Renault Vehicle Industries - Essay Example

Renault Vehicle Industries 1. Introduction As in the case of most high tech industries, the automobile industry is marked with a host of complex business challenges, which requires the companies in this industry to be dynamic and at the cutting edge of technology and innovation. Innovation is not only an aspect of product development but should also extend to the areas of organisational and process management. Changing needs in the business environment which demands for more dynamic and agile business responses, highly developed and fully utilized human resource capital and a work force moral which sets companies apart from its mediocre counter parts are the key success factors which organisations are striving to achieve. Agility in organisational process in responding to market demands can only be achieved through organisational structures, which are well-integrated, less bureaucratic and collectively aligned towards achieving the organisational objectives (Thomson & Strickland 2003). The case study analyses the current issues being faced by Renault Vehicles Industries, (RVI) the French Auto manufacturer with regards to organisational structure and culture. The analysis will take in to account the current status of the organisation and identify the problem areas being encountered at Renault. The insight gained from the analysis will aid in explaining the past background and how the company has developed to its current stage as well as what the future may hold if the organisation proceed without interventions. Lastly the analysis will also provide suggestions and recommendations for intervention and creating change at Renault to succeed in the ever-competitive field of automobile industry. . 2. Organisational Back ground Renault Vehicle Industries, initially established in 1915 as Berlite was nationalized in 1915 and name changed to Renault in 1978. The company mainly focuses on the manufacturing of heavy goods & transport vehicles and buses. The company’s annual turnover levels are in the range of 25,000 million francs and across Europe the company holds nearly 10% of market share for heavy goods & Transport vehicle segment. Renault busses and coaches hold over 50% of the market share in France. The company is ranked third in the world market for heavy goods and transport vehicle market. The Venissieux site houses two production facilities, which produce busses and coaches. Little over 5,000 people are employed at the Renault factories and 60% of the workforce is shop floor workers. As part of the Renault Group, the Renault Vehicle Industries is currently facing challenging future with the government intentions of privatizing the company. The failed merger plans with Swedish auto manufacture Volvo has further increased the uncertainty of company’s future prospects. 3. Overview of Issues at Renault While the company has successfully responded to many of the challenges in the international marketplace through innovative product designing and quality of production, the company still grapples with a host of organisational issues which needs to be resolved to achieve full potential of its workforce. Following can be identified as the key issues currently affecting the Renault operations. Lack of smooth transition from a Bureaucratic structure to more dynamic organic structure such as cellular work structure. It can be seen that the company has in effect made the change by developing cellular structures and introducing a more organic organisational structure at Renaults but the possible mismanagement of the change process has led to retention of many legacies from the previous bureaucratic structure. The Workforce demographics also indicate issues pertaining to an aging population of workers accounting for over 60% of the workforce. While the workforce at Renault indicates long standing loyalty and commitment to the company, the need for gearing this workforce for new developments and innovation will be a challenge for the company. The subculture conflicts, which may hinder organisational cohesion and harmony at the cost of overall productivity of the company, should also be considered. At Renaults, a rift may form between the younger workers with higher level of qualification and the older workers with longer work experience. It is important that the company management understands the different values and needs of these two sub cultures. For instance, the younger workers are more ambitious and would look at prospects of career progress while older workers may be more interested in job security and continuation of familiar work processes. Motivational issues related to acquiring new skills and competencies, which are at different levels between the older workers, and young employee is another issue needing to be addressed in order to facilitate innovation and change at Renault. Poor utilization of remuneration strategies to develop motivational levels of the workforce is also a key issue. The broad banded flat salary structures being administered currently does not link performance to pay, which takes away the incentive to perform above average. Gaps in administering Training and Development programs. There seems to be deficiencies in the training need identification process where employees have to request for training and await approval from a hierarchical structure of superiors. Gaps are