Organizational Models: Harley-Davidson

FRAMINGHAM (02/15/2000) - Notorious for its deep growl, the V-twin engine is what gives the legendary Harley-Davidson motorcycle its kick. But it's more than that guttural sound (think "Leader of the Pack" by the Shangri Las) that makes a bike a Harley. It's the "ape-hanger" handlebars, the swashbuckling black-and-chrome styling and the low, king-of-the-road seat that define the hog. It's everything that says freedom from the everyday.

But it wasn't always that way. For years, the Harley-Davidson Motor Co. fought against the badass biker image so closely associated with its product, fearing that its straight, all-American customers would be turned off. But beginning in the '70s, after the company's production level had reached a new low, HD design director Willie G. Davidson (grandson of founder William A. Davidson) realized that not only were those roughriders the company's core constituency, but when it came to motorcycles, they were the early adopters, the thought leaders.

Wherever they led, biking America would follow.

These days, from the beginning of the riding season in April to its end in November, HD employees, clad in the boots, leathers and jeans popularized by (among others) Marlon Brando in the '50s, park their flamboyant choppers along the side of the Juneau Avenue headquarters in Milwaukee, in front of signs that read, "No Cages" (cars).

As a 20th century icon, the Harley symbolizes countercultural, anti-establishment attitudes. It's no wonder then that the company should inculcate those fundamental biker values into its corporate culture and reflect them in its organizational structure, which (it should come as no surprise) looks beyond the traditional, hierarchical, single CIO model for its IT shop.

Laurel Tschurwald, Cory Mason and Reid Engstrom share the same title: director of IS/CIO. Between them, they are responsible for all of HD's IS functions...and all three love their hogs.

Tschurwald, 44, is the best biker of the bunch (according to her boss, VP of IS and strategy David Storm). She regularly rips up the Milwaukee streets on her Fat Boy, the solid disk wheels glittering as they spin.

Atop his Ultra Electra Glide equipped with a radio and a luggage case, the burly Mason, 49, most closely resembles the classic Harley-Davidson rider with his salt-and-pepper beard and piercing blue eyes.

Tall and slender, the 46-year-old Engstrom cruises the blacktop in the low, stepped seat of his black Wide Glide, when not strumming one of his 10 guitars.

Together with the soft-spoken Storm (who owns three Harleys), the free-wheeling CIOs developed a unique framework for aligning IS and business goals. But just as HD's success began with that powerful, growling V-twin, the success of HD's tripartite IS leadership owes more to function than to form.

SEE HOW IT RUNS The organizational model of HD's IS department is nestled in the overall structure of the company as closely and comfortably as a biker in the saddle of his Road King. The 97-year-old motorcycle titan envisions its corporate structure as three overlapping circles in a Venn diagram. Each circle represents a core capability: manufacturing, sales and support. And each CIO oversees IS operations for one of these areas. Mason directs IS for manufacturing. In this position he is responsible for developing the applications and implementing the technologies for all of HD's manufacturing and engineering sites. Tschurwald does the same for the sales, marketing and customer service functions. As the director of IS for the support circle, Engstrom builds the infrastructure for HD's finance, human relations, communications and legal departments.

Although each CIO is in charge of IT for his or her own circle, they share administrative responsibilities such as recruiting staff, fixing the budget and setting departmental goals. In addition, Tschurwald and Engstrom share responsibility for HD's sites in England and Japan. Engstrom takes care of infrastructure issues, while Tschurwald handles the marketing and sales applications for those two sites. Tschurwald is also responsible for network and desktop support at HD's Milwaukee headquarters, but Mason and Engstrom are always available to lend a hand.

With Storm, the triumvirate forms the Information Systems Leadership Council (ISLC). The ISLC is one element of the framework they've built to make their delivery of IT to the company consistent in terms of standards and strategy. At the beginning of each fiscal year, the trio sets the strategic goals for the IS department, checking them against the business goals.

