Review of Harvard Business Review Article on Fiat
Fiat's Extreme Makeover
“Fiat’s Extreme Makeover” by Sergio Marchionne (Marchionne, S 2009, ‘Fiat’s Extreme Makeover’, The Australian Financial Review Boss, February, pp. 47-49)
In this broad ranging article Sergio Marchionne reviews the turnaround at Fiat from a company that was near bankrupt to one considering the purchase of Chrysler in just 4 years. While there are a number of factors that have contributed to this success there are two strategic human resources management (SHRM) initiatives that have assisted. These are:
• Terminating the old management and replacing them with new, younger managers with a background in marketing, not engineering (Boss, 2009, p.48)
• Replacing the old managers and the ‘management by committee’ leadership style (Australian Financial Review, 2009, p.60) has changed the culture of Fiat to leadership characterised by autonomy and initiative (Boss, 2009, p.48).
Holmes, Schnurr and Marra (2008, p. 434) say that a change in top level management will also change workplace culture. This clearly occurred at Fiat when Marchionne changed the top managers. Gone is the CEO making all of the decisions to an organisation where everyone is expected to lead and to achieve their stretch targets (Boss, 2009, p. 48). This is supported by Yukl (2008, p. 716) who says that the CEO can’t be the only hero; a distributed leadership is required to achieve a high level of financial performance.
This change to top management occurred after just 60 days of Marchionne’s arrival (AFR, 2009, p. 60). These managers were replaced with a new generation of leaders mainly sourced from within the company, including consumer marketers and HR specialists. This is an example of SHRM and strategic planning in order to reshape Fiat and to change the culture for success. While on the surface it may appear harsh of Marchionne to terminate a large number of leaders within Fiat, this is becoming a common occurrence in other organisations throughout the world (Manderscheid & Ardichvili, 2008, p.113). One of the key strategies is placing the right leaders in the right positions (Manderscheid & Ardichvili, 2008, p.115) and the need for organisations to position and reposition leaders as required to stay competitive. Fiat needed to change the culture and achieved this through terminating old style managers in order to promote talent that could move Fiat towards profitability and survival.
Workplace culture has been defined as ‘the way we do things around here’ (Bower cited in Holmes et al, 2008, p. 435) and this definitely was the case at Fiat where leadership was management by committee. Marchionne has changed this by:
• Unlocking talent within the business and appointing new energetic leaders to top management roles
• Giving staff responsibility and holding them accountable (Boss, 2009, p. 48)
• Moving away from engineers in top roles and replacing them with marketers or external specialists (Boss, 2009, p. 48-49)
By making these changes Fiat’s new way of ‘doing things around here’ is now based on accountability, openness, communication, flexibility and sharing ideas (AFR, 2009, p. 60). This has allowed Fiat to reduce their time to market on a new vehicle from 4 years to just 18 months (Boss, 2009, p.48). This could only be achieved by changing the workplace culture.
Despite this success, not all is ‘rosy’ at Fiat. Marchionne says in Boss (2009, p.49) that being a leader at Fiat is ‘a lifestyle decision’. Leaders need to give up their time including weekends to attend meetings and therefore there is a lack of work-life balance for them. Fiat clearly requires their top talent to dedicate extraordinary amounts of time and resources to help drive the company. This could lead to reduced staff satisfaction and over time could increase staff turnover (Deery, 2008, p. 795). It also could be seen as discrimination against women or people with families (Stone, 2008, p.747). In contrast kindergartens and shops have been built near plants to assist front line staff to balance their lifestyle (BOSS, 2008, p.49). Marchionne could have also changed the culture by creating for Fiat a new set of values and goals that all employees and managers must religiously adhere (Freeman, 2009, p.47). Through a top down approach this would have resulted in a radical shift in employee and top management behaviour (Freeman, 2009, p.47) and may have caused less short term pain at Fiat than terminating top managers.
It is clear that Marchionne is driven to change Fiat and so far these strategies appear to be working. Fiat has a definite SHRM philosophy and has been able to change its culture. However, other aspects of employee relations such as leaders work-life balance are still very underdeveloped. This should be a focus of the HR Executive and CEO to prevent turnover of top talent and to encourage a more diverse range of people to apply for these positions at Fiat.