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More Than a Motorcycle: The Leadership Journey at Harley-Davidson

After rescuing the Harley-Davidson company from major troubles in the 1980s with traditional command-and-control techniques, CEO Rich Teerlink set off on an even more difficult path: creating a new kind of organization that turned the whole idea of leadership around. In this conversation, Teerlink and Lee Ozley, co-authors of More Than A Motorcycle (HBS Press) describe the "leadership journey" at Harley-Davidson.
More Than a Motorcycle

Retired Harley-Davidson CEO Rich Teerlink and organizational consultant and coach Lee Ozley were the two individuals most deeply involved in the transformation of the company in the 1980s and 1990s. In More Than A Motorcyle, Teerlink and Ozley chronicle Harley's journey toward a new kind of organization that recognizes people as a company's only sustainable competitive advantage.

You've said that the command-and-control leadership at Harley during the 1980s was critical to its well-known financial turnaround. Do you still believe in its effectiveness given the "softer" management style Harley has adopted?

We believe that traditional command and control hierarchies are of limited effectiveness and have a host of fatal flaws in the long run. But command and control works in certain situations—and in fact may be the only thing that works when circumstances are desperate enough. If an organization is under extreme pressure—so much so that one wrong move can mean the death of that organization—then an authoritarian system of controls may be absolutely necessary. Because they're top-down and more or less unilateral in their decision making, command-and-control organizations can move quickly in a crisis. When Harley was in trouble in the early 1980s, it benefited significantly from just this kind of decisive leadership style.

What prompted the leadership journey—away from command and control management—that you write about in your book?

We can make an analogy with a country surrounded on all sides by invading forces. The defending army looks to its generals for decisive leadership, and the nation prays that those generals are skilled and lucky. But what happens when the invading armies are turned back and that immediate pressure is relieved? The crisis had receded at Harley—we had regained market share and the company was financially stable again. The challenge was to sustain this success and sustain the high performance and the zeal that employees had demonstrated when survival was everyone's shared goal. After the crisis had passed, the motivation for working together collaboratively began to fade. Everyone began reverting back to former habits. Unilateral decision making at the top, a clear chain of command and foot soldiers who take orders and execute someone else's plans meticulously—all of these serve well in the crisis mode but don't help the organization months or years after the fire is extinguished.

How did the definition of leadership change at Harley-Davidson?

During the troubled years, the role of leadership was to anticipate impending challenges, decide how to solve them, and then impose the prescribed solution on the organization. "Leadership" resided in a few individuals around whom others within the organization would rally. In this view, leaders had distinctive characteristics that uniquely qualified them to lead: charisma, technical and managerial knowledge, and the ability to focus on the big picture. Leadership was a personal trait, to be exercised in a top-down, hierarchical way. Harley didn't invent this definition, of course—the command and control model was and still is the dominant model for organizing industrial organizations.

The new definition of leadership became the process of creating and sustaining an environment in which people work together toward the achievement of common goals—and not because they have to, but because they want to. Leadership is a process whereby everybody can make contributions to the success of the company and ordinary people can achieve extraordinary things. Harley could survive and prosper only if every employee took responsibility for leading the company. Too often, corporations attempt to take solutions to their employees, rather than work with employees to solve a problem. Leaders should take the questions to their people, not answers all the time.

To get this kind of cultural change required changing the fundamental organization structure.

Yes, but neither of us had any illusions that a structural change would represent a cure-all for the company. In our experiences, organization charts have more often been a representation than a cause of problems. In fact, both of us had long been convinced that the reporting relationships codified on org charts—relationships to which many people attach so much importance—are basically irrelevant. At the same time, however, we realized that the existing organizational structure—the traditional pyramid—was beginning to get in the way of the kinds of changes that were in process. The structure of an organization has a significant influence on how people behave. In a strict hierarchy, people generally have very specific limits on their responsibility and authority. If we wanted to provide people with greater responsibility and authority we had to reduce the hierarchy.

And that was achieved through the circle organization?

The philosophy behind the circle organization was to get the right people, together at the right time, to do the right work right. We wanted teamwork without the teams and the idea of natural work groups emerged. The circle organization is based around the core processes at Harley—create demand, produce product, and provide support—which are depicted by three interlocking circles. This is a more accurate representation of the shared leadership and cross-functionality at work in Harley-Davidson.

How did the circle organization create a new way of doing business for Harley?

People who had historically taken their ideas, work products, problems, and complaints "up the organization" were now encouraged to work with the right people to get the work done. Decisions began to be made as close to the source of the problem or topic as possible. People who had occupied formally hierarchical command-and-control positions were being transformed from "commanders" into facilitators and coaches. In a typical organization, you go to the big boss, talk him into your idea, and then count on him to beat your peers into submission. Ultimately, you need their cooperation, but it's easier to get it through the big boss than by talking to them. The concept of the circle organization takes the big boss out of the circle. You call them "coaches." They're still out there, but now their job is to mentor and help, rather than to make decisions.

Looking at a diagram of the circle organization begs the question: Who's in charge here?