also present in the Renault quality initiative where the organisational wide information sharing with regards to the TQM program has not been successfully achieved. This hinders the total integration of the quality initiative across the organisation, which is critical for the success of change programs such as TQM. 4. Assessment of Renaults Organisational Culture Organisational culture of a company plays a crucial role in determining its cause of actions and binds people with shared core concept, values, beliefs, attitudes norms and expectations. “Every organization has its own unique culture even though they may not have consciously tried to create it. Rather it will have been probably created unconsciously, based on the values of the top management or the founders or core people who build and/or direct that organization” (Weiss 2001). Culture of an organization influences the style in which employees behave, decisions are made and risks and crisis situations are handled. Organisational culture can be identified at three levels. These includes, artifacts which are the visible organisational structures and processes; Espoused Values which represents a company’s strategies goals and philosophies and Basic Underlying Assumptions which are the unconscious, taken for granted beliefs, perceptions and attitudes shared by the members (Schein 2004). For example, at Renault many of the workforce expect to work till their retirement. Such expectations are not common to all organisational cultures. The shared pride in the high quality buses and coaches they manufacture is also a part of the Renault culture. The commitment and exceptional long service records of the majority of the workforce at Renaults indicate the strength of the corporate culture. Espoused values at Renaults can be identified in examples such as the QDC model, which the company uses to support their TQM effort. The triangle with QDC letters represented at each corner reflects the interconnectedness of Quality, Deadlines and Cost. Another aspect of Renault’s corporate culture is that it is male dominated and the fact that only 1.4% of the shop floor workers and 11% of the cadre are women indicates this gender bias. The language of Renault culture can be identified in two distinct forms of verbal and non-verbal commutations. The formal culture of the company is reflected in the hand shaking “ritual” for greeting purposes between employees who may have worked together over 25 years. The terms and phrases used in verbal communication also reflect the role of language in supporting the formal culture at Renault. For example the old terns such as “ouvrier” referring to shop floor worker is still being used although its considered today as carrying negative connotations. The role of language in organisational culture can also be identified in the adaptation of new terms such as “agent de fabrication” to refer to same shop floor worker position. Use of terms such as “cells” and “teams” reflects the partial transition the company has made towards becoming team-based operation. However the utilization of words such as cadre, forman and superior indicate how language at Renault is still facilitating a culture, which stems from a bureaucratic culture. Organisational cultures differ from one another markedly but some common characteristics shared allows for categorizing cultures in to various groups in developing culture assessment models. As per Jeffrey Sonnenfield’s organisational culture model, organisation cultures fall largely in to four types. These include Academy culture, Baseball Team culture, Club Culture and Fortress culture (Organisational Culture 1999). Academy cultures are characterized by highly skilled employees who tend to stay in the organization, while working their way up the ranks. The organization provides a stable environment in which employees can development and exercise their skills. Examples are universities, hospitals and large corporations. Baseball Team Cultures consist of Employees who perform as "free agents" who have highly prized skills. They are in high demand and can rather easily get jobs elsewhere. This type of culture exists in fast-paced industries. Club Cultures are characterized by the importance placed upon conformity expected of the employees and the need for fitting into the group. Usually employees start at the bottom and stay with the organization. The organization promotes from within and highly values seniority. Examples are the military, some law firms, etc. Fortress Cultures are where employees are faced with high level of job insecurity. These organizations often undergo massive reorganization. There are many opportunities for those with timely, specialized skills. Examples are savings and loans, large car companies, etc Analysis reviles that Renault’s organisational culture according to this model can be categorized as an Academy Culture. The large percent of the workforce who has over 30-40 years of work experience and the trend for working up the ranks is evidence of this. However, most companies in automobile industry today fall in to the Fortress culture where only those who have specialized skills and competencies survive the reorganizing and restructuring programs, which these companies need to undergo periodically to stay ahead in the fiercely competitive market. 