Harley-Davidson Motor Company organizational design: The road to high performance

Organization Development Journal, Spring 1998 by Young, Jeffrey, Murrell, Kenneth L

Introduction

During the past century, the application of Organizational Development (OD) principles to corporate management have resembled the ebb and flow of the tide. Conservative to progressive, traditional to radical, one minute to one lifetime, etc., are all adjectives that can describe corporate efforts to improve company effectiveness. Yet, with such diverse approaches, the evolution of American management encountered a force destined to hinge directly on its survival - the ability to adapt and change within the global market place. This ability, central to the many facets of OD, has evolved over several decades and is responsible for allowing some companies to succeed where others have failed. One manufacturer, whose application of these principles essentially saved it from bankruptcy, is the Harley-Davidson Motor Company. Harley-Davidson not only "turned around" their manufacturing operations and dramatically improved production and quality (the topic of several case studies over the past decade), but continue to successfully apply OD principles to manufacturing and grow in their quest to learn and stay competitive.

As a result, Harley-Davidson - specifically the final assembly plant at York, Pennsylvania, has embarked on a new course of OD excellence - the design of a High Performance Work Organization. It is this design that holds such a great potential for learning. This article, written by a recent MBA graduate from the University of West Florida, who witnessed and aided in the formation of this design (exclusively at the York, PA site), and his professor mentor, relates the experiences and learnings gained from observing and helping with the design process first hand. The article furnishes an especially significant learning case study rare in manufacturing today - the actual creation of a transformational organization. This study attempts to show how OD approaches to manufacturing methodology can improve an organization's production process.

High Performance Work

Organization (HPWO)

History: The productivity triad

Harley-Davidson, over the past decade, has worked hard to exemplify the principles of OD and can be considered a top candidate for a truly transformed corporate culture. The company, no stranger to the need to compete in a global market place, has grown and effectively established a business that is both strong and profitable throughout the world. This was not always the case. During the mid 70's and early 80's, Harley-Davidson suffered from a reputation of poor quality. This reputation, combined with a Japanese influx of low cost, reliable motorcycles, convinced management that drastic steps in production efficiency were needed to respond to the new competition. Therefore, in March of 1981, Vaughn Beals (an executive of the then parent company - AMF), along with a group of motorcycle division executives, bought back the company from AMF and instituted a new management philosophy. This philosophy became known as the Productivity Triad. The Triad, described in Peter Reid's Well Made In America - Lessons From Harley-Davidson on Being the Best, consisted of: Just-In-Time inventory controls (re-named MAN (Materials-As-Needed)), Statistical Operator Control (based on Deming's Statistical Process Control), and Employee Involvement (EI). The integration of these three methods into manufacturing initiated Harley-Davidson's renewed quest for improved quality. These concepts provide the basis for this study and serves as an extremely valuable reference point to examine high performance.

Partnering (Union/Company)

With the implementation of the Productivity Triad in the early 1980's, Harley-Davidson soon began to see the fruits of their labors. In 1987 they earned a record net income of $17.7 million on sales of $685.4 million. In addition, Harley-- Davidson market share in the U.S. super-heavyweight class was 40 percent - eleven points higher than that of Honda, their closest rival. (Reid,1990). Despite these numbers, Harley-Davidson was not satisfied. Richard Teerlink, CEO, recently said, "More companies fail in the crisis of success than in the crisis of failure." This realization that global competition will not allow complacency was also evident to union officials. George J. Koupias, IAM International President (International Association of Machinists and Aerospace Workers) stated in 1995, "The North American economy is an economy of transition. Clearly, we must transform our workplaces in order to sustain them." (HPWO Field Manual,1996). Their combined solution: Partnering. Partnering, or the shared relationship between union (employee) and management in the operation of a company, was created in order to provide true worker participation at the very core of manufacturing. This concept, which originated with the Employee Involvement segment of the Productivity Triad, evolved as a result of a commitment by the union/employees and management to work together to improve the overall operation of the company. These highly motivated individuals set in motion a system to encourage teamwork on the shop floor as well as in the corporate board room.