Organisational Learning in the Automotive Sector

Dr Penny West, Penny West

• Publisher: Routledge
• Year: 2002
• Print ISBN:
  9780415219860
• eBook ISBN:
  9781134601127
• Topic: Business
• Subtopic: Business General
• Index: Business

This book considers the concepts of organisational learning and the learning organisation, and critically examines their take up within the context of four contemporary work organisations in the European automotive sector. Within this dynamic environment, the pursuit and implementation of approaches that encourage individuals to learn and challenge existing orthodoxy are now dominant on the management agenda. Changes to processes, structures, cultures and the employment relationship per se.

1 Organisational learning and change in the automotive sector

Summary

This chapter outlines the context of the empirical research and provides an historical background to the nature of work and organisational life in contemporary organisations operating in the automotive sector. It identifies the distinct phases related to the employment relationship and work organisation that characterise the development of the sector, drawing upon the approaches adopted by producers in the United States and Europe. The entry of Japan as a leading agent of change to work practices in both Europe and the United States is discussed, in terms of the influence and transferability of its ‘lean’ approaches. In tandem with that, the simultaneous effects of the global nature of change characterised by flexibility, human resource management and excellence, are considered. The chapter continues with an exploration of what might be termed ‘post-lean’ developments, together with the future of the automotive sector itself, clearly increasingly operating within a global environment that is characterised by market saturation, mergers, alliances and new producers emerging from Eastern Europe and the Asia–Pacific region. In view of such increased competition and globalisation, it is clear that managing change and continuous improvement will be key issues, essential to ensure survival for contemporary organisations in the sector. The chapter concludes that the organisations most likely to survive will be those that engage the commitment of people to learn and innovate, thereby ensuring continuous improvement – provided that appropriate systems, structures and processes are in place for this to occur.

Background

Automobile production is the largest manufacturing activity in the world. It has a turnover of over a trillion dollars and employs ten million people; it is estimated that in 2000 the industry has the capacity to produce twenty-two million more vehicles than the world population wants or needs (The Economist, 10 May 1997). The industry has traditionally been at the forefront of innovation in work organisation and it continues to be the lead sector for the advancement of new work practices and organisational forms. The trigger for profound change in Western companies was the threat of their own collapse due to market maturity, over-capacity and the increasing penetration of established markets by Japanese producers during the 1960s, 1970s and 1980s. Whilst Japanese approaches to work organisation evolved over time, this precipitated a major crisis for Western companies in the sector that forced them to re-invent themselves in order to remain competitive.

This faced companies with two key challenges if they were to survive. First, they needed to learn new skills associated with new organisational forms developed in Japan incorporating ‘lean’ approaches. Whilst they appeared enlightened they also posed a threat to established Western organisation and management systems. Second, they had to ensure that people would embrace and adopt the changes. The key for success in this environment is seen as the ability to learn and change continuously; the key approach for achieving this is the creation of what some theorists and practitioners describe as ‘learning organisations’ that are capable of continuously transforming themselves to meet the challenge of change.

The emergence of Fordism: the first phase

The shift to mass production in the early part of the twentieth century characterised the first significant watershed in the development of work and organisational activity for society. Henry Ford established a system of vehicle production that was to be copied throughout the Western world in a variety of manufacturing settings. Again, after World War Two a second change occurred within the automobile industry that was to culminate in the development of ‘lean’ manufacturing, pioneered by Eiji Toyoda at the Toyota Motor company in Japan. As before, the impact and implications of the processes involved have spread far beyond the automobile industry. Indeed Womack et al. (1990) observe that the two changes within the industry during the century have led to fundamental changes within society itself.

Thus it is acknowledged that the development of the automobile has had a profound impact upon the social fabric of society. It changed the way people lived, worked, occupied their leisure time, and the nature of social interaction. To explore the past, present and potential impact of the automobile industry, an initial analysis therefore needs to be located in the development of organisations, together with associated work practices and management approaches. Thompson and McHugh (1995: 23, citing Goldman and Van Houten 1980: 108) suggest that from the beginning of the twentieth century business organisations were beginning to be ‘transformed from chaotic and ad hoc factories to rationalised, well-ordered manufacturing settings.’

