of Harley’s people is supposed to be “doing the right thing naturally and organically but not in response to some external crisis”, which can be enabled by tools for individuals and groups to operate independently, without continuous guidance from corporate, balancing “local” responsibility with the larger needs of functions, divisions, and departments. Three key points here:

1. A “work unit”, today operating as “natural work group”, would map out plans annually according to the stages of the annual operating plans.

2. An employee-driven Performance Effectiveness Plan (PEP) was developed for every employee to understand plans, in both strategic and operating level, and then to make personal plans correspondingly.

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3. Inside the Two-way communication, managers act as knowers, to whom people provide their information and go for answers.

Managing business process enables organizations to be more efficient, more effective and more capable of change than a functionally focused, traditional hierarchical management approach. In business process, knowledge is created and transferred throughout the organization by tools such as lessons learn database, best practices and community of practices. And since the transfer of business practices is viewed as a source of competitive advantage in knowledge management strategies (Alexandre P., 2007), business process provides Harley the platform to build the core advantages of the company—“world class” system through best practices originated from the “Operational Committee” —the behavior model(Teerlink, 2000).

Organizational Structure

Organizational design is one of the factors that will greatly influence the implementation of a knowledge management process (Enrique Claver-Corte s, 2007). Organizational structure which have high hierarchy and very bureaucratic tend to have low innovations from the employees. Usually the structure is command-control, not much space for the employees to express himself.

Harley s manager and union members found that organizational structure gives huge barriers to realization of company s future. Rich changes Harley s organizational structure from command control decision making into employee-driven and minimal structure. Employees have opportunity to contribute on deciding specifics boxes and lines for the organization and the structure should derive from real organizational functions.

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Rich and colleagues come up with idea about circle organization. The philosophy behind this circle organization was to get the right people, together at the right time, to do the right work right. (Teerlink, 2000). It represents shared leadership and cross-functionality at work in Harley.

The circle organization based on three core processes, Create demand; include marketing, sales, public relations, customer services and styling. Produce product; include manufacturing, engineering, purchasing, logistics, etc. Provide support; include finance, HR, legal, information services, etc. And leadership and strategy council (LSC), its coordinator of other three circles.

Figure 6 shows complete picture about the circle organization. Arrows pointing to stakeholders area means it s the external focus for the company. Meanwhile, arrows pointing across the circle indicate recognition of interdependence. The scheme encourages employees to seek the right people to work with in order to get the work done. The command-control position was replaced by the coach or facilitator in each group. Employees communicate and share knowledge inside and between the circles, knowledge buyer and seller change their idea how to solve a problem, new ideas often generate during the discussions.

Employee Engagement

One of factors influencing successfulness of Knowledge Management initiative is employee s engagement to the organization. When employee feel the organization is belong to them and their contribution is recognized by the company, employee will be encouraged to share their knowledge and actively participate to the company s business strategy. Bob Hayward in his website shares some benefits of employee engagement in the organization (Hayward, 2010):

Better performance Knowledge worker whom engage in his job tend to work smarter. They always looking for ways to improve their performance. Work in effective and efficient way. It means better quality, innovations and lower cost.

Better communication

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Engaged employee communicate to share ideas, information and knowledge. Knowledge sharing is in his blood. He actively plays roles in knowledge market.

Greater customer satisfaction

Customer is a king. Engaged employee will seek how he could meet customer needs. Customer satisfaction is his target.

Better team working

Employee has personal responsibility to deliver business agenda. He works in the team to achieve organization s vision.

Greater commitment

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Employee has a pride and really cares about the company s future, because company s future is also his future.

Lower employee turnover and greater ability to recruit great people

One of serious problem in organization is high employee turnover. Without proper knowledge management system, knowledge could walk away out the door together with employee. Organization has to reinvent the wheel every time employee goes out. For engaged employee, they do not easily leave the company. They feel happy working there. Good employee usually has good networking; it will lead them to propose the company great people to join them.

Rich and his teams clearly have vision how to engage their employee to the company. Harley did some activities to encourage the employee engagement:

Established Performance Effectiveness Process (PEP)

PEP gives individual opportunity and responsibility to determine function of his work unit and how he can make difference in company s future. PEP is the smallest participatory process entity of company s vision that will evolve iteratively and it will lead to the creation of whole company business process. PEP can be used for several activities, such as:

o Performance Evaluation

One purpose of performance evaluation is to see strength and weakness of individual. Harley involved the employee on defining their own performance measure and see individual from other perspective. Employee should know his position based on others judgments and understood how their colleges perceived them and how to improve their performance in the eyes of their college. Based on this evaluation, company will extract strength and weakness of their employee. So the company will know which subject they should concentrate to develop.

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o Career Development

PEP was tailored by the HR department to become basic for career development. Many employees like status quo. When company trying to make major cultural change, they do not want to change and hate to be changed. Integrating career development into PEP, it will insist the employee to change their habit. If they do not want to change, then he will be the first employee who will leave the company when layoff comes.

o Maximize employee participation.

Individuals know clarity how he can make a difference. It s good for company as well for the individuals. With PEP, employee have to give input how to improve them self as well as the company. In their employee handbook, Harley Davidson commit to create a working environment designed to maximize employee contribution and provide resource and opportunities to develop their knowledge.

PEP does not succeed in its first month or even first year of implementation. It emerged over several years, with continuous improvement in all aspects.

