Apr 3, 2019 in Exploratory

Change Management at Michelin

Introduction

Michelin is a global company in the tyre industry with plants all over the world. This report discusses the change management at the Shanghai Michelin Warrior plant in the suburbs of the city. In 2004 and thereafter, the importance of change for the enterprise has become obvious and the problem has been regarded as acute. The external environment’s threats and the weaknesses of the organisational culture were the major drives for change. Therefore, this report provides insights into major change incentives, studies internal and external environment of the plant before and after the change management programme lasting from 2008 until 2011 and run by Mr. Bertrand Ballarin, and provides the scope of strategic decisions made by Mr. Ballarin as well as the outcomes of the change programme. The focus of the report is on specific approaches of change management and scientific underpinnings of various theories. Leadership tendencies are also subject to discussion, as well as the role of organisational culture and management at Michelin. 

Key Characteristics

General Initial Data

Shanghai Michelin Warrior Tyre Co., Ltd is a joint venture between Michelin and Shanghai Rubber & Tyre (Group) Co., Ltd based in Xinzhuang, the suburban region of the city. It has been founded in 2001 and is currently employing 2000 workers. The factory has been one of the least productive among all Michelin’s plants due to the lack of discipline and an inadequate managerial structure. However, due to new industry standards, efforts were put into the change to raise the return on investment and implement international policies and regulations for working conditions. 

The market was distributed among four major industry players, which are Bridgestone, Continental, Goodyear and Michelin. The latter firm competed severely with Bridgestone. Michelin used to have a competitive international brand renowned for technological innovation. Its Bibendum icon was highly regarded and was key for branding. Still, in China, besides the abovementioned companies, the players from the U.S., Korea and Italy had established their factories.

Historical Discourse and Culture

Since 2004, Mr. Scheide was appointed as a plant manager, and in an attempt to shift the culture of procrastination and ineffectiveness, he, together with the management, fired 300 employees in return for a demand of better pay and bonuses from the senior employees. This change resulted in a month-long strike and the ultimate loss of trust between management and blue collar workers. Although some workers, who performed poorly, were not fired, they waited until that would happen instead of improving their performance. They knew that they could not fulfil the requirements, and thus it was reasonable for them to stay in the company and receive severance pay. Others could not comprehend how it was possible to lose a job, which was meant to be secure, as it usually was in a government-owned enterprise. In general, there was a culture of distrust in all levels of organization.

Circumstances Surrounding the Change Initiative

The employees were not motivated to perform better, and it was Scheide’s mistake to try to apply autocratic leadership style, as he used to do it at his previous managerial positions. Blue collar workers knew that this plant used to be the best in the Group, therefore, they could not realise why they were being punished. The autocratic approach also implied the lack of structure in the organization. Poor track industry record added even more pressure. 

Previously, the demand and the competitive nature of the industry presupposed high performance standards for workers. Most of them lacked experience and showed poor results in their twenties. In their turn, they never admitted this fact. Historically, the Warrior plant was the best one in the region indicating that, actually, the workers were doing rather well. The rewarding system was a materialistic expression of the problem – workers demanded higher salaries and bonuses for better production, from their point of view. In fact, they were inconsistent in their demands, and, at the end of the cycle, the output was always below the required level. However, to deal with external factors, an internal change was needed. The more competitive the industry became, the more demanding was the behaviour of Michelin management. The lack of communication between the organizational levels created a gap in understanding of the situation between every manager and worker. Thus, radically different opinions on how management should work had developed. Chinese workers did not understand their French colleagues and were not motivated to perform according to their pace – it was too heavy a burden for them. However, when Mr. Ballarin was appointed, he realised the potential for change and the complexity of its implementation. His experience in the military and at other Michelin plants allowed him to successfully manage the Warrior plant situation. 

 

The Change Processes

The Individual Level

The change processes imposed by Ballarin, in theory, can be subdivided into three categories: the individual level, the team level and both individual and team level. In practice, it is difficult to distinguish whether the processes affect merely an individual or a team, or the organisation altogether, as the hierarchical nature of the structure makes it difficult to clearly define the place of impact. However, some tendencies can be observed. On the individual level, several important change processes, which embodied various theoretical underpinnings, took place. They included the following measures: revamping the physical environment, the transformation of the employee incentive and reward system, and refining human resource practices. 

The plant was in an awful condition, which was harmful for the image of the company, especially in relation to the employees. Visualisation is one of the techniques of the cognitive psychology approach that was used by Ballarin in this respect, since the outer and inner image of the workplace influenced the attitude of employees towards the change. In fact, the study shows correlation between productivity and office design, and, thus, on a cognitive level any changes of the visible environment have added to change implementation. 

The behavioural approach can be observed in Ballarin’s initiative to alter the incentive and reward systems. By lowering the productivity and quality targets to a reasonable point, he increased motivation to perform better, since it became possible to achieve the result. It might seem unwise in a competitive industry, however, in the long-term perspective, it has become possible to gradually increase the target thus improve result with no major stress caused by the change. For workers, it also meant the possibility to receive bonuses, which are an effective stimuli, according to the behavioural approach. The fact that the best employees had the highest salaries was change-friendly.

