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 ability."1 - 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." - Volvo's Mission Statement, www.volvo.com.
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 year's gap, analysts said Volvo's 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 employeefriendly 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 results.Volvo was inspired to build a new facility keeping this work design as a basis. This reiterated the company's belief that industry needed to adapt itself to the people's 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 company's financial performance if the experiments failed. Acknowledging this, Gyllenhammar, in Harvard Business Review wrote, "Volvo's Kalmar plant, for example, is designed for a specific purpose: car assembly in working groups of about 20 people. If it didn't 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 outside."2

Introduction Contd...

Gyllenhammar's apprehensions proved correct when Volvo closed down Kalmar plant in 1994. However, Volvo's 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 Sweden's roads and climatic conditions. The 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 200,000 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 company's 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. Volvo's financials were boosted during the war period (1939-1945), when it supplied a large number of vehicles to the military. In 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 100,000th 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 1968.The 1970s witnessed a significant change in Volvo's operations, under the leadership of Gyllenhammar. In 1972, the Volvo Technical Centre (VTC) was established, which had R&D facilities, including a safety centre and an Emission Laboratory...
The HR Problem------ Volvo was among Sweden's leading employers with employees numbering 41,000 in company-owned plants. Its dealer network provided employment to an additional 10,000 people as of 1973. An additional 15,000 people were employed through Volvo's sub-contractors. Volvo's 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. Volvo's 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 Rotation Job rotation involved shifting around of jobs among workers according to a predetermined plan. Each employee within a group was offered a job, which was different both physically and psychologically from his/her 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: Training new recruits intensively. Disseminating organizational objectives to all employees in the company. 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 plant's 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..