Compensation

The second way how Harley engaged the employee is by giving them compensation. Harley compensates people not only from performance but also on how they demonstrate their capabilities. Harley found that they should not compensate the employee only with money. Because their motivation is not only money, indeed we should have much money to do that, said Lee. Harley has two visions on giving compensation. The first is to make a larger part of employees’ compensation at-risk or variable and the second is to compensate all employees in essentially the same way by creating standard pay components across the company.

Listen to the employees

Harley Davidson is an employee driven organizations. They were changing their culture from command control top down company into more participatory. Most people want the same thing from their company. For them working motivation is not only money. What Harley s employee really seeks are rewards and recognition in non-monetary realms. They seek opportunities to be heard, organization s evidence of contribution, involvement in decision making and problem solving process. They want to know every single aspect in organization and understand what is going on. Employee seeks total experience in their working place.

The company really listens carefully and takes necessary action to response the employee s need. Harley s facilitate sharing session on what they expect in the organization. The employee proposed 49 things to the company. Some of the items can be done immediately and the others need approve from the board. But Harley really engages to his employee satisfaction, and this will bring the employees to do the same thing for the company.

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Lifelong Learning

Learning organization is organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together. (Senge, 1990) Some benefits of becoming a learning organization are:

Maintaining levels of innovation and remaining competitive (McHugh, 1998)

Being better placed to respond to external pressures (McHugh, 1998)

Having the knowledge to better link resources to customer needs (Wikipedia, 2010)

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Improving quality of outputs at all levels (Wikipedia, 2010)

Improving corporate image by becoming more people oriented (Wikipedia, 2010)

Increasing the pace of change within the organization (Wikipedia, 2010)

Harley s leaders, both union and management leaders have commitment to encourage and facilitate learning and intellectual curiosity in the organizations. Intellectual curiosity is result of looking somebody else doing the task and reason why he doing in that way. Company serves the employee by providing skills and knowledge they need.

The most significant step toward Harley learning culture was Awareness Expansion III. One of participant said We re learning from each other, and we re increasing our understanding of our respective business . Successfulness of AEIII leads to establishment of AEIV. AEIV main purpose is to learning from each other. Employee divided into 5 groups and they present on one particular topic. They change knowledge when the presentation was held. Working together in this way, give them a new experience of learning. Based on Lee opinion, AEIV is a huge step of Harley s journey because the group discussion is led and facilitated by themselves, not by professional.

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Another achievement in AEIV is, they collaborate with MIT-based Organizational Learning Center (OLC). This Research group headed by Peter Senge, he is an organizational theorist and consultant. Peter Senge was the author of The Fifth Discipline book. Rich and Lee had read the book and interest to implement his idea on how to become a successful organization. Senge proposed five disciplines about successful organization, which are: personal mastery, mental models, shared visions, team learning and systems thinking. Senge s sights were aligned with what Harley s doing lately.

By working together with OLC, Harley wants to emphasis lifelong learning for all employees. To support this program, Harley provides some formal learning program to its employee.

Harley Davidson Leadership Institute

Tuition reimbursement programs at Graduate and Undergraduate levels

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Degree Program with Marquette University

Lifelong Learning Centers

Motorcycle U – Harley Davidson University

On creating the learning concepts, they were involving all the stakeholders. Because the root learning concept built based on old Chinese proverb

Tell me, I’ll forget

Show me and I may remember

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But involve me, and I’ll understand

To decide specific training and education, management and labor jointly adopt Learning Maps approach developed by Perrysburg. By using this Learning Maps, the employee come up with four topics that they need to learned: our market, the business process, our processes and the money cycle. All these topics are compelled to help every single employee understand the company’s critical business issues in the same way.

Communication

Achievements reached in Communication

As stated by Rich and Lee at the beginning of the journey, the umbrella business process was serving to ensure that everybody had the appropriate level of information as defined, to allow them to do their job for the organization. However, the results from two baseline audit surveys on the employees in 1991 broke the leadership s expectation after their more-than-three-year effort on improving the relationships and communications within the organization. Shocked by the feedbacks from a majority of the employees, the leadership recognized the failure on communication and started to find and fix the problems. Aligning with the organizational strategy, transforming the company from command-and-control model to a totally new way based on good communication, Rich and Lee thoroughly abandoned dictating method and broke the assumptions of some senior managers and supervisors on employees perspectives about information and knowledge. Later, they came up with a new approach to improve organizational communication by asking the employees what they need to know and trying to meet the needs. Due to the executive of the new approach and the establishment of Harley communications department (which had a risk of setting the communication situation back to the command-and-control era, as worried about by Rich, but truly facilitated the organizational communication and drove the efforts on better communication), the employees curiosity on information in a big picture – By design, they owned the big picture. They therefore took responsibility for figuring out which piece of that big picture they would communicate, to whom, and in what form. (Teerlink, 2000) – was dramatically raised and information and knowledge finally began to flow efficiently throughout the company and among plants in different locations.

Although the achievement Harley obtained on organizational communication still cannot be regarded as a huge success, it did lead to favorable outcome in the organization s coming partnering project. The roots of partnering, as described by Rich and Lee in the book, can be traced back to the crisis in the late 1970s and 1980s.During the hard time, Harley s union leaders and members worked collaboratively with management to save the company. However, once the crisis was gone, the collaborative work began to fade, which was obviously not likely to the company continuous improvement in the new marketing environment. And in the year of 1994, the increasing marketing demand urgently called for an expansion of manufacturing capacity which was not possible to be realized without partnering. Due to the endeavors mainly made by Harley s leadership, Joint Partnership Implementation Committee (JPIC) was founded and Kansas City plant started up as a great outcome of partnering.

Factors Leading to Success of Communication

According to Thoma