The Team and Team & Individual Levels

Among the practices implemented by Ballarin related to teams as well as teams and individuals, there were the set-up of the Plant Senior Management Team (PSMT), the creation of BULs (Business Unit Leaders), investment in technology and equipment as well as the general expansion of the leadership team. 

The PSMT comprised the Chinese middle management and the Direction Team. After a two-day seminar, they developed together a vision for the next five years and established a plan on how to change the culture at the Warrior plant. Their aim was to shift away from the distrustful mind-set to an open and accepting attitude of both front-line workers and management with the special emphasis on the former employee group. The creation of the BULs was an expression of the democratic leadership style that was employed by Ballarin. He took one tear to take the BULs trough the leadership development curve including directing, coaching, supporting and delegating in the training program. The stages are reflected in the activities of the training program, which are learning of leadership principles, modular learning, coach visiting BULs and delegation with guidance. 

Another important practice in this aspect is the PSMT’s enhancement by creating four leading committees – those responsible for safety, strategy and production, maintenance and quality, and personal development and internal communication. These four teams then let the front line managers influence policies to provide better solutions. The meetings of the committees were regular and allowed everyone to be heard, consult and exchange experience. The learning opportunities of these platforms produced significant results. The manpower consumption per ton was optimised by 20%, productivity levels improved and, which was extremely important, customer satisfaction increased by 86% and employee satisfaction increased by more than 40% for both white-collar and blue-collar workers. Ballarin’s policies and practices proved to be effective. The headquarters were also an important consideration, while they allowed Ballarin to implement the change at the right time. 

Change Initiative Environment

Internal Environment

In 2011, when Ballarin was supposed to take care of global working policies at Michelin, having implemented a tremendous change campaign, he left the company in the following state (from the point of view of the change environment). The plant was accomplishing the daily norm of 14,000 tyres per day, high morale was present, the workers were motivated to do better, and the levels of trust, cooperation and communication were increasingly high. Technologically, every business unit was functioning appropriately. In general, the plant was performing the way it should. The success was not above the norm, thus, the progress had to be continued by a different person. Ballarin appointed Mouysset, a loyal Michelin manager with a strong engineering background, who became responsible for achieving tactical and strategic targets. Ballarin’s vision was to enhance the production side and make it the organization’s major strength. It would produce much greater volumes and increase its quality. 

Thus, the structure of the plant included PSMT, four committees, and workshops converted into business units with their BULs, which constituted the major components. The HR department developed policies that improved retention and internal communication. Training programmes secured constant learning in the firm, and the organizational culture allowed the knowledge to be distributed among all levels. The cultural change was expressed in the way the managers treated blue-collar workers and each other according to “the ten principles of leadership” initially imposed by BULs. Naturally, senior managers had to live up to those standards as well for the principals to be adopted. The practice of “Unification Day” evolved into the celebration of respect, while Ballarin himself took this chance to listen to blue-collar workers. It allowed him to use his personal power and leadership qualities to spread the culture of “masters and students” as he became the role model who was crucial for the change implementation success.

PESTEL

The external environment, together with time, is a major reason for change adoption in organizations. The external environment consists of multiple factors, which can, despite the broadness and complexity of the issue, be subdivided into such major groups as political, environmental, social, technological, economic and legal. Ethical considerations should also be of major significance. Therefore, PESTEL factors for this case are demonstrated in Figure 1 below:

External Factor

Description

Political

Transitional economy; Communist country; Previously state-owned enterprises; Conservatism

Economic

Emerging market opportunities; Growing competition

Social

Cultural differences; Language Barriers; Low motivation and morale

Technological

New technological approach; General industry optimisation of processes

Environmental

-

Legal

New human resource policies; new safety regulations

Figure 1.    PESTEL Analysis for Shanghai Michelin Warrior Tyre Co., Ltd

China is a communist country, which is not that evident any more due to high levels of globalisation. This fact is connected to the mind-set that was present among the workers – they knew that trade unions would always have power, and that is why the senior employees demanded benefits back in the times of Scheide’s appointment. In other countries, shareholder value is prevalent and it does not allow slack behaviour in the first place. Therefore, the change was, first of all, a challenge for an existing mind-set. This fact is interconnected with the social aspect, because it was natural for workers to have low-quality education. The fact that the factory once belonged to the government affected their attitude towards the new management and the European culture.

The reasons behind the production in countries like China are often cheap labour, resource allocation as well as emerging markets in developing countries. For Michelin, a plant in Shanghai was a strategic move, since the prospective of the market in the financial sense was tremendous. Such an opportunity could not be ignored. Although the plant was performing below the standards and was a source of losses, the headquarters maintained Michelin’s presence in the region, struggling with the situation and realising the desperate need for a change.

