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Functional Assessment of Problem Behavior: Dispelling Myths,
Overcoming Implementation Obstacles, and Developing New
Lore
Gregory P Hanley, Western New England University
ABSTRACT
Hundreds of studies have shown the effcacy of treatments for
behavior based on an understanding of its function. Assertions
regar
legitimacy of different types of functional assessment vary
substantially
published articles, and best practices regarding the functional
assessment
cess are sometimes diffcult to cull from the empirical literature
or
lished discussions of the behavioral assessment process. A
number
regarding the functional assessment process, which appear to be
within different behavior-analytic research and practice
communities,
reviewed in the context of an attempt to develop new lore
regarding
tional assessment process. Frequently described obstacles to
implementing
critical aspect of the functional assessment process, the
functional
will be reviewed in the context of solutions for overcoming
them.
aspects of the functional assessment process that should be

exported
versus those features that should remain the sole technological
behavior analysts will be discussed.
Keywords: autism, descriptive assessment, functional analysis,
functional
sessment, indirect assessment, intellectual disabilities, open-
ended
problem behavior
A
PERSPECTIVES Behavior Analysis in Practice, 5(1), 54-72 54
fter a conversation with Timothy a review of functional
analysis proce-
dures being published several years later
(Hanley, Iwata, & McCord, 2003).
The 277 articles aggregated in that
review, along with the hundreds that
have been published since 2000, are the
primary reasons practitioners are able to
conduct effective functional assessments
of problem behavior. Much has been
learned from the functional assessment
research base. Nevertheless, best prac-
tices regarding the functional assessment
process are sometimes diffcult to cull
from this massive empirical literature. I
never forgot about the idea of contribut-
ing an article that attempted to answer
questions that arose when one put down
an empirical study and attempted to
conduct a functional assessment. This
article is an attempt to fll in the gaps that
exist between how the functional assess-

ment process is described in published
research articles and book chapters and
how it probably should be practiced, at
least from my perspective.
This perspective piece is not merely
a set of opinions however; it is a review
of relevant existing literature synthesized
with my own practice commitments.
Some readers may disagree with particu-
lar assertions in this paper and lament
that the assertion may not be followed
by an empirical reference. I do include
references when a satisfactory analysis
has been conducted, but I admit that
some of my assertions have developed
through both experience conducting
functional assessments and from my
own conceptual interpretation of exist-
ing analyses.
There are still many important ques-
tions to be asked about the manner in
which problem behavior is understood
prior to treating it, and I look forward
Vollmer, one of my graduate school
professors at the time, in which
we discussed the subtle differences in
the manner in which we had learned to
conduct functional assessments of severe
problem behavior, we concluded that a
paper describing functional assessment
“lab lore” would be important and well

received by those who routinely con-
ducted functional assessments. By “lab
lore” we were referring to the commit-
ments people had to the various strate-
gies and tactics involved in the process of
fguring out why someone was engaging
in severe problem behavior. My graduate
school advisor, Brian Iwata, suggested
that rather than focus on lore that I fo-
cus on detecting the different functional
assessment commitments by reviewing
the literature base that existed. These
collective interactions eventually led to
to reading and hopefully conducting some of that research, but
practitioners cannot wait for this next generation of studies
to be conducted. They need to know what to do today when
given the opportunity to help a family or teacher address the
severe problem behavior of a person in their care. I hope that
this paper will help practitioners develop their own set of
commitments regarding the functional assessment process and
perhaps also stimulate some important future research if an
assertion occasions skepticism from those who have different
commitments.
Some Rationales for Conducting a Functional Assessment
What is a functional assessment of problem behavior?
Despite the availability of a variety of functional assessment
forms, you can’t hold it in your hand—it is a process that
involves a lot of highly discriminated, professional behavior.
More precisely, it is a process by which the variables infuenc-

ing problem behavior are identifed. Why engage the process?
Because it allows you to identify an effective treatment for
severe problem behavior.
Behavior modifcation has been effectively used for many
years to address problem behavior, especially of those with
autism or intellectual disabilities (e.g., Hall et al., 1972; Risle y,
1968). So you may be thinking, why conduct a functional
assessment of problem behavior? In other words, assigning
powerful but arbitrary reinforcers for not engaging in problem
behavior or for behavior incompatible with problem behavior
and assigning powerful punishers to problem behavior (i.e.,
modifying behavior) can effectively treat problem behavior, so
why bother conducting a functional assessment at all? There
are practical reasons; doing so increases treatment precision
and effcacy. In other words, doing so identifes treatments that
work and that can be practically implemented (as illustrated in
Carr & Durand, 1985; Iwata, Pace, Cowdery, & Miltenberger,
1994; Meyer, 1999; Newcomer & Lewis, 2004; Taylor &
Miller, 1997). There is an equally important humanistic reason
for doing so; conducting a functional assessment dignifes the
treatment development process by essentially “asking” the
person why he or she is engaging in problem behavior prior
to developing a treatment. Behavior modifcation, or program-
ming powerful but arbitrary reinforcers and punishers without
frst recognizing the unique history of the person being served
or the prevailing contingencies he or she is experiencing, is
somewhat inconsiderate. It is like saying, “I don’t know why
you have been behaving in that extraordinary manner, but it
does not matter because I can change your behavior. . .” By
contrast, a behavior analytic approach, with functional assess -
ment at its core, essentially communicates: “I don’t know why
you have been behaving in that extraordinary manner, but I
will take some time to fnd out why and incorporate those fac-
tors into all attempts to change your behavior.”

