HRM Strategic Context and Process

HRM Strategic Context and Process

Assessment Two
HR6005: HRM Strategic Context and Process
Assessment Type: Case Study response
Word Limit – 2500 words
Weighting – 30%
Turn-it-in Submission Date – Week 22 (Thursday 23 March 2017, 3pm)

Over a number of weeks we have been looking at areas including Business Strategy, Generic and HR Strategies as well as Organisational Design and Structure. We will also be covering Strategy and Culture although you are encouraged to start reading up on this forthwith. You have been encouraged to take up the opportunity to discuss a number of small and more detailed case studies provided on weblearn.

For Assessment Two you are required to analyse the BMW case study provided with these instructions.

TASK:

To what extent and why could BMW be said to be utilising a Strategic Human Resource Management (SHRM) approach. In your response you should refer to theories, models and concepts covered in the module.

Requirements guidance:

Read through, digest and analyse the BMW Case study. You should then provide a discussion on the key findings of your analysis which might include an over-view of the key themes the case study presents in relation to Business Strategy, Organisational design, structure and culture.

You should aim to comment on:
• The historical aspects behind BMWs take-over of Rover, that is, the challenges Rover had faced up until the takeover and what key challenges BMW faced (at Oxford) as a result of the take-over.
• Why had Rover failed for so long, including why had successive attempts to turn the business around failed?
• Why was BMW so successful when Rover had failed?
• In the main you should focus on HR factors, theories and best practice
You should aim to critically apply and analyse theoretical approaches/models that can be used to review or evaluate the approach adopted by the case study organisation.

You are encouraged to:
• Look at recent articles reporting on BMW and its market performance
• Seek out articles that report on how BMW continues to address people management matters
• Review the You-tube clips viewed in class and any additional items discovered in your research activity
• Look to make comparison’s and benchmarks where possible (you may come up with examples of good as well as bad examples of practice).

THE CASE

BMW Manufacturing : Oxford Plant
.

Introduction

When Rover Cars were finally sold to the Phoenix Group in 2000, the Cowley plant near Oxford
remained in BMW hands, and became a 100% subsidiary of BMW (UK) Holdings Ltd, as BMW UK Manufacturing Ltd. Up to this time the future of the Cowley plant was in jeopardy. For instance following the privatization of Rover in 1988, and it purchase by British Aerospace, the closure one of the assembly plants in the Cowley complex in Oxford was followed by the eventual closing of a second plant, leaving only one assembly line in Cowley. The BMW Group provided Cowley with a future with its decision to locate the assembly facilities for MINI production at the Oxford plant. To enable this equipment for MINI production was shipped from Longbridge, which was sold to the Phoenix group, to Oxford. During the change-over phase, a nine-week extended summer break was agreed for the Oxford workforce. This was supported by investments of more than $400m to modernise the plant, it invested an additional $330 million into machinery, facilities and infrastructure on-site to support the start-up of MINI production.

The Production Process

The structures at the plant Oxford were in accordance with BMW Group’s production strategy, allowing the possibility to build other BMW Group products at the plant if so desired.

This production strategy included the aim to ensure that every car is delivered to individual customer at not only a confirmed date but at the customers desired date, which requires reduced lead times. This also requires `zero defects’, while flexibility in production is enabled by an integrated computer system linking sales outlets with production and suppliers. This is supported by KISS (Kernfertigungs- Integrierendes Steuerungs System) which is a BMW Group information technology system which totally automates communications throughout the production process and provides an electronic history for each and every car produced. From beginning to the end of the assembly line KISS schedules and sequences production and makes sure each car is built to the highest quality standards. The car’s barcode is read by KISS at every assembly stage providing a direct electronic link with the production control system. Each car is also fitted with a transponder that ensures immediate identification and tracking at any assembly station. The build process is highly automated with some 250 robots, spot welding is 100% automated. Laser inspection is also carried out by cameras at key points of the build process to check the build integrity during manufacture. The car body itself can be raised and lowered on wooden platforms which allow the body to be moved between floors for different assembly processes while being wide enough for employees to work on the car as it moves down the line. The height of the car on the assembly line can also be altered to provide optimum working conditions for associates and for one assembly sequence the car is rotated through 90[degrees] on a swivel mounting at waist height to give easy access to the underside. Altogether, 2,415 different parts are fitted on the car on the final assembly line. Some parts arrive Just in time, for example given just a six-hour notice of the required specification, the cockpit arrives from the supplier to the appropriate point on the assembly line without any manual handling from the time it is dispatched from the supplier plant 60 miles away to fitment. Altogether, there are 10 just-in-time suppliers responsible for 45% of all MINI parts.

The essence of the strategy involves lean production, and the modernization of the Oxford plant involved key partnerships with British firms as well as European suppliers who provided state-of-the-art facilities. This strategy has been a major factor in the flexibility and productivity of BMW Group plants, which have been applied to the Cowley facility, such that customers can customise their chosen model to exact specifications with a choice of 50,000 combinations of options and accessories. Dr. Herbert Diess, Managing Director Plant Oxford, said: “MINI will be built here at Oxford using the latest technology and to BMW’s stringent quality and production standards. Our employees have already shown … that they are capable of delivering this quality. We have successfully completed the first challenge and I am positive that together with our suppliers and the support of the whole BMW Group we can fulfill the high expectations for the launch of MINI.”