The tyre industry is conservative and has low dynamics, meaning there are now rapid technological shifts. However, in the early 2000s, most competitors began to apply new technologies with benefits in speed and waste management. An attempt to adopt new means of production required substantial investment (primarily in time and energy) into training, and the slack attitude of employees towards work was a stumbling factor. Moreover, there were also new labour standards in terms of workplace safety, rewards and compensation. In order to implement them, new policies and practices were to be established, and thus the change was inevitable, yet difficult to implement. 

The Success of the Change Programme 

Revamping the Physical Environment and Improving the Machines

An investment of one million into plant refurbishment was a strategic move of Ballarin, which proved his ability to ask for money from the corporate wing and invest it into the comfort of the workers, not into the process of making and selling tyres. From the employees’ point of view, it was a direct expression of putting their interests above those of the company. However, Mr. Ballarin knew that the investment into the physical environment would pay off later. It was a clear application of the humanistic approach introduced by Rogers, by which the leader expressed an authentic desire to accept the subject by acting in the workers’ interests. 

The next important move was to confirm Michelin’s interest in the factory by bringing in a group of experts, who developed a proposal on how to upgrade the old machines, which costed RMB 45 million. It was a substantial investment into the employees’ perception of the company. It also meant that better machines needed better workers, which was a signal to those, who were not willing to develop together with the organisation. Those who were not willing to work were voluntarily resigned by the human resources department with an appropriate amount of financial assistance, which led to the resignation of 150 employees in a gradual manner over the next two years. The expenses for resignation appeared to be compensated by the high morale of the new workers.

New HR Policies

First of all, since it was difficult for Ballarin to communicate with the employees and understand what they wanted, he knew that he would be perceived as a foreign player by them. Thus, he appointed a Chinese HR manager who would be responsible for gathering the information from workers. It was supposed to be a person whom they would trust. Thus, he found out the importance of approval of good behaviour for the workers and the practice of appreciating specific actions. Based on such principle of the behaviouristic approach, he managed to develop a performance-oriented culture among the workers. The “Unification Day” practice was a chance for the employees to get to know each other and communicate between the departments. Thus, any positive feedback on the new policies could be spread among the branches of the firm. The creation of a platform for communication between white-collar and blue-collar workers as well as management with the help of the department’s newsletter and other activities was one more important opportunity for Ballarin. This is how he was able to cater for the workers’ needs of a new entrance or free meals. The job was then to fulfil those needs, which he accomplished successfully. 

The Establishment of 40 Business Units

The previous investment in technology would be futile if the workers did not know how to make the best of themselves. Therefore, in order to implement the Management System of Daily Production, the workers had to understand why the system was established in the first place, and then they would be able to learn it and adopt it. Efforts were made to provide every BU with a leader who would be responsible for completing the work of a specific sector of the production line. This focused approach allowed everyone to learn faster. The BULs were a new formation that was important for both front-line workers as well as top and middle managers, since they all were highly competent in specific fields and knew a particular limited group of people and their needs. It was also easier to control processes on a smaller scale. BULs enabled the possibility of MDP, and Ballarin employed delegation to increase accountability and motivation in order to achieve results. 

The Plant Senior Management Team Committees

PSMT held a specific consulting role in the previously discussed fields. Their strategic goal was to provide guidance to middle managers by bringing together ideas from various people, who would then refine them and develop rational decisions on a regular basis. The regularity meant stability for middle and front-line managers, which, psychologically, was a supporting factor. There were competent managers who could be counted on and who could provide the necessary advice. This supporting culture was of the utmost importance, while the pressure was on the front line and the value they added to the achievement of productivity targets was immense. 

Conclusion

The discussed case is descriptive in terms of providing examples for theoretical change management approaches. The emphasis on behaviouristic approach is evident in this particular situation. However, it is impossible to conclude that only some definite path was implemented by Mr. Ballarin. Evidence demonstrates comfortable flexibility of methods adopted from both cognitive and humanistic approaches. 

Even though the comparison of practices implemented by Scheide and Ballarin was not the purpose of this report, conclusions can be valid in this respect as well. The positional power of Scheide and the personal power of Ballarin produced distinctively incomparable value. The peculiar behaviour of the former military person is descriptive in terms of his strategic decisions. Ballarin proved the importance of human relations, communication, respect and acceptance for the successful implementation of the change strategy. Moreover, he was willing to be close to the front-line employees, and this attitude changed the attitude of distrust into the culture of “masters and students”. The importance of learning in the process of change was emphasized in this case. 

The role of leader in the process of change is highlighted by the position in which Mr. Ballarin has found himself. It was between the two major types of pressure – external and the internal. It was his role to create the vision that would make it possible for the organisation to thrive in spite of the growing competition and the lack of the workers’ knowledge of the new technologies. 

The clear vision communicated by Ballarin to managers and workers as well as his ability to use strategic processes in the change implementation has produced significant results. There was increased employee and customer satisfaction. The value that has been brought by the change can be assessed not only by income figures, but also by the percentage of growth and development of the organisation as a social institution. 

 

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