Living Case Study

ACME AUTOMOTIVE

EXECUTIVE SUMMARY
Acme Automotive (fictitious name) is a start up automotive company that is engineering a hybrid-electric sports car, called the Karma, loosely based on the Chevrolet Corvette. The company I work for has been contracted to supply personnel to various teams in the organization. I have personally been contracted to the Advanced Manufacturing Engineering team; it is our responsibility to make sure the assembly plant can build the vehicle that is released by the Engineering and Design team. My position requires me to interface with all of the other teams in the organization so I have a good perspective of how the organization functions and how it is managed. Acme is owned by two individuals who are the CEO and CFO. They are Northern Europeans who relocated to the United States while employed by BMW. Their management style is to basically let the organization function without interference and with minimal reporting systems in place. They very seldom come out of the office complex where they sit and, when they do, they do not interact with the people on the floor. The only interaction is via the directors and VPs responsible for the individual teams. Therefore the upper management basically manages by decree. This style cascades through the organization and breeds arrogance and an island attitude that creates serious competition between the leadership. There is very little interaction between the teams and everyone blames everyone else for any failures.

The organization does not practice any of the competencies that were taught in this class and, in fact, does not tolerate individuals stepping up and trying to affect any changes even those that will substantially reduce capital investment. The lack of team interaction has put the program in jeopardy. Any substantial delay may mean losing the Department of Energy (DOE) funds allocated by the government to help bring this vehicle into production. The schedule Start of Production (SOP) is February 17, 2011 and at this time that is at great risk. The design is still changing and only some of the math data is available to kick off tooling. Yet, engineering is reporting their status as green. This is what upper management is being told and, it is what they believe. They will learn soon that they have not been fully informed and that they may be as much as six months late to SOP. In my estimation, Acme management needs to take some serious training in the new management strategies. They need to learn the new styles and begin to put them into effect in the organization quickly. If they continue running the business as they currently do, they are destined to fail. This is a start up company that is dependent on funds from the DOE and from investors. If they do not change the management style and get the program and the organization back on track, they will lose both. This is a complex program utilizing new technologies. The program timeline is very aggressive requiring a great deal of cooperation for an effective execution. The only way, in my estimation, to save this organization is to commit to the team concept and to promote the concepts espoused by Covey, Senge, and Scholtes. It will allow the teams to work more effectively, and with passion, to get the program and the organization on the road to success.

APPENDIX: MANAGEMENT, ORGANIZATIONAL LEARNING, AND CHANGE INVENTORY

Practice of the Five Disciplines
Personal Mastery

There is really no Personal Mastery at work in the Acme organization. It is more of an egocentric form of management; the upper echelon basically stays in Mahogany row, they rarely interact with the team members. There is very little contact between upper management and those on the floor doing the job. Most of the direction comes from management meetings where the CEO and CFO provide direction to the Vice Presidents and Directors who relay it to the team. It is the worst example of old style management I have ever experienced. The only mastery I have seen that could be considered personal is arrogance; the arrogance of the management is practiced by the middle and lower management and even infects the team on the floor. Those that know better and understand what it takes to build effective teams ignore the issues.
Mental Models

The mental models exhibited by the management team are that they know what to do, they will decide the direction, and they will tell you what they want. When they make the decision they will inform you and then you can do it. The models are that management manages and workers work. There is very little communication even between engineering disciplines. The mental models stop the team members from working as a cohesive team. It seems as if everyone

believes that they know how, and what to do and nobody should question them. There is their way and the wrong way and that is how the whole program is managed. There are timing milestones but engineerings mental models have convinced them that their function is important and everything else is secondary. Engineering misses a release date; manufacturing sends up a red flag that it will delay start of production, and upper management contacts the Program Management Office and instructs them to change the timing plan by moving the milestone date. However this has not changed the SOP date. They cant move that date, the DOE loans are tied to a successful launch. Nobody in upper management can explain how we are supposed to start production without having parts. And, it seems that everyone is afraid to report to them that the wheels are falling off. The chance of a successful SOP in mid-February is at great risk but the mental models of management and the teams allow them to believe that they can not fail. I fear it will be too late when their models are shattered by reality.
Shared Vision

