Case Study

Nissan's Approach to Supplier

Development Classical Theory of
Performance versus Improvement to
Nissan Approach

Ans1: Higher performance is an aspiration as well as a crucial feature of organization striving for
higher market share and better growth prospects today. Nissans approach applied in order to
achieve higher performance by improving suppliers capabilities is an eye opener activity for
many other companies in the industry. The approach followed by F.W Taylor believed financial
rewards are important than verbal appreciation to provide higher economic value to the workers
to increase their efficiency and commitment level. The approach has also been known as
classical approach of management that primarily focuses on improving efficiency of the
employee without improving any specific quality with respect to their behaviour or skills among
workers. The classical approach believed that people learn either by their choice, capabilities or
by looking at others. Observing practices was considered a prime source of learning as per the
philosophy of Taylorism. They are either motivated through monetary benefits or else they are
self-motivated to perform tasks as required by the organization.
On the other hand, Nissans theory of having an improved performance is way beyond the
classical theory as it focuses on improving the skill sets of workers i.e. in this case is its suppliers
through training and development program. Nissan believed that skills can be acquired at every
level of functioning and the best way to learn is from its own people that have shown great
results. The case study narrated that Nissan implemented the performance improvement
approach to improve the capabilities of its European Supplier in order to maintain cost standards,
reduce defects and minimize error as well as improvise quality with the help of a its team of
Nissan Japans unit. The unit member of Japans Nissan plant has been able to show exceptional
quality standards as well as reliability in the market. As per the F.W. Taylors classical theory that
encourage the use of financial instruments to motivate as well as improve efficiency of
employees, Nissans approach mainly focused on providing skill improvement training to
achieve productivity and quality improvement. The company has very well identified that the
suppliers of its European unit require much more assistance over strategic planning program,
supervisory training and over cost reduction initiatives along with joint production development.
In order to steam line the internal processes of Nissan European Unit it also offered to extend
expertise services in a way through facilitating consultancy services to its suppliers which they
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provided for free of charge. It was made sure by Nissan that these services are not wrongly
misinterpreted by the suppliers in any way or assuming Nissan making any favor on them. The
approach of initiating and identifying changes required in an ongoing process. To implement
changes Nissan designed a Supplier Development Team, the team has a prime responsibility to
work in coordination with the suppliers to identify the areas where the scope of improvement lies
and thereby further assist them to develop as well as monitor improvement plans. This initiative
was much on the contradiction to what the classical approach says i.e. it mainly considers
providing financial instruments to develop improvement plans if required by an organization.
The practice behind the F.W. Taylor approach identifies ways for improving the task as well as
reducing waste occurs in the process of work through time management technique. Theory of
Taylorism followed time management technique suggested breaking each task or process in
component parts then assigns timelines to each component must be timed, using its time
technique rearranging each task that ensure efficiency and effectiveness. On the contrary, the
approach followed by Nissan identifies the scope of improvement required as well as outlines the
tools and technique implemented to achieve assigned tasks. Nissan exercised referent powers
through which it was easily able to influence the behaviour of the suppliers and influence them to
adapt to the approach designed by it. Nissans approach made Suppliers Development team to
work in coordination with suppliers of small or big sizes therefore the method that has been
designed during presentation by the SDT personnel needs to be approved by the senior
management to understand their willingness to proceed with it.
The process and practices of improvement would revolve around a multi-functional team that
includes the Supplier Development team as well as the member of companies European
suppliers. The size of the suppliers eventually increased considering the performance of the
entire exercise and the result seen in the market. The idea behind involving supplier staff of
every level in the SDT program and exercises was to provide them with skills and motivation to
continue perform better after the training program. Nissan intend to create long term partnership
with its supplier, it does not meant to do any charity and therefore it believed that continuous
improvement in performance is required to further improve Nissan own competitiveness.
Ans 2: Learning new ways to perform similar tasks using new techniques and technology is a
crucial step that organizations today need to understand. In the stiff scenario of competition,
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continuous improvement of technology as well as among the skill sets of employees is important.
The process and procedures followed by management at all levels need to regularly monitored in
order to identify the gap and imply the required training necessary to overcome the short coming.
People in an organization are motivated when they are given a challenging atmosphere as well as
opportunities to grow in their carrier.