"Linking IS to strategic planning gives IS a big voice in the boardroom," says Storm. The ISLC meets on a monthly basis to discuss the status of business transformation projects, like the migration to an n-tier environment (a distributed, scalable, web-enabled computing architecture) that's currently underway. Engstrom, responsible for support infrastructure, is leading the project.

Given the "VP of IS" in Storm's title, and the fact that Tschurwald, Mason and Engstrom report to him, it would be easy to call Storm the CIO. But he has neither the title nor the function. Storm is a strategic planner whose role is to evaluate whether IS goals are aligned with the company's business plan.

"Dave has the top spot as the vice president and the person that we tie into at the leadership level," says Tschurwald. "But," Engstrom clarifies, "as a business strategist. He doesn't set our [IT] strategy or dictate what our architecture is."

The success of the distributed leadership model is due in part to Storm, who enforces it at the executive level. Mason explains that when it was inaugurated in 1995, the VPs of the various circles (manufacturing, sales and support) initially approached Storm rather than the three CIOs with their IT problems.

Storm insisted that they talk to one of the CIOs. If you want this to work, says Tschurwald, "you've got to have an executive pushing the model."

In addition to the ISLC, the quartet established two other councils: the Information Technology Council (ITC) and the Information Systems Managers Council (ISMC).

The ISMC is made up of 12 IS managers who report to Tschurwald, Mason and Engstrom. The ISMC manages and executes projects. For example, the ISMC set up the work plan to convert the company to the n-tier architecture. It led discussions about the tactical issues surrounding the move, such as training staff, "sunsetting," or phasing out legacy systems, and scheduling when and how the new system would become operational. Mason points out that the ISMC is different from other companies' IS steering committees and executive oversight committees because it is run by managers. This way, says Mason, the people who have to execute and sustain the decision-say, to go with a particular vendor-are not left out of the decision-making process. Indeed, they are the decision makers.

While the ISMC is responsible for the business of IS-operations like drawing up schedules and selecting architectures-the ITCs make sure that IS is aligned with the mission of the company. Each circle has its own ITC. The ITCs are composed of non-IS managers who report to the vice presidents in a particular circle. The ITCs assign which IS initiatives their circle will undertake by reviewing business cases and work plans for projects. Additionally, the ITCs are responsible for prioritizing IT projects, allocating how each circle will spend its IT budget for the year and determining the number of people required to execute a project. If an IS initiative comes about as a result of a business need, it begins in the ITC.

Whether it's building bikes or an IS department, HD applies one theory: the whole is greater than the sum of its parts. But, again, it wasn't always that way.

CUSTOMIZING THE IS HOG In 1995, HD had a harried and haggard director of IS, Rich Kolbe, who reported directly to the president. Storm, who joined HD as its director of operations strategy and support in 1992, believed that the CIO job had become too big for one person. Storm thought creating an interconnected, mutually dependent group whose members would share the risks and responsibilities associated with the IT function would prevent CIOs from burning out. He also figured that the company could see results on major projects faster if there were more manpower. And, he thought, what better way to organize the IS group than along the lines, or rather circles, of the entire company?

It was then that Storm made Kolbe CIO with responsibilities for support, and promoted Tschurwald, who was running an HD subsidiary in Cleveland, to CIO for sales, marketing and customer service. Storm then set out to convince Mason, who was working as director of planning worldwide IS for S.C. Johnson Wax in Rancine, Wis., that this CIO triumvirate could work.

Mason, who was looking to move up to CIO after 23 years at S.C. Johnson Wax, was skeptical when Storm asked him to take charge of IS in manufacturing at HD as one of three CIOs.

"I thought, You've got to have someone who's the CIO. One person has to make all the decisions," recalls Mason. It was Storm's argument about the high CIO burnout rate and the size of the job he was offering that convinced Mason that it was worth a shot-not to mention, he jokes, "multiple blows to the head from Tschurwald." But Mason was also intrigued by the potential to create a new form of leadership in his profession. "If you could have that kind of a model at the executive level, it had the potential to be very powerful in terms of sharing ideas, experience and responsibility," he says.

