The Management Style of the New United Motor Manufacturing Inc - Case Study Example

Case analysis: Nummi Executive summary New United Motor Manufacturing Inc (NUMMI) is a company that was formed as a result of a joint venture between General Motors of the U.S. and Toyota Motor Corporation of Japan in 1984.GM at the time was facing a lot of challenges and a joint venture seemed the only way out of their predicament (John, 2010).GM was searching for touchable business objectives in the new venture. GM, for instance did not know how to build a small vehicle profitably. Apart from that GM needed to revive its idle plant as well as its labor force back to work. Though not very explicitly expressed, GM had heard of the world famous Toyota Production System and thus wanted to learn as much as they could at an up close and personal level with Toyota. Toyota on the other hand was under immense pressure to build vehicles in America since they saw themselves as being late in venturing in the US market which had Nissan and Honda already building vehicles in Tennessee and Ohio respectively. Such issues therefore required a pragmatic approach which would involve complete overhaul of the production and management system as well as proper training and reassurance of employees so as to change their attitude and finally culture towards work. Thus both companies needed to learn to from one another; hence the concept of a joint venture. For both companies to succeed through NUMMI, they needed to implement a business process management (BPM) process which is a concept that would aid in NUMMI’s transformation, train employees through implementation of total quality management (TQM) and finally do a thorough business process re-engineering (BPR) which is a strategic business management approach whose major focus is design as well as in-depth analysis of business procedures and workflows in a firm. Identification of problem NUMMI is an acronym for New United Motor Manufacturing Inc, and was founded in 1984 and its location was Fremont California (John, 2010).There were several objectives that GM and Toyota had and that is the main reason why they thought that a joint venture would help them achieve most of them (Ben, 2009). Some of opportunities that were available for the 2 companies included; the fact that GM would benefit from technology transfer from Japan-since the Toyota production system would be used in the new venture. GM had heard of the world-famous Toyota’s production system and NUMMI was the best chance to learn it; up-close and personal.GM was also searching for tangible business objectives since they were faced by the challenge of making a small car profitably. Thus GM had a rare chance of not only putting an idle plant to work but also their workforce. Toyota on the other hand had a lot of pressure to start producing vehicles in America. Their competitors (Nissan and Honda) had already set base in the U.S. and were in full gear making vehicles in Tennessee and Ohio respectively. This therefore made Toyota to feel that it was lagging behind and very late to begin production in the U.S. Their main objective therefore was to learn fast through having an existing partner who could help them navigate through unfamiliar territories. These therefore were great opportunities for both GM and Toyota which were emanating from the joint venture. First and foremost, Toyota through NUMMI would be able to gain access into the American market so as to counter Nissan and Honda, thus in the process alleviate trade frictions which had come up between America and Japan. Toyota wanted also through NUMMI learn how to work with a workforce from America (Inkpen, 2005, p.117).Apart from that Toyota also through NUMMI wished to study about suppliers from America. Thus, Paul (1993b) states, “Toyota’s primary concern with respect to suppliers was to identify potential suppliers and establish long term relations with them” (p.185).Also as far as working with a workforce from America, this initially did not encompass a unionized workforce. Paul (1993a) states:”Toyota later claimed it had also wanted ‘to gain experience with American union labor,’ but at first Toyota wanted nothing to do with the UAW” (p.98).On the other hand, Inkpen (p.117) claims that GM’s primary goal was getting a source for a smaller vehicle so as to fill a gap in the market as well as utilizing a plant that was idle-GM Fremont plant closed in 1982.It is not astonishing therefore that GM was interested in utilizing the opportunity of learning about the world famous Toyota production system (TPS),which at the moment was having a very big influence on the US market by virtue of producing top quality vehicles at extremely competitive prices. However Inkpen (p.117) claims that at first, this interest was necessitated, for the better part, by the then GM chairperson, Roger Smith. Only after NUMMI began to considerably perform better than other GM’s plants that GM finally started to critically consider a systematic technique of shifting TPS knowledge to GM’s operations, and this took place a decade after NUMMI came to. Some of the issues that threatened this joint venture were undisciplined employees, who had a terrible reputation, constantly went on strike-sometimes wildcat strikes; filled grievances after grievances and went ahead to sabotage quality. They