Saturn Corporation was born from the economic and social realities within
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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
E
"O
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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O c g o