5. Issues being faced in the cultural change process As in the case of social cultures, the organisational cultures too need to evolve and change to meet the challenges and needs of the changing environment within which it exists. Culture can be described as “shared meaning, understanding and sense making and that culture must be perceived as an active, living phenomenon through which people create and recreate their worlds (Morgan 1997). These descriptions of culture also imply that key individuals have a crucial role to play in shaping and refining the culture. In order to make cultural changes a smooth process, it is important to manage the transition effectively. At Renault, it can be noted that the role of shaping and refining the new culture to suit the more demanding business environment has not taken place. Although the work processes and organisational structures have been adjusted to cellular form in response to the new business environment needs, the organisational culture has not be reshaped to be compatible with the new structures and processes. Evidence of this can be noted in the formal communication channels, individual relationships, which are based on high power distance concept and retention of positions such as “supervisors”, and “formans” which do not have a place in an organisational culture which supports an organic organisation. 6. Transition from a Bureaucratic structure to a cellular structure An organisation has to be designed to achieve its objectives and the process of organisational designing involves “identifying and configuring the organisational strategy and structure to achieve its mission and goals” (Weiss 2000). An organisational structure identifies and defines the duties, responsibilities and formal reporting hierarchy of an organisation. To meet the demands of the market effectively, organisations have to develop their internal structures to suit their industry features and characteristics. In industries, which the uncertainty is, high the organisational structures are decentralizes and decision making is less formalized and speed and agility is high. Such organisational structures are termed Organic and include cellular and cluster designs. On the other hand, companies operating in low uncertainty industries, the organisational structures are more centralized, standardised and formalized and considered as Mechanistic ( Lawrance & Lorsch 1967). Within these two ends of the continuum lies the machine bureaucratic structures, which can best explain the type of organisational design at Renaults. Machine Bureaucracies are less centralized than mechanistic forms but hierarchically controlled (Mintzberg 1983). Organisations, which are bureaucratic, are most suited for catering to environments, which are stable and less uncertain. The benefits of such structures include the opportunity for realizing economies of scale, allowing for in-depth skill development, ability achieve functional goals and to specialize on one or few products. This type of a structure would have served its purpose effectively in catering to the automobile market few decades ago. How ever with the fast phase of globalisation process, the automobile industry has become one of the most competitive business environments in which European and American manufacturers are coming under intense pressure to radically redesign their processes to compete with the onslaught of the Japanese automobile supply. Bureaucracies with slow response time, lower levels of productivity compared to more organic structures such as high performance cellular work teams, hierarchical overload and decision pile up at the top levels can hinder Renault from competing effectively in the current international market (Duncan 1979). 7. Renaults Organisational Culture vs. French National Culture In order to understand the impact of national culture on business practices it is important to establish what is being refered to as culture. Culture is defined in many ways based of different perspectives. Culture according to Boas, “embrace all the manifestations of social habits of a community, the reactions of the individual as affected by the habits of the group in which he lives, and the products of human activities as determined by these habits” (Boas, 1940) Culture influence and affects the business climate and the perception of international business and level of nationalism within a culture. National culture of a country also affects the work related attitudes and value systems thus impacting the shaping of organisational cultures existing within the national culture. Hofsted’s Work Related Indices refers to four dimensions in which national cultures differ in terms of values governing organisational and business practices As per the Hofsted’s model of cultural diversity, power distance is a dimension measures the degree to which people respect authority. In high power distant societies, the hierarchy is rigid and employees in different levels are treated differently (Hofsted 2001). France is rated among the high power distance countries with a score of 68 compared to low power distance countries such a Sweden, UK or America, which is in the region of 35-40. See appendix I. This indicates the impact and influence, which the national culture of France may have had on the formal structures present at Renault. This influence would have been more prominent due to the fact that the company has been a nationalized entity since 1915. 