How Motivated Employees Helped Save an American Institution Essay

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Motivational Challenges at Harley-Davidson, Inc.

Today, Harley-Davidson, Inc. (hereinafter alternatively "Harley-Davidson" or "the company") is the only major heavy motorcycle manufacturer in the United States and the company enjoys fierce loyalty from an ever-widening consumer base (Company profile, 2016). This legacy is the result of more than a century of intensive research and development as well as innovation in designs that have made Harley-Davidson motorcycles legendary for their high performance and rugged appearance. This legacy, though, almost ended during the 1970s and 1980s when increased competition from Japan and problems with manufacturing nearly bankrupted the company. To its credit, though, the company's leadership succeeded in turning the company around through informed management practices including employee motivation initiatives such as the High Powered Work Organization concept. To determine the facts in this case, this paper reviews the relevant literature to provide an overview of the company and a discussion concerning the motivational challenges that were experienced by Harley-Davidson during the 1970s and 1980s. Finally, an analysis concerning how these challenges were successfully met with the application of motivation concepts and strategies is followed by a summary of the research and important findings concerning these issues in the conclusion.

Review and Analysis

Company Overview

Founded in 1903 by Walter Davidson and currently headquartered in Milwaukee, Wisconsin, Harley-Davidson is a leading manufacturer of touring and cruising motorcycles (Business summary, 2016). Currently, the company operates two major business segments as follows:

Motorcycles & Related Products: This segment is tasked with designing, manufacturing, and marketing Harley-Davidson motorcycles; in addition, this segment also offers a line of motorcycle accessories and parts (e.g., replacement parts and aftermarket upgrades), general merchandise, and motorcycle-related services (Business summary, 2016). The Motorcycle & Related Products segment also features general merchandise (e.g., MotorClothes apparel and riding gears) as well as providing a wide range of business services to the company's nationwide network of independent motorcycle dealers (e.g., training, custom-designed software applications for Harley-Davidson dealers) and offers licensing for the company's globally recognized brand and trademarks (Business summary, 2016). Finally, this business segment also operates an ecommerce enterprise throughout the Americas, Europe, the Middle East, Africa, and the Asia-Pacific region (Business summary, 2016).

Financial Services. This business segment offers retail and wholesale financing services for the company's products as well as insurance and insurance-related packages to company dealers and retail consumers throughout North America (Business summary, 2016). In addition, this business segment also provides wholesale financial services for motorcycles and accessories as well as retail financing services (e.g., installment loans for new and used Harley-Davidson motorcycles) (Business summary, 2016). Finally, this business segment provides point-of-sale protection products (e.g., motorcycle maintenance protection, motorcycle insurance, extended service warranties, and credit protection services) (Business summary, 2016).

As shown in Figure 1 below, the company experienced a significant decline in sales following the Great Recession of 2009, but has since regained market share and has experienced a relatively steady increase in stock performance since that time.

Figure 1. Harley-Davidson (HOG) stock performance: 2007 to date

Source: http://www.thestreet.idmanagedsolutions.com

This successful rebound from a major economic downturn, combined with the fact that the company is still in business at all, is firm testament to the effectiveness of the employee motivational initiatives it implemented following its near-bankruptcy in 1981 as discussed below.

Description of Motivational Challenges

The company's reputation for quality began early on when its founder achieved a perfect score in the 7th annual Federation of American Motorcyclists contest of reliability and endurance in 1908 (Harley-Davidson, 2012). As a result, the company received substantial contracts from the U.S. government during World Wars I and II, and nearly half of its production during these years went to the military, including almost 90,000 motorcycles for the U.S. Army (Harley-Davidson, 2012). Returning veterans who had experience with the brand provided post-war increases in sales and the company enjoyed sustained sales and growth through the 1960s and early 1970s (Harley-Davidson, 2012).

