Manufacturing Systems: Foundations of World-Class Practice (1992)

NANCY L. BADORE

The history of industrial development is replete with challenges that have changed the direction of individual companies as well as entire industries. Firms and institutions that were operating successfully were forced to find imaginative and innovative new ways of operating or face the prospect of extinction. New ways or new technologies were needed to accomplish what had previously been thought impossible. The past decade—or perhaps decade and a half—will undoubtedly be noted as one of these critical periods in industrial history. Industry groups and firms that had dominated the scene since World War II were suddenly confronted with a new and very different challenge—worldwide competition. Reasonably inexpensive transportation and highly reliable communication systems, combined with new approaches to managing and controlling the manufacturing enterprise, enabled manufacturers in all segments of the globe to compete in markets that had previously been reserved to those who manufactured where the product was marketed. Furthermore, the plateau on which the competitive battle was joined focused not just on costs but on quality, responsiveness, and flexibility—all in the name of satisfying a reawakened interest in providing customers with what they needed or demanded.

While no unique set of elements properly describes all the companies or industries that were challenged by this wave of world competitiveness, many firms found that they suffered from some of the following characteristics. The customer was not recognized as having the determining influence on

product attributes or performance; tensions existed among various units and between various levels of the enterprise; no mechanism existed for setting priorities among the many desirable corporate objectives; suppliers were treated as a necessary evil to be tolerated but not trusted; and management and labor were confrontational in attitudes and objectives.

Firms that manifested these characteristics, even though they were common industry practice, found themselves at a distinct disadvantage to competitors who emphasized the customer, provided a product of high quality, and maintained an internal working environment that was stimulating and cooperative. It is not an overstatement to say that many U.S. firms were confronted with the highly unpleasant alternative of changing their ways of doing business or facing extinction. It was in this environment—the new competitive environment of the mid-1970s to early 1980s—that U.S. firms turned their attention to the development of employee involvement.

The term employee involvement means inclusion of the employee in the operation of the system. But it is the creation of the process—the tools and the means—by which this is accomplished that is the topic of this discussion. The two principal objectives of employee involvement are as follows:

1. To create, share, and make “real” for all employees a vision of the goals for the overall enterprise as well as for each organizational unit.

2. To seek and share the knowledge possessed by individual employees in achieving that vision.

This cannot be viewed as a grand philosophic statement of principle. Rather it must be an operational statement of a process that calls forth a new level of participation by the employees. This statement must serve as a guide by which each employee can support the shared goals of the enterprise while at the same time it serves as a standard against which the appropriateness of alternative actions can be assessed.

Employee involvement recognizes that individual employees have the best opportunity to understand and appreciate the problems that are unique to their positions; that the employees also have the greatest insight and experience in suggesting ways of solving those problems. It does not directly follow, however, that a mechanism is available by which that knowledge and experience can be put to use in solving those problems. This is

the function of “employee empowerment.” If proper advantage is to be taken of the knowledge that the employee possesses, it is necessary for an organization to empower the employee to implement the improvements that they know to be necessary. By so doing, the enterprise is making the employee an integral part of the process of staying competitive.

Although size of the enterprise is not a prerequisite for being successful, certain aspects of “smallness” clearly make some tasks easier to achieve. Among these are the ability to achieve good communications among all employees, a common understanding of corporate and organizational objectives and goals, and a greater chance that the managers know personally the employees who must be involved in problem solving. The role of employee involvement and empowerment is, in a sense, the means by which a large organization attempts to achieve many of the benefits that are generic to the small organization. Although certain organizational structures and systems are required in larger organizations, the effort to accomplish meaningful employee involvement and empowerment is directed at preventing the organizational structure and systems from providing barriers to finding the best solutions to problems. Furthermore, the involvement process provides a means of humanizing the organization and maintaining participation by individuals at all levels—a process that is intended to lift the organization to new heights of competitive performance through the best use of the skills and interests of the individual. It is the means by which continuous improvement can be made an operating goal for all levels of an organization.

One might question, of course, the nature of the stimulus for developing employee involvement and empowerment. It would be pleasing to assert that recognizing the importance of employee involvement and empowerment was a natural part of organizational maturation and that the organizations saw it as a natural way to improve their performance. In fact, this was not the case and it was embraced, sometimes reluctantly, often belatedly, when the competitive crisis became so stark that management and workers alike were willing to take what was viewed as drastic action in order to survive. Industry appears to be no more immune to crisis management than any other segment of our society.

The process by which firms and enterprises achieved these changes has not been easy. It has been a difficult transition from the hierarchical structure, dominated by managers who “know what is best” for the organization and who expect others to do whatever task is asked of them, to a more open and sensitive environment in which people are willing to listen and respond to what they hear.

