1^st Master Class Session – 6^th July 2004
 

Background

Rolls-Royce has seen a significant reduction in hours as well as productivity gains at its new factory in the west of Scotland, through radical changes to working practices developed in partnership with its trade unions. 

The £85million state-of-the-art site at Inchinnan in the west of Scotland, built to replace a 60-year-old facility at Glasgow’s Hillington, now provides the model on which Rolls Royce plans to set up four new factories in England. 

It features:

• Simple, focused layouts based on flow
• Dedicated machines and resources arranged for easy operation
• “Pull” systems rather than “push” – the customer’s demands dictate output levels
• Team-based working with a “can-do” attitude
• A clean, modern, low-maintenance, safe working environment

Above all, it is driven by people working – and thinking - differently. 

Inchinnan has seen overtime (though never very high at Hillington) virtually wiped out and a new 37-hour working week introduced across its single-status workforce, while still managing to complete its development phase and hit many of its productivity improvement targets. 

 “You cannot address hours and productivity issues in isolation of the business,” says HR manager Ann Davie. “We had to make sure, while we were talking about people and cultural issues, that it was based on the need to drive the performance of the business – methods of manufacture, processes, systems and so on.” 

New direction

Rolls-Royce, needs to secure a 30 per cent productivity increase in order to justify its £85m investment in Inchinnan.  

While the company has 34 per cent of global market share, the industry wide challenges caused by the explosion of low cost airlines and the effects of 9/11 has brought a change in direction to the company’s strategy. Product development and quality must now be hitched to a single-minded drive to reduce unit costs and increase output. 

“Cost leadership is a huge driver that every single employee is actively and heavily involved in,” says Ann. 

Key to the company’s new direction was a working environment that could drive world-class performance: in other words, every single Inchinnan worker needed to think hard about why, how and when they worked. 

“We knew we had to change quite dramatically. It used to be very much an atmosphere of: ‘leave your brain at the front gate because we are not employing you to think, we are employing you to do’. Those cultural issues needed to be changed,” says Ann. 

Working together 

Out of extensive negotiations between Rolls-Royce senior management and its trade unions, Amicus and the GMB, came a “Statement of 16 Principles” - the platform on which to build the new working culture. These 16 principles have expanded over time to almost 50, but important ones are: 

• A competitive pay structure based on performance rather than hours, outputs rather than inputs
• Putting cost-consciousness at the centre of all activities
• Constantly challenging and improving productivity levels
• Flexibility in response to customer demand
• Multiskilling
• A single-status environment
• A commitment to work-life balance
• Team working
• Empowering workers to make decisions at the lowest possible levels
• Openness and communication
• A can-do environment
• A no-blame culture

A new consultation forum was created, the Working Together group, made up of senior management and trade union representatives. The forum shares business information and intelligence. It gives the unions, and through them the entire workforce, a clear understanding of the links between their own day to day work and the business’s bottom-line results. 

“Together we design what we believe is best for our business,” says Ann. 

Says Amicus works convenor John Neillie: “Working Together is based on trust, mutual respect. The more information you give your people, the more informed decisions they will make on behalf of the workforce.” 

Working Together has helped the teams to take responsibility for many of the factors that directly affect the bottom line – the quantity and quality of items they produce, how efficiently they work, how many costs they incur  - rather than to see their contribution purely in terms of the hours they put in. 

Working Together has produced an all-inclusive pay and benefits package that drives and incentivises performance. This includes

• a competitive monthly salary above the market rate, which is the same for all cell operatives whatever their shift patterns or hours
• No overtime payments or shift premia
• A complete, any-hours flexibility payment
• Training in cutting-edge skills to allow employees to perform a wide range of jobs
• Equal status for all staff - whether they are a machinist or an accountant.

“Our business is based on a 37-hour week whether you are on the shopfloor, a manager, a planner. We do not want our people to work beyond 37 hours but we recognise that is not always possible. We had to ensure we had the flexibility from our employees to think differently, to deliver their commitments as promised,” Ann says. 