The theory of F. W. Taylor mainly implies that people in an organization requires only financial
incentives or monetary appreciation to stay motivated. Such ways of motivating employee as per
theory of Taylorism is the only way an organization can ensure commitment and zeal to perform
better with their assigned tasks. There are many areas where the theory presented by F.W. Taylor
doesnt work in the present environment; financial incentives can be difficult to manage when
the company needs its operation to be cost effective as well as efficient. The cost reduction
initiatives to effectively utilize resources including man and material as well as initiating the
concept and practice of joint production development is missing in his theory. It is ultimately a
human that is running the main operation of the organization, starting from the process of
planning to execution and realizing the output, therefore it makes it important to improvise the
way they conduct the process and procedures. Theory of Taylorism suggests that the employer
i.e. the managers of the organization are required to identify what makes the people motivated,
what inspire them to work effectively and how better these monetary incentives can be designed
to push their performance in a positive direction. He implies that it is a prime function of the
management to provide them with the deserving incentives.
The bottom-up approach of Nissan is in comparison to the classical theory of F.W. Taylor is
much more practical and effective in the current industrial environment. Nissan believed that to
meet competition it is important to work closely with their suppliers by improving their
performance which further improves Nissans own performance. The Suppliers Development
Team created by Nissan had an objective to recognize the value and benefit of the adopting
Japanese approach of achieving productivity as well as quality improvement believing that the
same would be practiced and followed by the supplier once the team is left. The Japanese
approach is frame around a holistic view including of those soft as well as irrational factors such
as management style and skills. Through Nissans approach it tend to created Punctuated
Equilibrium where small periodical change leads to revolutionary change in the system and
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strategy of the organization. Through incremental change Nissan leads to Kaizen i.e. continuous
improvement among groups. It has concentrated on the shop-floor improvement project where it
has provided a broader range of assistance such as joint production, cost reduction initiatives,
strategic planning program and supervisory training program. To make the communication
simpler among employees of the same organization, Nissan choose to keep the shop-floor
member as the most important team member. This led to a comfort level among employees and
can restore complete trust in that person. Such initiative also led to sharpening the skills of the
shop-floor member much more effectively. Having a member of their own in the Supplier
Development Team would also provide team adequate skills as well as motivation to continue
improving the process even when the main team would go back.
Unlike the theory of Taylorism that advocates the implementation of financial incentives to
create satisfaction among employee perform better, theory of Nissan analyzed area that require
managerial attention, money and time. The improvement activity was framed in such a way that
it evaluates quality of equipments, training and process of the organization; ease of operation;
appropriate technology implemented as well as quality and the layout of the process to eliminate
excess work in progress. Since the bottom up approach followed by Nissan focused primarily on
the development of shared values or a common goal of customer service, quality, flexibility it
help company constitute the culture of excellence and have an improved performance in
comparison to theory of F.W. Taylor.
Ans 3: Work has different meanings for people in different situations, it is widely dependent on
how a person consider his or personal and professional aspiration as; work for some is a mode to
earn their daily bread, a way to fulfill their minimal needs but for some work could be a path
they want to lead their life on. A person as an individual has a sense for self a space to be myself
where it considers his or her own need as prime. An individual tries to strike a balance between
work and non-work life, motivation to balance the two could be different; some may consider
financial benefits or some may see it as a learning path. An individual needs to strike harmony
between personal values to achieve his or her desired objectives and those of the organizations.
According to F.W. Taylor, motivation for achieving both personal as well as professional
objectives an individual needs to be provided with financial incentives. It is the monetary benefit
that keeps the efficiency as well as the commitment level of employees intact. As per Penne
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Consulting Hierarchy of Engagement, the human being in the view of Taylor is considerate about
the last segment with focuses over earning pay working hours benefits. It is this primary
requirement of an individual that motivates them to work that makes them looks like a greedy
robot and hence needs to be identified by the management as its sole responsibility.
Nissan believed that human are not only financially inclined or can be motivated independently
through monetary incentives but rather they can be made to learn new skills to enhance their
competency and approach towards work-life. As you move further to hierarchy of engagement, it
is learning and development that is required to increase employee engagement as well as
commitment level towards the organization. Nissan believed that in order to increase
productivity and performance it is imperative to improve the capabilities of its suppliers.
Considering the Banduras Social learning Nissan initiated the concept of learning and selfdevelopment through implementing practices as directed by development team. The central to
social learning suggested that people consciously try different methods and behaviour to adopt a
systematic approach where they would receive a pleasant outcome. The implementation of SDT
was also made to introduce to the employees a different way to improvise their knowledge,
learning and skills. The motivation among the employees was more of having an opportunity to
learn and explore different methods of doing the same things for improvised performance as well
as results.
