Industry, Sustainability and the Common Good
- Steve Haywood
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Steve Haywood, Large Programmes Director, Ricardo
The way I see it, there are three guiding principles to hold in life as a mantra for ethical business:-
1. What goes around comes around (or put another way, you reap what you sow)
2. You get the behaviour you measure
3. I’m OK you’re OK
These three controls or statements sustain my relationships both in business and socially.
WHAT GOES AROUND COMES AROUND -- I am a firm believer that the way you treat people and act, either from a business perspective or on a personal level will circle around and, one day, will reflect on the way other people and business treats you.
YOU GET THE BEHAVIOUR YOU MEASURE -- I am a firm believer too in the fact that the way people behave and respond is directly proportional to the measures that they are assessed by and recognised for. If you use the wrong measures, you will get the wrong behaviour. Conversely if you want the right behaviour you have to measure the right variables.
I’M OK YOU’RE OK -- I’m a firm believer of in any given relationship there are three main states.
I’m OK you’re not OK -- You’re OK I’m not OK -- and I’m OK you’re OK.
It may seem a little obvious but when managing business either inside or outside of any given organisation the first two states are unsustainable. Only the long term position of I’m OK you’re OK can operate on a sustainable long term basis.
Whether the business is focussed on the automotive sector or not a sustainable long term position is the key strategic goal. What I mean by this is:
Sustainability in compliance in a continually changing marketplace and legislative framework
Sustainability in meeting customer desire and providing satisfaction in a product or service
Sustainability in maintaining skilled and motivated workforce
Sustainability in maintaining a sound business structure, based on sound finance
Legislation has, and will most likely continue to have, the largest impact on the product strategy of any automotive business. Examples of legislation are the ever reducing limits for tailpipe emissions and CO2, ever more stringent requirements for recycling and the use of recyclates, and ever greater restrictions on materials usage - including the eradication of hazardous substances, - end of life vehicle disposal, and vehicle and plant noise pollution.
The auto industry has changed out of all recognition over the past 30 years. With the development of alternative power generation, clean diesels, hybrids, micro hybrids, range extenders, electric vehicles, hydrogen fuel cells and the continuous drive for lightweight material usage modern day vehicles in busy inner city streets now often emit cleaner air than they intake.
Manufacturing facilities and their impact on the environment have transformed the world in which we and our children live. Improvements in air emissions, care of waterways, refuse segregation, responsible landfill and local noise and traffic management have all contributed to a cleaner life for the Common Good.
YOU GET THE BEHAVIOUR YOU MEASURE
Global legislative constraints have driven auto manufacturers to invent and develop technology to ensure compliance and business sustainability.
Interestingly there is a facet of compliance that has out accelerated the legislators influence and become a market competitive positioning factor within the automotive pier group - and that is vehicle safety.
The areas of active safety and passive safety have both seen tremendous development. In-car passenger protection has been vastly improved by the use of smart seat belt systems, airbags and structural collapse mechanisms or pedestrian safety improvements with the advent of low injury bumper systems and deployable bonnets.
The rapidly developing area of collision avoidance has also contributed to safer travel. Anti skid systems, dynamic stability controls, cameras and radar systems all give the driver more capability to read the road ahead and to proactively avoid the need for the active systems.
Since the early Volvo advertising campaigns that based their brand strategy on promoting their vehicles as being safer than any other automotive manufacturers have been developing safety standards with a view to out-positioning their competitors. This has developed into a situation where now the NCAP process - which assesses vehicle safety performance and publishes its results globally - are effectively driving the game on.
The other three key thrusts for sustainability are purely dependent upon the ethos of the auto manufacturer. They are, how they offer their products to marketplace, how they reward and recognise their workforce and how they structure their internal and external costs.
First - the marketplace.
Every month at Motor Shows around the world we see the plethora of new products, new designs, new innovations, new features and new technologies being paraded in front of thousands of eager onlookers tempting them to reach into their pockets for the next best thing. It’s a never ending conveyor belt of temptation and opportunity. The industry is nimble and highly adept at searching out white space, creating desire, moving customers on to the next new object of desire.
