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Sustainable Leadership Report

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SUSTAINABLE LEADERSHIP: AN ANALYSIS ON BMW

Akhil Menon Srikumar # 3936612

Submitted to
Dr.Valerie Lindsay
TBS 923
University Of Wollongong in Dubai
TABLE OF CONTENTS

EXECUTIVE SUMMARY 03

INTRODUCTION 04

COMPANY PROFILE- BMW 05

TECHNIQUES FOR SURVIVAL 05

BUSINESS MODEL 06

CREATIVE INITIATIVENESS 06

SUSTAINABLE LEADERSHIP 07

THINGS TO LEARN 09

CONCLUSION 10

REFERENCE 11

EXECUTIVE SUMMARY

This report is basically a case analysis on the sustainable leadership excellence showcased by BMW. It describes their booming stages in their ventures through sustainable leadership. The report contains many concepts of locust form of enterprises as well as honeybee form of enterprises discussed and comparing in between which one is more preferred for better working of the enterprise.
It mainly discuss on how the company works during the global financial crisis of 2008-09 and how they stood apart in front of its competitors when General Motors and Chrysler were in the stage of bankruptcy and the US government had to bail them out and Fiat bought Chrysler.

INTRODUCTION

The global financial crisis of 2008-09 has been a key thing for testing the efficiency and sustainability of many organizations around the globe. Most of the organizations could not survive GFC and the government had to come for the rescue of these companies. The report explains about how these companies managed to come back as key players after GFC. Here we also try to identify the two striking features in order to distinguish sustainable or honeybee leadership from non-sustainable or locust management. Honeybee practice maintains unity among stakeholders and helps in maintaining long term gains. Locust technique helps to make it feasible for short term returns to investors and allow bonuses to executives. Honeybee practice takes up a wider view because they consider full scale stakeholders and not just the stakeholders. They think their firm has mutually supporting part of wider community and their main goal is to achieve consistent development. The organization feels that honeybee principles are sustainable and which leads to high performance and also socially responsible than locust thinking
This report briefly explains on how BMW group can successfully implement sustainable leadership. During global financial crisis and other recession, many companies try to choose survival mode and avoided long term strategies but BMW followed honeybee principles.

COMPANY PROFILE: BMW

BMW was founded in 1916, having headquarters in Munich, Germany. According to the latest reports the company employs 96,000 candidates with 24 production services within 13 countries and have sales network of more than 140 countries. The company produces cars and bikes with brands BMW, MINI and Rolls Royce. The company always tries to remain highly profitable as well as self-governing firm. Although, when global financial crisis poorly hit rest of the automobile industry, BMW stayed stronger during the downturn. Two of the foremost U.S competitors were facing the financial difficulty. General Motors and Chrysler were facing financial difficulty for many years. The U.S government had to bailout General Motors so as to avoid insolvency. In addition, Chrysler was purchased by the famous Italian carmaker Fiat by acquiring 52% of the company. During 2010, €40 billion was estimated to be the net worth of BMW. BMW had record returns and earnings after tax, in spite of that they issued highest shareholder dividend ever.

Techniques for survival
There are 3 main key elements behind BMW's success which are as follows: * Business Model * Creative Initiatives * Sustainable Leadership
These are organization's long time strategy which creates good performance and efficiency.

Business Model

This model provides flexibility for customers, employees as well as the company. They produce cars which customers have demanded. Since the company follows the principle which allows company to increase the production and flexible working times depending on the demand. BMW is following mass customization so that customers can make their opinion on what they require in the interior of their car. The model enables 300 work time sample that enable distribution of work for skilled workers. This pattern allows individuals have considerable work elasticity; pay for more extra working time in busy periods and can withdraw when the work is slow.

Creative Initiatives

In order to maintain BMW way which needs creative initiatives, Even though having benefits from its business model, in 2008, the firm had to decrease expenditure which include staff cuts. The standard lay off was 2.7% of full time workers but during 2008 level of staffing was reduced twice without sacking. This measure was carried out with close partnership with unions which included trying to seek the decision to quit the job, voluntary retirements and no new recruitments for new vacancies or renewing the contract of short-term workers. The company was not interested in loosing highly skilled workers who can be needed if the conditions are improved. So in spite of lay off these workforce, the firm had to make a pact with German government to transfer workers to four day work. They provided salary for 4 days and government decided to hold up 80% of fifth day that means the employees will lose only 20% of one full day payment. The government not only had gain of not paying benefits for laid off workers and company reduced the wages bill by retaining skilled people. BMW took a innovative approach throughout the downturn time. This will eventually increase the value of supplier to the company. Though GFC created monetary difficulties for some suppliers, but BMW used risk management system to find out lack of financial resources and provided proficient advice, credit facility and yet other support to suppliers.

