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How is Detroit responding to Japanese and Swedish organization and management systems?

How is Detroit Responding to Japanese and Swedish Organization and Management Systems?

The Japanese are rewriting the book on the American automobile industry, and the reading is disquieting. Since the turn of the century, Detroit has dominated the global automobile industry. In 1960, Detroit's Big Three manufactured over the half of the world's automobiles. Today, the Big Three are struggling to hold onto their dwindling share of the U.S. market, which has declined to 65 percent and is still falling. A recent editorial in The Economist says the unthinkable: "A truth has become nearly self-evident: Detroit's Big Three are staring death in the face."

The Japanese automobile plants in the United States (transplants) are creating high levels of unemployment and dislocation. Current estimates are that over 20,000 U.S. auto workers have lost their jobs in the last three years alone, without counting the losses in the automotive parts plants. During this same period, approximately 11,000 new jobs have been generated by the new Japanese transplants. The ratio of jobs lost to jobs gained has hardly been favorable, and the displacement has only begun. A more optimistic forecast of Japanese transplants is presented by Robert Lawrence, a senior fellow at the Brookings Institute, in a study funded by the Automobile Importers of America. According to Lawrence, Japanese transplants may displace 64,600 jobs in GM, Ford and Chrysler by 1992; however, they will create a net 100,000 new jobs. It is also apparent the U.S. automobile crisis is now moving from an economic problem to a social and political national issue as evidenced by congressional protectionist threats, coupled with growing U.S. mistrust of the Japanese. The unprecedented response to Moore's low budget film about GM's CEO, Roger and Me is a clear indication that the U.S. public is deeply feeling the social costs of automobile plants closing and job losses. In addition, the movie highlights the anachronistic corporate aristocracy in the U.S. It is increasingly apparent to the U.S. public that the centralized, aristocratic corporation with its ever growing disparity between executive and employee compensation, perks, and power, is increasingly seen as inconsistent with U.S. democratic culture and values. Illustrative of this problem is the latest GM increase in executive pension benefits which result in Roger Smith's pension doubling from $700,000 to $1.25 million per year. These fattened executive benefits come at a time when thousands of GM workers are being laid off as GM's market share slid 11 percent last year alone. The traditional corporation, with its win/lose corporate culture, results in a dramatic trust gap between top management and their workers as evidenced by recent polls.

The Japanese have established ten automobile transplants in North America as well as hundreds of parts plants. Despite a world awash in automobile plant overcapacity, the Japanese transplants continue to expand, improve the quality of their product while employing U.S. workers, and sharpen their marketing operations in the United States. Indeed, the Japanese system has been viewed as the new model for Detroit to follow and, in many respects, is revolutionizing the U.S. automobile industry. Indeed, some Big Three critics suggest the Japanese should run the Big Three's factories. The distinguishing characteristics of this Japanese management model have been discussed at length in an earlier article. Among the more important of these are the team concept, quest for perfection (in both quality and quantity), mutual trust, stable livelihood, win/win relationships between labor and management, and just-in-time inventories.

After some five years of witnessing the Japanese system first-hand, U.S. academics, managers and workers alike better understand the many benefits and accomplishments of the Japanese approach. At the same time, they also are becoming increasingly aware of its true human costs. Many U.S. transplant employees are asking what the point is of duty, loyalty, quality, teamwork, and productivity if the end result is loss of individual freedom, compromised industrial due process, and diminished quality of work life?

Following an analysis of the current economic and human impact of Japanese transplants in the U.S., the latter are contrasted with the pathfinding Swedish organization and management system, as illustrated by the Volvo Corporation's Kalmar and Uddevalla plants. The Uddevalla plant has been hailed as the new manufacturing organization for the 21st century. The Kalmar and Uddevalla plants have been pointed out as evidence of Volvo's sincere effort to balance profits with the quality of life of their employees. The concluding section of is article focuses on the insights and lessons gained from the innovative management and organizational systems of the Japanese and Swedes as well as the many questions and uncertainties they are generating in this time of transition.

Detroit is in deep trouble and it finally knows it. The Big Three have closed seven U.S. automobile plants since 1987, while the Japanese have opened five transplants in those intervening years. By 1990, ten Japanese-owned or -managed auto factories (transplants) in North America are producing 17 percent of current U.S. production and are growing. However, this is only the first wave of Japanese transplants into the United States automobile industry. For each one of these ten major automobile plants, scores of Japanese wholly owned and joint-venture suppliers - favored by unprecedented exchange rates - are investing in new plants to provide the "zero defect" parts essential to their JIT production systems. Beginning in 1982 with 25 supplier manufacturers in the U.S., Japan currently has over 125 component plants. Reasonable estimates forecast that number will triple over the next five years. As many as 40 percent of these companies are joint ventures. Overall, it is estimated that between 850,000 and one million American citizens will be employed by Japanese firms in the United States by the turn of the century.

