Invest In People

Dec. 21, 2004

Richard Teerlink knows what it is like to be at the bottom looking up. When he joined Harley-Davidson Inc. in 1981 as chief financial officer, he thought the motorcycle manufacturer was as low as it could go. But sales plunged even further in 1982, losses from operations deepened, market share dropped to 15.2%, and the workforce plummeted to fewer than 2,300 employees in the aftermath of a 40% downsizing. "We had just-in-case inventory," Teerlink says. "We had inventory just in case someone anywhere wanted to buy one." It's easy for Teerlink, who retired as chairman in December, to laugh about Harley's fortunes back then. Today its market share is more than 49%, unit sales have more than quadrupled, and operating profit (in 1997) was $228 million -- 12.9% of sales. It employs 6,060 workers. There are many reasons for Harley's turnaround. However, Teerlink believes that understanding the importance of his company's human resources was among the most critical. "We knew that we had to create an organization where all people feel important because the only sustainable competitive advantage is people," asserts Teerlink. "You have to invest capital and systems to support the investment in people." In Harley's case, employees receive 160 hours of training during their first year and 120 hours of training after that. The company has an employee-driven performance-evaluation and effectiveness system and natural work groups in both white-collar functions and the union-represented production workforce. "You need to create an ongoing, lifelong learning environment," says Teerlink. "You are not going to get gold stars anymore for what you do. As a leader . . . your principal job is to create an operating environment where others can do great things." "Globalization has clearly shifted the balance of competitiveness toward human talents and skills," says former U.S. Secretary of Labor Robert B. Reich, now a professor of social and economic policy at Brandeis University, Waltham, Mass. "The core of the new enterprise in the 21st century will be talented people capable of quickly assimilating new knowledge and learning from one another." That means, says Reich, that management must change its attitude that "workers are costs to be cut. The high-value organization can only succeed if it is people-centered and views workers as assets to be developed." Part and parcel of any strategy centered around human resources: Everyone must add value. "You must have employees adding value, not just doing repetitive jobs," says Edward E. Lawler III, director of the Center for Effective Organizations at the Marshall School of Business, University of Southern California, Los Angeles. At Allegiance Healthcare Corp.'s El Paso, Tex., plant, for example, sales per employee have risen 61% since production workers were given the responsibility five years ago for making assembly-line, purchasing, and shipping decisions that formerly had been made by supervisors. As Reich explains, "Competitiveness is what you can do uniquely. And the only thing that is unique within each company is the capability of its people. So if a company's workers add more value, [the company] will do better." The keys to creating an environment where all workers add value? First, suggests Albert A. Vicere, professor of business administration at Pennsylvania State University, State College, Pa., "instill a desire for continuous learning" among all workers. Second, establish a talent pool of workers at all organizational levels. Finally, understand the importance of retaining talent. "You can't run a magnet over your employees' heads" and capture their knowledge when they leave, Vicere points out. Companies also must figure out how to make their knowledge workers more productive. "The knowledge worker today is less productive than before the Great Depression," says management expert Peter Drucker, professor of social science and management at Claremont Graduate University, Claremont, Calif. "The most important challenge . . . in the next decade will be to make that new breed of knowledge workers productive." Drucker's research suggests that engineers and other knowledge workers spend as much as 70% of their time on tasks -- much of it paperwork and support work -- that don't serve the customer. "You need to work very hard to get all that does not contribute to performance out of the jobs of knowledge workers and hire people at one-fourth of the knowledge workers' salaries to perform those tasks," Drucker says. "You need to ask knowledge workers what are their tasks and how they perform service for their customers, and then take everything else they do away from them."

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