In discussing some of the issues and barriers that exist in accomplishing the transition to a more “people-oriented” company, I will draw on my experiences at Ford Motor Company. For simplicity, these experiences are presented as occurring in three distinct phases, but it should be realized that no such simple demarcation actually existed. In fact, some element of each phase was under way at all times.

I will try to offer some insight into the problems we experienced and the lessons we learned. The process of change is never easy for an organization. For a large, complex organization, it can be particularly traumatic. A retrospective assessment of the process and its results —after many of the frustrations have diminished in importance with the passage of time—can only be viewed as immensely valuable to the organization and to the people who have participated in it.

One should recall that the late 1970s was a period of economic downturn, in part a result of OPEC actions. It was also a period of severe labor stress with frequent confrontation between labor and management. This was the environment that provided the stimulus for experimentation and change. The change sought was originally cultural—improvement of the relationship between union and management within the plants. The vehicle to achieve the change was to be the establishment of quality circles, a somewhat unoriginal concept at the time, given that the quality circle movement was being imported widely from Japanese manufacturers.

What differentiated the Ford experience from other quality circle efforts at the same time—efforts that consistently ran out of steam —was the fortuitous combination of several elements. These included timing—the near-depression that hit the manufacturing sector at the same time the project was launched; the care taken to prepare each plant, one at a time, to install quality circles; and the vitality that was inadvertently built into the process when age-old adversaries —union leaders and line managers—were “married” to provide joint oversight to the change efforts. Perhaps the most critical element of all was the fact that quality, selected as the overarching goal for these joint efforts largely because it was noncontroversial, would turn out to have important consequences for the competitiveness of the company and the union alike.

In 1979 Ford's U.S. manufacturing organization consisted of some 80 plants and parts depots varying in size from several hundred to several thousand employees. Organizing to manage change on this scale meant applying concepts devised by researchers and thinkers who dealt with much

smaller organizations. We could find no precedent for a change effort as extensive as the one we contemplated.

In this first phase of change at Ford, a formal organizational development model was created centrally to be implemented in a decentralized fashion—that is, on a plant-by-plant basis. This model drew heavily on the theoretical work of Walton (1969) at Harvard and of Beckhard and Harris (1987) and Schein (1969) at Massachusetts Institute of Technology. It drew also on our analyses of why so many of the attempts to install quality circles in the United States were failing in the early 1980s. The model presented, almost simplistically, a series of five steps to be taken by the leadership of an organization before embarking on a significant change, that is, before launching quality circles or “Employee Involvement Groups.” We defined “leadership” as the senior-most positions in the plant on the company and union sides. That is, the leadership of the employee involvement efforts was to be provided only by a pairing of the plant manager and the union leader.

Creating a model, however theoretically valid and practical in its intent, was one thing; getting people to use it was another. “Marketing ” the concept of employee involvement—and the business and political rationale underlying it—was a crucial part of the change process. The job of speaking on behalf of the change effort was undertaken by two people with high visibility and credibility in the plants: Peter Pestillo, Ford's vice president for labor relations, and Don Ephlin, vice president of the United Automobile Workers' Ford Department. For several months, on request, they jointly visited plants to hold informal meetings with line managers and union officials. They accomplished two things at these events: they modeled an unprecedented camaraderie and they educated their audiences about the link between business outcomes and the ways business is conducted.

At the end of 1979, several plants had volunteered to sponsor the first pilot employee involvement projects. These living laboratories were to teach the rest of the company about the real issues underlying a major change effort. We found, for example, that it was not difficult to enlist volunteers from management to improve quality or from the union's political hierarchy; nor was it difficult to enlist volunteers from the ranks of the people working in the plant. What was difficult was handling the sheer workload associated with implementing improvement ideas once the problem-solving groups began to meet and work.

Only belatedly did we discover that quality circles reverse the work flow of the traditional hierarchical organization: ideas for implementations were suddenly flowing upward from the broad base of our plant pyramids. There is much talk about management sincerity as the crucial factor in efforts to change quality. We were to learn that it is even more a question of being organized to handle the incremental work flow associated with

putting new ideas to work: reviewing group recommendations and assigning priorities—including capital allocations when necessary—and responsibilities for implementation. Communicating back to the Employee Involvement Groups the final determination on suggestions, the status and timing of projects stemming from the accepted suggestions, and why certain suggestions would not fly, also took a tremendous amount of coordination and (for us) new sensitivities and skills.

Nonetheless, these early projects prevailed; they achieved remarkable results in improved quality and various organizational (and union) measures of payoff. By the end of the first three years, quality had been improved up to 40 percent by external industry measures. The projects, moreover, have persisted and have expanded and spawned many other significant initiatives.