The U.S. Federal Trade Commission is investigating whether Japanese automobile and supplier corporations are reproducing their Keiretsu system of interlocking corporate structures in the United States. The implications for the U.S. auto industry are disturbing and far-reaching. In the majority of cases, the Japanese partners run the U.S. plants and there is growing concern that these new joint ventures may be Trojan horses. Given the Japanese long-term market-share goals and their patient bankers, who will be in control of the customers and markets in five to ten years? Many U.S. partners are, already, being bought out by the Japanese. Domestic suppliers complain that state- and city-sponsored incentive programs necessary to attract Japanese companies allow their transplants to be unfairly competitive. Further concerns aired by U.S. statesmen, union officials, and economists alike include the prospect of lost domestic jobs and technological know-how because typically, transplant suppliers, as well as assemblers, retain much of their high-tech, value-added components in Japan. Because Japanese transplants most often design and engineer their units in Japan, most of the top jobs remain in Japan and are not open to Americans. And it goes without saying that despite heavy initial U.S. capital investment, profits will eventually return to Japan.

The Japanese challenge hangs like smog in the air over Detroit. UAW President Owen Bieber most candidly revealed his true feelings in his statement, "When are policy makers in this country going to wake up and realize that when you already have a developed automotive infrastructure in your country, you are a bit crazy if you invite foreigners to come in and build a second one whose only purpose is to displace the first!"

After a short period of operation in the United States, these transplants already have established new standards of quality, productivity and, for the most part, more harmonious employee-management relations. The Big Three and its suppliers are still trying to catch up and learn how the Japanese are doing it. Scholars, consultants, and in-house corporate researchers in the United States have been almost mesmerized by the transplants' new management and organization system, while their publications often have overlooked some of the inherent costs as well as some of the improvement opportunities. These organizational problems are presently centered in the areas of organizational control, work stress, safety, and the role of the union. In addition, ongoing job tensions are exacerbated by the conflict between Eastern and Western cultural values."

Fear of unemployment is a very real motivator in Japanese transplants. Job security in the automobile industry is indeed rare in a world flooded by excess capacity, and the Japanese transplants have, to date, provided a higher degree of job security than the Big Three. At New United Motors (NUMMI), the contract between NUMMI and United Auto Workers Local 2244, signed in 1985, goes so far as to say that the company promises not to lay off employees unless compelled to do so by severe economic conditions that threaten the long-term financial health of the company. The company also is committed to take affirmative measures before laying off any employees. These measures include reducing the salaries of officers and management, assigning previously subcontracted work to bargaining unit employees, seeking voluntary layoffs and other cost-saving measures. In the minds of NUMMI employees, job security is closely tied to continued high levels of productivity, quality, and constant improvement.

NUMMI inherited a work force highly fearful of unemployment after several years of layoff status while the Fremont plant was shut down under General Motors management. In other transplant locations, both in Detroit and in the rural mid-South, jobs paying $30,000-36,000 per year are highly prized, and the possibility of unemployment remains a very real concern. While the transplants generally have not laid off workers en masse, there is attrition because of stress-related illness, absenteeism, tardiness, and failure to meet required work standards. Many assembly line workers are not accustomed to working 56-plus minutes an hour, as required in the typical Japanese transplant. At GM, it has not been unusual for employees to work only 35 to 45 minutes an hour. The pace and repetitive nature of transplant assembly line jobs, car after car, hour after hour, and day after day, are difficult under the best of circumstances; however, a cold, sore arm, or bad night can put a team member too far behind to catch up. At Mazda's new transplant in Flat Rock, Michigan, the high number of repetitive or cumulative trauma injuries in 1988 raises serious questions about both the team manufacturing system and the quality of training provided by the company. In a front page article in the February 13, 1989 Automotive News, entitled "Injury, Training Woes Hit New Mazda Plant," production workers told the reporter that they had been injured by repetitive work, then fired or not called back because of their lingering upper extremity injuries.

The typical Japanese transplant team organization is a powerful social control system based on peer pressure. In addition to more traditional controls inherent in the machine-paced assembly line, the team-based structure is seen by some workers, union leaders, and academics as a highly threatening form of social manipulation and intimidation. Teams always have existed in more traditional organizations as informal work groups. Such workers frequently have banded together to protect their work pace by controlling "rate busters" and by withholding from management certain process shortcuts discovered on the job. These control devices often have provided employees with a cushion whenever a worker fell behind or management attempted to speed up the production process. Now, under the Japanese transplant work team system, these informal work groups have been largely coopted by management and also perhaps, by the union.

