H-D’s performance has been consistently higher than auto industry norms for more than 20 years (see Exhibit 4). Yet in 1980, the company was as good as dead. Its corporate parent at the time, American Machinery and Foundry (AMF), had put Harley-Davidson up for sale and found no takers. Japanese competitors like Honda had not only encroached on America’s last domestic motorcycle brand, but opened up entirely new segments of commuter and recreational users.
In 1981, Vaughn Beals and 12 other executives took Harley-Davidson private, buying it back from AMF. In a desperate bid for survival, they shrank the company by one-third, rapidly implemented Toyota production system techniques to improve product quality and reduce costs, and successfully petitioned the Reagan administration for the “Harley Tariff” on imported motorcycles over 700cc to give them some breathing room. In 1983, they formed the Harley Owners Group (HOG), a stroke of marketing genius that created the largest factory-sponsored club of its kind and enabled direct communications between H-D and its most fervent customers.
When Rich Teerlink took over as CEO in 1987, he inherited a company that had been rescued from the brink through a strong form of “command and control” management. Naturally, there were questions about whether Harley-Davidson could sustain its success without a crisis to compel its employees. But instead of clinging to a top-down management style, Teerlink and his senior management team engineered a further transformation of H-D using a model of shared leadership and accountability, continuous improvement, and investments in learning and development—practices that are all typically linked with agility. The company’s managers and employees were asked to go from a “tell me what you want me to do” style of managing others to a “given where we’re going, I’ll figure out what’s best to do” approach. Said Teerlink at the time, “I believe fundamentally that people should have the opportunity to influence their lives and their workplace.”
Teerlink and his management team took the company through a series of initiatives, including a “joint vision process” involving the top 130 executives. They clarified and codified Harley-Davidson’s identity, synchronized their planning and performance management to it, and set up an integrated, cascading goal-setting process that provided lines of sight from executives to the worker on the floor. Personal and organizational goals were incorporated into appraisals and variable compensation. Leadership and accountability were distributed throughout the organization. Along the way, Teerlink and other senior leaders paid close attention to the four routines of agility:
Strategizing dynamically. Prior to the buyout, H-D’s reputation and style had been rough, oily, and arrogant. Through strategy and organization changes that consistently emphasized the importance of customers, quality, and accountability, a new identity evolved, summarized in the company vision: “We fulfill dreams inspired by the many roads of the world by providing remarkable motorcycles and extraordinary customer experiences. We fuel the passion for freedom in our customers to express their own identity.”
Perceiving environmental change. At H-D, every employee engages with the outside world—particularly with customers. Through HOG, employees (including current CEO Keith Wandell) ride with customers, attend HOG rallies, and participate in sponsored musical and sporting events. The Harley-Davidson Museum in Milwaukee is a shrine that attracts 300,000 visitors each year. There is also constant formal and informal contact with H-D dealer and supplier networks, and an expanded website where customers can interact directly with marketing and product development. To help communicate the ideas that come in, H-D has a shallow hierarchy and little cultural tolerance for gatekeepers and apparatchiks who would impede or filter information flow to executives.
Testing responses. Managers routinely vet the ideas coming from HOG and dealer connections for viability. These ideas include marketing programs, model customizations, new motorcycle models, new engines, new styling, new manufacturing methods, new ways of working with customers, and new markets. H-D also adopted the quality movement practice of “plan–do–check–act,” wherein activities, processes, and decisions are improved on the basis of collected data, and the military practice of “after action reviews,” wherein participants in a campaign meet in intensive sessions to analyze successes and failures.