Various Leadership Theories and Traits of BMW - Case Study Example

 BMW Case Study Analysis 1. Introduction Leadership is the method and process in which a person called the leader manages to obtain the voluntary enlistment and support of other people to achieve a task. Leadership skills are very valuable in building an organisation and the leader with the right skill can turn a company around in very tough times and make it a success. Right from early civilisations to modern times, charismatic and great leaders have often made a huge difference in the fortunes of nations and organisations (Shriberg, 2005). Organisation development is an important task that leaders take up. De Kler (2007) has proposed that organisation development is a term that would include a number of business management, HRM and change management techniques and tools. It is the strategic plan to improve the firm’s effectiveness, strengthen the processes with the ultimate advantage of providing a competitive advantage and to enhance the employees self worth (French, 2005). Hughes (2006) says that with the change in business models in the Internet age, several new paradigms for business management have been put forth. Present managers have to devise a strategy that would cover for outsourcing, mergers, acquisitions, restructuring, agile and lean processing, online trading, business continuity and so on. Firms have to reinvent themselves, offer new offerings, keep adapting to changing market conditions and all the time, they have to understand that some one else is ready who would offer to deliver at a lower price (Hesselbein, 2007). Customer’s perceptions about service levels, needs and requirements are changing. Business leaders are faced with rapidly changing scenarios and they have to take a series of actions and steps as suggested in the action research process, that is illustrated a below (Wendell, 2003). This paper discusses various leadership theories and analyses the BMW case study from the leadership perspective. 1.1. Leadership Theories and Styles Some of the leadership theories are: Trait theory: This theory suggests that if a person has certain characteristics or traits, then these would lead to proper and effective leadership. Some of the expected traits are energy, leadership motivation, self-confidence, ambition, achievement and so on. There is some amount of criticism as the tenets are difficult to prove empirically and that the theory gives rise to ‘born leaders’, a term that researchers are not ready to accept (Pedler, 2007). Behavioural and style theories: The theory shows that leadership is a result of behaviours and by analysing the behaviour of leaders; it is possible to create a behaviour identity map that would define different leadership styles. Accordingly, this theory has given rise to various concepts of motivation, activity inhibition, influence on group decision-making and so on. So there would be different styles such as democratic, authoritarian and laissez-faire (Vroom, 2002). Situational and contingency theories: The theory suggests that leadership profiles and behaviour are caused by the situation a person is placed in. The manner in which a person behaves when serving as a leader depends largely on the situation. It would also mean that a leader would change his style of leadership based on the situation. An authoritarian leader is required in a crisis but would not have many followers in a normal situation. A democratic leader is suited where consensus decisions have to be taken and the laissez faire leader is not situated in conflict situation. This brings to light the result oriented and relationship oriented leaders (Vroom, 2002). Functional theory: According to this theory, a leader is said to be effective and when he has enhanced tie cohesiveness and effectiveness of a team. To ensure better cohesion, it is essential that five functions have to be performed by the leader and they include environmental monitoring, scheduling activities of subordinates, taking up training and coaching of sub ordinate, motivating team members and intervening and adding to the group work (Hiebert, 2005). Transformative Leadership: Transformation leadership 'is focussed at ushering in a strategic organisation change, in response to market forces that are technological, competitive or regulatory'. The leadership comes into practice where there is a instability and transition and changes have to be done to transform an organisation to make it competitive. The change that is envisioned may be disruptive and system wide and the leader needs to have the vision to balance a number of social, financial, and marketing forces (Anantaraman, 1993). Transactional Leadership: Transactional leadership is defined as “a rational exchange process in which subordinates needs are met if their performance measures up the leaders requirements indicated in explicit or implicit contract". Importance is on contractual requirements, meeting goals and obtaining rewards. Bass suggests leaders adapt their style to the current requirements so that the style may be transactional in one case and transformational leader another (Bass, 1985). The section has presented various leadership styles and it should be noted that a leader would adopt different leadership style to suit the conditions at hand. Once cannot say that if a leader 2. Analysis of the BMW Case Bayerische Moteren Werke's - BMW is a Germany based premium car manufacturer with 15 production centres and 8 plants across the world. The company is rated among the 12 largest automakers in the world and it employs more than 97000 people in 26 countries. The global car industry is hit by over production and over supply, highly fragmented market with high manufacturing costs and falling sales. Many automobile manufacturers have failed and it takes strong and visionary leadership to sustain and grow a firm such as BMW. This section provides an analysis of the BMW case from the leadership perspectives (BMW, 2002). 