To drive this point home, let’s do some perspective tak-
ing. Imagine that you experienced some temporary muscle
paralysis that does not allow you to talk, write, or engage in
controlled motor movements. You are now hospitalized and
on several medications that have the common side effect of
drying out your eyes, nose, skin, and, especially your mouth.
Water is viewable on the rolling table, but unattainable due to
your lack of dexterity. You learn that if you bang the bed rails
with the back of your hands long enough and loud enough,
people will come to you and do things for you, like turning the
television on or off or fuffng your pillows, or give you things,
one of which is the water that you desperately need. Due to its
functionality, the banging continues to such an extent that the
backs of your hands are bruised and your care providers an-
noyed. The consulting behavior modifer shows up and recom-
mends a program of contingent restraint with Posey® mitts “to
ensure your safety” and access to music and some Skittles when
you are not banging. Your problem behavior occurs much less
frequently. It doesn’t go away, but your bruises are healing, and
the staff is certainly less annoyed with you. Job well done by
the
behavior modifer? I doubt you think so.
If there were a process available to allow your care provid-
ers to know the simple reason why you were hurting yourself
and annoying them, wouldn’t you want it employed? Wouldn’t
it have been nice to just be able to push a button that requested
assistance obtaining water at any given moment (or perhaps
simply have access to a long straw!)? The functional assessment
process makes these humane and practical outcomes pos-
sible. So let’s return to the earlier question of why conduct a
functional assessment and provide a better answer: Behavior
analysts should do it to identify effective, precise, personally
relevant, and humane treatments for problem behavior (see
Hanley, 2010 & 2011, for additional reasons for conducting
analyses).

Defning the Parts of the Process
Before I discuss some myths and isolate some good practices
regarding the functional assessment process, it is important to
defne the three main types of functional assessment. With an
indirect assessment, there is no direct observation of behavior;
in-
direct assessments take the form of rating scales,
questionnaires,
and interviews (e.g., Durand & Crimmins, 1985; Paclawskyj,
Matson, Rush, Smalls, & Vollmer, 2000). With a descriptive
assessment, 1 there is direct observation of behavior, but
without
any manipulation of the environmental conditions (Bijou,
Peterson, & Ault, 1968; Lalli, Browder, Mace, & Brown, 1993;
Lerman & Iwata, 1993; Mace & Lalli, 1991; Sasso et al., 1992;
1Because there is no manipulation of the environment when a
descriptive
assessment is conducted, the term descriptive assessment, and
not descriptive
analysis, is used here because as Baer, Wolf, and Risley (1968)
noted, “a non-
experimental analysis is a contradiction in terms” (p. 92).
PERSPECTIVES 55
erspectives

Vollmer, Borrero, Wright, Van Camp, & Lalli, 2001). This is
the “fy on the wall assessment,” which takes multiple forms like
A-B-C recording and narrative recording (Bijou et al.). With a
functional analysis, 2 there is direct observation of behavior and
manipulation of some environmental event (see Iwata, Dorsey,
Slifer, Bauman, & Richman, 1982/1994, for the seminal ex-
ample; see Hanley et al., 2003, for an expanded defnition and a
review of these procedures). These three types are all functional
assessments; the term functional analysis is employed only
when
some aspect of the environment is systematically altered while
problem behavior is being directly observed.
Reconsidering the General Approach
to Functional Assessment
The necessity or utility of a least restrictive hierar chical
approach to conducting functional assessment has not been
proven, although it is apparent in practice and described
(Mueller & Nkosi, 2006; O’Neill, Horner, Albin, & Storey,
1997) or implied (Iwata & Dozier, 2008; McComas & Mace,
2000) in book chapters or discussion articles regarding the
functional assessment of severe problem behavior. The myth
goes something like this: Start the functional assessment
process
with an indirect assessment. If you are not confdent in the
results,
conduct a descriptive assessment. If you still have competing
hy-
potheses regarding the variables controlling behavior, then
conduct
a standard functional analysis. Like all things based on a least
effort hierarchy, this process has intuitive appeal, but there are
several reasons why behavior analysts should reconsider their
commitment to this assessment hierarchy. The frst is that