The emergence of mass production – defined by Piore and Sabel (1984) as long runs of standardised products made on dedicated special purpose equipment by Taylorised, semi-skilled workers – characterised the shift from traditional, skilled craftsmen controlling the manner and pace in which work was executed. Mass production created a system that was dictated by the employer and was essentially outside the discretion of those at the point of production. It therefore not only required the establishment of a structural framework within organisations, but also required that a complementary management approach had to be developed. Thompson and McHugh (op. cit.) consider that changes involved systematising and stabilising both the practices of management and the organisation of the employment relationship. This resulted in hierarchies, division of labour, and new work patterns with a greater emphasis on supervision, measurement and reward.

The creation and manifestation of these changes have been well documented insofar as they emerged in the early part of the twentieth century as part of the classical approach to organisational design and management. Key contributors included Frederick Taylor (1856–1915), Henri Fayol (1841–1945) and Max Weber (1864–1920) and their ideas soon became apparent within the fast-developing automobile industry founded in the early part of the twentieth century in the United States of America by Henry Ford and William C. Durant. Burnes (1996) suggests that the American approach to industrial development owed much to individual entrepreneurship. Leaders such as William C. Durant of General Motors Company and Henry Ford played a significant role in establishing both the foundations for future practice throughout the world and the consumer society that was to become the expanding market for products. In 1908, when the automobile was priced out of the mass market, Durant anticipated one-million-car sales in the coming year (Sloan 1986). Similarly, Henry Ford’s intention was to create a car for rural America that was affordable to as many people as possible (Hodgson 1995).

The visions of both leaders clearly meant that the way cars were traditionally built, and the way workers built them, had to undergo profound change. What followed was the emergence of mass production and Fordism, with the moving assembly line transforming the daily lives of those involved in the processes. Moreover, the major impact of the assembly line and the key to mass production, Womack et al. (op. cit.) believe, was the complete interchangeability of parts and the fact that they could be simply and quickly attached to each other. The structural characteristics that emerged within organisations from the development of mass production meant that work had to be strictly controlled and monitored within clearly established parameters of authority, as Weber (1947) identified. The organisation of people on a moving assembly line meant that work tasks had to be closely co-ordinated, giving rise to the ‘scientific, rational’ approach to work and management pioneered by Taylor (1911).

Morgan (1986: 32) suggests that the notion of separating the planning and design of work from its execution was the most destructive aspect of Taylor’s approach, as it essentially advocated the separation of hand and brain. He quotes Taylor’s often repeated phrase ‘you are not supposed to think, there are other people paid for thinking around here’ to demonstrate that men were employed only to provide the energy for production and profit. The Fordist approach not only promoted the development of the interchangeable part but also the interchangeable worker by taking the idea of the division and separation of labour to its ultimate extreme (Womack et al. op. cit.). Workers performed only one or two tasks and required the minimum of training, often just a few minutes in duration. Their pace of work was controlled by the speed of the line and if performance was not acceptable, people were easily, and quickly, replaced. In terms of motivating workers, it was considered that money and material incentives were the only means to encourage people to work purposefully. Indeed, the strategy of better pay for Ford workers in Detroit in the 1920s (five dollars per day) ensured a plentiful supply of labour and the rapid establishment of a consumer society that was willing to purchase the finished goods. Beyond this, however, was recognition that a systematic approach to the organisation of work also demanded an approach to managing change that would encourage workers to ‘accept rather than reject or resist the introduction of new methods, techniques and technologies.’ (Burnes op. cit.: 25)

Within the context of the classical approach and the emergence of mass production, there was also acknowledgement by Fayol of the need to train and educate managers in order that they could prevent industrial unrest through fairer and more consistent management methods. In view of what would inevitably lead to the emergence of an increasingly divided labour force, this would prove to become an essential factor. As the manufacturing system produced workers who were narrowly skilled, so the roles of quality inspector, repair and rework specialists and industrial engineer, appeared on the factory floor. Additionally, sub-specialist roles also began to emerge within these groups. Hence, workforces became more divided within and between groups.

In terms of career progression, opportunities and scope for involvement were limited for the shop-floor worker in the Fordist regime. Neither were they encouraged to volunteer information concerning malfunctions or how operating processes could be improved. Nevertheless, over time, and with the emergence of specialist roles, those who developed skills in product and manufacturing engineering became the newly emerging professionals who could advance within their own specialist areas. As the automobile became more complicated in its design and manufacture, however, the division of labour within the engineering professions also became more pronounced (Womack et al. op. cit. ).

