Volvos HR Practices Focus on Job Enrichment

Critically analyze Volvos HR initiatives with special emphasis on its job enrichment initiatives.
What benefits does an organization derive from such initiatives?

In the early 1990s, the Volvo corporation was experiencing high levels of employee absenteeism
and turnover in their manufacturing facilities due to dissatisfaction with the predominantly mass
production environments prevalent then. In manufacturing plants across Sweden and the UK,
Volvo attempted to combat these issues by putting in place a number of HR initiatives that
provided alternatives to the traditional assembly line style of work design.

Job Enrichment

Job enrichment, as it was practiced by Volvo, was a direct outgrowth of Herzbergs Two Factor
theory of motivation. It was, therefore, based on the assumption that in order to motivate
personnel, the job itself must provide opportunities for achievement recognition, responsibility,
advancement and growth. The basic idea was to restore to jobs the elements of interest that were
taken away under intensive specialisation.

In 1974, Volvos new Kalmar plant became the first assembly plant in the world to break with the
Fordist concept. Kalmar plant revolution came about as a result of the vision of then new
president P. G. Gyllenhammar in 1971. His starting point was the necessity of being able to offer
people decent working conditions. In order to satisfy demands for work satisfaction, work
organisation needed to be changed without lowering economic growth. The most important
change was a shift from individual, monotonous work to work in a group.
Autonomous Work Groups
Autonomous Work Groups is an alternative to job specialisation that allows an entire group to
design the work system it will use to perform an interrelated set of tasks. Volvo successfully used
autonomous work groups at its Kalmar, and subsequently, at the Uddevalla plants. The groups in
the plant ranged in size from fifteen to twenty-five members. Each group had complete
responsibility for a set of tasks, such as wiring or upholstering. The group members themselves
determined who will perform each task. They could speed up or slow down the flow of work
somewhat without disrupting the work of other groups. The group received frequent feedback on
its productivity on computer display screens.
Job Rotation
Volvo made job rotation a part of its plan for flexibility at the Kalmar and Uddevalla plants.
Workers adopted job rotation as a way of relieving boredom, distributing jobs fairly, and
spreading physical demands. They also tended to enlarge their jobs to do more from end to end,
and to check their own work instead of designating a quality checker.
Employment Strategy
The employment strategy used was closely related to the principles of competence growth and
competence utilisation. The strategy was meant to lead to a reduction in sick leave and an
increase in teamwork. The personnel in the Uddevalla factory were brought together in several
ways. There were about 40 percent women and in a number of age bands. The goal was to
employ 25 percent of the employees of the age of 25 years and younger, 50 percent between 25
 Volvos HR Practices Focus on Job Enrichment

and 45 years and another 25 percent over 45 years of age, and 40 percent were to be women.
Each team was composed so that both sexes and more than one age group were represented. The
aim was to make use of the fact that people are different and that they have different positive and
negative qualities.
Flat organisation
The objective was to form a flat organisation in the Uddevalla factory. In the beginning there
were four levels in the organisational structure; plant manager, production leader, product
shop leaders and teams. During the last year of the life of the factory, there were only three
levels namely, plant manager, product shop leaders and teams. Therefore, the flow of information
between the top manager and the shop floor was very rapid, compared to any other assembly
plant.
The remuneration system was also adapted. Replacing the previous system which was based on
eight fixed wage categories for operators, with adjustments limited to the first three years the
new simplified system comprised only three wage categories, A, B and C, with a lower and
upper limit, enabling a yearly wage adjustment to be made.
Benefits of Job Enrichment
Job enrichment dramatically boosted quality (and sometimes raised productivity) by pushing
power down, replacing inspection with responsibility, and having people work in teams. When
Volvo initiated it in the 1960s, quality skyrocketed, according to then-president Pehr
Gyllenhammar (who retired in the 1990s). Volvo found that the time and capital invested to make
the switch more than paid off in cost savings from reduced turnover and absenteeism. Volvo also
found additional gains in lower warranty costs coupled with better sales and marketing benefits.
Instead of paying customers to buy through low prices, advertising, and rebates, companies with
a reputation for quality can charge a premium.
In Volvos Kalmar plant, turnover dropped from 24% to 5% following reorganisation 1.
Furthermore, in the Volvo Truck Corporation ( VTC) plants, absenteeism fell from 15% to 12%
and machine tool efficiency increased by 40-90% in some units 2. The time required to
manufacture automobiles was reduced by 2-4 hours per vehicle and overall production costs
decreased as well3.
Job Enrichment is not a cure-all
Thought many companies appear to be interested in job enrichment programs, the extra cost
appears as a big deterrent, if the company is not convinced that the returns will offset the
increased expenditure. General Motors tried six man and three man teams in the assembly line
but they found the output lowered and cost increased. (It comes as a pleasant surprise that at
Volvo Motors India it was found that increased cost is compensated by reduced absenteeism and
labour turnover). Yet the cost of the programme remains a strong dampener.
Job enrichment is not a social cure for workers discontent. Moreover, it may not be possible to
give priority to social efficiency over considerations of purely economic gains in the long term.