8. Dynamics of Sub cultures within Renault Within organisations there will exist number of sub cultures, which shares common characteristics and bound together by these similarities. While its common for sub cultures to operate with conflicting interests and view points, these differences should not be allowed to create turmoil which costs the organisational productivity and effectiveness. When leaders manages these subcultures effectively, they are able to co-habitat harmoniously and yield synergies output. At Renaults, there are two distinct sub cultures in existence, which includes the young academically qualified workforce who are ambitious and ready to learn and innovate and the old long time workforce of Renault who are rankers and have over 30 years of work experience at Renaults. The younger generation is feeling hindered by the hierarchical bureaucratic structures and systems at Renault while the other sub culture has operated within such an environment for the past 30 odd years and familiar with it. These two subcultures are currently having conflicting relationships and as such needs to be guided towards establishing a synergistic relationship, which is beneficial for both the company as well as the members of the sub cultures. 9. Effectiveness of Leadership roles While its recognized that "Organizational culture is the key to organizational excellence” the key role which the leadership of the organisation has to play in creating and managing the organisational culture is sometimes less acknowledged (Schein 2004). At all levels, managers and leaders should interpreting and understanding organizational culture as it affects strategic development, productivity and learning. An effective culture can facilitate while a negative culture can hamper organizational growth and success. Therefore, the Renault leadership needs to lead by example in areas of productivity, quality drives and customer focus. The leadership roles have the key to establishing new cultures, which are less formal and less structures but driven by motivation for high achievement and learning. At Renaults, leadership role is seen to be restricted to policy making and setting things in motion but not becoming involved in the execution stage. Most successful leaders did nor restrict their leadership roles to merely decision making at the top but also to communicate the strategies and policies down to the grass root level. While it should be recognized that Renault leadership has so far not failed completely in effectively implementing many effective change programs, the leadership should become more involved in achieving a transformational change within the organisation. A comment made by one of the Renault staff on the training accessibility also reflects the lack of involvement of leadership at higher levels. It was commented that the training approvals depend upon goodwill the worker has with the senior most manager in the hierarchical structure and that at most times the top managers are not closely aware of down liner’s training needs. While its acknowledged that senior management does not have time to get closely involved in functional matters, their leadership role of empowering those below them to make effective decisions have been neglected by Renault Leadership. This is probably a result of the bureaucratic red tape surrounding nationalized business entities. 10. Motivational Issues Motivational theories as Maslow’s Hierarchy of needs as well as Alderfer’s ERG Theory both identify people’s desire for growth and self actualization. Both theories see this need category as the highest order needs in the pyramid and in Alderfer’s ERG model, the “Growth” includes need for creativity and productivity (Weiss 2001). Herzberg’s Two Factor theory of Hygiene and Motivator factors also address the need for providing learning opportunities and an environment for growth and achievements. McClelland’s Trichotomy of Needs, while not being concerned of how to satisfy needs, holds that needs can be created and developed and by doing so with certain needs, a person’s productivity can be improved. Out of the three needs in his model, the Achievement factor or nAch is the need for demonstrating high performance levels, mastery over complex tasks and ability to taken on challenging tasks. An organisation that develops achievement needs in their staff through opportunities for growth, autonomy and creativity will therefore stand to gain from the resulting high productivity of these staff. Therefore, providing a workplace environment, that promotes learning opportunities through innovation, creativity, participation and autonomy is essential for meeting the motivational needs of the employees. The hierarchical bureaucratic structures tend to limit autonomy and stifle the creativity and innovation of employees through rigid practices. Thus, Renault should address its work force motivation needs through the facilitation of learning and allowing for flexibility and creativity. The new forms of job designs and more organic structures will allow for greater autonomy as well. 11. Remuneration Issues In developing a remuneration system, it is important to consider the motivational aspects involved. Remuneration provides the reinforcement needed to ensure company goals are achieved. Theory of Reinforcement in motivational studies indicates that Consequences, which give