When we presented the concept to the organization, this was the single most frequently asked question. At the core of the overlapping circles lies a zone of intersection. This is the coordinating function, one of the four core processes of the organization. This zone of overlap was named the "Strategy and Leadership Council," or LSC. Its primary function is to ensure that cross-functional integration occurs with authentic input from informed individuals from each circle. In the circles, we expected each to operate as an empowered work group. Here is what we hoped would be a quiet revolution. We did not expect a single individual to emerge as the leader of a circle. Instead, we anticipated that leadership would be a shared responsibility. At the same time, managers within the circles were expected to operate independently. "Shared leadership, individual management" emerged as a catch phrase. At the same time, we didn't expect the circles to take effective shape without any assistance. In their infancy, they were coached by competent counsel: Tom Gelb, vice president of manufacturing coached the "produce product" circle, marketing vice president Jim Paterson accepted the coaching job for the "create demand" circle, and Rich, then acting head of the motorcycle company, took responsibility for the "provide support" circle.

How did the idea of partnering extend beyond Harley's relationship with its employees?

Partnering became a fundamental part of Harley's vision statement. In part, it states that Harley exists to "continuously improve the quality of mutually beneficial relationships with all stakeholders" and Harley has tried to work in a partnering relationship with all six groups of stakeholders—customers (dealers and riders), employees, suppliers, shareholders, government, and society. Consider, for example, Harley's relationship with its dealer organization. In 1993, for the first time in the history of the company, the sales service agreement that governs the relationship between Harley and its dealers was developed by the company and the Dealer Advisory Council. It's hard to convey how big a change this really was. In most cases, contracts are written by the party that holds the power, and it's a zero-sum game: I win, you lose. It's highly unusual for a manufacturer to go to its first-line customers—its dealers—and say, "Hey, let's get together and work out the right kind of contract for our relationship."

And most notably, the spirit of partnership carried over into Harley's labor-management relations.

By 1994, Harley's successes had lead to expectations of even greater growth in the future. But Harley, with its factories running already at full bore, had literally no room for growth and expanding manufacturing capacity seemed like an obvious first step. Not surprisingly, some executives and managers saw this as an opportunity to build a new plant far from its existing unionized facilities that would operate "union free" with all of the advantages thought to be associated with that way of doing business. After a lot of internal debate, Harley decided not to use the circumstances of the moment as an excuse for disrupting the company's long-standing relationship with its unions. Instead, we explored the opportunity of entering into a full-fledged partnership with the PACE International Union (PACE) and the International Association of Machinists (IAM)—the two unions that together represent a large percentage of Harley's employees. What resulted was the Joint Partnership Committee (JPIC) which is comprised of representatives from Harley, PACE, and IAM with the joint goals of 1) continuing improvement in existing facilities and 2) dramatic improvement in the new facility.

Historically, unions have taken a reactive posture in traditional labor-management relations. Management acts, and the unions react; management makes a decision, and the unions either agree with it or fight against it. PACE and IAM agreed to take joint responsibility, working with management to reach decisions together. The roles of all parties are dramatically different. Management involves union representatives much earlier in the process than ever before. Union leaders are responsible not only for representing the interests of their membership in the wake of real or proposed change, as had traditionally been the case, but also for convincing their members of the rightness of a tough decision. Giving up traditional powers and taking on new responsibilities has challenged all members of the partnership and no group has avoided all the potholes that the partnership road has presented. Nor has any single site, group, or function at Harley yet realized the full potential of the true partnership that was envisioned. But the very premise of the partnership—continuous improvement—argues that the partnership will always have more potential.

Your relationship wasn't a typical CEO/consultant relationship. How would you characterize it?

Lee: We have had, and still have, a relationship that is unique. We've worked closely together for twelve years. I viewed my journey with Rich less as a CEO/consultant relationship and more as a relationship between colleagues, equals, and mutual advisers. We respected each other's prerogatives and had confidence that the other would act skillfully, based on a firm foundation of values. We didn't keep score, because that's not what either of us was about. He has served me in many of the same ways I've served him—as coach and consultant to my own organization.

Rich: CEOs need a source of ongoing counsel: a group of individuals who aren't afraid to tell the emperor that he has no clothes. For twelve years, I've had a one-man secretariat: Lee Ozley. He is viewed as a partner. Lee first stood out in our eyes as a kindred spirit, and then emerged as a coach, mentor, and colleague. He forced me to rethink subjects about which I thought I had sufficient and clear understanding. He mentored me through very difficult and stressful times during our process. He learned about my life experiences and built them into his repertoire of tools for helping Harley and me. And he paid me the great compliment of accepting my coaching and mentoring as his own career evolved, and as he changed his own work focus. The relationship Lee and I had, as CEO and consultant, was a unique one—one that I think allowed for the changes at Harley to evolve. Individually, we weren't interested in being identified as the owner of an idea, but were more interested in moving an idea to the implementation stage through the efforts of others. This approach allowed for the development of the real and enduring personal benefit of the journey Lee and I have shared.

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