BMW’s Sustainable Leadership Strategy: A Critical Analysis

Practises of Sustainable Leadership at BMW

The assignment focuses on the case study of BMW and its successful practises of sustainable leadership. The company of BMW was founded in the year 1916 and it is headquartered in Munich, Germany. Currently the organisation employs over 96,000 individuals at around 24 production facilities in 13 regions and it operates on our worldwide sales network in more than 140 nations. BMW manufactures car and motor bikes under the three premium brands which includes MINI, BMW and Rolls- Royce. The company was badly hit by GFC like the other automobile industries and BMW emerged from the recession strongly and had a revenue of around €40 billion in the year 2010. The company practises a Sustainable Leadership Strategy which will be discussed further in the assignment. Sustainable leadership requires the senior executives to take a macro view of the firm by discussing about the basic question about its objectives (Gerard, McMillan and D’Annunzio-Green 2017). Sustainable leadership is equally important for improving the flexibility and performance of business which helps them to overcome from a poor strategic decisions, natural disasters and unforeseen events (Hallinger and Suriyankietkaew 2018). Sustainable leaders are the ones who look beyond instant, and short- term goals in order to see the part of their organisation that place in a wider context. Apart from this, they even set strategies and guarantee an effective delivery of outcomes which can meet up the triple bottom line of environmental, financial and social performance of the company. The paper will furthermore highlight the critical analysis of management processes within the organisation from the context of the case study provided. In addition to this, the critical analysis of internal and external challenges faced by the organisation will also be discussed. A set of recommendations will be mentioned which will help the organisation to have sustainable practises so that they can continue to remain the market leader within the auto mobile industry all across the globe.

The company of BMW is an example of effective sustainable practises as the company has retain their workforce even during the recession, they consider and assist other stakeholders where necessary such as its suppliers and customers, and its systems, values and processes align to its shared vision of having the premium brand in each vehicle segment it produces. Apart from these, another establishing element that has been identified in the organisation is long- term thinking. This particular perspective has allowed several decisions made by the management of BMW during the GFC such as retaining their trained workforce along with helping their suppliers to survive during the recession. From the context of product area, the organisation has invested in hydrogen cars over the previous two decades by being aware of the fact that they might have to wait for around 20 years or more than that for the hydrogen filling stations to become popular. Apart from this, another example of the long- term thinking within the organisation is the development of a young board of management team which was founded to bring a substantial experience in order to be ready for the upcoming future crisis. The company of BMW has also been recognised in several ways for its constant efforts on environmental and social sustainability programmes. These particular programmes within the organisation are dated back to the early 1970s when the company first announced an environmental protection policy as a part of its organisational strategy. Although, the company currently put emphasis on environmental sustainability as one of its core aspects within the organisational operations.

Challenges Faced by BMW

The company has even made efforts in offering a constant training and development opportunities to all of its staff members, not restricting it to a special group. BMW has invested around €179 million in the training of their employees in the year 2010 which was comparable to a small university’s budget. Even during the economic recession going on, the formal training was provided by the company, where employee was averaged to around 1.6 days per year which was increased to 2.4 days in the year 2010. In addition to this, the company has even continued to focus on graduate and trainee development programmes for their workforce. A robust focus was put on retaining and developing workforce throughout the organisation which was included in the series of planning policy within the organisation. The company even values their employees and the basic benefits provided to the workforce include sick pay, maternity leave, protective clothing, holiday bonus, annual bonus and staff share scheme. The employees within the organisation partake in the profit- sharing plan; however, due to the impacts of GFC, no holiday bonus or performance bonus were paid to the workforce in the year 2008 and 2009. Although, the employees received a special “makeup” payment as they made sacrifices over the previous two years and along with the other bonuses paid in the year 2010, every employee of BMW received and extra 1.6 month’s compensation. This particular act conducted by the organisation demonstrates their ethical and sustainable practises towards their people within the organisation.

BMW has also emphasised on change management approaches in a systematic manner which was evident by the organisation’s collaboration with unions in minimising workforce and using it as a technique of risk management to support their suppliers during the time of GFC. The other management approaches of BMW include ethical practises of the company as they have taken several steps in order to promote an ethical workplace culture and responsible governance. In addition to the Ethics Advisory Committee and code of ethics, the firm has even established an anonymous and independent external contract points for the workforce and other related stakeholders in order to report any type of misconduct occurring within the workplace. The company has even devoted itself in respecting the whistle- blower’s rights and other filing reports. The company has been awarded as an A+ on corporate governance and business in the year 2011 which includes effectiveness and independence, compensation for executive, democracy of shareholder, structure of shareholders and business ethics. Therefore, it can be said that the organisation endeavours a premium quality in every aspect of its business, whether it is training in its financial division, recognising the employee’s performance or manufacturing of their products.

Understanding about the environment in which the organisation operates is a vital part of planning and it even helps the company to understand about the threats and opportunities which are associated with the area of business. The external analysis of the company looks at a wider business environment that will impact the business. On the other hand, the internal analysis looks at the factors within the business environment such as its strengths and weaknesses. In order to analyse the internal and external environment of the company of BMW, PESTLE and SWOT Analysis will be used.