Rewards, increase a behavior while consequences, which give Punishments, decrease a behavior. Consequences, which give neither Rewards nor Punishments, extinguish a behavior (Weiss 2001). The equity theory of motivation suggests that people compare their efforts and rewards with the others to determine the fairness of the outcome. Employees compare their remunerations with other employees in the organisation as well as with employees in similar positions in outside companies. Perceived inequities may prompt the individuals to take actions to remedy the felt inequities. Such actions may include demand for more rewards, reducing of efforts or leaving the organisation for better offers. These actions carry negative implications for an organisation’s productivity (Lawler 2000). Remuneration systems, which are not linked to performance can be ineffective in motivating employees to perform at above average levels. More and more companies are now moving away from flat job based pay systems and adopting skill based pay systems to promote a learning environment and incentive pay structures to reward performance. Renault currently is practicing a job based broad-banded pay structure this has failed to incentive the efforts of acquiring new skills and performing above average levels. 12. Effectiveness of Quality Initiative at Renault The TQM concepts are being practiced in organizations to improve the organizational productivity and enhance quality. Principles of TQM hinges up on the successful blending of the process systems of the organization with the human systems (Bounds 1996). A Renaults the TQM initiative has been implemented with some level of success. Total Quality Management from its inception intuitively recognizes the importance of bringing together the organizations and individuals though team and process. Thus these two elements of team and process brought about new emphasis on to training and technologies as well as quality systems implementation (Everett & Ebert 2002). At Renaults the success of the TQM initiative is partially hampered by the still existing bureaucratic structure with hierarchical management systems. The need for team based structures to optimize the effectiveness of TQM program should be recognized. For change programs such as TQM, which aims to integrate the overall organisation process and manpower, the need for involving everyone and all activities of the company is imperative. This is an area, which Renault has failed where some of the down line workforce is not aware and fully involved in the quality initiative than merely following instructions. 13. Issues with Training & Development – Learning Organisation Alan Garvin defines a learning organisation as “an organisation skilled at creating, acquiring and transferring knowledge and at modifying its behavior to reflect new knowledge and insights” (Garvin 1993). This definition address the fundamental crux of learning process if learning is to take place, which is the need for new ideas. This definition has the advantage of having the concept of learning organisation translated in to practical and operational set of requirements. Organisational Learning identifies five essential activities which a learning organisation performs, including systematic problem solving; experimentation with new approaches; learning from own experiences; learning from others and transferring knowledge quickly and efficiently through out the organisation (Garvin 1993). Companies, which have rigid structures and hierarchical management styles, hinder organisational learning. This is evident in the Renault Training & Development programs where the personnel who wish to receive training have to request for it and await approval from many tires of management. Renaults’ learning to learn program should be lauded for its initiative towards creating a learning climate by encouraging the employees to learn. However, the workforce needs to be facilitated by not only the training programs but also by the overall culture and systems prevailing in the company. 14. Assessment of Long term prospects With its specialization in transport and heavy goods vehicle segment, Renault has a good potential for growth and success in the market. However, it needs to consolidate its position by adapting its internal processes and structures to meet the new demands of the market place and the intense competition fueled by the Asian automakers’ that are very successful with their quality systems and productivity programs. With the French government’s intention of privatizing the company, there are good prospects for a transformation of the company with radically redesigned business processes. Such a Business Process Reengineering (BPR) will allow the company to cut costs, increase productivity and integrate overall operations and human resource to fully utilize their potential. 