2.1. Theories of leadership operating at BMW The leadership style of Joachim Milberg who was appointed as the CEO and later that of Dr. Helmut Panke as the CEO after Milberg joined the supervisory board can be described as a combination of Transformational and Transactional. When Milberg had taken over as the CEO from Pischetsrieder, BMW had incurred heavy losses from the badly planned takeover of British Rover and the subsequent sale at a heavy loss. The global auto industry was rapidly undergoing consolidation and there were major changes in the market place. Japanese carmakers such as Toyota, Honda and US carmakers were also offering premium branded cars. In Germany, Volkswagon and Mercedes were also making rapid progress while BMW was struggling with loss making ventures. While BMW cars commanded a premium price, the off take was not sufficient and in addition, there was a need to improve internal efficiency and reduce costs. This was a very difficult period and BMW needed a leader who could transform the company that was steeped in tradition into a modern organisation that would not compromise on quality and yet exceed expectations at reduced costs. The Transformational leadership was provided by Milberg who revamped the internal process of design and manufacture. He also changed the concept of treating employees as cost and took up measures to enhance their ability, willingness and providing them opportunities for growth. The measures introduced and implemented paid off and there was an overall increase in the car and motorcycle production and sales. By 2001, BMW managed to show a record profit of 1866 million Euros and retail sales were increased by more than 10%. Turnaround time for made to order vehicles was reduced to a few hours than the weeks it took before. Once the transformation of the organisation was in place, then the Transactional leadership style came into focus under Panke who was the CEO. In this phase, the initial euphoria was sustained by involving workers and creating a work improvement groups. These groups were made of experienced workers who looked at all phases of the production, marketing and other departments to improve the transaction processes. 2.2. Leaders’ view and expectation of followers As a part of the transformational leadership, Milberg has transformed the organisation processes and systems and aligned them with the market needs and not just the leaders needs. The leader expects the BMW brand to be protected and no matter what, the quality of the cars should never be compromised. The leader also believes that innovation is fundamental, partners and suppliers should be treated as members of the organisation and they should be involved in programs for their continuous improvement. The leader also expects the employees to be involved in sustainable development of the automobiles and conserve power and water. The leadership expects the vast organisation to be made of a network of cross functional and multi skilled teams. This concept was there in an informal manner but later on it took on a more formal approach with teams being formed in other areas such as engineering, design and administration. The work processes were improved by having quality circles where team members would speak informally about problems in the work areas and how they can be tackled (BMW, 2002). BMW like other automobile manufacturers had developed over capacities, lost the will to innovate and improve quality and they were taking customers for granted. The leadership wanted customers to believe in the slogan of 'sheer driving pleasure'. The slogan was designed to attract car owners across the globe that liked high performance, innovate, high brand appeal luxury cars. There were many other luxury car companies such as Mercedes, Ferrari, Porsche, Lamborghini and so on. Some of them like Rolls Royce and Ferrari were super luxury cars and BMW did not compete in this segment. However, the leaders wanted the employees and customers to believe that the BMW bran stood for determination, high standards and professionalism. Over the years since 1916 when the firm was started, BMW had held on to many of its traditions. The leaders were trying to focus employees on the fact the traditional values of performance and quality were never to be compromised. However, other processes and systems of working, the rigid structures within the organisation had to be modified so that these systems became flexible, driven by innovation and quality needs (BMW, 2002). 