closed-ended indirect assessments (e.g., Motivation Assessment
Scale [MAS], Questions About Behavior Function [QABF]) are
notoriously unreliable; when two people who have a history
with the person engaging in problem behavior are asked to
complete a rating scale, analyses of their responses usually
yield different behavioral functions (see Newton & Sturmey,
1991; Nicholson, Konstantinidi, & Furniss, 2006; Shogren &
Rojahn, 2003; Zarcone, Rodgers, Iwata, Rourke, & Dorsey,
1991 for some analysis of the reliability of closed-ended
indirect
assessments; see Hanley, 2010, for a more in-depth discussion
of the reliability of these instruments). Without reliability,
2I prefer the term functional analysis to experimental analysis
and to experimen-
tal functional analysis in both practice and in science in general
because of
the very diferent efects “function” and “experimental” have on
the listener.
Function can be understood in a mathematical sense, but more
importantly,
it also conveys the operant or adaptive nature of the response
being analyzed,
which has obvious importance in the context of behavioral
assessment (see
Hanley et al., 2003; and Hineline & Groeling, 2010). Te term
experimental
does not convey this latter meaning, and instead erroneously
conveys that
the procedures being implemented are in a sort of trial phase,
awaiting a
proper analysis of their utility, as in an experimental
medication. In addi-
tion, considering the quote from Baer et al. included in the
footnote above,
experimental analysis is redundant.

there is no validity, meaning that there is no opportunity to
determine whether the function of behavior is correct from
these instruments. Closed-ended indirect assessments are likely
preferred because quantifable results can be obtained quickly,
and documentation regarding behavior function is created and
can be easily fled or shared at an interdisciplinary meeting.
Behavior analysts can probably save a little time and be no
worse off by simply omitting closed-ended indirect assessments
from the functional assessment process.
At the start of the functional assessment process, behavior
analysts should indeed talk to the people who have most often
interacted with the person engaging in the problem behavior.
But, instead of presenting generic scenarios and asking for nu-
merical or yes/no answers (i.e., the substance of closed-ended
assessments), the behavior analyst should ask questions that
allow caregivers and teachers to describe in detail what happens
before and after severe problem behavior occurs. These sorts
of interviews are known as semistructured and open-ended
interviews. The appendix at the end of this article contains an
example of this sort of interview that allows behavior analysts
to discover common, as well as unique, variables that may
evoke or maintain problem behavior. Because of the likely
unreliability of interviews, including the one in the appendix,
treatments should typically not be designed based solely on the
results of these interviews; instead, functional analyses are to
be
designed from the interview results. An open-ended interview
allows for behavior analysts to discover prevalent variables that
may be further examined and possibly demonstrated as impor-
tant via functional analyses. An important thing to consider is
that careful open-ended interviewing used to be the norm prior
to conducting functional analyses (see Iwata, Wong, Riordan,
Dorsey, & Lau, 1982).3

The second reason the least restrictive assessment hierarchy
is troublesome is due to its reliance on descriptive assessment
to determine behavioral function. I have yet to come across a
study showing that the exclusive results of a descriptive assess -
ment were useful for designing a treatment for severe problem
behavior. This is likely related to the fact that descriptive
assess-
ments are notoriously invalid for detecting behavioral function
(St. Peter et al., 2005; Thompson & Iwata, 2007). Why might
this be? The fact that most people will attend to someone who
just kicked them or to someone who makes a jarring sound
when they bang their head on a wall leads to most descriptive
assessments suggesting that attention is a possible reinforcer
for severe problem behavior (McKerchar & Thompson, 2004;
Thompson & Iwata, 2001). But studies that have compiled
3Tere are multiple articles that describe conducting an open-
ended interview
prior to conducting the functional analysis, but the interview
appears to only
inform the topography of the behavior targeted in the analyses
because the
analyses in these same studies are all standardized (i.e.,
including the same
test and omnibus control conditions).
PERSPECTIVES 56
data on the prevalence of behavioral function show that atten-
tion maintains problem behavior in only about one quarter to

one third of the cases examined (Derby et al., 1992; Hanley et
al., 2003; Iwata, Pace, Dorsey et al., 1994). The lack of cor-
respondence between descriptive assessments and functional
analyses is often due to these false-positive outcomes regarding
attention (see Thompson & Iwata, 2007).
Consider also that most teachers and parents learn to avoid
the presentation of events that evoke negatively reinforced
problem behavior (Carr, Taylor, & Robinson, 1991; Gunter
et al., 1994); perhaps this leads to the likely false negative out-
comes regarding behavior maintained by escape. For instance,
The literature has shown that descriptive
assessments are good at teaching us about
the prevalence of the environmental events
occurring before and after problem behav-
ior, but that we need to conduct functional
analyses to learn about the relevance of
those events for the severe problem behav-
ior we are charged with understanding
if the teacher has learned that diffcult math evokes dangerous
behavior, the teacher is not likely to present diffcult math
to the student while the behavior analyst is conducting the
descriptive assessment. Furthermore, it is unclear how auto-
matic reinforcement is to be detected and differentiated from
socially mediated problem behavior via descriptive assessments
(e.g., nonmediated sensory reinforcers cannot be detected and
recorded).
The literature has shown that descriptive assessments are
good at teaching us about the prevalence of the environmental
events occurring before and after problem behavior (McKerchar
& Thompson, 2004; Thompson & Iwata, 2001), but that we
need to conduct functional analyses to learn about the relevance
of those events for the severe problem behavior we are charged