While there are issues over sustainability here, these new products almost invariably show important technological advances and, by simple virtue of their newness, satisfy a human impulse.
There are other sides of the strategic equation that are not as well understood and not necessarily as supportive of the Common Good. The desire for financial sustainability can affect decisions that have a less than positive effect on people and the environment.
So, second - the people.
Pay rates, working conditions and the work environment are areas that consume vast amounts of cash and reducing outlay in these is often seen as a fast track mechanism to improve profits. There are always opportunities to trim operational costs; however, to maintain the capability to be the manufacturer on the show stand that can consistently deliver customer desirable products, workforce commitment, quality of work output, quality of process and quality of product delivery depends almost entirely on the capability and motivation of the company’s workforce.
WHAT GOES AROUND COMES AROUND. Don’t be surprised when workforce attitudes reflect those of its senior management. A great many manufacturers know this and have known it for a long time. They recognise the need for inward investment in order to secure world-class people, world-class processes and a world-class work environment.
So where else might lie the solution to achieving a reduced cost burden in an ever more competitive product marketplace.
The answer lies in the third thrust for sustainability - cost structure.
In an industry where the material cost of a vehicle is between 40% and 50% of its total cost, the supply chain presents an obvious opportunity to realise economies. Encouraging delivery of components, systems and commodities from smaller companies at minimum cost or below minimum cost to secure trade is a device that has been used for many years.
There are three main ways of delivering this kind of improvement, and all are employed by automotive manufacturers.
First, negotiate a reduced transaction price and put the onus on the supplier to ‘find a way’ of delivering their own cost reduction.
The second, and far more proactive method, is to work with the supplier base to jointly identify ways of reducing supply chain costs.
The third way is to search for alternative supply routes to deliver a cheaper solution.
There is a comprehensive toolkit of data-driven and procedural-based processes that can be applied to analyse at detail level the cost breakdown of any commodity or component. It allows a full strip down of cost elements in order to identify waste in the system and generate opportunity to redesign products, processes, or supply logistics in order to achieve waste elimination.
An alternative tactic has been to seek out lower cost economies (BRIC) and to transfer supply to countries that can deliver equal levels of product quality from a far lower cost structure.
Without a full and detailed assessment of the working business of potential new supply sources the thirst to realise significant cost improvements can exacerbate abuses such as sweatshops, child labour, poor working conditions, illegitimate material sourcing and environmentally damaging manufacturing processes. But in my experience - with the right level of analysis and supplier assessment - real cost savings can be realised whilst maintaining a supply chain that carries all the business and social values that support an environment of Common Good.
I’M OK YOU’RE OK -- Bludgeoning suppliers into submission over cost reductions, and forcing the supply chain to exercise less than ethical solutions will not deliver a sustainable environment in which business can develop in such a way as those involved can sustain a quality of life for all.
The question is, can the automotive industry – or any other industry for that matter - construct a sustainable future, supporting shareholder profit and growth whilst protecting the interests of the many and ensuring an environment in which we all want to live and bring children into?
The answer, I believe, is an emphatic yes.
Yes, much focus is led from compliance with legislation. (YOU GET THE BEHAVIOUR YOU MEASURE) and therein lies an illustration of how governments have a large ongoing role in the drive for an improved global society.
But there is a corporate responsibility too -to develop a caring company in which the ethos is to treat people with humility and respect (WHAT GOES AROUNG COMES AROUND). A company in which the entire workforce is motivated by opportunities for personal recognition, and is given the right tools to do the job in a supportive structure.
And a company that develops external mutually beneficial relationships (I’M OK YOU’RE OK) to ensure its ongoing capability to receive or deliver goods and services within a balanced business environment.
These are the building blocks of a sustainable corporate framework. A framework that focuses on creating profit but has the vision to nurture people’s contribution- and also recognise a company’s responsibility for not only the welfare of everyone within its sphere of influence but for the wider environment in which it operates.