Evidence Case Study: GKN
This particular case study is an additional support to The Evidence Paper
GKN is a global engineering group. Its technologies and products are at the heart of vehicles and aircraft produced by the world’s leading manufacturers. It is organised into four business divisions: Automotive, Aerospace, Land Systems and Powder Metallurgy. It has a turnover of £4.5bn (2009) and has 37,000 employees in 30 countries.
In 2004, GKN set out a strategic plan to grow to £5bn with 8-10% margins over five years. In the time leading up to the recession, the company achieved great results, outperforming the target plan each year. As 2008 came to an end though, the banking sector and world markets finally collapsed, automotive and off-highway markets dropped by over 50% and, with this, manufacturing volume dropped in GKN globally by a third.
In November 2008, GKN issued successive profit warnings as carmakers downgraded forecasts for global volumes almost weekly. In 2009, GKN began its 250th year of business facing extremely challenging times. Credit agencies reduced their ratings and the share price fell from over £3.30 in 2008 to 43p in a matter of months, while investors watched and waited for the company’s response to the crisis.
Swift and decisive management action to reduce costs was implemented across the business; over 2000 temporary and 7000 full time jobs were lost, a further 2500 jobs were saved by implementing short time working practices globally. Regular group-wide audio communications were introduced between the organisation’s top 600 managers globally and the CEO and Executive team, to subsequently update everyone through cascade briefing on the status and progress of managing their way out of the recession.
GKN’s engagement strategy was not formed in the crucible of this crisis; it had been developed over a number of years in response to a series of insights and challenges. The established relationships across the company allowed the organisation to react quickly and although employees clearly did not like what was happening, they understood the necessity and therefore bought into the plan. Even at this difficult time a key message was about how the company could successfully manage the downturn and be a winner when the recession was over. The engagement strategy was developed from the insights gained in implementing the ‘Lean’ approach, employee surveys and also a review of best practice that had been summarised in the MacLeod Report, 2009. The enablers outlined in the report addressed areas of weakness identified in the survey and some competencies required to implement the Lean programme.
The resulting strategy consisted of four key elements:
- Connect the big picture narrative of the GKN strategy with what everyone does.
- Improve managers’ competency to lead and provide a process of global talent management.
- Develop a high level of insight about the business through detailed research.
- Develop a programme of engagement with the values and beliefs of the organisation that will help guide behaviours in GKN.
Their business outcome KPIs are reflective of their engagement performance and show progress toward, or sustained positions in, top quartile in their peer groups. Examples of these are:
- People strategy leading to top quartile employee engagement. Retention is 96%, (an improvement of 4% in some areas). Up to 78% of their top 600 management positions globally are recruited internally (up 30% in 2008). In addition their safety record is recorded as world leading by the Dow Jones Sustainability Index. Absence rates are now typically 3-5 days per employee, per year.
- Q2 2008, monthly engagement score of 2.67 (out of 4), the current level is 2.9 (over 8% improvement) achieved during very challenging times.
- Outstanding Customer Service (award winning quality).
- Above average growth and double digit margin (outperformed iterative plan each year).
During the whole period of the crisis, the company did not lose a single day to industrial action, a testament to the trust that has developed and exists between employees, their representatives globally and the company leadership.
Throughout this period GKN’s employee engagement scores have increased and at the same time so have a number of business results: up to 50% higher gross margin, 40% lower absence and 30% better safety.
Their engagement strategy resulted in a number of awards in recent years including CBI Grand Prix People Award, CBI International Engagement Award and CMI Employee Engagement Strategy of the Year Award 2010.
GKN has not just survived the recession, but has grown through it. Their strategy of engagement has resulted in higher levels of engagement and contributed to higher business performance outcomes. On Friday 24th September, 2010, the company returned to FTSE 100 status after a 6 year absence and their market positions in all areas has been strengthened over the last 18 months. In 2011 the company made two acquisitions followed by the further acquisition of Volvo Aerospace in 2012, the largest acquisition in the company’s history.