Managing Corporate Culture: Nummi
Executive summary In spring 2010, New United Motor Manufacturing Inc. , a successful joint venture between Toyota Motor Co. and General Motors Co, shut down its plant in Fremont, California. Over two decades NUMMI was a model manufacturing plant with high quality and productivity, exceptional worker’s satisfaction and attendance. What did NUMMI do to change the former GM’s dysfunctional disaster into best plant? This report is going to examine a dramatic change conducted by NUMMI’s leadership. It will address three main reasons which made this change possible: • Creating a new production system Developing a new management system • Reformation of corporate culture. And finally, the recommendations will be identified that should have been implemented in order to run the plant efficiently another two or more decades. Analysis of Situation By 1982, GM’s Fremont plant, California, employed over 7,200 workers was shut down. At the time, the plant had terrible reputation of being the worst of GM’s plants known by its low productivity, the worst quality automobiles, from 5,000 to 7,000 filled grievances, over 20% of workers’ absenteeism, and even sabotage.
Violation of the production and safety regulations, cycle time around with other errors were common for the plant. Meanwhile, another automobile giant, Toyota Motors, was facing with the necessity to produce vehicles in the United States. New United Motor Manufacturing Inc. (NUMMI), a Toyota – General Motors joint venture, took place in 1984. Generally, both companies had tangible objectives, on one hand, GM’s targets were reopening Fremont plant and learning how to produce a small, profitable car; on the other hands, Toyota’s aim was with GM’s help to launch a production line in the United States.
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However, the main strategy of the joint venture was learning. And ultimately, NUMMI became a desirable chance for GM to learn Toyota’s Production System (TPS) and for Toyota – an opportunity to learn about working with an American workforce and suppliers. In just a year, Fremont plant turned around dramatically from GM’s worst into GM’s best. Not only the productivity and the quality increased, but also worker’s satisfaction and attendance were exceptional. All were achieved with the same workers.
The prime reasons for this remarkable change were identified as: creating a new production and management systems and reformation of corporate culture. Strategic Alternatives and Selected Strategy What were strategic alternatives for both companies? Toyota could have been gone alone, which would have been easier and faster. Meanwhile, General Motors could just have been forgotten of the refurbished plant. However, joined work made NUMMI a successful story. Back in 1982, the only decision viewed by Fremont plant leadership was a closing of unionized, running out of control plant.
However, new Japanese executives saw the problem in system that made people bad. Despite that the first new hires were the exact same employees, who were in union before, a new hiring process was quite different. Contemporary a three-day selection process included written tests and interviews, production simulations, as well as individual and group discussions. All these technics allowed to evaluate applicant’s ability to fit with a new NUMMI’s strategy – to learn. Teamwork was viewed as a crucial skill.
Newly hired team members attended a four-day training conducted by team members and managers. These trainings included lectures “on the team concept, the Toyota production system, quality principles, attendance requirements, safety policies, labor management philosophies, cultural diversity, and the competitive situation in the automobile industry”(Stanford – Graduate School of Business, 1998). NUMMI was created as a team-based organization with sense of interdependence and unity. There were just three-level management levels; in contrast, old GM’s plant had a six levels hierarchy.
A team leader, who was responsible not only for coordinating teamwork and trainings of team members, but also was able to replace a team member on line if needed, represented the first level of management. The second-level management in addition was responsible for budgeting and planning. Moreover, these managers were expected to resolve the problems at the lowest possible level. In order to foster fair and efficient environment NUMMI designed a new job structure; specifically, job classifications were reduced from 81 to 3 with the same wage rate.
Developed reward system also tended to equalize rewards among employees. For instance, a team leader received only a 50-cent hourly premium and each team was awarded with a small social budget. Continual training system and information sharing among all team members let the company to support its goals. Implementing the stop-the-line system allowed management to empower its employees by pushing down responsibility for the production and quality at the lowest possible level, to a worker.
Meanwhile, the policy of “mutual trust” or no-layoff policy established a real trust between the company and employees by ensuring its workers to accept responsibility and take ownership. Toyota understood the importance of giving workers the means to successfully do their jobs. NUMMI emphasized that fostering a culture of fairness, empowerment and learning allowed them, only in 1991, implemented around 8,000 improvements suggested by workers of the plant. Implementation, Recommendations and Conclusion
Learning experience at NUMMI benefited both at the time, General Motors and Toyota, by transforming “a notoriously dysfunctional plant” into “a model manufacturing plant with the very same workers” produced as GM’s cars as Toyota’s. Creating a new production and management systems and reformation of corporate culture allowed NUMMI to succeed. However, the companies were not able to learn from this success as they should. According to Kotter (2002), in order to implement a positive change an organization should pass eight steps: • Step 1 – increasing urgency • Step 2 – building the guiding team Step 3 – getting the vision right • Step 4 – communicating for buy-in • Step 5 – empowering • Step 6 – creating short-term wins • Step 7 – making a vision into reality • Step 8 – sticking a change And what did we see with NUMMI? Did they really go to the step 7 and 8? Though quality was increasing considerable the quantity at the beginning was low, disagreements with the union and the ergonomic problems took place in the plant. The inability to communicate the knowledge and vision to newcomers and losing the sense of the Toyota’s Production System were preconditions for further disaster.
Instead of implementing the NUMMI experience all over the country at the time, considered its future as a massive, costly reorganization, GM was busy buying new companies. Meanwhile, Toyota was launching a plant after a plant. It took years for GM to start implementation of Japanese system in its plants. However, it met a huge resistance without Toyota as a partner. The time was lost. The recessions of 1991 and then of 2008 went GM bankrupt and pulled out. In 2009, Toyota became to operating NUMMI alone. As a result, on April 1, 2010 New United Motor Manufacturing Inc. a unique joint venture between Toyota and General Motors in Fremont, California, was shut down, leaving 4,600 workers and around 20,000 more employees, impacted by the plant closure in direct suppliers, without jobs. References 1. John Shook. 2010. How to Change a Culture: Lessons From NUMMI. 2. John P. Kotter. 2002. The Heart of Change. 3. New United Motors Manufacturing, Inc. (NUMMI). Retrieved May 8, 2012 from: http://gsbapps. stanford. edu/cases/documents/HR11. pdf 4. Closing NUMMI Is Easy For Toyota. Retrieved May 8, 2012 from: http://www. orbes. com/2009/07/24/nummi-toyota-gm-markets-autos-hybrid. html 5. NUMMI Plant Closure Ends Toyota-GM Venture. Retrieved May 8, 2012 from: http://www. npr. org/templates/story/story. php? storyId=125430405 6. This American Life From WBEZ. Retrieved May 8, 2012 from: http://www. thisamericanlife. org/radio-archives/episode/403/transcript 7. Robert B. Austenfeld, Jr. NUMMI—The Great Experiment. Retrieved May 8, 2012 from: http://www. agileway. com. br/wp-content/uploads/2009/10/nummi-austenfeld-agileway. com. br. pdf