VOLVO

To create an environment that will give satisfaction to the employees in their daily tasks is a matter for society as a whole Due to the advanced economic and social structure of Swedish society we have encountered earlier than more countries new problems in the organization of jobs and the working environment We do not look upon these problems as a threat Our familiarity with this type of question could well lead to an improvement in competitive ability1

- Pehr G Gyllenhammar Former President Volvo Group in 1973

By creating value for our customers we create value for our shareholders We use our expertise to create transport-related products and services of superior quality safety and environmental care for demanding customers in selected segments We work with energy passion and respect for the individual

- Volvos Mission Statement wwwvolvocom

Introduction

In May 1993 the Swedish automobile major Volvo AB (Volvo) announced the closure of its car manufacturing facility at Uddevalla Sweden barely five years since its launch in 1989 A year later the company had to shutdown yet another world famous facility the car assembly plant at Kalmar also in Sweden

Reacting to the two closures within a years gap analysts said Volvos human centric approach towards automobile manufacturing was no longer feasible in the fiercely competitive scenario of the 1990s with most companies striving hard to improve production efficiency Volvo was well recognized in the industry for its employee-friendly policies ever since its inception

Guided by the Volvo Way the company had made conscious efforts to implement job enrichment concepts such as job rotation job enlargement and employee work groups in its manufacturing facilities In the late 1960s and early 1970s when the company faced the problem of increasing employee turnover and absenteeism it introduced these concepts and obtained positive resultsVolvo was inspired to build a new facility keeping this work design as a basis This reiterated the companys belief that industry needed to adapt itself to the peoples requirements and not vice-versa This concept was implemented successfully in other plants of the company too in the 1970s The best practices in Human Relations (HR) tried and tested in these plants were passed on to new plants established in the 1980s While investing heavily in developing new plants like Kalmar and Uddevalla where new work design concepts were implemented Volvo was conscious of the risks involved and the possible effect on the companys financial performance if the experiments failed

Acknowledging this Gyllenhammar in Harvard Business Review wrote Volvos Kalmar plant for example is designed for a specific purpose car assembly in working groups of about 20 people If it didnt work it would be a costly and visible failure in both financial and social terms We would lose credibility with our people and those who are watching from outside2

Introduction Contd

Gyllenhammars apprehensions proved correct when Volvo closed down Kalmar plant in 1994 However Volvos efforts in bringing changes in work design offered valuable lessons to both the academic and corporate community

Analysts appreciated Volvo for its constant emphasis on learning from experiences and implementing the lessons so learnt in its new initiatives This contributed significantly to the development of human-centric production systems These systems brought to life several theories and concepts which had earlier only been enunciated in textbooks but rarely practiced with the kind of seriousness with which Volvo did

Background Note----Volvo was founded on July 25 1924 when Gaustaf Larson (Larson) an engineer and Assar Gabrielsson (Gabrielsson) an economist met over a meal and agreed to build a car suited for Swedens roads and climatic conditionsThe two founders had worked earlier for SKF a famous Swedish bearings manufacturer where they nurtured the dream of building a car In 1926 the duo prepared 10 prototypes of the car to convince SKF into investing in their company

SKF not only agreed to invest SEK 200000 kroner but also lent its patented name AB Volvo On April 14 1927 the new company rolled out its first car the OU4 from a factory near Goteberg Sweden The day marked the official date of inception of AB Volvo (Volvo)3 In September 1929 Volvo reported its first ever profits In 1934 Volvo launched its first bus the B-1 The product rapidly gained acceptance as a vehicle fit for rural areas By the time World War II broke out in 1939 Volvo had established itself as a profitable automobile manufacturer with a broad product range

