History of Harley-Davidson:Today it is hard to imagine Harley-Davidson (Harley) as a low-quality motorcycle manufacturer in severe financial trouble. But that’s exactly what Harley was in the beginning of the 1980’s. Harley motorcycles were of such poor quality that over half of all the cycles produced were effectively inoperable because of missing parts or poor assembly. When Japanese motorcycle manufacturers entered the US market th reliable and well-built bikes, past and potential Harley customers switched over to the foreign brand. The only customers that remained with Harley were its most loyal, technologically savvy ones who were committed to the Harley brand name. As a result, between 1973 and the early 1980’s, Harley’s market share dropped from over 75% to under 25%. By 1984, sales had dropped to $294 million and profit was merely $2.9 million. The future of Harley was nothing but bleak.
In order to change the company’s performance and improve the quality of the bikes produced, Harley implemented a series of programs and reorganization efforts to motivate its employees to help Harley turn around. Since Harley was financially squeezed, the bulk of the incentive programs were based on intrinsic motivation, including employee empowerment and increased challenge and excitement in the job. Harley also began offering financial incentives that were tied to specific performance factors. Due to the extraordinarily positive results from these programs, they are still in effect today.
Intrinsic Motivational StrategiesEmployee EmpowermentIn order to motivate its employees to improve the manufacturing process, Harley implemented a program that empowered its employees at all levels to take more control of the operations and decision-making in the company. In order to get the best that each employee has to offer, Harley encourages every employee to suggest ideas, involves all employees in major company decisions, and allows its hourly workers to make more decisions than most companies. This not only improves employee morale by instilling a sense of worth in each employee, it also creates a sense of attachment to the company. In turn, this empowerment results in increased dedication to the company, hard work and improved employee performance because each employee is given the power to initiate change and make decisions that affect the company.
Furthermore, Harley’s culture supports its strategy of employee empowerment. Harley is a flat organization with only two layers of management that fosters a friendly and collaborative environment. The atmosphere is casual and all employees interact with each other-there are no rigid lines between the management and the hourly workers. This generates a sense of camaraderie and feelings of mutual respect, which in turn facilitates open lines of communication and comfort with speaking up to identify problem areas and possible solutions. In addition, the company does not punish failed ideas or criticize out-of-the-box suggestions. Instead, the company always evaluates the new ideas and rewards employees for creative solutions that work. In fact, in 2001, more than 20% of Harley’s IT staff was internally promoted for creative thinking that resulted in better or faster production.
Finally, Harley doesn’t force the added responsibility and power onto the employees and leave them to fend for themselves, adopting a survival of the fittest attitude. Rather, it provides them the tools and skills necessary to succeed in the more challenging and complex environment. Believing that all employees that are expected to take on the responsibility of increased employee power should be equipped with certain necessary competencies, Harley provides training in communication, conflict resolution, team skills, planning, problem solving, decision making, and performance management. For example, Harley-Davidson University, a training program required for all employees, “teaches employees how to do business stimulation and how to plan for ownership succession since they deal with a lot of goods and services” (How Companies are Managed).
Harley even provides hourly workers the skills necessary to be able to market their new ideas to management and their peers. It trains employees on computers and teaches them how to give presentations on PowerPoint and how to use spreadsheets to manage the implemented changes. This commitment to training and education demonstrates Harley’s loyalty to and confidence in its employees and gives them the skills and abilities necessary to make employee empowerment a success for the company and a non-threatening, welcomed aspect of the job to the employees.
An example of how employee empowerment motivated an employee to generate change in the production process and therefore financially benefit Harley is when an hourly worker suggested putting two tanks in the pain chamber where he worked. The suggestion was quickly implemented and ended up doubling the productivity in the paint shop! If not for the combination of employee empowerment, the necessary training, and a supportive culture, it is unlikely that this hourly worker would have even discovered the potential improvement in the painting process. Yet, even if he did, he probably would not have cared enough to felt comfortable enough to suggest his idea to his manager. Consequently, Harley would have missed out on the full potential of its employee and would have been less productive in the manufacturing process.
Challenging & Enjoyable WorkHarley also motivates its employees by matching its employees with projects that are personally interesting and challenging to each employee. First, management makes the projects more meaningful to the employees by explaining the overall business objectives of the projects and helping them understand the business value of successfully achieving those objectives. For example, Harley doesn’t just promote new technology for technology’s sake, but rather markets the technology’s tangible importance to the customer and the bottom line. This gets the employees interested in the project and excited about achieving the stated goals.