In non-traditional Japanese transplant organizations, each team member is expected to pass along to the team and group leader any time-saving improvements and/or innovations for the benefit of the group and the company. The team leader, representing both team members and management, quickly incorporates team member improvements into the factory work process with the help of the first level manager, usually the group leader. The group leader then re-balances (or re-stresses) the line to take up the slack produced by the team's greater efficiency. This process also is known in Japanese organizations as Kaizen-ing, or constant improvement. The traditional informal work group that could buffer and reduce inherent work stress when job demands were great is eliminated.

Ideally, transplant team members are expected to feel a strong sense of ownership in the Kaizen process resulting from their involvement in process improvements. However, some union members and leaders seriously question both the Kaizen concept and its results. These critics acknowledge that under the new team system, team members clearly contribute to productivity improvements, but point out that the process also leads to higher job demands and pressure. Whereas management contends that team members "work smarter, not harder," the reality is that team members and managers work both smarter and harder.

Equally troublesome is that Japanese transplants seldom have regular absentee replacement workers on hand as is customary in Big Three factories. While the team leader usually fills in, the entire team suffers when anyone is absent, and the returning team member often receives both formal management sanctions and informal group pressures. These formal and informal actions are designed to control absenteeism, and indeed, they work quite effectively. At the same time, some workers now complain that unlike life under the traditional organization, there is now no one to take their side. Neither their fellow workers nor the union seems sympathetic or eager to represent the individual employee when tardy or absent.

According to some union members and their representatives, transplant managers actively indoctrinate their employees into believing that fellow team members are hurt by absenteeism. The predominant visual display, often in color, of each team member's absentee record, combined with an extremely strict attendance policy including possible discharge, have dramatically reduced absenteeism at the transplants. At the same time, these programs have created high levels of concern among rank-and-file workers. For example, the absentee replacement policy at NUMMI had become a serious problem in early 1986, according to Parker and Slaughter. More than a thousand NUMMI workers signed a petition that read:

"We, as concerned New United Motors Team members, are requesting to Human Resources and UAW to help us solve the absentee problem we are currently experiencing. If it means that we must redesign our attendance policy in order to effectively resolve this problem, and assure quality and job security, let's not hesitate to do so. The burden placed on our teams, due to absenteeism, is an unnecessary one."

It is noteworthy that the NUMMI workers (we) who signed the petition were asking both management and the UAW (they) to provide replacement workers.

Dissident Japanese workers have long complained about the problems associated with "company unions," and it would appear that U.S. workers also are beginning to understand their costs as well as their benefits. However, it is primarily at the unionized Big Three, NUMMI, Diamond-Star, and Mazda Motor USA joint venture transplants where these voices now are being heard. In summary, while Japanese managers involve their employees in setting high standards and in fine-tuning the production process, this worker participation also has tended to increase job pressures and has not eliminated worker concerns about job security.

Increasing numbers of union dissidents are re-assessing the non-traditional Japanese transplant management system and the UAW cooperative policies that have been generally supportive of the Japanese team concept. Under the impact of the new Japanese transplant management/labor partnership model of industrial relations, many veteran union leaders are struggling to redefine their traditional adversarial role. Union activists believe that on the shop floor, the Japanese team-based system has undermined the traditional power base of its members and that this system is spreading rapidly throughout U.S. industry, unionized or not. The Japanese transplants consistently have promoted a win/win management-labor partnership philosophy that is based on the belief that cooperation will increase both productivity and quality and allow greater job security. There is much evidence to support this non-adversarial model. At the same time, these new transplant labor agreements have drastically reduced the number of union representatives allowed, and have weakened the traditional grievance/arbitration procedures and the due-process safeguards associated with neutral third-party review of worker grievances.

Under the new system, it is unclear whether union representatives are defenders of the employees or proponents of a system that blurs the distinctions among employees, union, and management itself. For example, do team members turn to their team leader or to a union representative when they have a problem or grievance at work? Often the team leader and union representative are the same person.

The transplant's team system is designed to break down the traditional adversarial philosophy of trade unionism and to replace it with a non-adversarial extended family identity. Labor and management are seen as partners with a common goal and, indeed share many common tasks in motivating and controlling the work force. While the old adversarial model was not working, it is clear that the new system has exacted a price. Transplant employees no longer enjoy the protection of a quasi-legal system that ensures vigorous and independent representation by worker-selected representatives, along with the well-recognized benefits of binding arbitration as a means of ensuring both equity and justice in the workplace. It would appear that the Japanese cultural values of selflessness, collectivism, obedience, and authoritarianism are replacing the U.S. politico-economic value of checks and balances (i.e., separation of powers), not to mention individual freedoms on the shop floor. Honda's non-unionized transplants, however, have recently instituted a grievance procedure, again leading the Japanese transplants in adapting to their U.S. environment.