In the winter of 1998, Kolbe peeled out of the parking lot to become a solo CIO at Gidding and Lewis, a supplier of industrial automation products and machine tools based in Fond du Lac, Wis. With Kolbe's departure, Tschurwald and Mason asked themselves whether they wanted to divide up the job between them or continue with the tripartite model. They decided that a threesome made the most sense given the way the company was set up. In August, Engstrom, who had been at HD for three years as manager of architecture integration on the infrastructure side, made them a troika once more.

The three CIOs acknowledge that managing their IT operation sometimes requires that they park their egos on Juneau Avenue along with their bikes. In fact, says Mason, "Our managers expected this to be a survival of the fittest thing, where the strongest person would emerge as the CIO."

That might have been the way it would have worked at another company. It's not the way it worked at HD.

A WHOLE LOTTA LOVE Tell the truth. Keep your promises. Respect the individual.

These are just a few of the values that are posted on the walls of every conference room at HD headquarters and taught during a week-long orientation for new employees called "Root Learning."

"These values speak to our belief that our employees are our greatest asset," says Tschurwald. Storm agrees. "In the long run, your only competitive advantage is people. There's nothing magical about technology or styling that somebody else can't steal." These values are also the principles that guide the way Tschurwald, Mason and Engstrom work together. They all agree that respect for their differences is perhaps the single most important aspect of their relationship and accounts for their success as a group. "We value these differences, and we leverage the hell out of them," says Mason.

An example of this is how they developed their strategy for migrating to an n-tier architecture, which they delivered last October.

Given her experience running the Cleveland subsidiary where she oversaw the development of transaction processing software, Tschurwald views IT projects from the perspective of their effect on the customer. Mason, she says, saw the n-tier architecture in the context of IT evolution from mainframe to personal computer to client/server to n-tier.

"I told him," Tschurwald says, "Business people don't care about that! They care about the value that will be delivered to the business as we invest more in this new architecture." Engstrom, who's in charge of wiring the company together as the infrastructure guy, was able to see the importance of both sides and fuse them into a complete strategy that included training staff and getting rid of legacy capabilities.

"When we were done," says Engstrom, "the strategy showed the imprint of all our personalities."

Engstrom's, Tschurwald's and Mason's cubes are located right next to each other, so they are in constant contact. That's another way that they stay on the same page and ensure that IT initiatives deliver value to the company.

"After getting their feedback, I can act in a manner that is consistent with the goals of each of the circles," says Engstrom.

For this leadership model to succeed, Storm says the individuals involved "have to be willing to subsume their own ambitions somewhat." Mason echoes this idea and adds his own twist. "It's not important whether one of us gets to the board of directors. What's important is that IS has gotten to the board of directors."

Mason and the others believe that this governance model could be a model for everyone. He points out that most IS professionals grow up working in a collaborative environment. But, "Once you get to the senior executive level, you're all alone. That doesn't make a lot of sense given the way that you've learned to interact with people as a team. A partnership model just makes so much sense to me in our profession."

Staff Writer Meridith Levinson doesn't ride, but if she did, it would definitely be a Night Train. E-mail her at mlevinson@cio.com.

THE MAGIC OF 3 The number 3 is endowed with great historical significance at the Harley-Davidson Motor Co. (not to mention the rest of the Judeo-Christian world.) It was the three Davidson brothers-Arthur, Walter and William-who, along with William S. Harley, founded the company in 1903. That same year, they built their first motorcycle. Today, the Milwaukee-based company is structured along three core competencies-manufacturing, sales and support-that were established in 1993. Three CIOs share the responsibility of directing architecture and IS strategy for the company. Each of these CIOs oversee the IS operations for one of these competencies, and they have established three councils to unify IS and business goals.

They rank the success of their IS projects along three "key results areas," which are invest in the business, enable the workplace and engage the people.

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