This paper analyzes the motivational challenges faced by Harley-Davidson, Inc. during the 1970s and 1980s, a period when declining product quality, fierce Japanese competition, mass layoffs, and eroding employee morale brought the company to the brink of bankruptcy. Following a management buyout in 1981, new leadership introduced the Employee Involvement initiative and the High-Powered Work Organization concept, which empowered workers at every level and helped restore productivity, morale, and competitiveness. Drawing on corporate history, employee testimonials, and scholarly sources, the paper demonstrates how progressive human resource management practices were central to Harley-Davidson's remarkable turnaround and long-term survival.
Today, Harley-Davidson, Inc. (hereinafter alternatively "Harley-Davidson" or "the company") is the only major heavy motorcycle manufacturer in the United States, and the company enjoys fierce loyalty from an ever-widening consumer base (Company profile, 2016). This legacy is the result of more than a century of intensive research and development, as well as innovation in designs that have made Harley-Davidson motorcycles legendary for their high performance and rugged appearance. This legacy, however, almost ended during the 1970s and 1980s when increased competition from Japan and manufacturing problems nearly bankrupted the company. To its credit, the company's leadership succeeded in turning the company around through informed management practices, including employee motivation initiatives such as the High-Powered Work Organization concept. This paper reviews the relevant literature to provide an overview of the company and a discussion of the motivational challenges Harley-Davidson experienced during the 1970s and 1980s. An analysis of how these challenges were successfully met through the application of motivation concepts and strategies is followed by a summary of the research and its key findings in the conclusion.
Founded in 1903 by Walter Davidson and currently headquartered in Milwaukee, Wisconsin, Harley-Davidson is a leading manufacturer of touring and cruising motorcycles (Business summary, 2016). The company currently operates two major business segments:
Motorcycles & Related Products: This segment is tasked with designing, manufacturing, and marketing Harley-Davidson motorcycles. It also offers a line of motorcycle accessories and parts (e.g., replacement parts and aftermarket upgrades), general merchandise, and motorcycle-related services (Business summary, 2016). The Motorcycles & Related Products segment additionally features general merchandise such as MotorClothes apparel and riding gear, and provides a wide range of business services to the company's nationwide network of independent motorcycle dealers — including training and custom-designed software applications — as well as licensing for the company's globally recognized brand and trademarks (Business summary, 2016). This business segment also operates an e-commerce enterprise throughout the Americas, Europe, the Middle East, Africa, and the Asia-Pacific region (Business summary, 2016).
Financial Services: This segment offers retail and wholesale financing services for the company's products, as well as insurance and insurance-related packages to company dealers and retail consumers throughout North America (Business summary, 2016). It also provides wholesale financial services for motorcycles and accessories, as well as retail financing services such as installment loans for new and used Harley-Davidson motorcycles (Business summary, 2016). Finally, this segment provides point-of-sale protection products including motorcycle maintenance protection, motorcycle insurance, extended service warranties, and credit protection services (Business summary, 2016).
The company experienced a significant decline in sales following the Great Recession of 2009 but has since regained market share and experienced a relatively steady increase in stock performance. This successful rebound from a major economic downturn, combined with the fact that the company is still in business at all, is firm testament to the effectiveness of the employee motivational initiatives it implemented following its near-bankruptcy in 1981, as discussed below.
The company's reputation for quality began early when its founder achieved a perfect score in the 7th annual Federation of American Motorcyclists contest of reliability and endurance in 1908 (Harley-Davidson, 2012). As a result, the company received substantial contracts from the U.S. government during World Wars I and II, and nearly half of its production during those years went to the military, including almost 90,000 motorcycles for the U.S. Army (Harley-Davidson, 2012). Returning veterans who had experience with the brand provided post-war increases in sales, and the company enjoyed sustained growth through the 1960s and early 1970s (Harley-Davidson, 2012).
By the mid-1970s and early 1980s, however, the company experienced a serious decline in sales due in part to a reputation for increasingly inferior quality and competition from Japan following its acquisition by AMF in 1969 (Young & Murrell, 1998). According to Young and Murrell, "This reputation, combined with a Japanese influx of low cost, reliable motorcycles, convinced management that drastic steps in production efficiency were needed to respond to the new competition" (1998, p. 66). Many of the problems that had plagued the company over the prior decade related to production issues that added costs to finished products, making them less competitive with imports. In addition, a shortage of assembly parts meant that as many as one-in-three motorcycles were coming off the assembly line incomplete (Company profile, 2016). One company executive characterized the problems being faced during this period as fairly intuitive: "We were manufacturing products faster than we manufactured new customers" (cited in Oosterwal, 2010, p. 132).
The combination of these factors caused a serious decline in employee morale, and it seemed that Harley-Davidson's days were numbered — especially as increasing numbers of independent dealers loudly complained about the declining quality of the company's products (Company profile, 2016). As one industry analyst observed, "On the verge of bankruptcy in 1981, Harley-Davidson found itself facing severe market conditions and heavy foreign competition. Quality problems were rife. Customers were leaving in droves. Cash-flow was negative. And worker morale was at rock bottom" (Hampton, 2008, p. 3).
The company was also forced to lay off nearly half of its blue-collar workforce, further eroding morale among remaining employees (Hampton, 2008). Although the company still enjoyed fierce loyalty among a core group of hardcore motorcyclists, the sharp decline in sales combined with eroding employee productivity, the impact of the 1981 recession, and deteriorating morale pointed to only one logical outcome — the end of Harley-Davidson (Company profile, 2016). Recessions have an enormous impact on motorcycle sales, but the company managed to survive despite these trends, due in large part to improved human resource management practices.
"1981 buyout and new employee motivation strategy"
"Worker testimonials on empowerment and autonomy"
Established in 1903 with its current headquarters in Milwaukee, Wisconsin, Harley-Davidson is a leading manufacturer of touring and cruising motorcycles that operates two major business segments: Motorcycles & Related Products and Financial Services. The research showed that a combination of factors — including declining employee morale and productivity — nearly caused the company's failure by the late 1970s. However, the management buyout led by former AMF executives and the subsequent implementation of informed and progressive human resource management practices helped turn the company's fortunes around. The Employee Involvement initiative and the High-Powered Work Organization concept empowered workers, restored morale, and ultimately secured the company's survival and competitive standing. In the final analysis, it is reasonable to conclude that without this acquisition and these management innovations, the only Harleys on the road today would be those manufactured before 1981.
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