were chronic absentees which routinely went up to 20% and this particular plant produced the worst quality in the history of GM’s system. This was NUMMI’s major concern as well as Toyota’s, who were concerned that perhaps transplanting the most critical part of its production system-its method of cultivating staff involvement-in starting off. Toyota was concerned how such workers with such a bad reputation like that one could support them in building quality. Toyota wondered how would such workers support the notion as well as the application of teamwork (Shook, 2009). Causes of problem Upon proper analysis of NUMMI, it is evidently clear that some of the problems that the company experienced emanated from the closed firm at GM’s old Fremont plant. Apparently, about 85% of the new joint venture’s workers at starting point were members of UAW who originated from GM’s old plant at Fremont. The other 5-10% had its origin from a Ford plant that had just shut down, just near the road in Milpitas. The workers at NUMMI ,according to John lacked “the power to find problems and make improvements” (Shook, 2009).This was the real challenge at NUMMI and Toyota believed that introducing their renowned stop-the –line andon system on NUMMI’s line would really solve the problem. Consequently, all of NUMMI and GM employees who went for training in Toyota’s Takaoka City, Japan had the experience of not only learning but also working with the andon system. One of the key decisions to be made in the establishment of a production at NUMMI, therefore, was whether or not to set up the andon system. Toyota felt that there was no debate about that at all, to them it was given since the andon system epitomized Toyota’s belief, investment, focus, commitment to coming up with means of supporting workers in working harmony with machinery as well as processes to entrench in quality (Shook, 2009).Something else that posed a challenge at NUMMI was the lack of knowledge that a keystone of respect for employees is the assurance that all workers have the right to be triumphant each time they do their work. An aspect of doing their work is the finding of problems as well as making of necessary and required improvements. If GM and Toyota, therefore wanted employees to be efficient, find problems as well as make improvements, then the management had the duty of providing the ways of doing so. Another cause of problem was the fact that some of the GM employees were skeptical and questioned the concept of trying to set up andon system at NUMMI.”You intend to give these workers the right to stop the line?”They asked. Of which Toyota’s response was:”No, we intend to give them the obligation to stop whenever they find a problem.” (Shook, 2009).This therefore clearly shows that pundits thought it would be a whole waste of time and money trying to change the old way of doing things at GM. They wanted status quo to remain even at NUMMI. Possible solutions A critical analysis of some of the challenges faced by GM and Toyota reveals that one of the possible solutions for this new venture was changing the way of doing things at the new company. This would involve doing a complete overhaul of the production and management system that the company was using and replacing it with a new notion of “corporate culture” (Shook, 2009).The system used by GM lacked appropriate mechanism to help the workers correct a mistake. The introduction of the Toyota stop-the-line andon system is the best thing that can be said to be the biggest contributor as to what changed the culture at NUMMI. With the correct system therefore, workers could not easily make a mistake and would easily do their work properly. Secondly, workers could now easily identify where a problem was and be able to notice the moment a problem or mistake occurred. Thirdly this new system ensured that workers were able to notify respective supervisors of a problem easily and finally they would be comfortable knowing what will take place next, something that would greatly assist the supervisor determine what to be done about it (Shook, 2009).The andon system therefore epitomized Toyota’s belief, investment, focus as well as commitment to development of ways of supporting workers in performing their roles in harmony with the equipment as well as procedures to embed in quality. The second solution would be to change the employees’ attitude towards their work by empowering them so that they could be confident about themselves. It therefore would involve giving workers the means through which they could successfully perform their jobs. Such a process could be done through proper and clear communication which would let them know what their work was as well as provision of adequate training together with prerequisite tools so as to enable them work efficiently. This would not only empower the employees of the new company but also completely transform their culture making them efficient as well as disciplined workers. Solution and implementation After careful analysis of this case study, it was imperative that GM and Toyota needed to do a complete overhaul of all its existing production and managements if it all anything constructive was to be done. The culture of the company had deteriorated so much such that the only thing that needed to be done was coming up with a new way of doing business. This process was of course not to be done overnight and needed time like one to two years so as to realize its benefits. The very first thing that needed to be done was identifying the right type of system and when it should be installed. This could be done by introducing business process management (BPM) which is a management concept that usually focuses on enhancing corporate performance through managing as well as optimizing a firm’s business processes. In other words it can be referred to as a ‘process optimization technique.’ As a result, GM and Toyota by use of BPM would enable them be more competent, effective as well as more able of transformation as a functionally focused, conventional hierarchical management process. This therefore meant that GM and Toyota would be impacted not only on cost but also on their revenue generation. The other solution would be to do thorough training on all the employees of the newly formed company. This could take place through total quality management which is a management approach that encompasses long-term success via customer satisfaction. In a TQM approach, therefore, all employees of a company takes part in enhancing, products, processes, services as well as the culture in which they perform their work.TQM can therefore be summed up as a management system in which a customer-oriented company involves all its staff in constant improvement by using data, strategy as well as effective communication to incorporate the quality discipline into not only the activities but also the culture of the company. Total Quality Management therefore would help both Toyota and GM through NUMMI be customer-focused, involve all the employees, be process-centered, make use of integrated system, have a systematic and strategic approach to issues, continuously improve its processes, make decisions on the basis of facts and finally enhance effective communication within the organization which would greatly play a major role in maintenance of morale as well as motivating workers at all levels. All of the above components are regarded as being so crucial to TQM that several companies actually define each one of them, of course in some format, usually as a set of key principles and values as the basis on which the firm is to operate. This would simply be the best method to motivate and bring back the lost morale for these employees who had been undisciplined as well as errant. Justification Based on the review of the objectives of GM and Toyota when they began operations, it is evidently clear that the two companies were in dire need of learning from one another. The 2 companies therefore entered into this venture with distinct objectives and left with distinct gains. On the surface, GM made use of its 20 year old factory which it had shuttered; with Toyota contributing the blueprint for a poor-selling vehicle. However, rescuing old assets was actually not what this venture was all about. For Toyota on the other hand, this was its first key manufacturing investment in America. What other better way to find out about the uniqueness of the America automotive market other than from GM? Thus Toyota became skilled at how to adapt its world-famous production system so as to work with American government, regulations, suppliers and most significantly, the UAW (Ben, 2009). Just 2 years schooling with GM, Toyota was able to invest in its fully-owned plant in America; which would later become the largest Toyota’s investment outside of Japan. On the other hand, GM on its part, tried also to learn as much from NUMMI. However it had a more challenging task.GM in fact sought to gather tips from Toyota’s magical performance. However the method used in running NUMMI kept GM’s learning to the minimum. Whereas GM positioned numerous managers at NUMMI, Toyota took charge of plant operations as well as filling of other managerial posts. Toyota’s managers’ learning-by-doing proved to be the best useful method of learning.GM faced a daunting task in incorporating its lessons from Toyota; GM saw the different way in which Toyota organized the plant floor as well as its different relations with suppliers. However transferring these lessons to GM’s legacy to other plants in Detroit failed (Ben, 2009). GM could also have applied the concept of business process re-engineering (BPR) which is a strategy for business management, and focuses on the design as well as analysis of business processes and workflows within a firm.BPM would therefore assist GM to basically rethink how they performed their work so as to radically enhance quality and thus improve their already damaged customer service. (Sanjay, 2012). References Ben, G. (2009). NUMMI:What Toyota Learned and GM Didnt. Harvard Business Review , np. Ed, W. (2013). What We Can Learn From the Lean Car Plant,NUMMI. Projects little Helper , np. Inkpen, A. (2005,Summer). Learning Through Alliances:General Motors and NUMMI. California Management Review , pp.114-136. John, S. (2010). How to Change a Culture:Lessons From NUMMI. MITSloan Management Review , np. Paul, A. (1993). Time-and-Motion Regained. Harvard Business Review , pp.97-108. Sanjay, M. (2012). Business Process Reengineering:Automation Decision Points in Process Reengineering. New York,NY: Springer. Shook, J. (2009). How NUMMI Changed Its Culture. Lean Enterprise Institute , np. . Read More