Harley also tries to motivate employees by making their work sufficiently challenging. While giving the employees the ability to and pressuring them to step up and initiate positive change in the organization is one strategy to make the workplace more exciting, Harley doesn’t stop there. It also offers all of its employees the chance to work on new technologies, innovative processes and highly-visible projects. Employees are assigned to these activities by “showing initiative, keeping up with current technologies [or process improvements] and learning soft skills such as how to work effectively on a team and how to talk with business customers” (Hamblen). This not only keeps employees interested in their work, it motivates them to improve their portfolio of skills so that they can participate in these challenging and exciting projects.
Finally, Harley makes a concerted effort to match employees with projects and jobs in which they have specific interest. Managers are urged to stay in tune with the interests of their workers in order to best match them with the available job opportunities. For example, managers have quarterly review meetings with their subordinates to discuss upcoming projects in the company and determine which projects are of interest to the employee. Harley’s commitment to maintaining the employee’s interest in their work is paying off. In 2001, the IT department, which has over 200 employees, had a turnover rate of less than 3%. Such a low rate clearly illustrates the employees’ satisfaction with their jobs and commitment to Harley.
Intrinsic Motivation: An exampleA prime example of Harley’s use of intrinsic motivation programs is its use of councils. Councils are groups of employees, with ten approximately members, who work to address specific issues that affect their day-to-day work. Fellow workers choose the members, and it is considered an honor to be selected to serve. The work done on the council is typically exciting and challenging, and produces tangible and noticeable results throughout the organization.
Due to the prestige associated with being on the council, along with the skills developed by serving on one, “participating in a council is widely recognized as a career growth opportunity” (Vitiello). While these councils do increase decision-making time, the benefits are worth the lost time. First, they motivate employees to perform well in order to get on one of the councils and to get recognized while serving on one. Second, they create wider acceptance of the decisions by the employees because they were partly responsible for and involved in making the decisions rather than them being mandated by management.
Financial MotivationHarley understands that while intrinsic rewards are important, employees are also significantly motivated by financial incentives. Therefore, Harley implemented three kinds of variable financial incentives, all of which that are linked to valued behavior. First, at least a portion of every employee’s compensation package depends on the achievement of the company’s annual goals; when the company meets or exceeds its objectives, the employees meet or exceed their target salary. Second, Harley utilizes a stock program whereby a portion of the employees’ compensation is in stock options. This motivates employees to continually improve the overall performance of Harley because the better the company does, the higher the stock price a
nd potential financial benefit to the employees. Finally, employee performance bonuses are given to individuals that provide exemplary work or suggest improvements that result in increased productivity or lower costs. All three of these programs motivate the employees to improve the productivity, efficiency, and financial performance of Harley.
Harley-Davidson Today: The Results of Harley’s Motivational ProgramsThe programs implemented by Harley back in the middle of the 1980’s are still being used today. And for good reason-Harley’s performance has done nothing short of skyrocket since their implementation. In the first quarter of 2003, Harley reported net sales of $1.1 billion and a net income of $186.2 million. This is over 3.7 times the sales generated throughout the entire 1984 fiscal year. The Vice-President of the Kansas City office believes these motivation programs are the reason why Harley has had such a complete and long-lasting turn around:”[W]e’ve created an environment where all employees are valued and expected to make good decisions to benefit the enterprise, and people who feel they are making a contribution to the business are happier people, and they are committed to helping the company succeed. With 8,000 people showing up each day, determined to find ways to improve our business, I’m confident we will be able to continue our successful growth” (How Companies are Managed).
Web Sites Used:
1.Why you can still buy a Harley; by Derek Parker; week of January 15, 2001: http://portland.bizjournals.com/portland/stories/2001/01/15/editorial1.html2.Harley profit roars past estimates on slower U.S. sales; week of April 14, 2003: http://www.bizjournals.com/milwaukee/stories/2003/04/14/daily26.html?jst=s_cn_hl3.How Companies are Managed; by Brandon McNeal: http://academic.emporia.edu/smithwil/001fmg444pa/eja/mcneal.html4.Harley-Davi