Growing differences in how transplants are seen by Japanese and U.S. managers, employees, labor leaders, and academics can be traced to the two fundamentally different cultural value systems. There is little disagreement as to the effectiveness of the Japanese transplants' organization and management system in economic terms; however, it is in human terms where the cultural differences emerge. Cross-cultural studies of Japan and the U.S. have pointed out that the Japanese tend to value themselves by the position they hold in an organization. In fact, the individual is addressed by his title or function instead of his name. The nameless Japanese have a phrase to express this - jibun ga nai, or "I have no self." American values, which prize individual freedoms, are well established in Western culture and codified in the U.S. Bill of Rights. Americans identify with their individual names, roles, professions, and accomplishments. Gordon Brown identifies himself as an engineer and marathoner, not a NUMMI man. The Japanese see the company not just in economic terms, but as a family with shared values centered on mutual respect, loyalty, cooperation, and harmony - as well as authoritarianism, obedience and mutual obligations. Japanese managers, therefore, have a natural tendency to believe that by putting the company's interests first they are also acting in the best interest of all of their employees and families.

It is often said that the Japanese live to work while Americans work to live. The Japanese identify closely with their corporation because in their culture it represents both their extended family and the very basis by which they judge their own selfworth. The corporate employer is seen by the Japanese salary man as his second parent, and managers see their employees as their dependents. This paternalistic view has roots deep within the Japanese Confucian heritage. The strong sense of mutual obligation between employer and employee, while diminished somewhat of late in Japan and still further in their overseas corporate adaptation, still remains to give a decidedly paternalistic culture to the transplant corporations. The Japanese transplant managers expect loyalty and cooperation and, in turn promise their employees higher levels of job security. While this paternalistic culture appeals to some U.S. workers and managers, others find it controlling and stifling their need for autonomy and individual freedom which are central to the U.S. culture. It is therefore, easier for a Japanese employee to harmonize his personal goals with the corporate goals than it is for an U.S. employee to do the same.

It is understandable that the converging U.S. and Japanese cultures seen in the hybrid Japanese transplant organizations provide countless opportunities for misunderstandings and conflict as well as innovation. The fact that Japanese and Americans have worked together so well to date is indeed a reflection of the Japanese socialization abilities and U.S., as well as Japanese, organizational adaptability. In addition, Japanese transplants have, overall, provided high levels of job security in an industry awash with excess capacity where many plants will close world-wide. The commendable Japanese commitment and ability to provide a high level of job security and growth remains a powerful force to smooth cross-cultural waters in the plant and with many levels of government. However, we can expect growing problems as the competitive pressures in the auto industry intensify and the basic differences in values become more apparent A survey of 4,500 Americans employed by Japanese corporations in the U.S., including one automobile company, was recently conducted by Teikyo University. Nearly 50 percent of the respondents described the Japanese management style as "puzzling," and 60 percent said they felt excluded from the Japanese-dominated decision-making process.

Big Three managers should continue to study and adopt other new and innovative models of management that hold promise in order to provide both high levels of quality and productivity while improving employees' development and true quality of life. The Swedish model, as illustrated by the Volvo Corporation, has gained world recognition for its innovative organization and management systems seeking to achieve this lofty goal. Volvo's progress and problems to date provide no fewer - and perhaps more - valuable insights for U.S. managers than do the Japanese transplants.

Several highly industrialized Western countries provide instructive examples of high-performance management and organizational systems; however, few are more innovative and centered on enhancing the rights and well-being of its employees than the Swedish system. For a small nation of 8.3 million people living in a country approximately the size of California, Sweden has developed a truly global automobile industry. Its two large-scale domestic producers, Volvo and SAAB-Scania (and related companies) employ approximately one tenth of Sweden's gainfully employed and have recently achieved an annual combined production of approximately 500,000 motor vehicles.

In the face of increasing Japanese competition, including the transplants now in Britain, together with ballooning product development costs, the European auto industry is consolidating rapidly. SAAB recently joined forces with General Motors, while Volvo has entered a new alliance with France's Renault SA through a broad set of minority cross-shareholdings and related cooperative projects. Such arrangements will leave Swedish corporations largely independent and should allow at least Volvo to retain its unique organizational culture.

Volvo is by far Sweden's largest corporation as well as its largest exporter. Indeed, this automaker generates approximately eight percent of Sweden's gross national product. One-sixth of all heavy trucks and buses manufactured in the Western world are Volvo vehicles. Both Volvo and SAAB-Scania export over 80 percent of their passenger cars, a proportion exceeding that of any other country having a motor vehicle export industry. Volvo has gained international recognition for its humanistic values and creative adaptation of technology to enhance the productivity and satisfaction of its employees. In fact, Volvo management attributes the company's past success as a major international competitor to its enduring commitment to quality, safety, high ethical standards, and concern for employees, customers, and the environment. In order to better understand Volvo's unique corporate culture, a brief synopsis of its socio-economic environment with some comparison to Japan is essential.