Incentivising performance

The pay structure has been designed to stabilise workers’ effort and output as far as possible, in the knowledge that whatever their shift or whatever their hours, there will be no extra money available.  

“The incentive is there to make sure we hit our commitments within the 37 hours. Whereas in bygone days, the incentive was to drive slow performance at the back end of the week to instigate the need for overtime, we are now finding our productivity levels go through the roof on Thursday and Friday,” Ann explains. 

If difficulties arise during the course of a working week, the onus is on the team to decide how to recover the lost time and hit output targets.  This could mean “borrowing” an operator from a different team or asking another cell to take on some of the work if possible. Or it could mean designating one team member to work the extra hours on the understanding it will be someone else’s turn next time.  

“But by hook or by crook, they need to deliver the bits,” says Ann. 

Teams are starting to take greater control of their own workloads, putting forward their own short-term recovery plans to maintain output. “On Monday morning the talk is not just about the football that Saturday, it is about KPIs. And if you don’t understand the management speak on the shopfloor, you ain’t going to see the football on Saturday,” says John. 

The future 

Of 32 manufacturing cells to be based at Inchinnan by 2005, 15 are operating and 6 are going through transition. And while some of the cells are already hitting their targets, many are still a long way off. While Rolls-Royce believes the factory is performing well during this transition phase, there is a long way to go.  

The company philosophy is constantly to push at productivity levels. The Working Together team is now looking at ways to strengthen the incentives for workers to deliver not just to targets but well above them. It is putting in place a quarterly bonus scheme to drive beyond-budget performance. Workers could earn up to £500 more per quarter if they hit ambitious figures on measures such as productivity, quality, cost and customer satisfaction. 

“Everything we are doing is designed to drive out the old custom of flinging hours at it. Because flinging hours at it didn’t solve it,” says John. 

QUESTIONS AND ANSWERS 

Have you had situations where people have been happy to take the additional payments but have not been willing to put in the extra hours?

Ann: Yes absolutely. We have some areas where I would challenge any business to show better practice in terms of teams working to resolve issues. But we have got pockets where people are resistant – they have been paid, they now don’t want to live up to that commitment.

John: When you are in a situation where people don’t turn up, we are finding the teams themselves, without the need for formal discipline, are starting to resolve those issues between themselves.  

What has the average wage gone up by?

John:  23 per cent since May 2002. We have a three year pay deal based on achieving a 30 per cent productivity increase. We have triggered three productivity milestone payments which have been consolidated into the salary.

Ann: But this is not all about money. It is about driving the whole culture. We want to do is recognise the contribution people are making in return for hitting their targets. And hopefully they are happy, fulfilled, competent, successful people who want to stay with the company because we have invested this level in them.  

What has been the percentage reduction in overtime?

Ann: We have not done a cost benefit analysis but we were sitting at about 3 per cent overtime a year. This is not a lot because we were managing it pretty well. But in terms of cost and hours equivalent, for the first six months at Inchinnan overtime has been sitting at about 0.5 per cent. We need to run an analysis over a long period to identify some of the trends and benefits. 

What happens if workload goes up and a cell says it can’t make its targets in the 37 hours?

Ann: If demand shoots up it will not automatically be a case of bringing in new people, it will be about how we can stretch our resources and how teams can work through that. We do know these targets are achievable and we are starting to see problems addressed within particular cells.

John: Within the Working Together group there is a process whereby if for any reason a cell can’t make their targets, the plant leader and the local TU representative will look at the issues and, while encouraging the team itself to put forward plans and proposals, if it cannot be resolved locally it will be brought to the Working Together group. We have got to listen to people and be prepared to give them the tools to do the job.  

Culture change is about whether you can make it last. Do you think you can finish what you started?

Ann: It’s a very good point. We still have a huge way to go. We will come back in two years and tell you if we managed it!

Employment Relations home page  |  Search  |  Crown Copyright  |  Disclaimer
Top of page

Last updated 9 December 2004