Managerial and technological innovations at Saturn Corporation

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ALFRED

P.

WORKING PAPER SLOAN SCHOOL OF MANAGEMENT

MANAGERIAL AND TECHNOLOGICAL INNOVATIONS AT SATURN CORPORATION Richard G. LeFauve and

Amoldo

C.

Hax

Working Paper No. 3418-92BPS

MASSACHUSETTS INSTITUTE OF TECHNOLOGY 50 MEMORIAL DRIVE CAMBRIDGE, MASSACHUSETTS 02139

April 1992

MANAGERIAL AND TECHNOLOGICAL INNOVATIONS AT SATURN CORPORATION Richard G. LeFauve and

Amoldo

Working Paper No. 3418-92BPS

C.

Hax

April 1992

APR

1

6 1992

MANAGERIAL AND TECHNOLOGICAL INNOVATIONS AT SATURN CORPORATION

Richard G. LeFauve President, Saturn Corporation

and Arnoldo C. Hax Alfred P. Sloan Professor of Management, Sloan School of Management,

Massachusetts

Institute

April

of

Technology

1992

Harvard Business School Colloquium be published It will on Global Competition and Telecommunications. Technology, and Competition, S. P. Bradley, in the book Globalization, J. A. Hausman, and R. L. Nolan (eds.), forthcoming.

This paper

was presented

at the

The Origins

of

Saturn

Saturn Corporation realities within

(DAW)

GM

1981,

In

During this

foreign competitors.

to

GM/UAW

employes were

Responding

laid

financial of

market

nearly 170,000

crisis,

off.

GM

to this challenge,

American automobile production.

began

June

In

to

scrutinize

its

GM's Advanced

of 1982,

Team was asked

to

answer the question, "Can G.M.

a world-class-quality small car

in

the U.S.

Product and Design build

was experiencing

and an escalating loss

losses, a prolonged U.S. recession,

share

the economic and social

General Motors (GM) and the United Auto Workers

the early '80s.

in

was born from

successfully with the imports?"

They

that

can compete

set up a "small car project"

and they adopted a "clean-sheet"approach, avowing they would not be restricted

by traditional thinking and industry practices.

applying an unobstructed mind to any and

all

approaches and solutions could be found

like

high-speed machining techniques. that to

problems,

risk

new

lost-foam casting and

These were two

were evaluated and adapted as high

Perhaps by

of the

concepts

but possible solutions

the challenge.

Meanwhile, another team was forming. president of

GM's

vice president

Industrial

and

Relations Staff, and Donald Ephlin,

director of the General

increasingly dissatisfied with

decided

was a

to

Alfred S. Warren, vice

the

labor

Motors Department, were

relations

climate.

bring together a handful of people to figure out

better

way

to

do business.

UAW

They if

there

This handful soon realized the

enormity of the question and reached out for additional team

members.

By the time they had

finished, they

were an unprecedented

alliance of

GM

and

UAW

people

--

managers, superintendents,

plant

union committeemen, production workers, and skilled tradesmen along with

UAW

knowledge

of

GM

and

They represented the

staff.

55 General Motors plants and 41

They would become known as The Group

system.

The teams then spent two months and 60 benchmark companies

plants

they

made more

million

UAW

miles,

and put

threads

49

locals

99

the

GM

.

GM

different

over the world.

all

in

Together

,

than 170 contacts, traveled approximately two

50,000 hours of study.

in

During these fact-finding

common

visiting

of

collective

in

Quality

the successful companies:

a top

is

customer

priority

maintaining customer

for

The customer

satisfaction.

internal

they observed several

visits,

number one, whether the

is

the next group getting your parts (the

is

customer) or the person getting your

final

product (the external customer).

Everyone failures

Equality

the

in

company has ownership

of the

company's

and successes. is

Barriers to doing a

Total trust

not just preached.

practiced,

is

good job are eliminated.

a must.

People are the company's most important asset. People are given authority With

this

to

conflict

outcomes.

All

job.

background work behind them, the team members

focused on two concepts that were new

was a

do the

resolution

to

General Motors.

process that used consensus

key stakeholders

in

a conflict are given

to all

The

first

determine

By putting aside hidden

information relevant to the decision.

agendas and focusing on each that results

a win-win solution for

in

consensus

party's needs, a all

100 percent

to

its

each participant must commit

that

structure.

that

emerged was the need

Realizing

that

workers

environment that they help create, the Group integration

Saturn

of

in

implementation.