Transformation

Customer demand and more efficient manufacturing processes enabled MINI production at Plant Oxford to reache reach the half-million production target two years ahead of schedule. When MINI was re-launched in 2001 it was anticipated it would take five years to achieve this. Even by 2002 `Plant Cowley’ had exceeded target production by 60% and it had delivered cost savings of £6.3m (S$19.7m) and MINI is now the UK’s fifth largest car manufacturer As the plant had been a hotbed of industrial disputes, against an industry background of declining production, industrial unrest and plant closures this turnround is reflective of the substantial changes taking place in some parts of UK manufacturing,

Six hundred MINIS of all types come off the production lines daily. Plant Oxford, with 4,500 employees, referred to as `associates’ are currently working at maximum capacity operating seven days a week on a three-shift system. 180,000 MINIs are expected to be built at Plant Oxford this year and these will be sold in 73 countries worldwide. It is expected that the production capacity of Plant Oxford will be increased to coincide with the new models in about three years time.

HR reinvents the wheel! A Mini adventure – February 2004

HR initiatives were important to BMW’s Oxford manufacturing plant in supporting the customer and production strategy. The plant faced the challenges of upgrading the site to a market-leading standard, integrating the Rover and BMW cultures and launching a completely new car in the form of the new Mini. The company introduced a change-management programme that would contribute to the delivery of the plant’s quality, volume and productivity targets at the same time as producing a turnaround in working practices and workforce behaviours. The company realised that employee buy-in, a culture of pride, collaboration and joint purpose at the Oxford plant was necessary. To assist in this a nine-part change programme, known as the New Oxford Way (NOW), was rolled out. NOW was a high-level cultural change programme concerned with identifying the best elements of the Rover and BMW cultures, along with the requirements of the new plant and vehicle, and using them to develop a unique Mini culture. Each NOW sub-project was led by a member of senior management – and critically, the programme had full support right from the top of BMW in Germany.

As part of the NOW programme, a Working in Groups, or WinGs, concept was developed. WinGs “reflected and fully supported the developing culture with its emphasis on teamwork, empowerment and effective communication”. At the core of the WinGs project were “self steering” teams. A manager explained that this means “… the team taking ownership and responsibility for its own organisation, development and achievement of its targets…The WinGs concept was about creating a turnaround in manager-employee relations; abolishing directive management styles to give a more autonomous team-working approach. The main element of the programme, the development of self-steered teams, diminished the power of the traditional hierarchical structure and gave much more responsibility to the working teams in the manufacturing area. It placed continuous improvement and the achievement of plant improvement targets directly into the hands of the team members.”

Each of the manufacturing areas involved in WinGs appointed a co-ordinator or function champion who ensured the implementation within their area, supported by internal and external consultants. The function champion was released for 50% of the time from their normal role to facilitate teams in self-steering activities. And BMW also provided training in effective communication, leadership, conflict resolution in teams, goal setting and assertiveness.

WinGs was initially run in 20 pilot areas, before being rolled out across all of the Oxford plant’s shifts. Initially, the effectiveness of each self-steering group was assessed by internal and external consultants but over time these reviews became the responsibility of the groups themselves, supported by intensive coaching from outside and reinforcing the sense of ownership. Fortnightly 45-minute team-talk sessions were built into the production schedule, as well as a checklist to provide guidance to the teams about where they should focus their activities. These were audited monthly to measure progress. Visual techniques such as team target boards were designed to monitor progress and a dedicated logo was created to help raise the visibility of the project.

The project reduced the number of organisational levels at the plant and provided more ownership and responsibility to the team by allowing decisions to be made at lower levels. At meetings, employees were encouraged to present their ideas – with unprecedented success. For example, one suggested recycling screws that were previously thrown away during the production process: the plant now has a supply of about a million screws to use, saving significant expenditure and wastage.

Management knew change programme on this scale generate resistance from those affected by it and this was reduced by running a series of ‘kick-off workshops’ – at which associates were encouraged to raise their concerns – before the project began giving employees the chance to buy into the deal from a very early stage. Momentum was maintained by using rewards schemes and regularly communicating with staff, especially when there was good news.

Recognition and reward
The project in the Oxford was given the people management award for 2003. The director general of the CIPD stated . “BMW has systematically worked with people at all levels to change the culture of the Oxford site…teamworking, continuous learning, open communities and building a climate of trust have generated real bottom-line benefits. They have also opened up opportunities for people to develop and to contribute their initiative to their work.”. The judges also commented on the transformation of the plant from an industrial relations hotspot to a collaborative, modern workplace. The managers say relations with the unions were genuinely productive and cordial, critically the unions were supportive of WinGs – not least because they too were communicated with throughout, although they did not get involved in the detail of the project.