with understanding. Therefore, behavior analysts can save a lot
of time and be no worse off by simply omitting formal, lengthy,
and especially closed-ended descriptive assessments from their
functional assessment process. Brief and open-ended observa-
tions may be useful for refning operational defnitions of the
problem behavior or for detecting possible unique antecedent
or consequent events to examine in a functional analysis, and
they may be especially useful if the interview does not yield
unique information for designing the analysis.
The third reason the common hierarchy is troublesome is
due to its reliance on a standard functional analysis. By stan-
dard, I am referring to the rapid alternation of four conditions
in a multielement design with tests for all generic contingencies
(i.e., an attention test condition, an escape test condition, and
an alone condition testing for maintenance via automatic rein-
forcement) and an omnibus control condition usually referred
to as the play condition (Iwata, et al., 1982/1994). Simply put,
there is no standard analysis; a functional analysis of problem
behavior simply involves the direct observation
of behavior while some event suspected of being
related to problem behavior is manipulated. Note
that this widely agreed upon defnition of a func-
tional analysis does not specify where the analysis
takes place (e.g., in a 3 m by 3 m therapy room or in
a busy classroom) or who will conduct the analysis.
More important is that it does not specify how
many test conditions to include or any particular
type of control condition (e.g., the omnibus play
condition is not mandatory). These are decisions
to be made based on the many factors that will
become evident during an open-ended interview.
For instance, if the results of the interview

show that one child’s loud moaning and hand
fapping occur under most conditions and seem to
occur irrespective of the social environment, con-
ducting a series of alone sessions frst to see if the
problem behavior persists in the absence of social
consequences is a good idea. By contrast, if the results of the
interview show that another child’s tantrums most often occur
when the teacher removes toys from the child during free play,
then two conditions should be conducted, with the access to
the toys provided contingent on tantrums in one condition and
perhaps uninterrupted access to toys arranged in the second
condition. The former condition is known as the test condi -
tion because the contingency thought to maintain problem
behavior is present, whereas the latter condition is referred to
as the control condition because the contingency thought to
maintain problem behavior is absent.
The point being made with these examples is that behavior
analysts should consider asking simple questions about the
variables most likely infuencing problem behavior and test-
ing the ones that seem to be most important frst. By testing
one hunch at a time, more careful control conditions can be
designed in which only the contingency differs between test
and control conditions. The interested reader is directed to
Thompson and Iwata (2005) for a thorough discussion of the
importance of properly designing control conditions. If the
PERSPECTIVES 57

3
2
1
0
Test Condition
Control Condition
1 2 3 4 5 6
Sessions
P
ro
bl
em
B
eh
av
io
rs
p
er
m
in

erspectives
hunch from the interview or observation is affrmed in this
initial functional analysis, then the behavior analyst will have
a stable and sensitive baseline from which to assess the effects
of a function-based treatment. Examples of this approach in
which results of open-ended interviews informed the design
of analyses involving a single test condition and an intimately
matched control condition can be found in Hanley, Iwata, and
Thompson (2001).
More questions regarding other factors possibly infuenc-
ing problem behavior can be asked separately and as often as
there are still questions about that which is infuencing prob-
lem behavior. In essence, there is no mandate that all questions
be asked in a single analysis (e.g., in the analysis format frst
reported by Iwata et al., 1982/1994). It is equally important
to consider that there is no single analysis that can answer all
questions about the environmental determinants of problem
behavior. Even comprehensive analyses such as that initially
described by Iwata et al. (1982/1994) are incomplete in that
these analyses do not test all possible contingencies that may
infuence problem behavior. The main strength of a functional -
analytic approach is that the analysis is fexible and can be
individualized. Although this set of assertions awaits empirical
validation, it seems likely that the probability of differentiated
analyses will be strongest when more precise and personalized
analyses are conducted based on the results of semistructured,
open-ended interviewing. I suggest the following for consid-
eration as practitioner lore regarding the general functional
assessment process: Start with a structured, but open-ended,
interview and a brief observation to discover potential factors
that
may be infuencing problem behavior, and then conduct a precise
and individualized functional analysis based on the resultant
information to examine the relevance of those discoveries.