1
Jones, 1991
2
Thompson and Wallace, 1996
3
Wallace, 2008
 Volvos HR Practices Focus on Job Enrichment

Job enrichment programmes put all the focus on worker and how to restructure his job, and
forget the boss. Supervisors often feel that job enrichment programmes have sliced away a big
part of what is actually their responsibility.
The Uddevalla plant was closed in 1993 after only four years of operation. The plant was
outstanding in its human-centered approach to building cars. The plant also introduced advanced
computer technology in logistics and planning in order to supply the teams with the components
they needed to build a specific car in an efficient way. The plant was often seen as Europes
answer to Toyotism and lean production. Volvos Kalmar plant, created in the beginning of the
1970s was also a pioneer when it comes to breaking up the assembly line system. It was closed
in June 1994. (we will see later why).
 Volvos HR Practices Focus on Job Enrichment

Some analysts had commented that Volvos human centric approach towards automobile
manufacturing was no longer feasible in the fiercely competitive scenario. Do you agree? Give
reasons in support of your answer.

Though the Kalmar and Uddevalla experiments of Volvo were generally accepted as path
breaking, some very influential automotive researchers were deeply suspicious. In the book The
Machine That Changed The World Womack, Roos and Jones from Massachusetts Institute of
Technology disparaged both Kalmar and Uddevalla as neo-craft nostalgia. The authors are said
to have argued that productivity of the Uddevalla system is almost certain to be
uncompetitive even with mass production, much less lean production. In an interview in The
New York Times (July 7, 1991) Womacks criticism was even more hard hitting, asserting that
Uddevalla is not in the ballpark Its not even in the outer parking lot of the stadium. Frankly
its a dead horse.

This then raises a very important question Were the two innovative assembly plants just
noble experiments, doomed to fail in the competition of the 1990s?

My answer is no. In terms of productive and commercial performance Uddevalla displayed a

remarkable potential while in terms of engineering competence and quality, Kalmar is said to be
a definite success. Kalmar was showcased as having the best quality record among the European
auto plants.

It is essentially a toss up between Japanese favoured lean production system and Volvos human
centric approach to production.

In Japan, the "lean" production system has attempted to eliminate boring, repetitive and isolated
tasks through innovative work teams, but the high pressure that the system imposes has
extracted very severe human costs. In contrast, Volvo's "Uddevalla" production system,
emphasizes a supportive, democratic environment to make workers innovative as well as
productive.

Why then was Uddevalla closed? Volvos official answer is low sales, losses and overcapacity.
Therefore, there was a need for capacity reduction. Volvo had an overcapacity problem and
preferred closing the smaller plants in Kalmar and Uddevalla, and utilising instead the larger
Torslanda plant in Gothenburg for continued production.