Swedish corporations, like their Japanese counterparts, are strongly influenced by ethnic homogeneity and cultural conformity. As summarized later in this article, Sweden and Japan evidence several similar cultural and corporate characteristics, as well as some fundamental differences.

Like the Japanese, the Swedes tend to favor harmony and typically avoid open conflict and confrontation both in their social and in their business and political relationships. Swedes and Japanese also are alike in their tendencies not to reveal their emotions. Non-disclosure of feelings, either verbally or non-verbally, is descriptive of both cultures. A notable exception to this somewhat detached and rational behavior pattern observed in both cultures involves the periodic use of alcohol, at which times an outpouring of pent-up emotions frequently occurs.

Both Sweden and Japan also are strongly characterized by their rationality, efficiency, planning, and scientific methods, including precision measurement. Both countries have long histories of dealing with the capriciousness of harsh natural environments - conditions that may help explain not only certain shared values but also the cooperative relationships between the public and private sectors in both Sweden and Japan. In sharp contrast with the United States, cooperative working alliances between business and government at home and abroad are strongly characteristic of the Swedish and Japanese politico-economic systems. Both Japan and Sweden place high value on education, the importance of mastering foreign languages, and learning from other countries.

Both Sweden and Japan enjoy well educated and highly paid work forces, with world leadership in job security and unemployment rates averaging below two percent. This extremely high level of employment requires that both nations compete internationally on the basis of their quality, advanced research and development, sophisticated technology, and heavy investment abroad. Japan and Sweden have non-adversarial industrial relations systems characterized by relatively high levels of unionization, cooperation, and information sharing; however, as will be discussed in greater detail later, the two systems differ significantly in the degree of independence exercised by their unions.

Certainly, both Sweden and Japan invest heavily in their human capital, through support of excellent formal education systems, ongoing adult education, and extensive corporate training and development programs. Japanese and Swedish corporations have developed as exceptional learning organizations able and anxious to innovate as well as learn and adapt key ideas and hard technology from their competitors world wide.

Both countries have evidenced highly effective industrial policies and major reliance upon privately owned industry. Not surprisingly, Japan and Sweden's cultural and political economic systems have strongly influenced enterprise characteristics in both countries. In both countries there is evidence of greater compatibility between their corporate organization cultures and their national culture than in the United States. Swedish corporations in general, and Volvo in particular, have developed with various degrees of success organizational cultures, structures, and practices that are more consistent and closely aligned both within their organization and externally with its national cultural and political economic system than in the United States. A closer examination of the Volvo organization, its culture and current operations provides some interesting and valuable insights for U.S. automobile managers. The question remains, why have Detroit's Big Three managers shown so little interest to date in the Swedish model when it is so closely aligned with U.S. democratic values?

The several philosophical guidelines that have shaped the unique character and culture of Volvo are well-articulated in Volvo President Pehr Gyllenhammar's visionary yet highly pragmatic book, "People At Work." A penetrating summary analysis of the Gyllenhammar approach at Volvo is provided by Leonard Woodcock, past president of the United Auto Workers, in his introduction to the book:

"It is refreshing that a growing cadre of business managers, of which Mr. Gyllenhammar is representative, is introducing into the private-enterprise system a philosophy based on humanism - recognition of the dignity and self-respect of the individual. Fundamental to Pehr Gyllenhammar's philosophy of good management is the expressed belief that each individual has a right to have a job, has a right to self-respect in his or her work; has a right to `goodwork,' work that is `human' and `meaningful,' in a circumstance that permits workers to have `as much control as possible over their working lives,' and has a right to `decent pay' . . . Pehr Gyllenhammar has set as his objective the fulfillment of noble democratic values, not only in society in general, but in the workplace as well. He wants to achieve `Democracy in Working Life' - and that is the next step toward the consummation of the truly democratic way of life."

The enlightened perspective and professed values of Volvo as set forth by Mr. Gyllenhammar comprise the essential foundation upon which its corporate strategy, structure, and systems are built. Volvo is a corporation that has attempted to practice what it preaches, at least most of the time.