Overcoming Common Obstacles to Conducting
a Functional Analysis
The importance of the open-ended interview (e.g., Iwata et
al., 1982), especially for informing the design of the functional
analysis, seems to have been passively overlooked in behavior -
analytic practice, whereas the functional analysis (Iwata et al.,
1982/1994) appears to be more actively avoided in practice
(Desrochers, Hile, & Williams-Mosely, 1997; Ellingson,
Miltenberger, & Long, 1999; O’Neill & Johnson, 2000;
Weber, Killu, Derby, & Barretto, 2005). Behavior analysts
who are charged with treating severe problem behavior but
who do not conduct functional analyses are quick to provide
multiple reasons why they do not conduct analyses. These
reasons may have had merit in the past, but our research base
regarding functional analysis has grown tremendously (Hanley
et al., 2003; see JABA Special Issue on functional analysis,
2013,
volume 46, issue 1). With this growth, solutions for common
Figure. An example of graphically depicted data from a
functional analysis. Note the presence of only two conditions;
one in which a contingency thought to maintain problem
behavior is present (test) and one in which the contingency is
absent (control).
and seemingly insurmountable obstacles have been discovered,
properly vetted, and await adoption by those who would
beneft from an understanding of problem behavior prior to
its treatment—behavior analysts and the people they serve.
Tables 1 and 2 provide a summary of the available solutions
in the context of general and client-specifc obstacles. Some
references for the empirically derived solutions for overcoming
the oft-stated obstacles to conducting functional analyses and
accompanying rationales follow.

Implementation Obstacle 1: Functional Analyses Take
Too Much Time
Multiple researchers have proven the effcacy of several
timesaving methods relevant to functional analysis. Wallace and
Iwata (1999) showed that 5- and 10-min sessions are as valid
as longer sessions. Iwata, Duncan, Zarcone, Lerman, and Shore
(1994) showed us how to trim our designs to include only two
conditions. Considering only these adjustments, a functional
analysis can take as little as 30 min to complete (three 5-min
test
sessions and three 5-min control sessions; see Figure). Sigafoos
and Saggers (1995), Wallace and Knights (2003), and Bloom,
Iwata, Fritz, Roscoe, and Carreau (2011) described trial -based
analyses in which test and matched control conditions occur for
a maximum of one-min each. Thomason-Sassi, Iwata, Neidert,
and Roscoe (2011) showed that sessions could be terminated
after a single response and that measurement of the latency
to the frst response can be sensitive to typical contingencies
PERSPECTIVES 58
arranged in a functional analysis. In short, functional analyses
need not require a lot of time.4
It is also important to consider the chief alternative to a
functional analysis and that is to rely on a descriptive assess -
ment that often yields spurious correlations as opposed to the
more compelling functional relations derived from a functional
analysis. Descriptive assessments often take a long time to
complete because observers have to wait for problem behavior
to occur in uncontrolled environments in which the establish-

ing operation for the problem behavior may or may not be
presented (and because there is no obvious criterion for termi -
nating a descriptive assessment). In addition, considerable time
and expertise is required to collect a suffcient sample of data to
analyze and to undertake the increasingly complicated quanti -
tative analyses necessary to depict and begin to understand the
data yield via descriptive assessments (e.g., Emerson, Reeves,
Thompson, & Henderson, 1996). These efforts certainly take
more time than that required to conduct six brief observations
of problem behavior in properly informed test and control
conditions comprising an analysis.
Implementation Obstacle 2: Functional Analyses Are
Too Complex
The functional assessment and treatment development
process is complex, but functional …
“It’s more than a brand. It’s a culture.”1
Kent Grayson
Professor of Marketing, Northwestern University
Introduction
Harley-Davidson is an American cultural and business
icon on the level of Levi Strauss and Coca-Cola. Often
imitated, but never duplicated, Harley-Davidson has
managed to survive, and has, at times, thrived for many
decades. Through depression, recessions, world wars,
high technology developments, Japanese competition,
and increasing government regulation, Harley-Davidson
has maintained operations where over a dozen other U.S.
motorcycle firms have failed. Harley-Davidson has even
survived over a decade as a subsidiary of a bowling alley

service firm. It has achieved this by essentially relying on
designing, manufacturing, selling, and servicing a rela-
tively static product: two wheels, a 45° V-Twin engine,
and a set of handlebars.
How has Harley-Davidson managed to survive
through these and other hardships in a motorcycle
market that is dominated by leisure riders? How has it
kept the doors open while its historic U.S. rival, Indian
Motorcycles, is currently in its fourth incarnation? How
has it maintained its attractiveness with outlaw bikers,
investment bankers, and those who appear to be expe-
riencing a “mid-life crisis” and who sometimes turn to
the firm’s products as a result? More importantly, what
is this firm selling that keeps it as the industry leader in
full-size motorcycles? The answer to these questions is
not a 526-pound batch of steel with 250 feet of wiring,
but rather the fact that Harley-Davidson is selling the
American dream of freedom. How it is able to do this is
a fascinating story.
The Challenge
With over 6,000 employees, 1,400 franchises, and nine
production facilities, Harley-Davidson has managed to
survive the economic downturn that was in full force in
late 2007 and for the next few years; but the firm is not
out of the woods yet. In fact, Harley-Davidson is strug-
gling with three pivotal issues, the first of which is that
the firm’s products are viewed as leisure items. The other
two issues are similar in nature in that they deal with
the fact that managing the firm’s target market is chal-
lenging, particularly as demand for its products is chang-
ing. Individually and collectively these issues pose a real
challenge to the company’s long-term success. Without
addressing these issues, Harley-Davidson may lose its