15. Recommendations for the future Renault has successfully restructured one of its plants in to cellular structure, which has yielded higher levels of productivity, and improved work related conditions as well as better motivation for the workforce. In order change from a bureaucracy to a cellular form of organisational structure, the company will not be able to make such a change in the form of developmental or transitional change. Such a change can only be implemented effectively through a transformational change and thus the company should choose to radical redesigning and restructuring process (Weiss 2001). Otherwise problems currently evident at Renault such as co existence of concepts such as work teams and quality circles along side hierarchical structures and supervisory roles, which reduce effectiveness, will result in. Although Renault has invested heavily on training & development efforts, the need to educate and train the management and leadership of the company of how to be responsible for training and developing their subordinates and team members should also be addressed. In creating a learning organisation techniques such as Participative Policy Making, efficient information sharing and formative accounting, which shares cost and profit details giving pride to the work groups generating such revenues and profits, should be implemented. Self development among all employees should be fully supported and encouraged. Managers should be made responsible for employee development. A skill based salary system aids in benefiting organisations in becoming highly flexible autonomous work team structures where employee’s multi task to achieve goals and objectives effectively(Cascio 1998).. Such pay structures allow organisations to move away from hierarchical, specific job profiles in to team structure. Renault should introduce such skill and performance based pay to encourage acquiring of new skills by the old staff who are used to old ways of doing work In order to make the TQM program more effective the whole organisation should be involved in to the process. This should be achieved through grouping workforce in to working committees responsible for each area of organisational development under the TQM program and having quality circles, which are fully autonomous and empowered. Leadership at Renaults should also become more involved in all areas of organisational activities, placing greater level of attention to reshaping the structure and culture of the company. It is in the hands of the leadership that the key to workforce moral and motivation lies. Decisions pertaining to job designs and remuneration should be taken with understanding of how they impact the motivation of the employees. 16. Conclusion In conclusion, the analysis reveals the gaps and issues surrounding Renault’s organisational structure, culture and the resulting motivational and productivity issues. Gaps in leadership in shaping the desired culture as well as motivating the work force towards change should also be recognized. Need for changing not only the organisational culture but also the organisational structure from its current bureaucratic form in to a more organic design is also identified. The gaps in training and development strategies as well as remuneration strategies need to be revised to suit Renault’s overall corporate strategy of being a dynamic and agile international player. Lastly the need for Renault to undergo a transformational change in terms of its business processes including organisational and work designs as well as human resource strategies has been discussed. Appendix I Table 1 – Work Related Values for 20 Selected Countries Country Power Distance Uncertainty Avoidance Individualism Masculinity Argentina 49 86 46 56 Australia 36 51 90 61 Brazil 69 76 38 49 Canada 39 48 80 52 Denmark 18 23 74 16 France 68 86 71 43 Germany 35 65 67 66 Great Britain 35 35 89 66 Indonesia 78 48 14 46 India 77 40 48 56 Israel 13 81 54 47 Japan 54 92 46 95 Mexico 81 82 30 69 Netherlands 38 53 80 14 Panama 95 86 41 44 Spain 57 86 51 42 Sweden 31 29 71 5 Thailand 64 64 20 34 Turkey 66 85 37 45 United States 40 46 91 62 Adapted from: Culture’s Consequences, Beverly Hills: Sage 1980. References: Bounds, G. (1996). “TQM’s Approach :A Model for Organizational Learning.” Productivity, Vol. 37 No. 1, April – June. Boas, F. 1940. Race, Language & Culture. New York: Macmillan Publishing Company Cascio, W. F. (1998) Managing Human Resources: Productivity, Quality of Work Life, Profits. 5th ed. New York: McGraw-Hill Companies. Duncan, R. (1979) What is the Right Organisation Structure? Decision Tree Analysis Provides the Answer. Organisational Dynamics, winter. P. 429. Everett, A. E. Jr. & Ebert, R. J. (2002) Production & Operations Management 5th ed. New Jersey: Prentice Hall Garvin, D. A. (1991). “Building A Learning Organisation,” Harvard Business Review, July - Aug, pp. 78 -91. Hofsted, G. (2001) Cultures Consequence: Comparing Values, Behaviors, Institutions and Organisations across nations. London: Sage Publications Ltd. Lawrence, P. & Lorsch, J. (1967) Differentiations and Integrations in Complex Organisations. Administrative Science Quarterly, June p.1-47. Lawler, E.E. (2000) Rewarding Excellence: Pay Strategies for the New Economy. San Francisco: Jossey-Bass Publishers. Morgan, G. 1997. Images of Organisation. California: Sage Publication. Mintzberg H (1983). Structure in Fives: Designing Effective Organisations. New Jersey: Prentice Hall “Organisational Culture” 1999. Available at http://www.managementhelp.org/org_thry/culture/culture.htm Schein, E.H. 2004. Organisational Culture and Leadership. 3rd ed. San Francisco: Jossey-Bass Publishers. Thomson, A. A. Jr. & Strickland, A. J. (2003). Strategic Management Concepts and Cases. 13th ed. New York: McGraw-Hill Publishing Company Ltd. Weiss, J.W. (2001) Organisational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. Read More