The Engineering and Design organization is basically divided into five disciplines or teams. The teams are; Styling, Engineering and Design, Manufacturing, Program Management, and Purchasing. There are other areas in the company but these are the primary teams that execute the program and the ones that I deal with on a daily basis. These disciplines have subdivisions that handle individual tasks but for the purpose of this case study I will only refer to the discipline as a whole. Overall the shared vision is to get the Karma into

production and then into the market place. In that aspect they work together to execute managements vision.
Team Learning

There does not seem to be a lot of team learning, the standard response when things are brought up to team leaders is that Acme will do things differently. The Engineering team has missed every milestone that has been set and just continues to move forward. SOP is getting closer and team still has not had a production release of design data. Millions of dollars in tooling has already been scrapped due to part changes and the team still has not learned that a production release is necessary. They are working so hard to be different from the Big 3 that they are not learning any lessons. I agree that the Big 3 are not always right, times have proved that, but they have solid processes in place and, practice lessons learned, to reduce in stream changes and money waste.
Systems Thinking

The individual teams practice systems thinking regarding their own parts and part interfaces but, they do not consider the overall system. Styling makes concept changes not considering the impact it will have on the engineering team and the release of the parts. These changes drive expensive design changes that continue on through the system all the way to the production facility and every step has a price tag attached to it. If all of the teams worked together and considered the overall system, there would be fewer changes at this late stage of the process. It is clearly managements responsibility to impart the effects of

individual actions on the overall system. Engineering is still changing part suppliers without consulting manufacturing. This can drive process changes at the assembly plant that we have no time to execute.

Learning Disabilities Present in the Organization

I am my Position

The majority of the employees are concerned only about their role in the company. There is minimal company ownership, no one seems to consider how their actions will affect other groups or even individual team members. As an Advanced Manufacturing Manager I work across all the module groups to ensure the vehicle can be assembled when the parts reach the plant. When working with individuals on issues related to fit between parts I frequently hear, my parts are correct his are wrong make him change. This may even be a true statement in some cases however, it is not the individual part that is important here, it is about the whole vehicle and how the customer perceives it. There seems to be no consideration given to the customers perceived quality of the overall vehicle and the attitude is as long as I have done my job right, its okay.
The Enemy is Out There

The Module Group Leaders (MGLs), those people in charge of the various teams, blame all of the other teams when something goes wrong. The team leaders never accept responsibility for issues that arise from their actions. Engineering blames styling when a milestone is missed; Manufacturing blames

engineering when a tool or process has to be changed. If the teams would stop playing the blame game and work together to resolve the issues, the program could move forward rather than continuing in a vicious circle of changes and blame.
The Illusion of Taking Charge

Each of the MGLs have the illusion that they are in charge of their part of the development process and, through that, the final part release and vehicle assembly. In reality the styling team, backed by the management team, have total control of the program. The continuous change to interior and exterior parts drives changes through the entire system which creates further delays. This is where true control of the program lies; the MGLs can only control how the changes are executed and processed. Any thoughts they have of being in charge of the program are a complete illusion.
The Fixation on Events

The Mule builds are coming up, they start in May. Mules are vehicles that are not saleable to the public; they are used for testing, assembly learning, crash validation and airbag validation. They will not be running vehicles and will use representative parts, for example a block of concrete in the engine compartment to represent the weight of the engine. The whole organization, except for Advanced Manufacturing is fixated on this event. Everyone is acting as if this is what the whole program is about. Nobody seems to realize that the SOP starts in February and that is when it really counts. Engineering and Design

is concentrating on completing interim designs for the Mule builds when they should forget those builds, let the plant cobble up whatever parts it can to get the Mules built, and concentrate on completing the production design so we can hit a home run for SOP.
Boiled Frog Syndrome

The Engineering and Design, Manufacturing, and Purchasing teams all exhibit classic Boiled Frog Syndrome. They are moving forward executing the changes that come down from the Styling team. They continue to release design data to suppliers marching toward an unattainable milestone, SOP. The changes keep rolling in, dates continue to slip and the teams slowly boil. They either ignore the facts or are totally ignorant of reality. An example, the door outer skin will take 30 weeks from start of machining until delivery of first parts. The door skin has not been production released as yet; tooling can not begin without production release. Styling just made a change to a styling line, the change will require 4 weeks of design to attain production release and SOP is 28 weeks. This is only one of many examples. Most of the styling driven parts, the touchyfeely parts the customer interfaces with are in the same shape. And, all of the groups just continue to move forward with their collective heads in the sand.
The Delusion of Learning from Experience