Sustainable Leadership

The principle of sustainable leadership can be described in the form of four-tier pyramid, the lowest three tiers includes 23 honeybee practices and top level indicates the company results. Base of pyramid have 14 foundation practices because they can start at any time when management decides to do. The next tier includes six high level practices which depend on various base practices. The third stage explain the 3 significant performance drivers which reflect the customers experience like systematic innovation, engagement of staffs and quality of products and services. This is a progressive model and performance is influenced with each other.

The case explains about the three essential factors in operation at BMW which are: * how the company retained the workforce during GFC * how the company assisted stakeholders whenever necessary * how the company's system, processes and value with vision having each vehicle class
Another foundation element is long term view. Several decision which BMW administration took during GFC such as retention of skilled workers and helping suppliers in order to survive. Over 2 years ago BMW has invested in hydrogen cars, knowing that they have to wait for 20 or more years for hydrogen filling stations to be circulated all over. Another instance for long term view was that in 2006, when the managerial board certain to assign young board members which could work as a team and can bring ample experience. The most important honeybee practice is training and development which are given to all staff and not to definite groups. The firm invested almost 179 million in training the employee in 2010. During GFC the training per employee was about 1.6 days per year to 24 days. The focus was develop and retain the staffs in the company and promotion within the firm, as the company prefers developing have their own managers. They also follow two other foundation practices which are social and environmental sustainability events. Organization believes that environmental consistency is essential for all of its operation. The firm applies sustainability principle throughout the supply chain, for example, designing, operation of products and processes and all most all the parts of BMW vehicles and production waste can be recycled. Consumption of water and energy has been reduced throughout the manufacture. The Dow Jones Sustainability Index have awarded BMW as the global super sector company for automobiles and parts.
Value employees are another honeybee practice which is practiced in BMW. The firm supplies essential requirements such as protective clothing, maternity and sick leave, holiday bonus, staff shares scheme and annual bonus which is based on firm's success throughout the year. During global financial crisis time they didn't provide holiday or performance bonus paid to workers in 2008 to 2009, in 2010 the employees received a special payment as recognition for their sacrifices which they made in past years. BMW plans on how to bring a change in systematic and resourceful manner. They contain to showcase it by collaborating with the unions for employee reductions and application of their risk management strategies for supporting their suppliers during their GFC. Also, was the case on their aging workforce. It is estimated that almost 45% of BMW workforce will be aged more than 50 in 2020. Services are agreed to be given to these aging workforces on this regard so as to make use of the skills and experience by keeping the workers healthy.
BMW has sovereignty from the monetary markets. Even if they are scheduled in stock exchanges, they are free from market pressures as controlling interest is with the Quandt family since 1959. They have a very strong financial track record and it helps in taking loans at lower rates and thus reducing pressures.
Taking its ethical behavior into thought, BMW has taken a lot of measures for promoting ethical actions and following their corporate authorities policy. The rules of moral values and other policy were made to make it a unique organization following these kind of practices for helping the workers.

BMW: Things To Learn

Below are the main important points as to why companies are not complying with the theory of sustainable leadership: * Short term perspective is there in almost in every action irrespective of undesirable long term consequences with regard to staff engagement, product quality and better services and innovation, putting these enterprises at higher risk. * Change from locust form to honeybee form of enterprise is something big for a firm as it requires hard work, more patience and sensitivity.

CONCLUSION

The first step is to conduct an audit of the extent to which the 23 practices on the Sustainable Leadership Pyramid are routinely practiced in the organization. Preferably many different workers from various functions and at different levels should be asked for their suggestion. Just running a few unplanned or unprepared skills courses or management training sessions is far from finest practice.

REFERENCE

* Avery, G, Bersteiner, H. 2011, “How BMW successfully practices sustainable leadership principles”, Strategy & Leadership, Vol.39, pp.11-18

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