Origins of NUMMI.
The Fremont plant of General Motors opened in 1965, and after experiencing nearly decades of labour-management conflict, closed in 1982. At the time of its closing, over 6000 workers lost their jobs and nearly an equal number of grievances remained unresolved.
Soon after the closing, two forces set in motion events that would lead to a reopening of the plant with very different management philosophies and practices. GM needed to build a compact car for its product line to compete with the popularity of smaller imports, and management wanted to study the production methods of Japanese auto makers. Toyota needed to manufacture automobiles closer to its major offshore markets and wondered how well its highly efficient Toyota Production System would transfer to American workers and suppliers.
What emerged from these two independent management motives was an agreement to form a 50/50 joint venture to build both GM and Toyota vehicles in the Fremont plants. A separate corporate entity was formed, New United Manufacturing, Inc (NUMMI – pronounce “new me”), and the plant was reopened in 1984 with a decidedly different approach to management.
The UAW Labor Contract.
For starters, the new management team negotiated with the United Auto Workers (UAW) union a unique contract. While former plant employees would be given first chance at the new jobs, former seniority rights were abandoned. Management focused on a new ideology that targeted building the highest quality vehicles at the lowest possible costs. Workers would be involved in deciding work standards, job allocations and layout, training, job rotation, and other work elements.
The dozens of former specialised job classifications were abandoned. Only two classifications are used at NUMMI for hourly workers – skilled trade and nonskilled. Within each classification workers are piad the same hourly rate with only a modest difference between the two classifications. A small 60 cents per hour premium is paid to team leaders who guide the planning and work of four to five people. Even professional people recruited to the firm, such as engineers, occupy their first several weeks on the job working on the line. This helps inculcate in them an appreciation for the tedious and stressful pressures workers face on the line.
A no-strike, no-layoff agreement was part of the contract, a form of job security. Gary Convius, NUMMI’s senior vice president until he was promoted to head up North American operations in 2000, believes the contract provision “buys the hearts of people.” Flexibility prevails instead of the confrontational enforcement of rules.
Management Philosophy and System.
When Convis was recruited into his original position as general manager of the plant, he was advised by a Toyota executive, “Manage as if you had no power.” The advice was to forget the command-and-control legacy of Detroit and strive instead of treat people dignity, to seek consensus in making decisions that directly affect people at work.
The NUMMI system emphasises human relations, empowerment, and shared responsibility. To emphasise management’s philosophy of mutual trust and respect, several key practices form the cornerstones of management-worker relations:
• There are no time clocks, only self-report time sheets.
• An Andon system gives every line employee the right and responsibility to shut down his or her section of the production line to resolve any quality or operating problems.
• A no-fault attendance system does not question an employee’s reasons for absence, and no external documentations (e.g., physician’s note) is required. However, if people are absent more than the “norm” there are specific steps up to termination that occur. Every effort is made to help people overcome personal problems that might be causing attendance issues.
• An open office environment where no one sits behind a walled-in office. Even Convis, as the senior line manager, had his desk in an open arena with 80 other people. To further promote a sense of equity, managers and hourly employees east at the same cafeteria and voluntarily wear the same uniforms provide at company expense. Bonuses are awarded to all employees based on quality, safety and productivity improvements, with the belief that employees should benefit from performance directly related to production objectives. Convis always wanted employees to “do more than just complete your job and then go home.” He advocates that employees “Work like your name is on the plant.” Such treatment seems to get desirable results. For example, if the robot that installs car seats breaks down, a team of mechanics put some of their people on the job to manually install seats while others work to solve the problem. Setbacks and Successes. NUMMI hasn’t been without its problems. Its business only to produce vehicles to specifications and orders generated by Chevrolet and Toyota. By 1995 it was producing over 350,000 vehicles per year. But at an earlier stage its output was erratic. From an output of 205,000 vehicles in 1986 (its second year), it slipped to 187,000 the next year and on down to 128,000 before recovering. At its nadir, NUMMI employed 400 more people than it needed. But true to its no-layoff contract, it engaged people in training and maintenance while keeping them on the payroll. Such treatment of employees seems strengthen employee performance. In 1994 NUMMI won the J.D. Powers “Silver Plant Award” (2nd place) and in 1995 won the J.D. Powers “Bronze Plant Award” (3rd place) out of 64 North American vehicle assembly plants. NUMMI’s Geo Prism has received the J.D. Powers highest quality rating of any North American-produced vehicle.
NUMMI management works to include employees in its suggestion and cost management systems programs. As the result of several suggestions, the amount of water used to produce one automobile declined from 1,000 gallons to 680. Teams even have responsibility for planning how to increase line speed. Currently completed automobiles roll off the end of the line at the rate of one every 58 second, and pick-up trucks at the rate of 92 seconds per completed vehicle. People are formally recognised for their ideas and dedication, whether improving quality, safety, attendance, or production.
(Source: Cook, C. W. & Hunsaker, P. L 2001, Management and Organizational Behavior (3rd Edition), McGraw-Hill, New York, pp. 266).
Students are required to address both of the following questions in the their essay:
Using three motivation theories/frameworks covered in this course, discuss what are the lessons to be learned about motivation from the practices of NUMMI?
Motivation theories that must be included:
1. Job Characteristics Model (job rotation, job enlargement, job enrichment) (A job must have 5 dimensions: skills variety, task identity, task significance, autonomy & feedback)
2. Maslow’s Needs Hierarchy Theory (physiological, safety, belongingness, esteem, self-actualization)
3. McClelland’s Motivational needs (need for achievement, need for affiliation & need for power
You can use McGregor’s Theory X & Theory Y or Alderfer’s ERG Theory to contrast with the 3 theories above if applicable.
Also include Effective Goal Setting Characteristics (Specific, Measureable, Achievable, Relevant, Time-framed, Exciting, Reviewed) and Equity Theory if appropriate.
What would you advise NUMMI management to stop doing, start doing, or do better?