This is a major problem concerning the Mule builds, the Engineering and Design organization believes that they will learn so much from the Mule builds that the Launch for SOP will go off without a hitch. The truth is that a majority of

the parts that will be used for those builds is not representative of the production intent material. They will learn some things but they will not learn enough to build a customer ready vehicle. They also suffer from a delusion that they have learned from the experience of working for the Big 3 automotive companies and that they can do things differently. I agree, in theory that things need to be changed from the way the Big 3 do business. However, they have been in business for 100 years and even though their arrogance is what put them in the situation they are in, they know how to design and build cars. In my opinion Acme should use some of the experience, the things they do right, and incorporate them into the business model trying to be executed. Not all experience is bad and the delusion here is that it is and that they can do it better by throwing all of the experience away.
The Myth of the Management Team

The management team at Acme is made up of stylists; there are no Product Development, Manufacturing, Purchasing, or Program Management representatives on the upper management team. Styling is a very important commodity in the vehicle development process; it provides the vehicle its personality. If not for strong styling input at the start of a program every vehicle would look like a shoebox with headlamps and tail lamps, easy to tool and easy to manufacture. However, they have an artistic mentality and most have a limited understanding of what it takes to tool and manufacture parts or assemble vehicles. They feel that the styling is all that matters and everything else is secondary. You must be able to build parts and assemble vehicles in order to be

successful. They will delay engineering, delay tooling, and miss any milestone to make a change to the styling. They believe they are managing the company but, in reality, they are managing the styling. There are no checks and balances on the management team from other parts of the organization to keep management on the correct path. Their belief that they are managing the entire vehicle is myth, the other teams just continue to allow them to execute their vision and change the vehicle. The result of this Myth is that the SOP date may be currently running over six months behind, the company is losing investors; the Department of Energy funds are in jeopardy.

Practice of Coveys 7 Habits

Be Proactive

I have been working with this organization for six months. In that time I have experienced one instance of proactive thinking. One of the Engineering leads decided that the assembly plant was substantially overcharging for the process of assembling the doors for installation on the car. He took it upon himself to work outside of the system and get quotes from other suppliers. The assembled doors would then be shipped to the assembly plant for installation. After weeks of working with three suppliers and proving that the assembly could be completed outside at a cost savings of $2.5 million in tooling and $224 in direct vehicle costs, the director of purchasing had him censored. He was told that it was not his responsibility to seek outside quotes and if he did so in the

future he would be fired. So much for being proactive, this incident stifled the possibility of anyone being so in the future.
Begin with the End in Mind

Acme has just hired a new Vice President of Advance manufacturing, my new boss. He has been with us for the last month and he actually knows what is going on and what needs to happen for us to build a vehicle. He has informed us that the Karma is too far along for us to make much of an impact. He has instructed us to do what we have to do to get it in production and to really concentrate on the Nina. The Karma will be a $100,000 sports vehicle of limited production. The Nina will be a $30,000 commuter vehicle and the car that will actually keep the company viable. The Karma will verify the technology the Nina will use. This man has a vision of the Acme Nina and he knows that we can make a difference in that vehicle if we concentrate the majority of our efforts on it now. It is slated for SOP in December of 2012 and will be what makes or breaks the company. He thinks about the end and brings us to the beginning. The job is actually looking up but, we still have to get the Karma into production.
Put First Things First

The teams are good at putting first things first. The engineering and design team and the styling team are the normal program start teams. The issue in this organization is that there is no discipline to stop playing in the sand box so that the manufacturing can kick off the tooling to get the vehicle into

production. The management allows the teams to move out the release dates and we will not be able to launch on time.
Think Win-Win

The only strategy I have witnessed is Win-Lose; negotiations are looked on as a way to exhibit your prowess in subjugating the competition. Even when negotiating with the assembly plant on assembly fixtures and tooling jigs engineering is relentless in imposing their will. The assembly plant is try to provide engineering with a better way to build a quality vehicle, and has decades of experience, and they are berated until they give in. They have built vehicles for Saab and Porsche for decades, the Acme organization has been around for two and they insist on providing all of the direction and refuse to accept suggestions. I have actually heard module group leaders come out of conference calls bragging about how they beat the assembly plant into submission. Not very team oriented and definitely not a Win-Win mentality.
Seek First to Understand