By the mid 1970s and early 1980s, though, the company experienced a serious decline in sales due in part to a reputation of increasingly inferior quality and competition from Japan following its acquisition by AMF in 1969 (Young & Murrell, 1998). For example, according to Young and Murrell, "This reputation, combined with a Japanese influx of low cost, reliable motorcycles, convinced management that drastic steps in production efficiency were needed to respond to the new competition" (1998, p. 66). Many of the problems that had plagued the company over the past decade or so related to production issues that added costs to the finished products, making them less competitive with imports; in addition, a shortage of assembly parts meant that as many as one-in-three motorcycles were coming off the assembly line incomplete (Company profile, 2016).

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One company executive characterized the problems being faced by Harley-Davidson during this period in their corporate history as being fairly intuitive: "We were manufacturing products faster than we manufactured new customers" (cited in Oosterwal, 2010, p. 132).

The combination of these factors caused a serious decline in employee morale and it seemed that Harley-Davidson's days were numbered, especially when increasing numbers of independent dealers loudly complained about the declining quality of the company's products (Company profile, 2016). According to one industry analyst, "On the verge of bankruptcy in 1981, Harley-Davidson found itself facing severe market conditions and heavy foreign competition. Quality problems were rife. Customers were leaving in droves. Cash-flow was negative. And worker morale was at rock bottom" (Hampton, 2008, p. 3).

In addition, the company was forced to lay-off nearly half of its blue-collar workforce, further eroding morale among remaining employees (Hampton, 2008). Although the company still enjoyed some fierce loyalty among a few hardcore motorcyclists, the sharp decline in sales combined with eroding employee productivity and morale together with the impact of the 1981 recession could only have one logical outcome -- the end of Harley-Davidson (Company profile, 2016). As shown in Figure 1 above, recessions do in fact have an enormous impact on motorcycle sales, but the company managed to survive despite these trends due in large part to improved human resource management practices.

Description of Company Response

In response to this downward spiral, a corporate executive from AMF, Vaughn Beals, together with 22 other motorcycle division executives, purchased the company outright from AMF for $81.5 million on June 16, 1981 and implemented a new management strategy that included an employee motivation component termed "Employee Involvement" or EI (Young & Murrell, 1998). Since that time, EI has been focused on developing a High-Powered Work Organization strategy that is intended to more fully engage the company's employees, an initiative that has been highly effective to date (Company profile, 2016). In this regard, Hampton (2008) reports that, "The new management team's response was to formulate a recovery plan based [on] a renewed focus on quality products and services, aggressive marketing, an emphasis on the customer's price-to-value perception, sales excellence, and highly motivated employees" (p. 4).

Some indication of the effectiveness of the High-Powered Work Organization concept implemented by the company can be discerned from the observations made by its current employees, including the following representative comments set forth in Table 1 below.

Table 1

Employee observations concerning motivation in the Harley-Davidson workplace

Employee

Observations

Clarence McDaniel

[What motivates me is] the High Powered Work Organization concept where every worker in each natural work group has a day-to-day say so in how the group functions, from parts requisition all the way down to vacation planning, educational training.

Janice Wheeler

[What motivates me] is our factory is very diverse. Being a woman is beside the point because I'm given the opportunity to do anything within our area, our natural work group, that I was hired in to do. I'm more inspired to do it because I know we're doing it as a group. I don't have someone shoving it down my throat. We all know what needs to be done and we all want to attain that goal with the highest quality possible if we can for this plant. Because it's our plant.

Darren Dillard

[What motivates me is] there's nobody over your back telling you, "Okay, you need to be doing this. You took an extra minute on your break," or something ... it's nothing like that. You just work at your pace. You know what you gotta do. You know you gotta do it, so you just do it. Just a sense of freedom. It makes you feel like you're really a part of it. Since there are no supervisors, you're running it [the factory], so you gotta know the ins and outs of the business in order to run it, versus the other way when the supervisors are running it and you are just there.

Phyllis Battle

In the partnership here at Harley we are supposed to be all working together for the same common goals and there is no difference between how an hourly person is treated versus what a salaried person is treated and that's the way we operate.

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