Case Study Nissan's Approach to Supplier Development –Classical Theory of Performance versus Improvement to Nissan Approach
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Ans1: Higher performance is an aspiration as well as a crucial feature of organization striving for higher market share and better growth prospects today. Nissan’s approach applied in order to achieve higher performance by improving supplier’s capabilities is an eye opener activity for many other companies in the industry. The approach followed by F.W Taylor believed financial rewards are important than verbal appreciation to provide higher economic value to the workers to increase their efficiency and commitment level. The approach has also been known as classical approach of management that primarily focuses on improving efficiency of the employee without improving any specific quality with respect to their behaviour or skills among workers. The classical approach believed that people learn either by their choice, capabilities or by looking at others. Observing practices was considered a prime source of learning as per the philosophy of Taylorism. They are either motivated through monetary benefits or else they are self-motivated to perform tasks as required by the organization. On the other hand, Nissan’s theory of having an improved performance is way beyond the classical theory as it focuses on improving the skill sets of workers i.e. in this case is its suppliers through training and development program. Nissan believed that skills can be acquired at every level of functioning and the best way to learn is from its own people that have shown great results. The case study narrated that Nissan implemented the performance improvement approach to improve the capabilities of its European Supplier in order to maintain cost standards, reduce defects and minimize error as well as improvise quality with the help of a its team of Nissan Japan’s unit. The unit member of Japan’s Nissan plant has been able to show exceptional quality standards as well as reliability in the market. As per the F.W. Taylor’s classical theory that encourage the use of financial instruments to motivate as well as improve efficiency of employees, Nissan’s approach mainly focused on providing skill improvement training to achieve productivity and quality improvement. The company has very well identified that the suppliers of its European unit require much more assistance over strategic planning program, supervisory training and over cost reduction initiatives along with joint production development. In order to steam line the internal processes of Nissan European Unit it also offered to extend expertise services in a way through facilitating consultancy services to its suppliers which they 2
provided for free of charge. It was made sure by Nissan that these services are not wrongly misinterpreted by the suppliers in any way or assuming Nissan making any favor on them. The approach of initiating and identifying changes required in an ongoing process. To implement changes Nissan designed a Supplier Development Team, the team has a prime responsibility to work in coordination with the suppliers to identify the areas where the scope of improvement lies and thereby further assist them to develop as well as monitor improvement plans. This initiative was much on the contradiction to what the classical approach says i.e. it mainly considers providing financial instruments to develop improvement plans if required by an organization. The practice behind the F.W. Taylor approach identifies ways for improving the task as well as reducing waste occurs in the process of work through time management technique. Theory of Taylorism followed time management technique suggested breaking each task or process in component parts then assigns timelines to each component must be timed, using its time technique rearranging each task that ensure efficiency and effectiveness. On the contrary, the approach followed by Nissan identifies the scope of improvement required as well as outlines the tools and technique implemented to achieve assigned tasks. Nissan exercised referent powers through which it was easily able to influence the behaviour of the suppliers and influence them to adapt to the approach designed by it. Nissan’s approach made Supplier’s Development team to work in coordination with suppliers of small or big sizes therefore the method that has been designed during presentation by the SDT personnel needs to be approved by the senior management to understand their willingness to proceed with it. The process and practices of improvement would revolve around a multi-functional team that includes the Supplier Development team as well as the member of companies European suppliers. The size of the suppliers eventually increased considering the performance of the entire exercise and the result seen in the market. The idea behind involving supplier staff of every level in the SDT program and exercises was to provide them with skills and motivation to continue perform better after the training program. Nissan intend to create long term partnership with its supplier, it does not meant to do any charity and therefore it believed that continuous improvement in performance is required to further improve Nissan own competitiveness. Ans 2: Learning new ways to perform similar tasks using new techniques and technology is a crucial step that organizations today need to understand. In the stiff scenario of competition, 3