It might be instructive to enumerate some of the lessons we learned from this early experience:

1. A business focus is essential in the early stages of a process this size—in our case the focus was on quality.

2. The goal must be viewed as worthy of achievement by all involved—it was this worthiness, not loyalty to management or union, that earned the time and commitment from the initial volunteers.

3. Every level of the organization has a crucial role—from the chairperson to the average worker on the factory floor. Leaving levels out can subvert the process.

4. “Early experimenters” (the first volunteers) in these change efforts are crucial to success. It will be their results, not the concept itself, that will attract the interest and support of a critical mass of the organization.

5. The organization must have the capability to learn from its early successes and failures and to transfer this knowledge to other elements of the organization.

6. Such efforts are sustained when they are tied to competitive improvement —ours has lasted through changes in union leadership, plant managers, vice presidents, and business cycles. “Cultural change for the sake of change” would not have lasted this long.

The early experience at the plant level demonstrated a number of things. First, it was clear that an immense reservoir of good ideas resided with the employees. Second, it was necessary to modify significantly the existing relationships among management and labor if we were to be successful in tapping this resource. Third, the process of change that was being pursued

could not be successful if it was limited to the local plants and concerned only with the unionized workers and their management.

The second phase in the process concentrated on bringing the middle management group of the operation into the process. With some successes to point to at the plant level, we found it possible to move somewhat faster in the second phase. The techniques were not all that different, however. A series of business conferences and workshops was organized for teams that made up the total business group. These meetings involved middle managers who shared common issues, for example, management teams from plants that produced similar products and the entire executive body from division headquarters who oversaw that constellation of plants. This provided an opportunity—even the necessity—for a role reversal with the plant managers now modeling and sharing with the headquarters “bosses ” what they had learned at the plant level. The headquarters personnel, in turn, found themselves responsible for articulating the business vision and competitive outlook for the enterprise as a whole, thus binding the plant management teams to the goals of the larger enterprise.

The meetings were held off-site in an environment of open discussion, free exchange, and constant debate—always with a coordinator who had an earlier successful experience in the process. Typically, five days of continuous immersion in the business problems was required. The results of these meetings might be briefly summarized by one phrase—improved understanding. The participants came away with an improved understanding of the business issues, their customers, the competition, the problems and constraints faced by others in the organization, and the potential benefits of the employee involvement process. Further, the participants discovered that the opportunity to discuss and debate the issues in this setting opened a wealth of new communication channels.

More lessons were learned from these experiences. Two were perhaps most important:

1. Involvement of the entire “system” in the process greatly reduces the time needed to accomplish a change in culture.

2. Debate is necessary to accomplish change—it both clarifies the issues and is an essential element in obtaining genuine commitment from everyone as to future actions. The building of this genuine commitment and understanding stood in marked contrast to the shoulder-shrugging compliance that had, in the past, been mistaken for agreeing with “the boss.”

As the process proceeded and included more and more people throughout the organization, it became clear that a continuing mechanism was needed

to provide a meaningful involvement of the senior management in this process. This led to the establishment of the Ford Executive Development Center. The center has the responsibility to provide an environment for bringing together the company's executives from around the world to develop a consensus on company strategies and to focus on the customers and their needs and wants. The format of the group sessions is similar to that used in the earlier stages of the program—a site away from the office, groups of 50 or less, a mixture of people from various levels of the organization worldwide, participation throughout the five days by at least three of the corporate vice-presidents, and a concluding session in which company issues are debated and discussed with the chairman or the president of the company. During the week, speakers from outside the company are also invited to challenge the group to think differently about particular problems.

As we found in the earlier phases of this effort, the lessons we learned are not revolutionary. It is critically important, however, that we continue to operate in such a way that those lessons are not forgotten. Perhaps the three clearest lessons from Phase III are as follows:

1. The executive development center provides a straightforward means by which senior managers can acquire a worldwide outlook about the business.

2. A greater openness has developed among Ford employees to new, even disturbing concepts necessary to our success in the future.

3. Debate and questioning of the status quo with the senior management is an important part of understanding and developing support for the worthiness and rightness of corporate strategic objectives.

An effective work force that is encouraged to search for ways of achieving continuous improvement is a key foundation of the modern manufacturing enterprise. Employee involvement in problem identification and employee empowerment that encourages the employee to take actions in creating a more efficient and effective system are critical to becoming world class. While it is not easy for large organizations to be “people oriented,” their ultimate success in meeting the demands of the marketplace requires a commitment and a willingness to search for new ways of solving problems. “Employee involvement” is one of the keys to achieving this. The process is never ending. Employee involvement must be constantly stressed, continuously practiced, and regularly evaluated if it is to become a foundation of the company's operating philosophy.