Workers at the plant managers say were given a voice which was listened to. This included the opportunity to air their frustrations and the special workshops looked at which of those frustrations could be resolved. Rather than outsiders, the ambassadors for the programme were recruited from within each of the main production functions so that each of them had specific knowledge of their areas and the programme was not seen as being forced through by a central department. Some areas of the plant were slower in embracing the programme than others, but publicising teams who had made significant progress in the staff newsletter helped to provide a role model for other teams to imitate.

People and productivity
BMW insists WinGs was crucial. Without the involvement of the entire workforce, explains a manager, particularly in continuous improvement activities, the plant would have been unable to achieve and exceed its targets. Further the success of the project resulted in higher morale and a greater willingness to get involved with other elements of the NOW programme. Critically, it also provided a much better environment against which to introduce any future change that may be required.
The self-managing teams, each between 8 and 15 people, can make production decisions, have job rotation schemes, and put the responsibility for achieving plant wide targets in the hands of those teams. Each team therefore has more stake in the way the business develops rather than a hierarchical system where workers feel alienated from decision making, stifling initiative and leading to a dependency culture. The organisation also introduced fortnightly team talks where plans, decisions, suggestions and points of view could be aired. Many of the ideas generated through this process have saved the company money – those who actually do the job tend to be able to see where the inefficiencies lie! Management and directors also had to spend time working on production tasks.
An assembly line in the 1990s – capital intensive, more efficient but still hierarchical. Since the programme started three years ago, BMW has put into practice over 8,000 ideas from its staff, saved £6.3 million over the past year as a result and seen production targets exceeded by nearly two thirds. The whole workforce is now seen as being less divided and more cohesive with a greater degree of respect all round and a willingness to contribute and be involved.

As a result WinGs has been expanded into the non-manufacturing areas. There is also a voluntary scheme that encourages every employee who does not work on the assembly operation to spend a week each year in a production role, to increase their understanding of the challenges that exist and to see how they might further support the manufacturing teams to meet their targets.

HR Policies and Practices

In addition to WinG’s BMW also changed HR practices, some of which went back to the time British Aerospace sold Rover to BMW in 1994, although there were specific changes to support Plant Oxford. At the start-up of Mini production BMW offered a one-off payment of £300 and a first year settlement of 6.89% (including an element of compensation for an increase in the working week). Subsequent changes included

• the introduction of a new grading structure,
• provision for the employment of temporary employees
• single status pay and conditions
• performance pay
• development of flexible working arrangements (introduced by Rover)
• Introduction of a Working Time Account (WTA) of +/- 200m hours which enables seven-day production, and an additional WTA shift can be introduced with only two days’ notice
• two crews work Monday to Thursday (Early from 0630 until 1615, and Late from 1615 until 0200) and one crew works Friday to Sunday (the Saturday shift is 0600 to 1730 and the Sunday shift is 1900 to 0630 on Monday); the Friday late shift is resourced through the WTA and other shifts can be extended by 1.5 hours under the WTA
• overtime is not paid but shifts attract unsocial hours premia; Saturday is paid at 1.5 and Sunday at 2 times

Individual performance pay for production employees is based on five criteria with grade-based targets

• work results
• business awareness
• flexibility & initiative
• co-operation in/out side group
• willingness to change

‘work results’ includes: achievement of targets (eg quality, volume, cost, time, works to processes). Employees earn ‘bonus points’, based on appraisal against three performance levels, for exceeding targets up to a maximum of 10 bonus points; payments are only made for exceeding targets the bonus range is up to £950 pa, paid monthly. Although initial payments have been small (around 1% of salary as against a target of c5%), the company want to increase payment levels but first want to establish the principle of paying for performance (eg in their German plants payments reach 20%). The company prefers to reward individual performance because there is a clearer link between personal contribution and take-home pay.

The changes have also been supported by training and development. For instance, general implementation of change has also been supported by training and development, targeted particularly at team leaders and supervisors selected. While Production Area Managers were selected through assessment centres and then trained in appraisal skills to support the new, appraisal-based performance pay scheme.

Employees are also rewarded for their continuous improvement ideas and the company may take some `associates’ on nights out at comedy clubs, or lent them cars for the weekend. All employees have to come up with three ideas a year on how to improve the production process. In one year employee suggestions produced cost-savings of more than £11m.

After all the investments and changes the atmosphere in this car plant is a world away from the dark, dirty, noisy metal bashing world of Britain’s car industry 20 years ago. There’s plenty of light, little noise, and the workforce wear smart, colourful uniforms. But it has taken a decade for BMW to make a success of car-making in Britain. When this was a Rover plant, the old culture proved difficult to shift. But technology has replaced workers, cell production has replaced the production line and the emphasis at Cowley is on self-managed teams. This has helped to replace the conflict culture at Cowley with one where the workers viewed themselves apart from the management. The ‘us and them’ culture created misunderstanding, communication problems, poor productivity and a reluctance to change that led to many car manufacturers in the UK falling behind their competitors abroad.