Beginning in 1972, the year Pehr Gyllenhammar assumed leadership of Volvo, the corporation went through a major decentralization with headquarters staff reduced from 1800 to 100 people and with many former headquarters employees being reassigned to newly formed, independent profit centers. The underlying purpose of these structural changes was to democratize the corporation from top to bottom, and in so doing redefine the role of Volvo managers in terms of placing people first. Along with these value-driven structural changes, corresponding alterations occurred in the work culture and socio-technical systems. For example, Volvo's core belief that work must be adapted to people, rather than people to machines, resulted in a socio-technical organizational development strategy that is now almost 20 years old. A detailed history of Volvo's organizational development strategy and an excellent analysis of the diffusion of their learning experiences is contained in an article, "The Learning Curve at Volvo," by Paul Bernstein. Bernstein's research underscores the long-term focus of Volvo's organizational development strategy and details the extensive union and employee involvement in the process from its earliest stages. Volvo's organizational development strategy resulted in the landmark design of the Kalmar plant, which abandoned the traditional assembly line in 1974, revolutionized the way work was organized, and transformed the pattern of worker interactions. According to the Volvo management philosophy, technology, like bureaucracy, can stifle human creativity, freedom, and growth. Accordingly, Volvo has sought dynamic new socio-technical systems that continually change and renew themselves largely at the initiative of all of its employees. Gyllenhammar put this concept succinctly: "The finest form of organization development occurs when planning can be entrusted to a group of people, ideally those who do the work." For these same basic reasons, the company has no overall "master plan." Rather, the corporate plan, like the organization chart, is decentralized in order to maximize personal initiative from the people running the various units. The problems and setbacks they have encountered have been an expected and essential part of their ongoing learning process. Again, the Swedish and Japanese views of planning are quite similar.

A primary goal of Volvo's first "Greenfield" plant in the coastal city of Uddevalla is to develop an internationally competitive automobile manufacturing system that avoids the classic problems associated with short, repetitive work cycles of no more than one or two minutes on conventional assembly lines. These negative consequences have been well-documented over many decades, and include worker boredom, stress and alienation, repetitive motion injuries, high absenteeism, excessive turnover, and frequent labor disputes in Sweden. Beginning with early start-up production in 1989, the new Uddevalla plant employs teams of 7 to 10 multi-skilled employees working in five product workshops, each having eight such teams. Because of slumping market demand, only five of the six planned workshops are operational to date and output in 1990 is forecasted to be closer to 18,000 units than the 22,000 forecasted earlier.

The team members, who are unionized hourly employees, largely manage themselves. In addition to their more usual production tasks, team members are responsible for scheduling, handling, quality control, hiring, and other customary management functions. Each team has an ombudsman who reports to one of six plant managers, who in turn, reports to the president of the Uddevalla complex. The plant is designed to create a socio-technical system that balances production needs with the desirability of maintaining a quiet, bright, safe, and clean work environment. Teams determine the length of time they work on a car and are responsible for its total quality.

Current plans provide for the work teams to communicate directly with both dealers and customers. Through such contacts, each team will continue to receive quality and maintenance feedback on each car they build. The entire Uddevalla operation is designed to reestablish the craftsman's connection between his/her work and the completed product - a connection that was removed by Henry Ford almost a century ago with his introduction of the assembly line.

Uddevalla represents a unique organization and management model and not just a new production system (as it is frequently described). Uddevalla involves major changes in both technical and organizational systems and the process by which they were planned, developed and unified. Unlike the Japanese transplants, the Uddevalla model was born of a highly participatory planning process involving a broad array of stakeholders including the strong and independent metal-workers union and the government. Again, unlike the Japanese model, shared control from the top to bottom of the Uddevalla corporation provides a balance of managerial control interests with union groups for worker autonomy. Uddevalla work groups have been given very broad and empowering responsibilities - not only to build the entire car, but for self management without the traditional first-line management foreman and to elect their own group leaders. Of special importance is the freedom to learn and develop on the job. Employees are encouraged to utilize their increasing knowledge and skill by making decisions with other team members as they plan and execute their work responsibilities. Balance between the technical and social systems is again seen in the participatory planning and development of new, flexible, small-scale and often manual technologies with the complete abandonment of the assembly line. The above distinctive characteristics of the Uddevalla organization and management system are in sharp contrast to the Japanese transplant system previously analyzed. However, as the learning curve at Volvo's Kalmar plant demonstrated, it is much too early to judge this unique management and organization system's success in global competition or even within Volvo.

The global automobile industry is in a major period of restructuring and transition as is most clearly evidenced in North America, Asia, and Europe. As the major international players form all manner of alliances - many cross cultural - new and innovative organization and management systems are emerging. Some of these, such as the Japanese transplant and Swedish model represented by several innovative Volvo and SAAB plants, are truly shattering traditional organizational and management paradigms. The rate, magnitude, and complexity of change, however, challenge the academics and practitioners alike just to describe them, let alone analyze and understand their complex and dynamic interrelations. Though some significant trends and findings are emerging, there are more questions and uncertainties than there are insights and conclusions.

The traditional one best way to organize and manage an automobile company no longer exists. Global experimentation and change are now the norm.