continuous improvement of technology as well as among the skill sets of employees is important. The process and procedures followed by management at all levels need to regularly monitored in order to identify the gap and imply the required training necessary to overcome the short coming. People in an organization are motivated when they are given a challenging atmosphere as well as opportunities to grow in their carrier. The theory of F. W. Taylor mainly implies that people in an organization requires only financial incentives or monetary appreciation to stay motivated. Such ways of motivating employee as per theory of Taylorism is the only way an organization can ensure commitment and zeal to perform better with their assigned tasks. There are many areas where the theory presented by F.W. Taylor doesn’t work in the present environment; financial incentives can be difficult to manage when the company needs its operation to be cost effective as well as efficient. The cost reduction initiatives to effectively utilize resources including man and material as well as initiating the concept and practice of joint production development is missing in his theory. It is ultimately a human that is running the main operation of the organization, starting from the process of planning to execution and realizing the output, therefore it makes it important to improvise the way they conduct the process and procedures. Theory of Taylorism suggests that the employer i.e. the managers of the organization are required to identify what makes the people motivated, what inspire them to work effectively and how better these monetary incentives can be designed to push their performance in a positive direction. He implies that it is a prime function of the management to provide them with the deserving incentives. The bottom-up approach of Nissan is in comparison to the classical theory of F.W. Taylor is much more practical and effective in the current industrial environment. Nissan believed that to meet competition it is important to work closely with their suppliers by improving their performance which further improves Nissan’s own performance. The Suppliers Development Team created by Nissan had an objective to recognize the value and benefit of the adopting Japanese approach of achieving productivity as well as quality improvement believing that the same would be practiced and followed by the supplier once the team is left. The Japanese approach is frame around a holistic view including of those soft as well as irrational factors such as management style and skills. Through Nissan’s approach it tend to created Punctuated Equilibrium where small periodical change leads to revolutionary change in the system and 4
strategy of the organization. Through incremental change Nissan leads to Kaizen i.e. continuous improvement among groups. It has concentrated on the shop-floor improvement project where it has provided a broader range of assistance such as joint production, cost reduction initiatives, strategic planning program and supervisory training program. To make the communication simpler among employees of the same organization, Nissan choose to keep the shop-floor member as the most important team member. This led to a comfort level among employees and can restore complete trust in that person. Such initiative also led to sharpening the skills of the shop-floor member much more effectively. Having a member of their own in the Supplier Development Team would also provide team adequate skills as well as motivation to continue improving the process even when the main team would go back. Unlike the theory of Taylorism that advocates the implementation of financial incentives to create satisfaction among employee perform better, theory of Nissan analyzed area that require managerial attention, money and time. The improvement activity was framed in such a way that it evaluates quality of equipment’s, training and process of the organization; ease of operation; appropriate technology implemented as well as quality and the layout of the process to eliminate excess work in progress. Since the bottom up approach followed by Nissan focused primarily on the development of shared values or a common goal of customer service, quality, flexibility it help company constitute the culture of excellence and have an improved performance in comparison to theory of F.W. Taylor. Ans 3: Work has different meanings for people in different situations, it is widely dependent on how a person consider his or personal and professional aspiration as; work for some is a mode to earn their daily bread, a way to fulfill their minimal needs but for some work could be a path they want to lead their life on. A person as an individual has a sense for self a space to be myself where it considers his or her own need as prime. An individual tries to strike a balance between work and non-work life, motivation to balance the two could be different; some may consider financial benefits or some may see it as a learning path. An individual needs to strike harmony between personal values to achieve his or her desired objectives and those of the organizations. According to F.W. Taylor, motivation for achieving both personal as well as professional objectives an individual needs to be provided with financial incentives. It is the monetary benefit that keeps the efficiency as well as the commitment level of employees intact. As per Penne 5
Consulting Hierarchy of Engagement, the human being in the view of Taylor is considerate about the last segment with focuses over earning pay working hour’s benefits. It is this primary requirement of an individual that motivates them to work that makes them looks like a greedy robot and hence needs to be identified by the management as its sole responsibility. Nissan believed that human are not only financially inclined or can be motivated independently through monetary incentives but rather they can be made to learn new skills to enhance their competency and approach towards work-life. As you move further to hierarchy of engagement, it is learning and development that is required to increase employee engagement as well as commitment level towards the organization. Nissan believed that in order to increase productivity and performance it is imperative to improve the capabilities of its suppliers. Considering the Bandura’s Social learning Nissan initiated the concept of learning and selfdevelopment through implementing practices as directed by development team. The central to social learning suggested that people consciously try different methods and behaviour to adopt a systematic approach where they would receive a pleasant outcome. The implementation of SDT was also made to introduce to the employees a different way to improvise their knowledge, learning and skills. The motivation among the employees was more of having an opportunity to learn and explore different methods of doing the same things for improvised performance as well as results. The Supplier Development Team was created as a role model of effective performance with focus and vision of accomplishing task with new methodology and techniques. Considering the behavioral modeling at workplace where people base some of their behaviour on a chosen model, they adapt to new roles by experimenting with provisioning themselves based on those role models. Nissan perceived learning as a continuous process that can be learnt better in a group where people can interact among each other and find out the gap missing in their process. Role models are considered in different forms; it can be in the form of physical appearance, dressing or way of interacting; deliberating that the SDT team was set with a vision to enhance capabilities and capacities among people themselves in group. Reinforcement is an important aspect of learning among individual it states that there has to be a return for a person otherwise the same behaviour won’t continue. Therefore to acknowledge learning skills acquired by individual as well as providing them with an opportunity to present themselves to the senior 6
