Driving through flexible changes

Bob Beddow has one of the toughest jobs in HR, as he brings in flexible
working practices aimed at transforming MG Rover. In 2000, it was facing
closure and losing millions. Now the car manufacturer is on course to make its
first profits by 2004

For such a small player in a global car market dominated by multinationals,
simply surviving is a minor miracle for MG Rover. But the fledgling company has
also had to stem huge losses and establish new working practices during its
two-and-a-half years of existence.

When BMW sold the troubled Longbridge car plant in May 2000 to a consortium
of businessmen, few rated its chances of success. However, last year, losses
were cut to £187m, more than half the level they were running at during the
company’s first eight months.

This year, losses are predicted to be in the tens of millions rather than
the hundreds, and the chief executive Kevin Howe is optimistic it will move
into profit during 2004.

Morale is still good despite a huge shortfall of spare parts earlier this
year, when production stopped for a week.

One of the main factors underpinning this turnaround has been to persuade
its 3,500 production workers of the need for working time accounts (WTA).

These are becoming widespread throughout the industry, making labour supply
match production cycles much more closely than in the past. Instead of using
overtime and temporary workers to boost output, and lay-offs and redundancies
to cut it, employees work longer hours without overtime pay. This ‘uptime’ is
then banked and used up when shorter working time or ‘downtime’ is necessary
during periods of reduced demand.

Earlier this year, the issue forced a strike ballot, which Sir Ken Jackson,
general secretary of Amicus, said would have been a catastrophe if the vote had
gone against the company.

A new deal guaranteeing WTA for the next three years was accepted, but Bob
Beddow, MG Rover HR director, said the battle to sell the concept to the
workforce still goes on with unions continuing to play their part as well as
his department.

How did a company come so perilously close to conflict so soon after
escaping closure?

Beddow explained that industrial relations tensions over the issue developed
as memories of the company’s rescue began to fade. He said one of the reasons
was that it was easy for staff to misinterpret WTA as a dodge by the company to
avoid paying overtime.

Two factors in particular raised tensions over the issue. Firstly, many
workers believed the agreement that originally introduced WTA at Longbridge
from 1998 expired in 2000. "We challenged that," said Beddow.

"The second thing was that a lot of uptime was being worked under the
old agreement through the summer months when traditionally people would rather
not be at work. It put a bit of pressure on the system."

Under the current deal, workers can build up a maximum of 200 hours uptime,
where 75 per cent is banked and the remaining 25 per cent is paid for.

If, at the end of three years, workers still have outstanding uptime, the
company will pay for it and wipe the slate clean. The limit on downtime, where
employees owe time to the company, is also 200 hours.

Some concessions were granted. "We put a limit on the amount of
consecutive weeks we would expect them to work uptime and the amount of hours
they would be expected to work in a given period," said Beddow. But, the
main lesson learned has been the need to keep on explaining how WTA works.

Stewart McKee, group public relations director, said focus groups of
employees demonstrated that it was understanding WTA rather than the principle
of it that was the problem. "Fundamentally, people do agree that we have
to be flexible in a business like the car industry. The thing we had to learn
is the need to carry on explaining it to people.

"It [WTA] does take three or four explanations because it is so
complicated," he said.

There are two channels of communication to the workforce. One is via the
works committee, elected from shop stewards, and the other is sent out
electronically or verbally via line managers, who are held accountable for the
effectiveness of the communication process within their own area.

Beddow says much more effort is put into communication than under BMW.

At least three audits are done each month to ensure messages are getting
through to the shop-floor. Managers responsible for areas of weakness are
encouraged to attend a half-day seminar on the importance of communicating with
the workforce.

McKee says the problem often boils down to individual managers lacking the
confidence to deal with difficult questions. "If you want understanding to
reach the veins of the business, then you have to do these things," he

Line managers and union officials are encouraged to sort out local
disagreements on the spot. The success of this is demonstrated by a sharp
reduction in the number of issues now dealt with by the formal grievance
procedure. A hands-on approach is also encouraged when rewarding exceptional

"We don’t want some great bureaucratic process," said Beddow.
"It operates far better at grassroots level for instant recognition."

A sense of involvement in the company is fostered through 60 per cent of the
business being held in shares by the employees.

These were offered free when MG Rover was formed and 99 per cent of the
workforce applied for them. Dividends will be paid when the company starts
making a profit but employees cannot sell their stake if they leave the

Ownership may partly explain why attendance is now running at 97.5 per cent.

"Three years ago, we would have budgeted for 5 to 6 per cent
absenteeism," said Beddow, who is one of six MG Rover board members.

Other traditional indices are also used to measure HR effectiveness, but he
believes the overall performance of the business is just as important. "We
don’t think the business will succeed if we don’t have a good relationship with
the workforce and all that is facilitated through HR," he said.

The culture of the car plant inevitably changed when MG Rover was created.
Instead of being part of a multinational with a head office in Germany and
sales, marketing and finance departments several miles away, everyone was
brought under one roof.

Some workers ended up at Longbridge under TUPE procedures and others were
given the choice of working for Land Rover or BMW instead. This created a
surplus of production workers, which led to 800 voluntary redundancies.

Playing on the advantages of being small probably best explains how much the
culture of the business has changed.

"You can make quicker decisions, be more effective with communication
and get a better level of understanding among the workforce," said Beddow.
"Small is not always a major disadvantage."

By Guy Sheppard

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