2.3. Leadership structures at BMW BMW as an organisation structured around teams and there are a number of teams that form a complex, interrelated and multi skilled teams. These are extended vertically and horizontally through the organisation from the middle management to the shop floor. Formal leaders are in the form of the CEO and the supervisory board and informal leaders are the large number of teams. Such a structure would not be supported by any standard organisation structure, as the whole process of managing would be very chaotic. However, from 1997 onwards, the self-organising teams of around 15 people were formed in the shop floor areas, design and other departments. The teams were made of highly skilled employees or associates as they were called and they were empowered to take appropriate decisions for work improvement. The associates are empowered to self organise, take decisions, solve problems and also operate with a working structure that would integrate efficiency an satisfaction to suit BMW conditions and culture. The team would decide on work rotation within the team and across team products. The performance management system would support the team based organisation and reward workers for their contribution. With adequate training, members would move smoothly from working under supervision to working in self-managed groups. The existing structure of classic division of labour would not have supported the new work structures. The management decided to move away from the old to a new structure by integrating the functions of workers and managers. This would reflect the new way of thinking about the manager-worker relationships and providing workers with greater understanding of how the firm operates. Workers at all levels are expected to think in business terms and BMWs work structures are designed to support responsible business focussed workers. Self-managing teams would make their own decisions and take responsibility for quality assurance, logistics, production and maintenance. These had been looked after by other departments all these years. As a measure if improvement, BMW should attempt to understand as to why so many teams for improvement of efficiency are needed after decades of working. The firm should examine ways of automation, lean production, cellular manufacturing that would have quality built into the machines and processes rather than manual checking and verifying the systems. 2.4. Development of Spirituality in the Workplace An important aspect of the BMW work practices is to develop sustainable work methods in their processes and the workplace. The meaning of the term spirituality is sustainable, in the context of the case and this again has relevance to sustainable methods of working, using less power and consuming lesser water per car manufactured. The German plan is situated in the heart of a township and BMW takes extra care to see that negative impact on the township is the least. 2.5. Leadership development at BMW Leadership development at BMW is done by looking inside the organisation for future managers and providing them with the required growth opportunities. The firm does not recruit leaders from outside unless there is a key skill gap. Leadership is developed in BMW through the BMW Associate and Leadership Model. This model is the cornerstone of the leadership development process and it is used to set out the requirements and to provide the right direction. The model is designed to support teams and process oriented cooperation is a long-term leadership strategy that is aimed at creating a culture of 'We' at BMW. The model has two main parts: the associate model and the leadership model. The associate model sets individual goals and expectations throughout the workforce while the leadership component challenges management to view its actions and activities within a culture of proactive leadership and development. Criteria for evaluating leadership are: achieving business goals, displaying corporate thinking and acting, possessing technical and professional competency, showing leadership and team behaviour and holding personal qualities. Using these criteria, high and under performing leaders can be identified. The important idea is: to create a culture of trust, provide orientation, promote cooperation and realise responsibility. The model is again founded on ten leadership principles. The principles are: increase risk taking, role modelling, agreed objectives, having fun, efficient teams, realistic visions, achieving business goals, communication, building trust and confidence and creating diversity. The associate and leadership model is aimed at developing a distributed leader organisation. Leadership is benchmarked internally by using employee surveys and through a feedback process involving subordinates. This helps to bring in a top down annual performance management process. In the annual review, the individuals potential as a manager is assessed and compared with other managers. The first line managers review and discuss the second line managers as a part of the benchmarking process. The initiative helps to create a template to manage the performance and potential of each individual in BMW. In addition, BMWs active management development process has three components. These are: corporate development programs, professional development programs and dialog development. Various skills such as culture, eCommerce, conflict management, communication skills, cross functionality and so on is developed. Some of the leadership development programs are managed through customised in house training, by hiring freelance trainers and through business schools. There are also special programs to help develop future leaders and global managers are given the opportunity to spend some years abroad and then allowed to return home. The leadership part of the model is aligned with the drive management development program that is meant to strengthen, broaden accelerate the specialist and management potential of junior personnel. 