Recommendations for BMW

SWOT analysis stands for strengths, weaknesses, opportunities and threats. The strengths and weaknesses of the organisation are internal on which the company can have a control; whereas, opportunities and threats are said to be external factors on which the company does not have any control (GURL 2017). This section of the assignment will discuss about the strengths, weaknesses, opportunities and threats of the BMW company so that the challenges faced by the comapny can be analysed.

PESTLE is an acronym for political, economic, social, technological, legal and environmental factors. This tool helps the organisation to form an imprint of the factors present in the external environment that might impact the business or the industry in which it is operating (Perera 2017). This section of the assignment will discuss about the various factors that can pose a threat to BMW company so that the company can have a note of the challenges it might face or is facing.

Political factors- The political factors have a huge impact upon the regulations of an organisation along with the spending power of customers and other businesses. After Brexit, there has been lack of skilled and talented candidates within the regions of EU which can impact the company of BMW in attracting candidates towards their organisation (Monteiro 2016).

Economic factors- These factors include the economic growth, interest rates, exchange rates and the inflation rate. These particular factors have a major influence on how the organisation operates as well as make vital decisions. For instance: the economic recession within a particular region might impact the company as they will have to face economic downturn due to which they will not be able to attract highly skilled and knowledgeable talents from the region or across the world (?ožíková 2015).

Social factors- The social factors of a particular region include the cultural aspect, which includes population growth rate, health consciousness, age distribution, career attitudes and emphasis on society (Debye 2014). This particular trends in the social factor might affect the demand for the organisation’s products along with how the organisation operates. For instance: the ageing population within a particular region might imply a less or small willing workforce which can increase the cost of labour for the company (Bees and Williams 2017).

Technological factors- The technological factors within a region or a particular industry includes the factors such as automation, research and development activities, technology enticements, rate of technological change and more. These factors can regulate the barriers to entry, manage a minimum effective production level and influence the outsourcing decisions. Furthermore, the technological advancements can help the organisation to improve revenue, quality as well as lead to innovation (Bees and Williams 2017). As the company of BMW has a huge number of older workforces, it is likely that they do not have the required and thorough knowledge about the technological factors or digitalisation through which they can implement automation or technology within the management processes. This can make the company of BMW to stay behind of their competitors where the competitors can adapt to this opportunity and gain a competitive advantage within the industry and region of its operation.

Conclusion

Legal factors- The legal factors within a company or the overall industry includes consumer law, discrimination law, anti- trust law, health and safety law, and employment law. These particular factors can affect the organisation of BMW in the industry in which it operates along with its cost as well as the demand for its products.

Environmental factors- The environmental factors include environmental and ecological aspects like climate, weather and climatic changes which can affect the industries of automobile. Moreover, an increasing awareness of the possible impacts of climate changes can either create new market for the companies or weaken and destroy the existing markets. However, for this factor it can be said that the company of BMW has taken sustainable initiatives in order to cater their environment and society better so that they can operate successfully.

After the internal and external environmental analysis of BMW with the help of SWOT and PESTLE analysis, it can be said that ageing workforce is one of the major challenges that the company is currently facing as the maximum number of employees within the company are either aged 50 or more than that. The PESTLE analysis has pointed out several factors related to this issue that might have an impact on the overall organisational operations of BMW. There are several issues and challenges related to the ageing work force within the company which are mentioned as follows:

Bias – The older employees within the workplace are less motivated, less flexible, slow and take more sick leaves as compared to the younger workforce. There are few stereotypes’ people in the older workers which includes the senior worker. Due to this, bias is one of the hardest challenges in ageing workforce. The older workforce and often observed to have immense knowledge as they have spent several years within the workplace and have adopted to its workforce culture (Clark et al. 2019). However, they often treat the new employees and fairly and it is observed that biasedness occurs among the senior and junior employees.

Absenteeism – Even if, the organisation faces bias, absenteeism is a trend within the ageing workforce. BMW faces absenteeism mainly due to the health concerns of the ageing workforce and often remain demotivated which costs the organisation. It is often observed that the ageing workforce within the organisation have a casual approach to their tasks and responsibilities due to which they take leaves on a regular basis (Silverstein 2008). On the other hand, as compared to the younger workforce, they were more active and enthusiastic due to which they believe in performing their tasks and completing it on the given deadline, and are also observed to take limited leaves only if necessary.

Postponed retirement – it is another famous trend in ageing workforce; however, every employee within the workplace is who have a specific age, if asked about retirement then it is observed that they often delay it. This is because the ageing workforce also wants to work as long as possible as according to them, they give their hundred percent to the organisation even if it lacks quality or required skills (Bento and Garotti 2019). Every organisation including BMW wants to keep the top talent as they are the most skilled ones and have a detailed idea or knowledge about the company’s mission, vision and goals. The ageing workforce also helps the company to train younger employees in order to make sure that they can take on with the responsibility after their retirement. Hence, the company like BMW always forces the ageing workforce to stay within their organisation as it leads to the overall success of the organisation.