In the automobile industry in the United States, huge gains in productivity were made in the first quarter of the twentieth century and the entrance of General Motors, and later Chrysler, saw the differentiation of products to serve different parts of the market. It seemed that Henry Ford was not only responsible for diffusing the manufacturing approaches he had developed, but also for providing a classical management model for other entrepreneurs to follow. Thompson and McHugh (op. cit.), however, consider that the focus on organisational design, strategy and structure offered by the classical theorists is valuable but partial. They contend that the approach neglects the informal dimensions of organisational life, increasingly addressed by the emergent band of social scientists and industrial psychologists after the First World War.

The Human Relations approach

The Human Relations school developed in response to studies on work fatigue (Burnes op. cit.) and was fuelled by the wave of hostility generated among workers by Scientific Management. Over time it seemed to erode skills and demand a faster work pace through time and motion studies (Thompson and McHugh op. cit.). The philosophy of ‘one best way’ was criticised on the basis that human behaviour and industrial conditions generated their own complexity that also entered into the equation of the organisation and management of people. In tandem was the view that while ‘the growth of bureaucracy was gathering pace, so too was people’s antagonism towards faceless machine-like organisations where employees and ‘customers alike lost their individuality and became numbers’ (Burnes op. cit.: 46). In the United States, a drift towards ‘welfarism’ was apparent to combat these feelings, particularly in those organisations that provided houses, schools, medical facilities, shops and personnel departments for employees, in return for their loyalty and hard work. In Ford, there was limited provision of this nature, but considerable potential for its development through the ‘Sociological Department’ and the ‘Plant Protection Service’. These groups employed investigators who were able to visit homes to check on absenteeism and monitor families’ values and habits. In tandem were profit sharing schemes that were offered to those employees who were found to be ‘suitable.’ This interest was not philanthropic, Thompson and McHugh (op. cit.: 46) argue; rather it arose ‘from attempts to grapple with the recruitment and motivation problems deriving from the increasing size of the labour force and a new industrial relations situation shaped by declining loyalty and rising unrest.’

At this time, theorists were beginning to reject the notion that employees were motivated by financial incentives alone. The most significant research was that associated with Elton Mayo (1880–1949) and the experiments conducted in the Western Electric Company’s Hawthorne Plant in Chicago in the 1920s and 1930s. Despite contemporary criticisms, the results at that time indicated that it was not money alone that motivated individuals, but social relationships and positive interaction in the workplace were also significant issues. As Burnes (op. cit.: 49) comments ‘the focus of good management practice would shift to the importance of leadership and communication in order to win over employees.’

From the 1930s onwards, other researchers contributed to, and enriched, these findings. Chester Barnard (1938) identified the importance of recognising the organic nature of formal and informal relationships in organisational life and advanced the need for cooperative activity between managers and employees. Similarly, Douglas McGregor (1906–1964) illuminated an approach to management that was based upon positive (Y) and negative (X) assumptions of human nature. He advocated management adoption of the positive approach towards workers in order to achieve a response that encouraged identification with, and commitment to, organisational goals.

By the 1930s, corporate America was besieged by legislation that allowed greater control over markets and pricing. In return, there was acceptance of minimum wage and maximum hour codes, together with guarantees of union membership and collective bargaining rights. Organisations such as General Motors looked to the ideology of human relations as an approach to management that would support these changes. Ford, however, resisted their adoption for as long as was possible, maintaining the traditional approaches that promoted a reputation for ‘plant brutality for which the company had become infamous’ (Abodaher 1986: 72). It was not until 1946 that change occurred, when Henry Ford II ‘made it clear that while the Ford Motor Company had operated on, and exploited, the fear of its workers during the past twenty years, those days were gone’ (Abodaher op. cit.). He continued ‘cars could not be built as cheaply as when good human relations existed inside the company.’ Womack et al. (op. cit.) describe 1955 as the pinnacle of success for the American automobile industry with Ford, General Motors and Chrysler accounting for 95 per cent of all sales, and six models accounting for 80 per cent of all cars sold. They add, however, that all traces of craft production had disappeared in the United States by this time. Significantly, 1955 also marked the decline of the domination of the United States in the market, the main reason being that mass production had become commonplace throughout the world. European producers Volkswagen, Fiat and Renault were producing at a comparable scale to Detroit’s facilities. Womack et al. (op. cit.) confirm that European craft-producers such as Daimler-Benz had also made the transition to mass production.

