Leadership Strategies at BMW - Essay Example

BMW Case Study Table of Contents Abstract 3 Section 1: Introduction 3 Section 2: Case Study Analysis 4 2.1BMW: Organisational Structure 4 2.2BMW: Corporate Objectives 5 2.3BMW: Knowledge Management 6 2.4BMW: Human Resource Policy 6 2.5BMW: Context of Leadership 7 2.5.1.Leadership Paradigms 7 2.5.2.Alignment of Leader’s Vision with Internal Environment 7 2.5.3.The Locus of Leadership 8 2.5.4.Spirituality at Workplace 8 2.5.5.The Development of Leadership 9 2.5.6.The Quandts Factor and Leadership 10 2.5.7.Substitutes for Vision Statement 10 Section 3: Conclusion 11 References 12 Abstract This research is centred on corporate leadership as observed at BMW and it aims at analysing the leadership theories that have been institutionalised by the management of this organisation. The research will also attempt to identify substitutes for an explicit vision statement that align the processes with the corporate objectives of BMW. Section 1: Introduction A generalised definition states, “Leadership is an influence relationship among leaders and followers who intend real changes that reflect their mutual purposes” (Rost, 1993 P. 102). It is clear from the definition that leadership requires a mutual relation wherein a leader sets the goals while the followers pursue them under the guidance of the former. Leadership is a phenomenon which depends on the distinct styles of the individual leaders. It can be charismatic or non charismatic, autocratic or democratic, enabler or controller, or transactional or transformational (Armstrong & Stephens, 2005 P. 14). While charismatic leaders are achievement oriented visionaries who, by virtue of their characteristic aura and excellent communication, inspire their followers, and are also capable of taking calculated risk, non charismatic leaders are knowledgeable, confident and analytical. Unlike democratic leaders who believe in participative management style and encourage the involvement of subordinates in decision making process, autocratic leaders tend to use the power of their position to impose their verdict on subordinates. Leaders are seen as enablers when they inspire and empower subordinates, and controllers, when they manipulate subordinates. These two contrasting styles can be correlated to some extent to autocratic and democratic styles. Finally, transactional leaders are those who incentivise the performance of employees and transformational leaders are motivators who aim at enriching the subordinates. During the course of this research I have conducted an extensive literature review in order to correlate these theories with the leadership philosophy adopted by BMW. Section 2: Case Study Analysis 2.1 BMW: Organisational Structure In compliance with the German laws concerning publicly listed organisations, BMW has a supervisory board and a board of management (BOM). The BOM has six members who are led by the Chairman, Board of Management Dr. - Ing. Norbert Reithofer. The supervisory board consists of ten representatives of shareholders as well as employees (BMW-website-a, 2009). The chairman of the supervisory board is appointed by the Quandts and BMW employees comprise half of the board. The organisational structure of BMW is team oriented. The organisation employs interrelated and multi skilled work teams. Being a top notch automobile company, BMW has institutionalised the concept of high performance work groups which are self organised. This leads to employee empowerment and thus a highly skilled workforce which enjoys enough autonomy to take decisions on its own, strives to achieve continuous improvement. In a nutshell, “at Bavarian Motor Works (BMW) the firm’s structure is thought to be flat, flexible, entrepreneurial, and fast” (Hitt, Ireland & Hoskisson, 2008 P. 309). 2.2 BMW: Corporate Objectives The corporate objectives of BMW rest on three strong pillars, viz. innovation, quality and sustainability. These are reflected through the company’s mission statement “The mission statement up to the year 2020 is clearly defined: the BMW Group is the world's leading provider of premium products and premium services for individual mobility” (BMW-website-b, n.d.). Though it operates within a highly competitive environment where lack of innovation may push it into obsolescence, BMW does not explicitly display the corporate mission and vision. The company prefers to apply its value propositions to its employees and products alike. The company has achieved to enhance employee morale to such heights that they enjoy being a part of the organisation and “every worker in BMW lives and breathes BMW” (Avery, Bell & Hilb, 2004 P. 165). Innovation is the cornerstone of BMW’s corporate philosophy and it strives rigorously to update is research and development and production facilities with latest technological advancements. The company also focuses on developing and improvising new concepts in order to justify its mission statement. BMW is very particular about quality which is highlighted in its value proposition. Cross functional teams as well as suppliers use a variety of tools to ensure that quality standards are duly met. All BMW employees take part in quality circles and a wide range of training modules are offered to them for the purpose of enriching their skills in quality and different other areas. On sustainability, the company’s aim is “to make sustainability an integral part of the entire value chain and its underlying processes – to create an added value for the company, the environment and society” (BMW-website-c, n.d.). 