2.6. Role of the Quandt family, the major shareholders The Quandt family owns more than 48% of BMW through shares and hence it becomes the majority shareholder with the remaining shares listed in the stock market or issued to other share holders. As per German laws, publicly listed firms must have a structure with a supervisory board and a board of management. At BMW, the supervisory board is made of 21 people and the Quandt family getting to appoint the Chairman and two direct representatives in the board. About half of the Supervisory Board is made of BMW employees while other members are made of different internal business units and external partners. However, the supportive role the Quandt family, the supervisory board and the major share holders extends to beyond making policy decisions. It has been pointed out that when Milberg joined the supervisory board, BMW enjoyed the highest growth in revenues and sales. Rather than play an obstructionist role, the board plays an active role in developing leadership, nurturing teams and defining the right strategy. 2.7. Vision and values operating at BMW The challenge for BMW leadership is how to be innovative and agile in responding to the pressures in a quickly changing and highly competitive global environment. In the words of Milberg, the CEO must be person with vision and the ability to turn the vision into reality together with his team. It was important for BMW to have a culture of openness and the courage of one's convictions. Innovation was a [art of the leadership style to point out the perspectives, define tasks and then agree on objectives. If targets were not met, then leaders would report and this would require some courage and it makes the employees to emerge out of their passive roles. Leadership is very much valued at BMW though the firm does not have a displayed mission and vision statement or values. The key message of enjoyment, quality and high performance would apply to employees as well as products. Every worker lives and breathes BMW and the very name BMW represented the vision of the company. This form of vision is distributed through the organisation and encouraged by the leadership. This vision was implemented by collaboration between the workforce and management based on mutual trust and a mature partnership. The culture of trust requires individual responsibility, self-organisation and flexibility with maximum continuity. 3. Conclusions The paper has examined various leadership theories and traits and also analysed the BMW case study with reference to the leadership practices in the organisation. As per the literature review and case analysis, it was found that the transformational and transactional type of leadership styles is practiced in the firm. Important issues related to leadership at BMW shoed that the firm operates through a complex network of cross-functional teams that take up tasks of work and process improvement. All employees believe in the BMW brand and have a urge for quality, perfection, customer care and service. Leadership issues are given a high priority at BMW and leadership is developed through the BMW Associate and Leadership Model. References Anantaraman. V., July 1993. Evolving concepts of Organisational Leadership. Singapore Management Review, 15(2), p. 17-33. Bass. B. M., 1985. Leadership and performance beyond expectation. New York: Free Press BMW, 2002. BMW Case Study, MN2015 N+C: Fundamentals of Leadership. Coursework study material. De Kler. M., 2007. Healing emotional trauma in organizations: An O.D. Framework and case study. Organizational Development Journal, 25(2), pp. 49-56. French, W. L., et all., 2005. Organisation Development and Transformation (6th edition). Prentice Hall, International Student Editions. Hiebert. Murray., 12 December, 2000. The Encyclopaedia of Leadership: A Practical Guide to Popular Leadership Theories and Techniques. McGraw-Hill Publications. Hesselbein. Frances., 2007. The Organization of the Future. The Drucker Foundation Future Series. San Francisco: Jossey-Bass Inc. Hughes, M. 2006. Change Management: A Critical Perspective. UK: CIPD publications Pedler. Mike., 2007. The Learning Company. Studies in Continuing Education, 11(2), pp. 91-101 Shriberg. Arthur., 3 March, 2005. Practicing Leadership Principles and Applications, 3 edition. Wiley Publication. Vroom. Victor, et all, 2002. Theoretical Letters: The person versus the situation in leadership. The Leadership Quarterly, 13, pp. 301-323. Wendell. L. French., 2003. Organization development: behavioural science interventions for organization improvement, 3rd Edition. Englewood Cliffs, N.J.: Prentice-Hall. Read More

 

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