The Supplier Development Team was created as a role model of effective performance with
focus and vision of accomplishing task with new methodology and techniques. Considering the
behavioral modeling at workplace where people base some of their behaviour on a chosen
model, they adapt to new roles by experimenting with provisioning themselves based on those
role models. Nissan perceived learning as a continuous process that can be learnt better in a
group where people can interact among each other and find out the gap missing in their process.
Role models are considered in different forms; it can be in the form of physical appearance,
dressing or way of interacting; deliberating that the SDT team was set with a vision to enhance
capabilities and capacities among people themselves in group. Reinforcement is an important
aspect of learning among individual it states that there has to be a return for a person otherwise
the same behaviour wont continue. Therefore to acknowledge learning skills acquired by
individual as well as providing them with an opportunity to present themselves to the senior
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member, Nissan motivates the shop-floor personal to present the achievements as well as the
suggestions that has been a result of their workshop. Since experimenting is an important method
of learning, Nissan followed the complete cycle of experimental learning among its suppliers i.e.
Concrete Learning, having an experience by doing the job themselves; Reflective Observation,
reviewing or reflecting on the experience, Abstract Conceptualization, this involves learning that
can be acquired through learning from the experience acquired by practicing the task themselves
and Active Experimenting , this stage is where the learning acquired from experimenting with
new techniques and process would be put in use by implementing the suggestions and trying
what has been learnt.
Ans 4: Competition in market both domestic and international has taken a huge share of industry
profit as well as growth; the ever changing demand of the customer and increasing number of
new comers in every industry is forcing organization to push their limits further by implementing
force with adequate skills and knowledge as well as superior technology and technique to reduce
error and time. Customer are demanding products and services that are much more customized as
per individual need, along with that enhancing their level of satisfaction to a larger level at a
global platform. Market restrictions such as duties or trade barrier has been made much relaxed
resulting to expanding the scope of industrialization, trying new developing market around the
world that are at a much mature level and has become slower in growth. The international market
overall has become a lot mature with its production and service sector, such maturity has been a
result of achieved economies to scale as well as continuous change in technology.
In order to meet the demand Nissan identified that to produce cars in a much more effective and
cost controlled way it would need to invest in the product and services. Along with that drawing
to its future possibilities to expand it into new markets as well as outsourcing some of its
functions. As an effective management Nissan analyzed methods to increase productivity, reduce
risk of error, shortening lead time for new products and services through Just in Time processes.
The Supplier Development Team set up by Nissan had initially only 12 medium sized suppliers
but considering its popularity and responses it has got from industry the SDT has grown in size
and has become an important part of Nissans operation. The SDT initiatives have made it
possible for Nissan to manage its suppliers through decentralization with respect to decision
making. There has been a partnership approach among the suppliers and Nissan in order to
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achieve improved performance. The suppliers also in turn have become a lot conscious about its
deliverables with respect to amending to the quality and other standards of Nissan. Customer
orientation has again an important parameter the suppliers has to meet, there has to be customer
dedication to meet the needs of its internal and external customers. The suppliers have felt
greater self-management by taking part in the SDT activity where they have received enormous
learning and exposure to new techniques and procedures also they consider it as their
responsibility to perform above expectation both as an individual as well as a team. The suppliers
aim to contribute to continuous development and improvement, also taking initiatives regarding
to achieve higher performance. The team of suppliers after realizing the benefit received from the
activity of team building, they have become much more committed than before towards personal
training, adaptability to change in technology or process as well as adaptability to the new
procedures.
Nissan itself has experienced much positive result with respect to their production, being a leader
in the market for its unique way of improved performance. Implementing new processes like
SDT to further improve the performance of Nissans supplier is a technique applied by the
organization to meet the increased competition pressure that has also lead to change in the
organization. The managers are mainly leaders acting as a change agent those have helped
Nissan in the phase of transformation as well as provided with a long term vision for its future
direction. Nissan has changed the over culture of the organization as well as of the supplier by
bringing out the bright talent they have in store, got highlighted during the activities conducted
during the training sessions. Both the managers as well as the managed one have been able to
learn the skills to be creative; impart excellent communication among different levels and
groups; acquire and share more knowledge about the task as well as work harmoniously with
each other in a set up. Nissan has been successful in following a Democratic leadership where it
has promoted the active participation of the subordinates along with being constructive as well as
regular. Under a democratic leadership the managers are always ready to discuss issues regarding
both managerial as well as technical with their subordinates; it also respect their views and
consider their feedback as a positive exchange of information. Feedback among both the
management and the suppliers are shared on a regular basis. Nissan believed using all above
approaches in its management practices it would further increase the motivation level among
employees.
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