2.3 BMW: Knowledge Management BMW is a learning organisation wherein production teams are given immense opportunities to learn new technologies. Moreover, being a true patron of participative management, it encourages employees to enhance KSAs through training programs and to share the knowledge for its magnification within the organisation (Murray, Poole & Jones, 2005 P. 400). By using employees’ suggestions in corporate decision making process the company has saved huge amounts and has institutionalised this non bureaucratic approach (Avery, Bell & Hilb, 2004 P. 163). 2.4 BMW: Human Resource Policy BMW management believes that both the organisation and its employees should be able to achieve success in pursuit of achieving international competitiveness. The HR policy of BMW is inspired by the ILO and complies with international human rights standards. At BMW, the choice of employment is left to the discretion of employees and the company abhors all sorts of forced labour as well as child labour. It is an equal employment opportunities (EEO) organisation which does not discriminate its employees on any basis. Collective interests of employees are protected through employee associations and collective bargaining. The company complies with government legislative statutes in terms of remuneration and working hours. BMW also ensures health and safety of employees in the working area. In order to establish these policies as an integral essence of its being, BMW encourages its partners as well as suppliers to incorporate similar values in their corporate policies (Anonymous, n.d.). The HR policy of BMW is differentiated and futuristic. It is aimed at the development and career advancement of employee groups through codetermination by the management and the works council. BMW attaches great importance to health management, qualifications, work environment, retirement models, communications and change management (Eurofound, 2006). 2.5 BMW: Context of Leadership 2.5.1. Leadership Paradigms Professor Joachim Milberg, former chairman of BMW’s board of management had expressed his leadership roles as “the most important thing is that the CEO must be someone with vision and the ability to turn his vision into reality together with his team” (Avery, Bell & Hilb, 2004 P. 164). By saying this, he had justified the fact that leadership is an integral part of BMW’s philosophy. Through the words of Milberg it is also apparent that an ideal leader who can shape the future of BMW should be charismatic as well as democratic. He should create an environment of participative management wherein the employees are empowered to form self managed teams and encouraged to take decisions in coherence with his visions so that they can collectively manifest the goals. 2.5.2. Alignment of Leader’s Vision with Internal Environment In order to align the organisational processes and systems with the vision of the leader, BMW attempts to make the working experience as much safe and enjoyable as possible for its employees. It invests a lump sum “into the design of ergonomically optimised workplaces” (Eurofound, 2006). The company also spends a considerable portion of its revenues in imparting training and education to employees to make them compatible with fast changing technologies as well as processes (Eurofound, 2006). The HR policy of BMW allows sufficient room for participative management whereby the employees can take part in decision making process and this helps in bettering the operations. 2.5.3. The Locus of Leadership The leadership model followed at BMW was developed by Milberg and is known as the “BMW Associate and Leadership Model” which “is a long term strategy aimed at creating a culture of ‘We at BMW” (Avery, Bell & Hilb, 2004 P. 165). It is again apparent that the two distinct and yet interdependent components of BMW’s leadership model manifest participative management. The efficiency of the leader is clearly reflected through team performance and behaviour. Thus leadership at BMW is a management function though it is influenced and evaluated through employee performance. 2.5.4. Spirituality at Workplace The leadership styles prevalent at BMW support spirituality at workplace. The corporate policies are humane and employees are considered as human beings who have to extend their KSAs to other activities as well. Keeping this is mind; the BMW management has designed different flexitime models as well as training modules wherein the employees can fit according to their necessities (Avery, Bell & Hilb, 2004 P. 106). By advocating workplace spirituality BMW successfully conveys the message that it cares for its employees who in turn feel more privileged to be associated with this organisation and owing to enhanced morale and job satisfaction perform optimally. Thus, the corporate goal of manifesting mutual benefits for the organisation as well as the employees is achieved successfully. 