BMW Case Leadership Theories - Essay Example

Case Study Analysis for MN N+C: BMW Introduction This paper performs an analysis of the BMW case study and discusses the leadership aspects in the German firm. BMW is an automobile and motorcycle manufacturer from Germany. The firm is well known for its high performance premium cars and these cars received appreciation for showcasing German engineering. BMW now is a global player and rated as 12th in the automakers with eight manufacturing centres and 15 production centres in different nations of the world. The company employs more than 97000 employees in 26 countries. When this case study was written, the world car market had been badly hit by excessive production with a large number of unsold cars clogging the inventories. The market is also extremely segmented with a number of manufacturers in the economy, compact, medium and premium segments. Many car manufacturers have gone bankrupt and closed because they could not control costs, improve quality and many of these firms did not have a strong leader with a good vision. BMW like a few of the manufacturers has managed to survive and grow, mainly because of the excellent leadership (Egri, 2000). This paper analyses the given BMW case study and presents details of the leadership at BMW and how it has managed to overcome the many problems. The paper first presents theories on leadership and then it analyses various leadership issues of the case study. 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 (Zaccaro, 2001). Transactional Leadership: Transactional leadership is a rational exchange process in which subordinates needs are met if their performance measures up the leaders requirements indicated in explicit or implicit contract (Bass, 2007). 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. 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 Analysis of the BMW Case This section provides an analysis of the BMW case from the leadership perspectives. BMW Case Leadership Theories 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. As per the situational and contingency theories, 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 (Tichy, 2004). 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 (Norrgren, 2009). According to the functional theory, a leader is said to be effective and when he has enhanced tie cohesiveness and effectiveness of a team (Schneider, 2002). 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 (Leithwood, 2006). 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 (Fullan, 2008). Leadership 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 (Berson, 2001). 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 (Lok, 2004). 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). 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 (Stogdill, 2004). 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 (Kennedy, 2002). 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. 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. 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. Quandt family role 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. Vision and values at BMW Milberg, the CEO says that the leader 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 ones 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. Conclusions The paper has examined important issues of leadership at BMW. 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 Berson, Y., 2001. The relationship between vision strength, leadership style, and context. The Leadership Quarterly, 12(1), pp. 53-73. Egri, C., 2000. Leadership in the North American Environmental Sector: Values, Leadership Styles, and Contexts of Environmental Leaders and Their Organizations. The Academy of Management Journal, 43(4), pp. 571-604. Fullan, M., 2008. Leadership for the 21st Century: Breaking the Bonds of Dependency. Educational Leadership, 55(7), pp. 1-6. Kennedy, J., 2002. Impact of leadership style and emotions on subordinate performance. The Leadership Quarterly, 13(5), pp. 545-559. Leithwood, K., 2006. Changing Leadership for Changing Times. Taylor and Francis Group, KY, USA. Lok, P., 2004. The effect of organisational culture and leadership style on job satisfaction and organisational commitment: A cross-national comparison. Journal of Management Development, 23(4), pp. 321 - 338 Norrgren, F., 2009. Leadership style: its impact on cross-functional product development. The Journal of Product Innovation Management, 16(4), pp. 377- 84 Schneider, M., April 2002. A Stakeholder Model of Organizational Leadership. Organization Science, 13(2), pp. 209-220. Stogdill, R., 2004. Handbook of leadership: A survey of theory and research. Free Press, NY, USA Tichy, N., 2004. The Leadership Challenge – A Call for the Transformational Leader, in Classical Readings of Organizational Behavior, edited by Ott, Parkes, & Simpson, Tomson - Wadsworth, Belmont, CA, 2008. Zaccaro, S., 2001. The nature of organizational leadership: understanding the performance. Wiley Publications, CA, USA. Bass, B., 2007. Does the transactional–transformational leadership paradigm transcend organizational and national boundaries? American Psychologist, 52(2), pp. 130-139. Read More