Uddevalla managers interviewed in the spring of 1993, were certain that it was a strategic
mistake to close this plant, particularly due to its unique qualities of customer orientation,
cooperation between design and production, and worker competence and motivation. Volvo
executives always maintained that the closure of Kalmar and Uddevalla was purely due to
capacity reduction and not a strategic choice of production concepts.

Uddevalla was an experiment that was still underway one that was terminated rather
prematurely before any firm conclusions could be drawn. It is likely that once the system was
fine tuned, the deficiencies removed, and the process allowed to mature, the benefits would be
more readily visible.
 Volvos HR Practices Focus on Job Enrichment

In automotive assembly, where vehicles are produced on large, expensive lines, empowered work
teams will always build cars with higher quality than teams who have little control over their
work. There are also side benefits, like lower turnover, less sabotage, and healthier, less fatigued
employees. These healthy employees can work a longer part of their lives, thus delaying
retirement costs eventually.

Some factors that contributed to less than spectacular results deriving out of these experiments
included:

Efficient work techniques and other valuable information residing within the
autonomous work teams were not being successfully distributed across the
organisation. This was hindering Volvos ability to capitalise on team-level
innovations that would have helped it to remain competitive in a global industry.

Although Volvo committed heavily in the technological aspects of the job redesign,
experts say that its commitment to the social/managerial aspects were inadequate.
Human resource functions such as employee selection, training, compensation, and
performance evaluation were never properly redesigned to reflect the changing nature
of the industry. For instance, many employees lacked the necessary skills to
accomplish their new tasks, resulting in considerable variation in the effectiveness of
the autonomous work teams.

All above actually proves that if the system is properly calibrated and the emerging glitches are
ironed out, the probability of success is very high.

One important lesson that the Volvo experiment can impart is that core needs should be taken
care of first in any organisation, in order to ensure a solid foundation for change. (According to
the Maslow model, complex models of workplace innovation should not be copied and
implemented if stability with regards to wages or other labour conditions has not yet been fully
achieved. Before embarking on teamwork, the organisation has to be properly prepared - in
particular, conflicts of all kinds should be first resolved.

According to HR Manager of Volvo Ghent, Hans Bogaert, it is important therefore to develop

and nurture a healthy industrial relations climate, in order to get the basic conditions right,
eventually enabling the organisation to implement more advanced organisational work methods
in due course.

Implementing a teamwork model is not something that can be achieved overnight. Instead, it is a
long-term project which requires a strong support from all the parties involved. Without this
support, the project will be hard to sustain. In the beginning, the results may be disappointing
and sometimes lapses will occur. Only when the teamwork idea is fully supported, will people
remain motivated enough to attain the desired results.

Lean production can never be the ultimate goal and form for human productive activity. Some
fat is needed to make the workplace a decent place for human activity, a place where you can
unfold as a human being. Although lean production may be a remedy for individual companies,
it may create deterioration of the economic and social climate in general. If lean production is
 Volvos HR Practices Focus on Job Enrichment

widely introduced the macro-economic consequences may threaten even the fundamentals of
the economy itself.

If the lack of competence among some of the leaders at the Uddevalla plant had not been
allowed to influence the production and learning processes at a certain time, the Uddevalla
concept would have displayed its strength much earlier. The Volvo Uddevalla plant, with its
untimely closure, will not be able to demonstrate the success of this model.
 Volvos HR Practices Focus on Job Enrichment

References

1. 200,000 Volvo Hands- A Volvo Report

2. Empowered work teams: Responsibility replaces inspectors www.allpar.com

3. Global management concepts and local adaptations: working groups in the car
manufacturing industry www.findarticles.com

4. European Foundation for the Improvement of Living and Working Conditions -

Workplace innovation

5. Developing a model to evaluate the companies Human Resource Development and Skill
Formation level in the globalization age Social Science Research Network

6. MPRA - Enriching Production: Perspectives on Volvos Uddevalla plant as an alternative

to lean production, KE SANDBERG, Editor Swedish Institute for Work Life Research,
Stockholm

7. www.openlearningworld.com

8. www.financialexpress.com