2.5.5. The Development of Leadership Any successful organisation tries to develop leaders from within its existing employees through coaching, mentoring, career planning and succession planning (Armstrong, 2006 P. 354-355). Change agents are hired only during periods of emergency to save the company from being ruined. In house talent is preferred over external hiring because the former has imbibed the organisational culture for a considerable period of time and thus identifies with the corporate mission and vision, while the latter will need some time before being accustomed with the company or workforce that he is expected to lead. Moreover the latter will be more prone to non cooperation which will again lead to wastage of productive time, etc. BMW uses internal benchmarking for the purpose of assessing leadership and consequently identifying potential leaders. The managerial competence and potential of each incumbent is compared against those of others. The findings provide information for the purpose of performance appraisal. The organisation prefers to develop leaders from among its employee base and resorts to external hiring only when “a critical skill gap cannot be filled internally” (Avery, Bell & Hilb, 2004 P. 166). Leadership at BMW is developed through various processes such as corporate development programs, professional development programs and formation of cross functional teams. The organisation employs tailor made in house training programs which are imparted in association with management consultants as well as premier business schools. Moreover BMW devises special developmental programs for potential global leaders (Avery, Bell & Hilb, 2004 P. 166) 2.5.6. The Quandts Factor and Leadership Literature review on BMW revealed that the automobile giant “is controlled by one of the least known, most secretive, wealthiest families on the planet” (Kiley, 2004 P. 81) whose combined wealth is estimated to be close to $17 Billion. That makes the Quandts one of the richest and most powerful business families. The Quandts play an important role in shaping the corporate leadership function within BMW. They are the major shareholders and own more than 48% of the company’s shares. The family appoints the chairman of the supervisory board and is also directly represented on the board by Stefan Quandt and his sister Susanne Klatten (Avery, Bell & Hilb, 2004 P. 159). This is of great significance as the strategic direction – one of the leadership functions – of the company is overseen by this board (Murray, Poole & Jones, 2005 P. 396). These facts make it clear that the powerful Quandts has an indirect control of the leadership function of BMW. 2.5.7. Substitutes for Vision Statement In sharp contrast to its global image and position, BMW does not have a clear vision statement. But it is proven by the company’s financial performance and growth that “vision is equivalent to clarity about an organization’s purposes and directions” (Avery, 2006 P. 90) and does not mandatorily require to exist as a document. BMW gives an indirect and translucent hint of its objectives through the slogan, “the uncompromising pursuit of the superlative” (Axson, 2010 P. 17), which does not quite sound like a vision statement due to lack of clarity but undoubtedly highlights the organisation’s strategic intent. The need for a vision statement has been obviated by BMW’s management as it percolates the value proposition of the company into the employees’ psyche. As a manifestation of this, BMW employees share the same characteristic features as the sedans they produce. BMW can achieve this because “its key message of enjoyment, quality and high performance seems to apply to employees as much as to products” (Avery, Bell & Hilb, 2004 P. 165) as a manifestation of efficient corporate leadership. Section 3: Conclusion Through the sections of this report we have explored the concept of leadership as well as the various leadership styles adopted by corporate leaders. As per the requirements of this research, the leadership theories have been discussed in the perspective of the BMW group. It has been observed that the management philosophy at BMW is participative while the leadership style is a blend of charismatic, democratic and organic. The corporate leadership at BMW is successfully institutionalised and it forms an integral component of the organisational processes. We have come across certain vital information about this Munich based automobile giant. The Quandts, the family that controls BMW, are one of the most influential European families. They influence BMW’s corporate leadership by nominating the chairman of the supervisory board of the company. Additionally, Stefan Quandt and Susanne Klatten are two members of the board. Thus leadership, though not centralised, is to some extent controlled by the powerful Quandts. It is worth noting that BMW continuously strives to develop leadership qualities in its employees through training and development programs and spend a lump sum for this purpose. In order to maintain solidarity of its philosophies and objectives, BMW prefers to develop future leaders from within its existing employee base through professional assistance from consultants and premier business schools and it also sends its potential managers to foreign visits in order to prepare them for their global responsibilities. On a closing note I would like to mention that BMW does not have a clear vision statement but even then this organisation has been performing well because of its efficient leadership machinery that aligns all the organisational functions and the employees into a holistic entity which possesses all the qualities of “The Ultimate Driving Experience” (Levine, 2003 P. 206) that it manufactures. References Anonymous. No Date. 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