How did Ford Motors, which had one of the most centralised administrative structure, shift to a participative style of management in the 1980s and pull it off with ease?
At a time when it was eliminating 45 per cent of hourly jobs and many salaried positions, how did the management elicit cooperation from employees instead of cynicism and sabotage?
The questions posed in a Harvard Business School case study, Transformation at Ford prepared by Mark Pelofsky and Richard T Pascale, was a hot topic of discussion at a recent CII-Aspen workshop. The answers provided in the case study make a compelling read.
The Employees Involvement (EI) programme, one of Ford's most ambitious change efforts, almost failed several times. Ford's senior executives, who were back from Japan, had learnt a clear lesson -- if you involve the hourly worker, he will willingly contribute far more than management could imagine.
But they had no idea how to execute this in an organisation like Ford. Predictably, it ran into a wall of widespread scepticism. Only four out of 60 plant managers volunteered to try EI.
Though the experiment succeeded in the four plants, senior executives began to take it so seriously that they wanted to manage everything -- right from the selection of workers in participative forums to running the scheme themselves.
The third near-miss occurred when the finance department wanted to measure the return on investment in such schemes by counting the number of suggestions, the savings realised and so on.
But despite these hiccups, Ford managed to stay its course. According to Pelofsky and Pascale, the experiment succeeded because of two key drivers -- crisis and quality. The company was deep in the red and the crisis heightened its collective consciousness that something drastically new needed to be done.
And quality was also a wonderfully positive unifying objective because it tied everyone from the chairman to the hourly workers together. These shared values were so compelling that false starts weren't fatal.
An important factor contributing to EI's success at Ford was the agreement that the management would not dictate which projects employees worked on. Further, the company was generous towards funding an employee development and training programme. Ford contributed 5 cents to it for each blue-collar hour worked.
These resources, which were subsequently increased, could be spent only with the union's concurrence and the company could not redirect nor reclaim the funds if there was a stalemate. These restrictions prevented the management from abandoning the programme if times got tough.
As the programme got underway and the trickle of ideas from workers grew into a stream of initiatives, Ford negotiated a profit-sharing programme with workers. The programme paid rich dividends.
Ford paid $636 million in profit-sharing -- the largest payout in US corporate history at that time -- with the average hourly employee receiving a check for over $3,700. But the returns were fabulous. The company produced 400,000 more cars out of plants that were already at rated capacity. The increase is the equivalent of adding one and a half new factories.
The next step in the change effort was to improve the white collar employee involvement. A Management Task Force realised that Ford had swung from a manufacturing-dominated culture to a financially driven one. One of the management's biggest challenge was to address this problem.
Finance always occupied the crucial spot at the top of the pyramid with its emphasis on measurables, but -- not surprisingly -- the line managers slowly lost faith in their convictions and started taking suboptimal decisions. The Harvard case study gives several instances of the problem.
For instance, a plant manager seeking to hold a factorywide meeting to communicate details of a major assembly line configuration would be prevented from doing so because the session translated into $100,000 in lost wages (workers would be paid while being briefed instead of working on the line).
The management's challenge was to sustain finance's strengths and yet upgrade the weakened domains of engineering, manufacturing and design.
It was addressed through three major thrusts: maintaining competence in finance but decentralising and redelegating some of its activities to the line managers; upgrading the product disciplines through investments in new tools, and giving these functions a greater voice in policy matters; and reducing the number of finance staff and shifting their role from policemen to a service organisation to the line managers.
Result: the very absence of an end-of-month numbers drill permitted the company to devote more time and energy to day-to-day business.
The Harvard case study offers fascinating lessons for India Inc's top bosses, many of whom still regard workers' participation in management as nothing but a waste of time.