member, Nissan motivates the shop-floor personal to present the achievements as well as the suggestions that has been a result of their workshop. Since experimenting is an important method of learning, Nissan followed the complete cycle of experimental learning among its suppliers i.e. Concrete Learning, having an experience by doing the job themselves; Reflective Observation, reviewing or reflecting on the experience, Abstract Conceptualization, this involves learning that can be acquired through learning from the experience acquired by practicing the task themselves and Active Experimenting , this stage is where the learning acquired from experimenting with new techniques and process would be put in use by implementing the suggestions and trying what has been learnt. Ans 4: Competition in market both domestic and international has taken a huge share of industry profit as well as growth; the ever changing demand of the customer and increasing number of new comers in every industry is forcing organization to push their limits further by implementing force with adequate skills and knowledge as well as superior technology and technique to reduce error and time. Customer are demanding products and services that are much more customized as per individual need, along with that enhancing their level of satisfaction to a larger level at a global platform. Market restrictions such as duties or trade barrier has been made much relaxed resulting to expanding the scope of industrialization, trying new developing market around the world that are at a much mature level and has become slower in growth. The international market overall has become a lot mature with its production and service sector, such maturity has been a result of achieved economies to scale as well as continuous change in technology. In order to meet the demand Nissan identified that to produce cars in a much more effective and cost controlled way it would need to invest in the product and services. Along with that drawing to its future possibilities to expand it into new markets as well as outsourcing some of its functions. As an effective management Nissan analyzed methods to increase productivity, reduce risk of error, shortening lead time for new products and services through Just in Time processes. The Supplier Development Team set up by Nissan had initially only 12 medium sized suppliers but considering its popularity and responses it has got from industry the SDT has grown in size and has become an important part of Nissan’s operation. The SDT initiatives have made it possible for Nissan to manage its suppliers through decentralization with respect to decision making. There has been a partnership approach among the suppliers and Nissan in order to 7
achieve improved performance. The suppliers also in turn have become a lot conscious about its deliverables with respect to amending to the quality and other standards of Nissan. Customer orientation has again an important parameter the supplier’s has to meet, there has to be customer dedication to meet the needs of its internal and external customers. The suppliers have felt greater self-management by taking part in the SDT activity where they have received enormous learning and exposure to new techniques and procedures also they consider it as their responsibility to perform above expectation both as an individual as well as a team. The suppliers aim to contribute to continuous development and improvement, also taking initiatives regarding to achieve higher performance. The team of suppliers after realizing the benefit received from the activity of team building, they have become much more committed than before towards personal training, adaptability to change in technology or process as well as adaptability to the new procedures. Nissan itself has experienced much positive result with respect to their production, being a leader in the market for its unique way of improved performance. Implementing new processes like SDT to further improve the performance of Nissan’s supplier is a technique applied by the organization to meet the increased competition pressure that has also lead to change in the organization. The managers are mainly leaders acting as a change agent those have helped Nissan in the phase of transformation as well as provided with a long term vision for its future direction. Nissan has changed the over culture of the organization as well as of the supplier by bringing out the bright talent they have in store, got highlighted during the activities conducted during the training sessions. Both the managers as well as the managed one have been able to learn the skills to be creative; impart excellent communication among different levels and groups; acquire and share more knowledge about the task as well as work harmoniously with each other in a set up. Nissan has been successful in following a Democratic leadership where it has promoted the active participation of the subordinates along with being constructive as well as regular. Under a democratic leadership the managers are always ready to discuss issues regarding both managerial as well as technical with their subordinates; it also respect their views and consider their feedback as a positive exchange of information. Feedback among both the management and the suppliers are shared on a regular basis. Nissan believed using all above approaches in its management practices it would further increase the motivation level among employees. 8