The companys automobile engines were known for their reliability and were used in cars buses boats fire tenders and military tanks Volvo began exporting vehicles on a major scale to Latin America Japan China Israel Ireland Holland and Belgium Volvos financials were boosted during the war period (1939-1945) when it supplied a large number of vehicles to the militaryIn 1946 Volvo introduced its first diesel bus the B-56 which became immensely popular as a city bus as well as a tourist coach By 1948 Volvo emerged as a major tractor manufacturer In 1949 Volvo rolled out its 100000th vehicle from its assembly lines In 1955 the company began exporting to the US

In 1963 Volvo commenced car production in Canada becoming the first European automobile manufacturer to set up such facilities in North America Its manufacturing facility in Belgium became operational in 1965 Volvo created a separate truck division in 1968The 1970s witnessed a significant change in Volvos operations under the leadership of Gyllenhammar In 1972 the Volvo Technical Centre (VTC) was established which had RampD facilities including a safety centre and an Emission Laboratory

The HR Problem------ Volvo was among Swedens leading employers with employees numbering 41000 in company-owned plants Its dealer network provided employment to an additional 10000 people as of 1973 An additional 15000 people were employed through Volvos sub-contractors Volvos products were marketed in 120 countries with 75 of its total production exported mainly to other European countries and the US

The Job Enrichment Experiments

The changes in the organization structure facilitated easier implementation of job enrichment concepts Volvos efforts involved both employees and the management The management decided to experiment with five job enrichment measures - job rotation management-employee councils small work groups change implementation and employee-oriented facilities - at its manufacturing facilities Job RotationJob rotation involved shifting around of jobs among workers according to a pre-determined plan Each employee within a group was offered a job which was different both physically and psychologically from hisher previous job

The New HR Initiatives

Volvo introduced three new HR programs in the late 1970s and early 1980s These were Match Project Full Rulle (Full Speed Ahead) and Dialog

The first was introduced in 1983 It aimed at achieving five HR objectives which were

bull Training new recruits intensively bull Disseminating organizational objectives to all employees in the companybull Framing rules and regulations for employees to establish discipline

The Uddevalla Plant Uddevalla offered the best work environment for employees Developing staff competence was deemed vital by Volvo to build quality cars as well as to achieve the organizational objectives of improving productivity flexibility and efficiency Also operations had to be scaled up as Kalmar could accommodate only 600 employees which was not sufficient Employee representatives were involved in the plants planning group which had a team of researchers with diverse backgrounds ranging from engineering to psychology

End of the Socio-Technical Approach

While Volvo was going ahead with its human-centric approach the external market forces in the automotive industry were changing This forced the company to take serious measures which stopped the progress of its job enrichment initiatives In the early 1990s with the declining demand for cars in the global market it was no longer feasible for Volvo to continue operating in relatively smaller facilities like Kalmar and Uddevalla

• Introduction
• Introduction Contd
• Background Note----Volvo was founded on July 25 1924 when Gaustaf Larson (Larson) an engineer and Assar Gabrielsson (Gabrielsson) an economist met over a meal and agreed to build a car suited for Swedens roads and climatic conditionsThe two founders had worked earlier for SKF a famous Swedish bearings manufacturer where they nurtured the dream of building a car In 1926 the duo prepared 10 prototypes of the car to convince SKF into investing in their company
• The HR Problem------ Volvo was among Swedens leading employers with employees numbering 41000 in company-owned plants Its dealer network provided employment to an additional 10000 people as of 1973 An additional 15000 people were employed through Volvos sub-contractors Volvos products were marketed in 120 countries with 75 of its total production exported mainly to other European countries and the US
• The Job Enrichment Experiments
• The New HR Initiatives
• The Uddevalla Plant Uddevalla offered the best work environment for employees Developing staff competence was deemed vital by Volvo to build quality cars as well as to achieve the organizational objectives of improving productivity flexibility and efficiency Also operations had to be scaled up as Kalmar could accommodate only 600 employees which was not sufficient Employee representatives were involved in the plants planning group which had a team of researchers with diverse backgrounds ranging from engineering to psychology
• End of the Socio-Technical Approach