The automobile industry: a second phase

Jones (1981) identifies a second phase in the global automobile industry that began in 1955. He sees it as characterised by incremental technical change, leading to a standardised product design and the refinement of the organisation of production on a large scale. In the United States, he suggests, the overall product design was stabilised by 1960 and this was accompanied by a slowing down in the rate of product innovation. This was not, though, the case in Europe, where market conditions were favourable and new innovations, including front-wheel drive and disc brakes, continued to be introduced throughout this period. Jones (op. cit.) suggests that from this time, car design in North America was not destined to be the dominant design world-wide. Indeed, from a global perspective, the centre of innovation moved from the United States to Europe and later Japan.

In terms of organisational design, by the 1960s the accepted view was that bureaucracy was being replaced with an approach that was more flexible and people-centred, although the development of a generic approach to managing was acknowledged to be piecemeal. Thompson and McHugh (op. cit.: 75) justifiably point out that ‘management is caught in the contradiction of needing to exert control and authority over labour to secure profitability in competitive conditions, while requiring workers to be motivated and co-operative.’ Using the motor industry as an example, they suggest that during the 1940s and early 1950s, most workers were treated as core, they were part of powerful trade unions and they were essentially co-operative with management due to post-war recovery conditions. The intensification of competition, however, provoked management to challenge wage systems, work group practices and staffing levels. Intense struggles between unions and management within Ford, Chrysler and Leyland in Europe and the United States throughout the 1960s signified a shift in power relations, with more direct controls exerted by management.

Increased managerial control led to growing unrest in the automobile industry in Europe. During the early post-war years, large numbers of immigrants were employed in European factories operated by Fiat, Renault and Volkswagen. Whilst some returned home, others stayed, only to be joined by returning indigenous workers. As Womack et al. (op. cit.: 47) remark

The workers in Turin, Paris and Wolfsburg realised that mass production was not a way station to self-employment back home; it was, instead, their life’s work. Suddenly the inter-changeable, dead-end monotony of mass production plants began to seem unbearable. A wave of unrest followed.

As a result, organisational ideology increasingly focused on the need to provide employees with opportunities for personal growth and development in order to compensate for the alienation experienced. Theorist Warren Bennis, for example, argued that the conditions that created the need for adjustments in approach included rapid and unexpected change in the environment. Added to this was the diversity of skills increasingly needed to maintain organisational effectiveness. Growth in size of organisations and a subsequent change in managerial behaviour that leaned towards McGregor’s theory Y assumption of human nature also provoked change (Burnes op. cit.).

In terms of practical demonstrations of the human relations approach, it was not until workers and managers began to challenge the Tayloristic basis of work organisation and job design that significant change occurred. Organisational psychologists such as Argyris and Herzberg argued that the alienation experienced by workers could be reduced if attention was paid to their ‘higher level needs’ (Maslow 1943). Morgan (op. cit.: 42) suggests that this was appealing to managers ‘as it offered the possibility of motivating employees without paying them any more money.’ Womack et al. (op. cit.: 47) argue, however, that, in reality ‘the European mass-production systems were patched up in the 1970s by increasing wages and steadily decreasing the weekly hours of work.’

Nevertheless, in the 1960s and 1970s management focused on redesigning work and implementing work humanisation schemes through job enrichment, job enlargement and granting more autonomy to the individual and group. But changes to work organisation and design, advocated by the human relations approach, were, according to Womack et al. (op. cit.),...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Tables
• Acknowledgements
• Introduction
• 1 Organisational learning and change in the automotive sector
• 2 The learning organisation
• 3 Learning in organisations
• 4 The relationship between learning and change
• 5 The case studies
• 6 Emerging themes for organisational effectiveness in the automotive sector
• 7 Discussion and analysis
• 8 Discussion and analysis
• 9 Summary and conclusions
• Bibliography