The Japanese transplants continue to displace U.S. and European market share while their innovative organization and management systems are also displacing more traditional systems worldwide. The Japanese transplant system however, is now past the honeymoon stage and is better understood as an evolving hybrid combining classical Taylorist standardization and highly repetitive simple tasks, short work cycles, and broad group participation, especially at lower levels. The Japanese concept of teamwork is a far cry from the self-managing, autonomous groups of the Kalmar and Uddevalla plants of Volvo. American management practices, and systems dominated by management such as total quality control (TQC), are partially decentralized by the Japanese. They require all departments down to the shop-floor production teams to take responsibility for management functions such as TQC, but with high levels of control and coordination. In the Japanese transplants, group participation with responsibility, close measures, and control systems were expanded to a much greater degree than individual autonomy. American managerial employees in Japanese transplants have also experienced limited opportunities to move into or influence the upper levels of their Japanese-owned and -controlled companies. Careful screening and selection seeking high levels of employee commitment and loyalty at all levels are key transplant characteristics. American, Canadian, and European unions and their employees are understandably divided on the costs versus the benefits of the Japanese system. It would indeed be misleading to infer that the success of the Japanese transplants is primarily attributable to their high-performance organization and management system. An understanding of the success of the Japanese transplants in the U.S. to date must include an analysis of their sophisticated, primarily Japan-based engineering and design-support systems. Of no less importance is the transplants' complex of satellite suppliers, banks and other Keiretsu-like interlocking corporate structures.

Organizational innovations in the Swedish auto industry have been largely centered in the Volvo group, especially the Kalmar and the new Uddevalla plants. The Uddevalla organization and management system represents a major new system, with the total abandonment of the traditional and still globally dominant assembly line system. In contrast to the Japanese transplant system, the Uddevalla system is designed to significantly broaden the workers' tasks and their control of the work environment. Again in contrast to the Japanese transplant system, a strong and independent union is a true planning and decision-making partner in the ongoing development of the organization and management system. The Uddevalla system was planned and designed from the outset by employees, their union, and management to fit and harmonize their technical and social systems and also be consonant with Sweden's unique political economic system.

It is still too early to judge the effectiveness and competitiveness of the Uddevalla management and organization system. While it holds promise for a new level of democratization of manufacturing organizations worldwide, social, political, and economic forces may limit its diffusion even within Sweden. Innovative plants such as the Vara diesel engine and Volvo LB truck chassis plants, which were moving some time ago toward the Uddevalla model, have now retreated to more traditional assembly systems under expanding production pressure. Furthermore, Volvo is moving more production volume outside of Sweden to Gent, Belgium and perhaps later to its only North American transplant in Halifax, Nova Scotia. Neither of these plants incorporate the innovative Kalmar or Uddevalla concepts and systems as their labor markets are quite favorable, and the demanding Swedish political and economic system is absent. Nevertheless, Volvo's Uddevalla management and organization system truly represents a new paradigm and provides exceptional learning opportunities for U.S. managers interested in better aligning their traditional, centralized organizations with the United States' more democratic values and culture.

The Japanese and Swedish automobile organization and management systems represent world-class learning organizations. They both combine various degrees of empowerment with quality values and job security, which creates an atmosphere of trust and constant improvement essential for confronting hard truths, taking risks, and learning. They both constantly challenge the traditional, promote experimentation, and celebrate and learn from their successes and many mistakes, which they recognize as essential opportunities. Unlike traditional Big Three bureaucracies, Swedish and Japanese automobile companies in general show most of the eight specific factors that Richard Pascale has identified as influencing an organization's capacity for learning.

While Japanese and Swedish automobile companies provide many learning opportunities for Big Three management, their responses to these opportunities remain behind the competition's learning curve. NUMMI and GM's new Saturn subsidiary in Tennessee are good examples of the problems GM had effectively utilizing its two primary organizational learning laboratories in the 1980s.

NUMMI proved to be a far more valuable learning laboratory for Toyota than for GM. General Motors executives had a difficult time recognizing that NUMMI was an entirely new organization paradigm and not just a new manufacturing system. The NUMMI philosophy of "every worker a manager" threatened the very soul of GM's traditional aristocratic culture where workers were traditionally treated as expendable direct costs and hired hands. As a result, the diffusion within GM has proven piecemeal and limited. Toyota, on the other hand, has been proven a superior learning organization and was able to adapt its Toyota system at NUMMI to the United States, with its unionized workforce. It then cloned NUMMI in Kentucky and in Canada in record time. The quality and productivity of Toyota's Kentucky transplant output has rivaled that of Honda's in Ohio.