ability to create value for customers and to serve stake-
holders’ needs as a result.
As noted, the first issue Harley-Davidson must suc-
cessfully address is the fact that consumers see the firm’s
products primarily as leisure items. This means that in
many consumers’ eyes, purchasing motorcycles, perfor-
mance parts, and high-dollar apparel is a luxury rather
than a necessity. Because of this, Harley’s products must
compete for funds from what at least sometimes can
be volatile discretionary budgets for consumers. When
economic conditions are challenging, the motorcycle
market tends to experience difficulties in terms of gen-
erating adequate sales. While Harley-Davidson’s revenue
streams originate from several sources, very few of them
appeal to a cost-sensitive consumer base.
Case 14
Harley-Davidson: Strategic Competitiveness that
Spans Decades
176
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CHE-HITT11E-13-0403-CaseStudy14.indd 176 22/10/13 2:44
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Case 14: Harley-Davidson: Strategic Competitiveness that
Spans Decades 177
Second, Harley-Davidson is challenged to effectively
specify its target market as a first step to appropriately
serving that market’s needs. Historically, the firm’s
target market has been males between the ages of 29
and 55. However, in the last decade, Harley-Davidson
has pursued younger riders and women as a means of
expanding its target customer segments. But expanding

the segments the firm serves with its products is not a
risk-free decision or choice for the firm to make in that
serving others might cause the firm to lose its ability to
effectively serve the specific needs of the 29- to 55-year-
old male (again, the historical target customer). This
matter is considered more fully later in the case.
Third, demands and cost drivers for the motor-
cycle market are ever changing. Overseas competitors
have shifted their focus from being the least expensive
to being affordable and to providing a wider variety of
motorcycles to customers as options to purchase. This
competitive shift has put pressure on Harley-Davidson’s
key markets and has forced the firm to respond. With
over 12 percent and 55 percent of the European and U.S.
heavyweight motorcycle market respectively, Harley-
Davidson has a substantial territory to defend.
History.2 Harley-Davidson, Inc. has been a pub-
licly traded firm since 1987. It has two primary divi -
sions: Motorcycles and Related Products and Financial
Services. The Financial Services Division provides credit
to motorcycle buyers and dealerships as well as risk man-
agement and insurance services for all parts of the firm.
The Motorcycles and Related Products Division cur-
rently operates through eight primary segments:
■■ Parts & Accessories (17.5 percent of net revenue in
2011)
■■ General Merchandise (5.9 percent of net revenue in
2011)
■■ Licensing ($43.2 million of net revenue in 2011)
■■ Harley-Davidson Museum
■■ International Sales (32 percent of net motorcycle rev-

enue in 2011)
■■ Patents and Trademarks
■■ Other Services
■■ Marketing
In 1903, William S. Harley and Arthur Davidson
founded Harley-Davidson Motor Company, known
by enthusiasts as “the Motor Company,” in order to
fund their racing pursuits. Accordingly, their first
motorcycles were merely contemporary bicycles with
small engines retrofitted to the frame. It was Harley-
Davidson’s early success in motorcycle racing that
fueled the demand for its early models, which were sold
in dealerships as early as 1904. Because these turn of the
century races were as much about endurance as speed,
Harley-Davidson acquired invaluable knowledge perti-
nent to practicality and robust design. After significant
success in road and endurance races, Harley-Davidson
broke fresh ground with the introduction of the V-Twin
engine design. Superior to large single-cylinder engines,
the lighter V-Twin design allowed similar displacement
in a lighter package with a shape that fit naturally into
the bicycle-inspired frames of the early 1900s. Few sus-
pected that this design would become so integral to
modern motorcycles.
Having dedicated over a third of its production to
the U.S. Army, Harley-Davidson sales exploded during
World War I. With the advent of motorized warfare, the
motorcycle proved itself to be far more than just a novel
invention. In addition to proving itself to the Army,
Harley-Davidson also proved itself to soldiers. After
the war, soldiers returned home and became a loyal
customer base for the young firm. Through the 1920s,

Harley-Davidson continued to focus on design improve-
ment and racing. It spent much of this decade fighting
for market share with multiple medium and small com-
petitors. During this time, firms producing automobiles,
airplanes, bicycles, and industrial machinery also tried
their hand at building motorcycles.
The 1930s were a unique time for the motorcycle
industry. In the wake of the Great Depression, the pub-
lic was looking for inexpensive, simple transportation.
At the same time, unemployment and inflation shrank
potential customers’ purchasing power. It was during
this time that many of the smaller motorcycle manufac-
turers dropped out of the industry. Most of these firms
were subsidiaries of companies in related industries.
These failed motorcycle firms had many of the capabili -
ties needed to produce motorcycles, but lacked the cor-
porate focus and support to continue production during
such a difficult economic time. It was during this time
that the U.S. domestic market shrank, with only Indian
and Harley-Davidson remaining. With the market
divided between only two domestic producers, Harley-
Davidson’s production held steady.
With the onset of World War II, Harley-Davidson
found itself to be a major supplier for the Allied war
effort. Again, war vaulted Harley-Davidson into a posi-
tion of higher volume, improved reputation, and deeper
loyalty with owners and soldiers. As the war came to
an end, the United States was flooded with a surplus of
Army WL45 motorcycles. Suddenly, this country was full
of prospective riders who understood Harley-Davidson’s
PM