Succession – One of the most significant tasks for BMW in relation to their ageing workforce is to transfer their experience and knowledge to their younger colleagues. This is one of the main reason due to which the companies often postpone the retirement of ageing workforce.

Attracting and retaining younger employees – No matter how long the ageing workforce stay within the organisation and how much an organisation can reduce their absenteeism, ultimately the older workforce in BMW will have to retire. It means that the company has a new generation ready within the workplace to take off where their predecessors have left off. This particular factor poses both threat as well as opportunity for the organisation.

One of the major challenges of an ageing worker is very obvious, it includes higher disability and medical costs. Study found that this particular course can increase an estimated rate of around 25% of workforce between the age of 40 to 50 and 35% for the employees of 50 to 60 (Clark and Ritter 2020). Apart from this, BMW has a huge percentage of ageing workforce due to which they have to provide them with a higher salary as compared to the newer and younger ones. In addition to this, as mentioned previously an increased tension occurs between both the young workers and older workers within the workplace, which leads to ineffective workplace culture and it can impact the overall profitability of the organisation (Kauerhof 2017). Also, the older workers are uncomfortable with the new technologies as they do not have the basic ideas to understand that. If the company of BMW feels like training them, it will take huge number of resources including time and money. Also, it won’t be sure that the older workforce has understood everything about the advanced technology and the ways in which it can be implemented.

After analysing the overall scenario of BMW, along with it internal and external challenges with the help of SWOT and PESTLE analysis, several recommendations have been made in reference to the organisation so that it can constantly improve its business processes and human resource management in order to have a smooth and sustainable business practise. Some of the recommendations for BMW are as follows:

Encouraging some of the ageing workforce to stay – The company of BMW is expected to face a huge number of employees leaving at once as there are several employees who have 50 or more age. In order to control this, the company must keep some of their aging workforce, mainly the ones who have 50 to 52 years of age. The company must offer them with a supple schedule along with part- time working opportunities as a part of their employee benefit programme. This will help the company to allow their retiring employees to work in a part- time schedule while preserving their eligibility for their health and other benefits.

Building a mentoring culture – Coaching and mentoring and two of the most competent ways for the ageing workforce in order to allocating the expertise and knowledge to the younger ones who are the less experienced employees. There are several ageing employees who would be happy to take on the approach of coaching and mentoring roles where the main job will be to transfer knowledge. Statistics show that mentoring within an organisation can have a myriad organisational benefit. It can increase job satisfaction among the employees, decrease turnover, improve employee capabilities and will even establish the employees to be capitalised within the organisation.

Investing in employee career development- Companies such as BMW needs to view human capital in a different manner. Currently, there has been an essential shift in the changing nature between employee and employer relationship, and the firm must seek to appeal and retain the skilled and knowledgeable candidates in the current diminishing labour market. BMW must make investment in developing their employees as they already do with the help of training and development programmes, which will help to retain the top talents. In addition to this, the company can also use internal career coaches who will help the employees with developing their careers and becoming the potential assets of the organisation.

Cultivating Millennials- As the ageing workforce will have to leave the organisation, the company of BMW can focus on attracting Millennials. As the company will have to cater to a new generation, they will also have to focus on the different set of values and expectations which will create new retention and recruiting strategies. The top five priorities that BMW must consider in order to attract Millennials are Work and life balance, opportunity to progress them as leaders, flexible working arrangements, professional development training programmes and more. This will help BMW to attract a huge number of Millennials who are looking forward to enhance their career.

The above- mentioned recommendations will help the company of BMW to attract skilled and knowledgeable workforce within the organisation after retiring of the ageing workforce. A constant training and development opportunities provided to the employees will help the company to make the employees learn about the organisation’s cultures, values and expectations that the firm has from its employees. Apart from this, the company must also conduct a survey through which they will be able to understand about the needs and preferences of their employees and if they are being met by the company. This particular approach will help the organisation to maintain a two- way communication with their employees which will ensure a healthy workplace culture along with reduction in employee turnover.

Conclusion:

Lastly from the above discussion, it can be concluded that the company of BMW has faced issues due to the economic recession, but they have been successful in implementing strategies in order to overcome the challenges. However, the current issue that the company is facing is related to retiring of ageing workforce as maximum number of employees are the older workers. This assignment has analysed the internal and external challenges with the help of marketing tools and has pointed out that retirement of ageing workforce as one of the major challenges that the company will have to face in the future. Therefore, several recommendations have been made which includes retaining of few ageing workforces in order to coach and mentor the younger employees. Apart from this, the company has been asked to attract millennials by focusing on their needs and requirements from the organisation which will ultimately help them in maintaining a good workplace culture and retention of employees. With the help of an effective sustainable leadership, the company will be able to overcome the challenges.  

References:

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