The circle organization structure

This month I am reading a book “Lean Machine by Dantar P Oosterwal” which talks about “How Harley-Davidson drove top line growth and profitability with revolutionary Lean product development” and encountered the circle organisational structure. The circle organization that Rich Teerlink championed reflected his belief in people and the notion that business has two primary functions: to manufacture customers and to manufacture products.

Harley Davidson started in 1903 when three brothers and a friend built their first motorcycle in an old shed behind their house. In 1969 it is bought by AMF to bolster their portfolio of leisure products and was back on the block by late 1970s. By 1985 it was nearly bank corrupt when CEO Vaughn Beals convinced the banks to accept a restructuring plan which was inspired from Japanese management principles which is now “lean manufacturing”. Harley-Davidson’s mission statement begins, “We fulfil dreams through the experience of motorcycling …” which reflects the business model: manufacturing customers, and manufacturing products to sell to customers.

Whole organisation was structured in circles. These circles were called Create demand circle (CDC), the produce product group (PPG) and the provide support circle (PSC). At the intersection of three circles was the leadership and strategy council (LSC). Each circle was made up of leaders who represented specific functions within the circle’s business objective. Each circle had functional responsibility for the area indicated by the circle title. The CDC was in charge of the rate at which customers were manufactured. PPG was in charge of product design, development, and manufacturing. The PSC was in charge of assisting the CDC and PPG in their ability to focus on manufacturing, customers, and products by dealing with the company’s human resources, legal, finance, and information systems, among other things. The Functional Leadership Group was the name given to the leadership represented by these three circles (FLG).

The LSC served as the company’s policy and strategic direction setting body. The CEO, President and COO, General Council, Chief Financial Officer, Vice President of Strategic Planning, Vice President of Human Resources, and two representatives from each of the three circles comprised the LSC.

The circle structure’s changes forced functional leaders to collaborate to provide leadership and direction, resulting in a flatter organisation. The structure was invaluable in developing leaders and improving collaborative decision making. It enabled the company to continue meeting business challenges while focusing on the two most pressing issues at the time: quality improvement and increased motorcycle production capability. The circle organization set up employees’ empowerment and traditional command and control culture was transformed into a participative organization. The business process anchored with three overarching umbrella constants: Values, issues and stakeholders.

The Harley Davidson environment is an essential aspect of the company’s success. The PPG sponsored the creation of a learning team to improve Harley- Davidson’s product development process, called product development leadership learning team (PDLLT) which became an important incubator for understanding and improving product development. I’ll summarise with this quote:

“You are a product of your environment. So choose the environ- ment that will best develop you toward your objective. Analyze your life in terms of its environment. Are the things around you helping you toward success — or are they holding you back?” by Clement Stone