Part 4: Cases178
product and appreciated how motorcycles could provide
inexpensive, dependable transportation. At this point,
only Indian Motorcycles was a competitor for Harley-
Davidson. But in 1956, at the height of an economic
recession, Indian Motorcycles declared bankruptcy and
stopped producing motorcycles altogether, leaving only
Harley as a major producer and seller of motorcycles.
As the sole U.S.-based motorcycle power, Harley-
Davidson enjoyed great success. Nevertheless, the lack
of competition nearly became its undoing. This market
condition allowed Harley-Davidson to take more risk
in the form of acquisitions, causing the firm to lose its
tight focus on a single market. It began branching out to
other leisure and motorized products such as off-road
motorcycles, ski boats, and golf carts. At the same time,
the bulk of Harley-Davidson’s revenue stream was still
coming from the sale of its heavy motorcycles. Many
of the acquisitions the firm completed in the latter part
of the 1950s and the early 1960s, such as the Tomahawk
Boat Manufacturing Company in 1962, were in similar
industries, but a poor fit with Harley nonetheless. The
acquired companies were often in deep trouble when
Harley-Davidson purchased them. In the end, Harley-
Davidson was hobbled with losing ventures that diluted
its focus and did not fit well with its core competencies.
In 1969, the American Machine and Foundry Company
(AMF – a longtime producer of leisure products such as
tile bowling pins and ball returns) purchased the finan-
cially distressed Harley-Davidson.3
Most enthusiasts consider the AMF years as the

“dark ages” of Harley-Davidson’s history. AMF operated
Harley-Davidson as a profit center, reducing allocations
to the unit’s marketing and research and development
(R&D) functions as a result. For the next 13 years, Harley’s
aging product line remained essentially unchanged.
In fact, its line was so static over the years that many
of the parts from a 1937 model fit on the 1969 design.
Harley-Davidson had just two motorcycles with differ-
ent trim packages: the low-budget sportster, the sport
bike of its day, and a full-size motorcycle available in
two different models. In light of Honda and Kawasaki’s
entrance into the U.S. market, Harley-Davidson’s stale
product line was even more disappointing. Many did
not see these imports as a threat given the prestige and
heritage of the Harley-Davidson name. However, the
Harley-Davidson image was deteriorating. Even with
its products in desperate need of a facelift, AMF relied
on Harley-Davidson’s reputation to defend its competi-
tive position; AMF plastered Harley-Davidson’s name on
products like snowmobiles and golf carts. While trying to
capitalize on the value of Harley-Davidson’s brand name,
quality became a serious problem; customers would have
to return new motorcycles to a dealership multiple times
to fix manufacturing problems. It was during this time
that owners coined the saying “a Harley always marks its
spot,” a phrase referring to the machine’s nearly universal
oil leaks. This turned off many prospective customers, as
they believed a Harley-Davidson would require constant
owner maintenance. All the while, Japanese motorcycle
companies enticed more and more riders looking for
inexpensive, dependable transportation.
By 1981, Japanese motorcycles were established in the
U.S. market not only as dependable transportation, but
also as performance machines. Harley-Davidson’s sales

were in free-fall as its tired designs appealed to a nar-
rowing market segment. It was selling to customers who
liked classic style and dated functionality, and all for a
high price. Finally, the employees and management of
Harley-Davidson led a managed buyout of the company
from AMF.4 The new owners immediately took stock
of the firm’s strengths and vulnerabilities and increased
its R&D and marketing budgets significantly. Because
negative effects of AMF’s past business decisions still
hampered the new management team, sales remained
low. In 1985, Harley-Davidson’s top management team
struggled to restructure the firm and divested itself of
most of its unrelated assets. In 1987, Harley-Davidson
became a publicly traded company, and none too soon
as Harley-Davidson had revamped its product line into
four motorcycle styles that were united by the introduc-
tion of a new engine. This was the turning point for
Harley-Davidson. From this point forward, the firm’s
quality control was exponentially more effective. In
addition, Harley-Davidson focused more on efforts to
operate efficiently and effectively. Following the pre-
cepts of just-in-time techniques and enhancement to the
logistics function were critical to the firm’s attempts to
enhance efficiency and effectiveness. At the same time,
Harley shifted to three major initiatives:5
■■ Improved manufacturing process, leveraging tech-
nology, robotics, and employee involvement
■■ Restructuring business management to a modern
system
■■ Aggressive management of its brand name through
dealership management, patenting activities, and
careful licensing of related products

