BMW Group30.11.2010 Page 1 Human Resource

Management in Times of Change.

Dr. Schmidt-Reintjes, BMW Group.

BMW Group30.11.2010Page 2

Agenda.

BMW Group – A history of change and challenges

How is change managed at BMW Group?

Discussion / Q&A

BMW Group30.11.2010Page 3

BMW Group.Overview.

BMWGroup

CarsBMW, MINI, Rolls-Royce

Motorcycles

Financial Services

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BMW Group. Global Vendor of Premium Vehicles.

BMW Group 2009

Car sales 1.286.310

Motorcycle sales 87.306

Employees 96.230

Locations in Germany Production PlantsCKD PlantsR&DJoint Ventures

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BMW Group.Annual Comparison 2005 to 2009.

3rd Quarter 2010Profit before tax 3.166m EUR

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1923: Developed within just a few weeks, the R 32 motorcycle hails the advent of BMW‘s great tradition in the two-wheeler market.

BMW Group.A short history of change (1/2).

1917: Foundation of BMW GmbH as a limited company. Registration of the white-and-Blue logo as the Company‘s official trademark. Production of the first aircraft engine.

1928: Taking over Fahrzeugfabrik Eisenach, BMW enters the car business (Dixi).

1945: Following destruction and dismantling of its facilities, BMW starts to re-built in a very hard process.

1952-1955: Large saloons, coupés, convertibles and roadsters in the 501 – 507 model rangecontinue BMW car production after the war, now for the first time at the Munich Plant. The BMW Isetta, BMW 600 and BMW 700 meet customer demand in the post- war years

1959: At the Annual General Meeting on 9 December 1959, small shareholders and Dealers prevent the company from being sold off. With BMW thus making a new Start as an independent mobility enterprise, Dr Herbert Quandt becomes the Major shareholder.

1962: BMW successfully makes its way out of the crisis with the sporting and compact midsize New Class Saloons.

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BMW Group.A short history of change (2/2).

1972: The new Headquarter designed by Professor Karl Schwanzer is completed For the 1972 Olympic Games. To this day the Four-Cylinder Building characterizesthe Munich skyline.

1986: The new Research and Innovation Centre (Forschungs- und Innovationszentrum, or FIZ) is built near the Group Headquarters and the Munich Plant. The FIZ is thehub of the Group‘s global research and development network.

1992: BMW AG took the decision to built a car production plant in the USA:the Spartanburg Plant.

1994: Purchasing Rover Group Ltd with its main brand ROVER, LAND ROVER,MG and MINI, BMW AG enters new market segments.

2000-2007: “Rover Demerger” and concentration on premium segments with theBMW, MINI and Rolls-Royce brands.

2007: “Strategy Number ONE” and new mission towards a sustainable economicmanagement.

2008/2009: Mastering world financial and economic crisis.

2010: Strong growth in BRIC markets, record performance on operating level.

2011ff. More to come…

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BMW Group. Strategy Number One has raised the necessity for continuing change.

Annual Report 2007

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BMW Group. New challenges and needs for change are under way…

Market, customers und competitors

Innovations and targeted business model design

Internal challenges

External challenges

• Shortage of raw materials

• Tighter legislation• Changing values• Mega-cities• Demographic effect• Sustainability• Economic developments

• Capital market

• Efficiency and profitability• Demographic effects

• Growth in premium segment

• Opening up new customer segments

• Differentiation and individual mobility

• Product differentiation• Downsizing/Downgrading

• Discernible customer benefits

• Partner management• Changes to sales channels• Service and after-sales business

Challenges and trends

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Changes in emissions legislation.CO2 regulations becoming much stricter worldwide.

Gewichtsklasse, Hubraumklasse)

-10%

-30%

-20%

USA EU 27 China

as of 2013under discussion

Japan

Group fleet 2008CO2

-10%

-25% to

-30%

-25%

by2016

by2015

as of 2020

-5% to

-20%

2010

as of 2015

> -20%

BMW Group30.11.2010Page 11

Customer requirements.Understanding future customer requirementswill demand a more international approach.

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Agenda.

BMW Group – A history of change and challenges

How is change managed at BMW Group?

Discussion / Q&A

CMChartsPZ-32Seite 13

Leading Change – Situation Analysis. Factors of success in the change process.

Analysis

Unfreeze

Implementation

Sustain-ability

Know

Want

May

Can

Change Objective

Strategy Content

Basic Principles

Challenges

CommunicationDialogue

Mobilisation

Reward /Sanctioning

Alignment of managers

Enabling

Resources

OutwardOrientiation

Leader-ship

StructuresProcessesGuidelines

BMW‘s Change Model is based upon

- Concrete experience in BMW change projects

- Kotter (1997) Leading Change- Results of empiric research to

Change Management by Cap Gemini (2005) / TU München (2006)