The second concept organizational

reached

A consensus

stakeholders.

requires that at least 70 percent of the participants are

agreement with the decision, and

is

of

for

will

a

new

support an

99 believed the

technology and resources required a partnership

management people and

UAW

people on

all

of

levels of decision-

making.

A Memorandum national contract

the

of

was then reached.

Saturn/UAW agreement was

forbidden

fruit

of

GM-UAW

Agreement separate from the

11

Unlike traditional agreements,

pages long

most labor contracts;

it

philosophy and the experimental structure

.

It

did not

list

the

stated simply the Saturn for

making world-class

cars.

Saturn therefore emerged as a separate company, charged with creating a whole

new

idea for General Motors

in

the

way

the

automobile business could be run.

The small car

project identified the technology

produce the small car; the Group

UAW

and G.M. management

business objectives. that

if

to

of

required to

99 revealed a willingness

work together

to

accomplish

of

its

Roger Smith, General Motors' chairman, pledged

a labor agreement could be written that would allow the

integration of the

needed technology, he would create a separate

He

company. a

also suggested that the marketing people be included so

new approach

Saturn Project

selling cars

to

compete

7,

1985.

agreed that the existing system needed Saturn would not

effectively.

The

well.

a separate subsidiary known as the Saturn

became

Corporation on January All

would be considered as

utilize

to

change

to

technology

for

technology's sake but instead blend technology and people

to

optimize the overall business performance.

The Mission

of

Saturn

The mission statement developed by the founding team had two distinct o

components: To market vehicles developed and manufactured



United States that are world leaders

in

quality,

customer satisfaction through the integration

in

the

cost and

people,

of

technology and business systems. ,

To transfer knowledge, technology and experience



throughout General Motors.

Fundamentally, Saturn wanted

be competitive

in

the small car market by manufacturing world-

class cars engineered and designed

Saturn did not

wanted

to

limit

transfer

prove that Americans could

to

itself

its

to

in

the U.S.

be successful

in

building cars but

managerial and technological innovations

General Motors, and help make a transformation challenge of immense proportions given risks,

Most importantly,

drawing ideas from

all

to

at

people

GM.

It

willing

to

was a to

assume

over the world, and adapting them

to

create a

new approach

to

indicates, the key to that

approach resides

of

Saturn

was complemented by a statement

corporate philosophy, which its

an appropriate

of Saturn

The mission

Saturn-

in

and business systems.

integration of people, technology,

The Philosophy

As the mission statement also

car making.

the

identifies

stakeholders of

critical

customers, members, suppliers, dealers, and neighbors

and how Saturn intends

to

fulfill

its

responsibilities

toward them.

Saturn's philosophy reads as follows:

concert with the UAW and General Motors, believe that meeting the needs of customers, Saturn members, suppliers, dealers and

We, the Saturn Team,

neighbors



in

fundamental to fulfilling our mission. To meet our customer's needs: Our products and services must be world leaders in value and satisfaction. To meet our members' needs: - We will create a sense of belonging In an environment of mutual trust, respect, and dignity. - We believe that all people want to be involved in decisions that affect them. We will develop the tools, training, and education needed for each member. -

is

Creative,

motivated,

who understand •

that

members

responsible team

change

is

critical

to

success

are Saturn's most important asset. To meet our suppliers' and dealers' needs: - We will create real partnerships with them. -

We

will

strive

for

openness, fairness,

trust

and

respect.

We want them to feel ownership of Saturn's mission and philosophy. To meet the needs of our community neighbors: -



of

We

be a good citizen and protect the environment. We will seek to cooperate with government at

-

will

all

levels.

By continuously operating according

we

will

our

fulfill

was worded

by the founding team, and

framework '

for Saturn's

after it

a long and serious

became

a fundamental commitment not

to

decisions that could be attractive

in

in

to

the long

pass

is

run.

whether

essential for a firm that believes people

character that

is

be involved

decisions that affect them, and

final

represents

it

it

fits

This provides a sense of coherence and strong

Saturn's philosophy.

As a

fact,

In

the short term but would lead

Constantly the relevant test a decision has

down

The Core Values

The philosophy

be compromised or undermined by

the organization to a very different direction

responsibilities

the guiding

decision making process.

statement sounds simple and straightforward.

in

philosophy,

mission.