All of the MGLs are intent on telling you what they are going to do and that you are going to live with it. They do not try to understand what our requirements are; they are only worried about what they have to do. They do not feel that any groups other than engineering and design and styling matter so they do not attempt to understand. They act like we need to understand them because they matter and we do not. It is very frustrating to sit with them in meetings; that is when they actually sit in meetings. Normally when you try to

get them to understand the requirements for a successful production launch they just get up and walk out of the meeting. It is only recently that my new VP has begun to take their directors to task that we have seen any change and they still do not attempt to understand our needs.
Synergize

There is no synergy between teams, if there is synergy among the team members themselves I have not witnessed it. The groups do not appear to work together and there is very little interaction between the disciplines. All of the individuals seem to work completely independently, this causes an extraordinary amount of redesign. The individuals just continue moving forward, they make the required changes like it is business as usual without questions or attempts to improve.
Sharpen the Saw

The departments that I interface with work as if they are on an island with no contact to anyone else. The team itself seems to function as if there are minimal lines of communication between the other team members. There is no attempt to improve individual competencies let alone improve team competencies. The individuals do not seem to want to improve their personal interface with the organization and the main theme seems to be to protect their own. Having witnessed this I find it difficult to believe there is any kind of spirituality in their core being, if there is it is invisible.

Practice of Scholtes New Leadership Competencies

Old Leadership Competencies (Personality Centered)

All of the upper management in the organization comes from European up scale brands, i.e. BMW, Mercedes, Maserati; they are not attuned to the American market. They have an attitude that they know what real cars are and that the public will buy what they build. They have strong European style personalities and direct rather than lead. The unfortunate side of this is that the people in the lower management ranks, those who come from the American automotive industry and really know what it will take to successfully launch a new company and car in the United States, have been infected by these personality centric attitudes and are beginning to act the same way. The only person who understands this and is trying to buck the trend is the new Vice President of Manufacturing, my boss. He is working to try to make the upper management understand the destructiveness of the current personality centered attitude. Our group is working toward systems thinking and working with the end in mind. He has actually moved us out of the main building and rented space in the building next door to remove us from the arrogance and to attempt to build a team that is proactive and focused on the end product.
New Leadership Competencies (Organization Centered)

I have not witnessed any of Scholtes new leadership competencies being practiced on the organization. There seems to be no systems thinking and no systems leadership. There does not seem to be any understanding regarding

work variability or problem solving. They do not provide training and no attempt is made to develop or improve personnel. If someone does not meet the expectations they are simply fired and someone is brought in to replace them. No attempt is made to understand why people behave the way they behave, interaction is not promoted. There is no direction provided and no focus to the organization, at least not one that I have heard or witnessed. A vision statement has not been written by the executive board, I wish we at least had that.

Practice of Strategic Leadership and Management

Acme Automotive has formulated a strategy to produce a hybrid electric vehicle called the Karma which is a low volume, high performance vehicle based on a Corvette. It then intends to follow up the Karma with a high volume, affordable hybrid called the Nina. The implementation so far has been the engineering and design of the Karma. SOP is scheduled for February of 2011 a date they will not attain. They may build some hand crafted vehicles but they will not build production vehicles in February. I honestly doubt that production vehicles will be built in 2011. They do not seem to attempt to evaluate the strategy to determine their ability to make the timing. When they miss a milestone on the timing chart there is no recovery plan, the milestone is simply moved on the timing chart. So, the process is completely ineffective. The basic management activities do not seem to be regarded as important and are not followed.

Capacity of the Organization to Learn Capacity of the Organization to Change

There is a very strict hierarchy that does not allow workers to speak to the upper management. I am fairly confident that the upper management are not receiving the actual status of the program or they would surely work to improve the situation. Under the current management style I do not see any ability to learn and there is no possibility to improve the current situation. This negatively impacts the companys capacity to enjoy any type of continuous improvement. In fact, there is no possibility of improvement of any kind. Some examples are the fact that engineering release milestones are consistently missed and the milestones are moved rather than providing an action plan to meet the Material Required Dates. There is also the fact that we could have reduced a tooling bill by several million dollars and the team member was sanctioned rather than being praised. If the company continues doing business as it currently does it will not improve and, ultimately, the company itself will fail.