CMChartsPZ-32Seite 14

6. Personal wish for change:Ambition and readiness for personal change

7. Personal match of valuesperception that personal and

company values are matched

8. Personal transformation plan:Knowledge of an target orientedplan for personal change

9. Personal efficiency:Trust in the individual ability and energy to change

10. Integration and participation: Perception that one is part of the company’s change activities

Leading Change – Situation Analysis. “Ability to change and implement.”*

Source: Harvard Business Review, Cracking the code of Change, May (2000)

Change of company Change of individual

1. Company’s Change requirements: Conviction that company mustchange.

2. Company’s Vision:Support for the company’s future vision of itself

3. Company’s transformation plan:Knowledge of an adequate planfor conducting the change

4. Company’s performance:Trust in the company’s ability to change

5. Leading and Advice:Conviction that practical changesupport will be given

Binding Processes

Push Factors

Pull Factors

Path Factors

Energy Factors

Engagement Factors

*for self-study

CMChartsPZ-32Seite 15

Leading Change – Change progress and implementation. Change direction is determined by the change concept followed.

Securing survivalCrisis Management/

organizational restructuring

MobilizingAdaptability and

developmental capacity

RenewalGrowth potentials

Learning organization

Market responsiveness

Radical repositioningStrategic

turnaround/organizational redesign

Change Map

low

high

Change capability/readiness

Cu

rren

t n

ecessit

y

for

ch

an

ge

high

Source: Doujak, Corporate Development

CMChartsPZ-32Seite 16

Leading Change – Change progress and implementation. Leaders in the role of Change manager.

COMMUNICATION QUALIFICATION COACHINGINFORMATION MONITORING

Personally perceived competence for change

7. INTEGRATION…of successful processes and behaviours in ones own active repertoire

6. RECOGNITION…why certain processes and behaviours are successful, and others not

5. TRIAL AND ERRORTrying new processes and behaviours: Successes – Failures – Confusions - Frustrations

1. SHOCKMajor discrepancy between own and others‘ expectations, and actual reality

4. EMOTIONAL ACCEPTANCE

2. DENIAL

…of reality; letting go of old processes and behaviour

Time

3. RATIONAL INSIGHT…that new processes and behaviour are necessary

Source: Change WorksW

ahrg

enom

mene

Leis

tungsf

ähig

keit d

es S

yste

ms

ZeitZeit

gering

hoch5

False sense of security; exaggerated view of own process and behavioural competence

BMW Group30.11.2010Page 17

Change Competences – HR perspective. Changed competence needs on a corporate level are broken down to the level of individual employees and realized.

Competence

On a corporate level, competence means necessary abilities of the enterprise which ensure current and future success in business.

On the individual level, competence means usable abilities, skills and knowledge which employees are able to use to contribute to the achievement of corporate requirements and targets in the degree expected.

?

The more change is necessary, the more HR processes need to work hand in hand and in a larger context to deliver expected results.

Strategic and operating Competence Management

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How can competence be structured?One proposal among many.

Top Level Job Families

Detailed Job FamiliesJo

b F

am

ilie

s

Functions,Technologies

,Services,Products,

Markets, …

Overa

ll C

om

pete

nce L

evel

Functional Skills

Personal Skills

Skill level

General Job Profile

SpecificJob

Description

BMW Group30.11.2010Page 19

Required Competence

Skills relevant for specific job profiles /

for specific positions

Multi-year competence requirements on a departmental level

Consistent competence catalogue

Targets for change in competence

Adequate qualification budget

HR processes

All relevant HR processes need to be aligned to pursue targeted changes in competence

EmployeeCompetence covered / potentials for coverage

Individual skills in relation to existing / new position

Com

pete

nce

Man

ag

em

en

t

??

Change Competences – HR perspective.A process to propagate change from corporate down to employee level was successfully piloted in a division of BMW.

Strategy

Critical tasks

Challenges

Resource allocation

Direction of inhouse vs.external service provision

Financialand employee headcount planning

Consistent development targets and general framework

Str

ate

gy a

nd

Lon

g R

an

ge

Pla

nn

ing

Development/ business plans

Target state, measures

General framework

Competence increase / decrease / change

Detailedplans

Decomposition to departmental level

Bu

sin

ess

div

isio

n

develo

pm

en

t

BMW Group30.11.2010Page 20

Change Competences – HR perspective. Complementary to this top-down approach, possibilities are currently investigated to strengthen employee self-organization and responsibility.

Daily needs of employeesand supervisors

Synergy potentials of an internal Social Network

Easy search of expert knowledge and transfer,identification of candidates for new areas / shifting employment focus. Future contact point for structured competence management.

Strengthening of networks / self-organization / change in habits. Spread of knowledge to groups instead of focusing on few experts.

Efficient co-work, savings in time spent, increased quality. Reproducible exchange on parallel topics as part of daily work. Transparency across countries and time zones.

Find or found by myself professional topic groups

Find experts / co-workers or be identified as an expert or as a contributor myself.

Work on professional topics together,deliver individual contributions.

Stay informed on any topic of interest / adapt my interests

as needed.

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It is People who will make the Change work.Thank you for your attention.

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Agenda.

BMW Group – A history of change and challenges

How is change managed at BMW Group?

Discussion / Q&A