Saturn's philosophy reflection

this

to

the

into

is

want

to

attempting to push

organization.

of Saturn

complement

founding team concluded principles of Saturn

to

its

Saturn's mission and philosophy, the

task of defining the organizational

by enunciating

its

core values:

Commitment

to

customer enthusiasm

Commitment

to

excel

Teamwork Trust and respect for the individual

Continuous improvement

The customer

deceptively simple: put your

have an unrelenting commitment toward excellence,

first,

teamwork and always

seem

core values

five

trust are the

essence

of our

continuous improvement.

strive for

American auto

complacency during significant

part of the

of

style,

one has

Sadly,

understand the centrality and significance within the context of the

management

to

these core values

whose

industry,

1970s and 1980s caused a

loss of competitiveness.

Saturn

one

is

most

of the

and creative responses from U.S. car manufacturers

visible

public confidence

to

regain

and recover competitive advantage.

Saturn's mission, philosophy, and core values represent

The

unalterable foundation.

new employee

and

initial

orientation

and

training

of

its

every

Saturn starts with learning and serious reflection

of

on this philosophical base, which constitutes the focal point of Saturn's

leadership.

Partnershi p at Saturn If

culture,

there it

was born

is

in

is

one word

partnership

start

can summarize the heart

The "clean sheet" approach

facing the American auto industry.

de novo, defining the new values necessary

effectively

and

attracting the best people

management and

DAW

rank-and-file

-

-

new environment

for constructive

to

management

willing

to

We

have

to

compete

both from

challenges and the risks associated with them. this

to

of Saturn

the conviction that old formulas were not responding to

new challenges

the

.

that

GM

assume

*

the

Central to creating

work was the creation

of

a

UAW

close partnership between

leadership

in

all

managerial decisions of a strategic, This

operational nature.

and building mutual confrontational,

The way

and GM, which includes union

was a unique

among

trust

and suspicious that Saturn

undertaking: sharing decisions

has chosen

presented

indicate the area of

in

is

evident from the figure

the so-called partnership arena,

where union and management Furthermore, getting

this

Figure

in

the

illustrate

to

areas

What

traditionally

one another.

of

is

parties.

had been

parties that

partnership approach of the ellipses

and

tactical

1.

The two overlapping

congruency is

GM-UAW

that

for the

two

most decisions

fall

leaving small decision areas

roles

have non-overlapping

gap between management and union

interests.

roles

is

narrower as the two groups become more comfortable with

one another, and the area

of partnership includes

the most

all

important issues facing Saturn such as the quality of the product, the quality of the worklife of the people

about the long-term strategic success

Paramount

to

in

the plant,

of the

leaders to

become more

direction.

base

will

is

the

help the union

business-oriented, and the managers to

understand how employees at its

business.

the success of this partnership

establishment of an educational process that

and concern

all

levels feel about the business

and

Saturn has used the strategic planning process as a

for this learning vehicle,

bringing union

together and reeducating them.

The

and management people

strategic planning process

becomes a powerful communication and coordination mechanism where people can address such business questions as defining the mission of our business, recognizing the industry trends,

'

10

1

1

understanding competitors' moves, recognizing what actions the firm

has

undertake

to

what roles are required organization.

to

be played by

we have

management perspectives

into

and

GM

true

and legitimate partners

teamwork

with

-

account

to

integrate dealers

in

consensus management

-

in

we make.

Saturn just

not limited

associated

its

better

to

every decision

in

is

extends

It

much

of the

taken both the employee and the

The partnership process managers.

members

and a stronger commitment

strategic business plan

implementation since

the

all

the process ends up with a

Finally,

and

establish a strong competitive position,

to

to

*

UAW

and suppliers as

the business venture, and includes

involvement and

individual

as equally strong elements of the

partnership approach.

Teams

Self-Directed

The to

cell

of the

as a work unit

at

Saturn

organizational structure of Saturn

a group of about fifteen people integrated as a

,

The

team, using consensus decision making. for the

work

unit to

become a

truly

in

Figure

structuring

resembles a conventional type

advisors: a critical

First,

UAW

Its

whose behavior

is

normal

is

2.

The team begins

exceptions.

ultimate objective

self-directed team.

evolution follows a four-phase sequence, illustrated

referred

is

of

itself

in

team

the forming

activity

with

phase, which

two significant

every team counts on the support of two external

and a management advisor representing the two

perspectives of Saturn's work.

