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September 1, 2005

Building the Motorcycle Smarter

Harley-Davidson's 10-year experience with the learning organization concept developed by Peter Senge has turned the world-renowned company into a creative force and kept it from becoming complacent.

Peter M. Senge, MIT senior lecturer and one of The Journal of Business Strategy’s 24 most influential business strategists of the century, was meditating one morning in 1987. Multi-functional work teams were big at the time. Total quality management was about to take off. Big companies with multi-layered hierarchies struggled to push decisions to the lowest appropriate level within their organizations. But, as is usual with hot management ideas, nothing really was changing. Ideas flashed across the big business landscape, which went along but essentially did things the same way while waiting for the next big idea.

The problem, Senge realized, was that no one really learned anything. People might do things differently after indoctrination in a series of enterprise-wide training sessions. But that only made them better trained. It didn’t make them any smarter. Workers didn’t learn things that could be used elsewhere in the organization or in their careers. The company itself just went along like the big, inert behemoth it had always been.

Companies, Senge concluded, need to create what he called the “learning organization,” something which he compares to a great orchestra or a top sports team where individuals collaborate, exchange information and develop plans so that they can perform well together. They pursue the same vision, and they know not only what they need to do to succeed, but how their individual roles affect the performance of the entire group. Senge calls this “profound teamwork.”

LEARNING VS. TRAINING

Senge believes that to remain competitive, businesses need to promote a learning environment in which all employees are encouraged to look at the big picture, not just their small part of it, thereby discovering new ideas and processes, and then have the authority to implement them.

In The Fifth Discipline, Senge paints a picture of the learning organization as “a place where people are continually discovering how they create their reality—and how they can change it.”

Resources for Creating a Learning Organization

Senge is quick to make a distinction between learning and training. Training involves programs to expand an individual’s knowledge, while organizational learning advances organizational knowledge, he says. Senge differentiates between learning and training and believes learning takes place at a deeper level and requires a more widely shared commitment than attending a company-mandated training program. “We never let anyone create a learning organization program,” Senge says, because a “program” implies work limited to a narrowly defined aspect of a company’s activities. “I think you really have to worry about terms like ‘programs’,” he says. “That’s the classic problem managers have: They want a solution, so they create a program.”

By contrast, the learning organization establishes “a different way of looking at problems from the old compartmentalized way—especially if you’re smart enough and take the time to draw the causal loop diagrams,” says Hugh Vallely, former director of Motorcycle Product Planning, who retired from Harley-Davidson’s product planning and development unit in March, 2004. “It’s also about the ability to talk to each other—so that marketing is talking with styling, engineering and other disciplines—and to talk about the issues you see.” Causal loops show the ripple effect of any decision. To restrict tobacco farming, for instance, would affect the farmer, Vallely says, but also doctors who treat patients for smoking-related illnesses, educators in health classes, and on and on. Drawing causal loops does not necessarily change the decision, but it allows a learning organization to realize the implications of everything it does—and all the people who should potentially be involved in how that decision is implemented.

Harley-Davidson first subscribed to the learning organization idea in the early 1990s, after then-CEO Rich Teerlink read The Fifth Discipline. The company, which was founded in 1903 and had undergone a tremendous financial turnaround in the late 1980s, was at a high point. But Teerlink, who chronicled his career at Harley-Davidson in the book More than a Motorcycle, wanted to find ways to improve upon and maintain that success. Teerlink agreed with Senge that sustaining successful momentum could be difficult in the absence of an external crisis, which tends to unite and focus employees.

Harley-Davidson already had other quality-management programs in place, and Teerlink had instituted a series of meetings in which his direct reports had to read a book and give an account of it once a month. After reading Senge’s book, Teerlink recommended it and then invited Senge to Milwaukee to talk to the staff. Teerlink then sent the core group of senior managers to Senge’s five-day workshop on the learning organization. He then sent even more Harley-Davidson staffers.

Vallely, who attended the workshop, says it presented a totally different approach to solving problems. “It fit in with Teerlink’s philosophy of collaboration and cooperation as opposed to command and control.” It also answered Teerlink’s concern about sustaining success. “Things were going very well at that particular time, and Teerlink was concerned about how do you move ahead, make fundamental changes and improve in the absence of crisis,” Vallely explains. “Peter had an answer with this book, which was learning organizations.”

BUILDING A LEARNING ORGANIZATION

There are, Senge says, three essential elements in the learning organization: a shared vision, systems thinking, and reflection and dialogue. To start, he suggests finding places where these tenets already exist. “Organizational learning is very widespread, but it’s usually in pockets limited to extraordinary teams and working groups, not always visible from the outside,” he says. “If you start asking people, ‘How do you make your teams more effective? How do you make your meetings run better?’ you find that a lot of
the basic ideas already are in practice,” he says. In the case of Harley-Davidson, senior management and the CEO were committed to the idea but, Senge says, you can look for that core group at any level of the organization.

Once you have your core group, discuss ways to integrate learning into your business processes. “You can use training as part of a larger strategy,” Senge says, “but the real question is: What are the strategies that people are using that others can use now? You always have to find ways to integrate into what people are really working on. It’s a matter of how people are doing what they’re doing, better.”

Senge says that “school is not a good model for learning,” rehearsal is. “Practice, practice, practice. The way you learn anything.”

At Harley-Davidson, the individuals who attended Senge’s workshop decided that to impact the larger systems in the organization and develop a shared vision, they needed to increase dialogue among employees. To do this, the company implemented cross-training and expanded job responsibilities, which gave employees more input and ownership of the work they did. Managers, for instance, were charged with putting together nontechnical explanations of certain business processes, such as cash flow and flexible production, so that employees at all levels understood the bigger picture. Teerlink also instituted a peer-review system so that employee evaluations did not come solely from their direct supervisors.