While Toyota's highly successful development and management of NUMMI proved a true shock to General Motors and the entire auto industry, Saturn represents GM's multi-billion dollar effort to build both a new world-class automobile and a new organization and management system at the same time. Money has been no object as both GM and Roger Smith's faces are clearly reflected in Saturn's mission statement:

"(To) market vehicles developed and manufactured in the United States that are world leaders in quality, cost, and customer satisfaction through the integration of people, technology, and business systems and to transfer knowledge, technology, and experience throughout General Motors"

The Saturn-NUMMI battle - an East versus West titans' war - has to date been no contest. However, Saturn is learning. Saturn was planned initially in 1983 as a lights-out, wall-to-wall, computerized facility. It was designed to leapfrog the Japanese competition and demonstrate U.S. technological superiority and GM's financial superiority to the world. However, GM's experience with its other new high-tech plants, (such as the unsuccessful Hamtramck facility in Detroit) and the highly successful low-tech, people oriented NUMMI organization of Toyota, completely changed GM's minds and Saturn's direction. Following several major new product and organizational changes during the past seven years, Saturn is metamorphosing into a more enlightened organization attempting to balance its people and technology. Saturn's organization today is team-based and highly participatory, with union and employee involvement unprecedented for GM.

While Saturn's new organization and management system appears to be promising, its new compact car faces head-on competition from the likes of Toyota's Corolla and Honda's Civic. Unfortunately, promotion superlatives ("The rebirth of the American car") may have raised public expectations to unrealistic highs, given its new and unproven engineering and production systems and its incomplete dealer and distribution system. The Japanese and Swedish companies are reluctant to compound the systemic complexities and uncertainties of building a totally new car within a completely new organization and management system.

In the summer of 1990, just as the new Saturn plant was to begin production, the Wall Street Journal ran an article about the new GM Saturn division. It included a time line comparing Saturn's development during the 1980s with that of Honda Motors' U.S. operations, also in the Green Belt. Unfortunately this comparison is a graphic illustration of General Motors', if not Detroit's, competitiveness problems. In the summer of 1990 Honda America, after eight years of development, has a complex of two assembly plants plus an engine and transmission plant with an annual capacity of over 500,000 cars. It is producing America's best-selling automobile, the Accord. Saturn, after six years of planning and preparation for both a new organization and management system and a revolutionary car, produced its first compact car in the Fall of 1990 in a plant that cost about as much as the Honda complex, but will be able to produce only about half as many units.

General Motors, once again in the best Detroit tradition, is planning "the one giant leap over the competition" while Honda - in the best Japanese and Swedish tradition - is utilizing its high-performance learning organizations to constantly improve its organization and management systems along with the automobiles it produces. We can only hope that General Motors and the U.S. auto industry will utilize their new organizational R&D laboratories such as the Saturn plant to develop essential new social-technical systems, and not merely view it as a new production process to be judged by the initial success of its new model automobiles.

Volvo's Philosophy And Goals


The company's good name

The name "Volvo" is one of the corporation's most valuable assets and should be protected and enhanced.


International operation

Whereas Volvo works in more than 100 nations, with different cultures and value systems, the guidelines declare that not only is the mother company Swedish, but the company derives its strength from its Swedish values and identity.



It is logical to shop around so we can buy under the best conditions, but these decisions must be based upon very long-term considerations of quality, price, technology, competitiveness, and security of deliveries. We must support our suppliers, try to provide needed technical assistance, and over the long term give them margins that will make them want to develop with Volvo.



The guidelines state: "The designs of the Volvo group shall be thorough and honest." We want to achieve a technological level second to none, while avoiding the cosmetic frills that so quickly mark the difference between old-fashioned products and timeless products.



Employees should be given comprehensive information about the company's total activities, and especially about those affecting the individual's own work. Clearer information can help achieve better accountability, as well as a more balanced distribution of power in the organization.



We can't afford it. Therefore, although adherence to the rules is important, deviations to increase efficiency will be tolerated. Every manager should cooperate, consult with, and try to tap whatever resources exist, but not organize these resources in committees. The spoken word will always have priority over written memos.



The ultimate efficiency is achieved when each employee is willing to give his or her best to the corporation. This means we must constantly develop our production methods to give each employee more satisfaction. Every employee is entitled to a dignified workplace and the opportunity to choose variation in his or her work. The company owes each employee the resources and environment necessary to perform a task and the opportunity for personal development. Each worker should feel that the company values his or her performance.



Too many people confuse participation and consultation with permissiveness, sloppiness, and a lack of discipline. Others worry about the effects on the organization of increased employee involvement and influence. These factors depend on a new definition of leadership. True leadership builds from an awareness of other people's dignity and their wish to do their best. Good leadership is the ability to cooperate and delegate without losing time or momentum. Such leadership depends on constant and consistent education programs as well as organization structures that fit the corporation's objectives.
COPYRIGHT 1991 Institute of Industrial Engineers, Inc. (IIE)
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Author:Rehder, Robert; Finston, Howard
Publication:Industrial Management
Date:Jan 1, 1991
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