These advisors are shown

12

13

outside the circles representing the team

team member" assumes the

"charter

assigned

to

Figure

2.

in

Figure

in

Second, a

2.

responsibilities

traditionally

a superior or foreman, depicted at the center of the team

He

members

or she hires the other

team, teaches

of the

them Saturn's mission, philosophy and core values, and provides the

team with the proper necessary In

the

skills,

and knowledge

abilities

phases

initial

each member

training for

of

perform the team tasks.

to

DAW

team development, the

development

-

in

Figure

the storming

phase

amount and degree

increasing

represented

in

the second

2,

-

is

phase

of

group interaction.

of

team

characterized by an This

is

the figure by the lines that surround the team's

members, implying an increasing degree

among them.

and management

member.

advisors interact directly with the charter team

As can be seen

develop the

to

In

the third phase

-

of direct

communication

the norming phase

the charter

-

team member moves outside the center but the advisor continues interact with the

phase

team through him or

the performing phase

-

-

when

her.

It

only

is

in

the last

the advisor acts with the group

as a whole, which has become completely self-directed.

team member has become an equal team This

years

to three

some

transition to

be

is

fully

it

it

is

common

can reaffirm

for

completed.

a team

itself

and

participant.

when two to

when

the team faces

or three

new members

Also

are

step back to the third phase again

as a self-directed team.

Each team member spends from 250 intensive educational

The charter

a lengthy process, typically taking two

serious changes, such as

added, until

full

to

training

to

750 hours

program, just

to

in

an

get ready for the

14

job.

more impressive when one

figures are even

These

Most are people who

these are not newcomers to the auto industry.

have worked from

five

at

GM

or other auto manufacturing plants

twenty

to

educational effort

five

realizes that

anywhere

Moreover, a large proportion

years.

of this

spent on behavioral subjects, emphasizing

is

leadership and team development.

The Organizational Structure The organizational from

different that

Saturn

of

structure

conventional,

the

Saturn

of

organizational

hierarchical

cannot be explained or represented through the

it

organigrams and organizational charts. as a

so dramatically

is

way

explain the interactions

to

participation

in

among working

We

these circles are nested

into

traditional

Saturn uses circles

Instead,

the businesses of Saturn.

form

will

units

now

and

explain

their

how

the overall structure of the Saturn

organization.

we

First,

start at the

whose tasks need

to

a work

,

circle all

unit in

work

unit

module

the charter

-

in

Figure

referred to as the decision

team members

the module, as well as the

of the

UAW

work

units

circle

in

the module.

In

module could contain temporary necessary

to

-

involves

which are part

and manager advisors.

into

The outside

3.

advisors normally oversee four to six different teams,

represented

units,

be appropriately coordinated, are included

module such as the one shown

the

Several work

level.

of

Those all

of

them

addition, the decision circle of the

or

permanent resource people

advise the work unit module

in

its

decisions.

For

15

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o

3 o 15

o

00

Li.

16

example, one such module could be the cooling system

of the car.

decision circle can work on ideas for cost reduction and quality

The

improvements,

for job

content and rotation, etc.

Taking the structure one level higher, the work

become

part of a business

the one portrayed

and assembly

in

Figure

activities

manufacturing complex distinct

unit within

business units

in

Spring

Hill,

in

this

modules

the Saturn structure, such as

Take, for example, the manufacturing

4.

executed in

unit

the four million

square foot

There are three

Tennessee.

manufacturing complex: powertrain

-

making casting from central foundry and building fully-dressed engines and transmissions; body systems painting complete sets of panels;

operations and building the

overseen by the circle

The

M anufacturing

makes decisions

MAC In

final

addition to

MAC,

and vehicle systems car.

is

assembly

-

These three business

Action Council (MAC),

affecting

organizational circle

stamping, fabricating and

-

decision

manufacturing operation.

the entire

presented

whose

units are

in

Figure

5.

there are two other functionally oriented

high level councils at Saturn: the Technical

Development Action

Council (TDAC), which coordinates advanced engineering and design,

and the Customer Action Council (CAC), which includes two Saturn dealers and focuses on sales, service, and marketing. of decision

making there

advising the teams.

In

is

a Saturn manager and a

the case of

MAC,

Finally, the

Strategic Action

of

DAW

all

levels

manager

the Vice President of

Manufacturing and the President of Saturn's

corresponding members

At

UAW

are the

the manufacturing advisor circle.

MAC, TDAC, and CAC come

together at the

Council (SAC) which oversees the organization and

17

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