To maximize employee involvement, the company began an open-door policy that extends all the way to the office of the CEO. Harley-Davidson’s current CEO, Jim Ziemer, has retained this culture. Beginning at their orientation, new employees get the message that the company wants their input. In 2004, the company won a Catalyst Award—given to companies that support women in business—in part because of what the award committee described as a “freedom with fences” culture that “encourages employees to take educated risks and ‘push back’ during the decision-making process.”

Harley-Davidson also created a less-hierarchical organizational structure that still is in place today. This structure is based on three broad functional areas called Circles: the Create Demand Circle, the Produce Products Circle and the Provide Support Circle. These circles comprise cross-functional groups (Create Demand, for instance, includes marketing, sales, new business development, customer service, motorcycle styling, government affairs and the Harley Owners Group) whose respective functional heads meet regularly with rotating leaders, depending on the issues the Circles are addressing. An umbrella Circle, the Leadership and Strategy Council, consists of members from each Circle, as well as the chief operating officers at the company.

The circle structure also provides outlets for ongoing dialogue and learning at all levels in the organization, as employees participate in cross-functional teams to tackle a project or address an issue. Through this process, employees gain insights and experiences though their interaction with people from other disciplines.

When Harley-Davidson first began following the learning organization, Vallely says, it held monthly day-long meetings that included representatives from most every part of the company—development, marketing, manufacturing, service, accessories, purchasing, buyers and even human resources—to talk about product development.

The meetings, facilitated by a representative from Senge’s organization, were broken into two, four-hour segments. “One half of the day was action oriented—trying to improve what we’ve got,” says Vallely. “The second part was, what did we learn, and how can we internalize that?”

There always was an agenda for the first half of the day, chosen in advance by executives or directors who typically set the meeting agendas for the year. For instance, Vallely says, the agenda might be how to improve the product development process. At one point, the company employed graduate students to analyze a product launch, so that month’s meeting was an in-depth discussion of the report and an examination of all aspects of what worked and what could be improved. Everyone had input in the discussion. The people who wrote the new product service manuals, for instance, pointed out that they received the final information too late to include before they went to press. Manufacturing discussed issues with getting parts on time.

The second half of the day was devoted to learning reflection and looking at ways to apply what they had learned that morning to other processes in the company. Vallely says that was an important part of creating the learning organization culture. “How does the organization talk to itself? The ability for communication and reflection is a very important part of learning,” he says. “Don’t rush into decisions in a one- or two- or three-hour meeting with an action plan. It’s important to reflect back on what was said, and meet again more than once before you decide what to do, and talk more about it.” This assumes there was no immediate crisis to be solved, he adds.

Most companies skip the second half of the meeting, which is why Senge says meetings often are so ineffective. Action-only meetings often result in top-down decisions. But knowledge-oriented meetings encourage the sharing of ideas and, ultimately, learning. “Increasingly, successful organizations are building competitive advantage through less controlling and more learning—that is, through continually creating and sharing new knowledge,” Senge wrote in the Harvard Business Review.

After 10 years of holding day-long meetings every month, the changes at Harley-Davidson are noticeable. In the example of the manuals, Vallely says, the service department reports that the prototypes they are getting today are much closer to the final product, which enables them to get the correct specifications and the manuals to the printer on time. This isn’t simply a matter of increased efficiency; each department now understands how its own processes affect one another and fit into the larger common goal.

Now, Vallely says, the confidence is high among service staff. “They had a very strong voice in the process,” he says. “It’s not that they didn’t have a voice before. The example of the learning organization is the progress we made because we talked to each other so much more. It’s not service talking to engineering, it’s service talking to product development. Before, those would be separate meetings—if they had those meetings at all.”

Harley-Davidson also included a report-back process in its monthly meetings. At the beginning of every meeting, the project management team reviewed the product development methodology discussed and decided on at previous meetings. “That group was responsible for going over that methodology frequently to make sure everybody was satisfied,” Vallely says.

SPREAD THE WORD

In companies where geographic spread prohibits face-to-face meetings, conferences, networks, Web sites, and the corporate intranet help find and connect the people who can work on solving a specific problem.

In effect, Senge advocates a form of decentralized leadership that increases the capacity of all people in the organization to work toward a common goal. “A lot of companies wouldn’t have done [what Harley-Davidson did] because they don’t know that they should talk about problems, which is why dialogue is so important,” he says. “You need to create an environment where people can talk openly about the types of problems they’ve had.”

An important element in creating that environment is continuing the feedback loop: Allow employees to create and implement solutions. If they’re effective, let them take the solution companywide. Once that happens, share the results—and continually communicate with your employees that yours is an organization that supports this type of change.

Although Teerlink retired in 1998, he firmly believes that people are what give a company its true competitive advantage, and that the best way to optimize that advantage is through lifelong learning. Indeed, one of the company’s five core values is to “encourage intellectual curiosity” among employees. This approach is now ingrained in the culture at Harley-Davidson, which has even taken its approach to learning outside of the company. Today, its employees are working with other industries to learn as a larger group. One of these learning initiatives involves work on sustainable technology. Twice per year, representatives from Harley-Davidson meet with representatives from other corporations, including Ford, Shell and Unilever to discuss issues in sustainability that affect each of their industries. These companies are a part of a materials pooling consortium established by Senge that employs learning-organization principles to share information about sustainable technologies.