The modern Harley-Davidson fought back from the
brink several times, each time seeming to evolve and
adapt. What appears to be universal to each evolution
of the company is that quality, promotion, and market
focus have always been a priority.
PM
Spans Decades 179
How Harley Does It6
Harley-Davidson focuses on a subset of the motorcycle
market featuring customers who value heritage, style,
reputation, durability, and adaptability. Until 2000,
Harley-Davidson’s motorcycles sold at nearly a 25 per-
cent premium. In the last decade, that premium has
dropped to 5 to 10 percent, depending on the class of
motorcycle. This is due to Japanese motorcycle manu-
facturers shifting to marketing and selling somewhat
unique motorcycles for a better than average price. In
comparison, Harley-Davidson uses the Sportster© line
as an introductory product, but most of its motorcycles
sell for over $15,000, with the average sale price of just
over $16,893.7 Harley-Davidson motorcycles provide a
unique product at a price that its target customers deem
acceptable or reasonable. While its competitors may have
attempted to cut costs, Harley-Davidson has continued
to invest in its products in ways that protect the qual-
ity of its brand image. Harley-Davidson’s market focus is
primarily males between the ages of 29 and 55. However,
this has been changing.8 Recently, it has targeted female

customers.
What It Does Best9
In its modern incarnation (1987 to present), Harley-
Davidson achieved success by doing what it does
best. Granted, multiple firms make great motorcycles,
and many of these firms have a dedicated following.
However, through the actions the firm has taken over the
years, Harley-Davidson has developed and maintained
what is a unique position in the U.S. motorcycle mar-
ket. Effectively managing its brand name, production
or manufacturing simplicity, and a dedicated product
following are the key sources of the firm’s competitive
strength.
Harley-Davidson’s brand name is its most important
asset. Cultivated through good times and bad, its brand
name is a powerful motivator for current and prospec-
tive customers. For many Americans, Harley-Davidson
is the American motorcycle. This belief is no accident.
After being separated from AMF, Harley-Davidson’s top
management team decided to significantly increase the
amount of resources being allocated to marketing and
R&D. This appears to have been a wise decision in that
Harley-Davidson now holds 55 percent of the entire U.S.
motorcycle market, and an even higher share in the U.S.
heavy motorcycle market. Strict protection of its brand
name permeates every decision the firm makes. Its
motorcycles, while occasionally deviating in style, gen-
erally follow traditional themes. Harley-Davidson only
makes a design change after witnessing a strong market
trend.10 For example, the custom portion of the motorcy-
cle market has been designing machines with wide rear
tires for nearly two decades; in 2007, Harley-Davidson
launched a single model with a wide rear tire.

Harley-Davidson is also very selective about its
franchise (dealership) opportunities, another method
through which the firm protects its brand. Due to
free-trade laws, Harley-Davidson is no longer able
to insist that its dealerships sell only Harley products.
However, it utilizes price incentives to encourage dealer -
ships to stay “Pure-Harley.”11 Harley-Davidson is espe-
cially protective of its name and logo when it comes to
licensed products, most of which are sold in its dealer -
ships. If it is not the best quality, the product’s license
is revoked. Retailers can sell ladies’ shirts at a 100 per-
cent premium because they are of excellent quality and
cannot be found anywhere. This aura of exclusivity is
embedded in the very DNA of Harley-Davidson Inc.,
from the headquarters to the dealerships. This aspect of
culture is an asset in that the notion of wanting to be
seen as providing products that are somewhat “exclusive”
in nature permeates the firm’s decision processes as it
seeks to serve its target customers’ needs.
Harley-Davidson’s production process is another
important firm-specific asset. The key elements of
the process are the melding of a JIT supply chain with
team production management and part interchange-
ability.12 When combined, the elements of Harley’s
production process are unique. Japanese manufactur-
ers have used the same JIT concept for years, but have
not stressed a limitation of key components. After 1987,
Harley-Davidson updated its production facilities and
design process. Its production facilities in Kansas City,
Missouri and York, Pennsylvania are the best examples
of modern robotics combined with team enablement.
Interchangeable parts are the most important compo-
nent of this asset. This concept simplifies all areas of the
motorcycle production process; but it is perhaps most

evident in the production of Harley’s frames and engines.
Harley-Davidson produces five unique frames for each
motorcycle family: Sportster©, Dyna, Softail©, V-Rod©,
and Touring. Even with 28 different models and seem-
ingly limitless options, Harley-Davidson produces only
three engines. Internal machining, displacement, and
color coating are the only differences across the engines.
The Sportster© line comes in two displacements: 883 and
1204 cubic inches. The Dyna, Softail©, and Touring lines
all share the same Twincam© engine, available in 96 and
103 cubic inches. The V-Rod’s© engine is only produced
in one version.13 This production approach with respect
PM
Part 4: Cases180
to interchangeable parts appears to be a competitive
advantage in that it allows Harley to produce several
models, subdividing its target market segments even
further, while keeping production costs lower than if it
produced 28 different frames and engines.
Loyalty to the brand is another important asset for
Harley-Davidson. While its brand name protection
applies primarily to prospective customers, its product
following centers on existing customers, many of whom
are repeat buyers of the firm’s products. There are mul-
tiple examples of Harley’s dedicated following. At the
extreme for example, consider the fact that some private
riding clubs only grant membership to those willing to
tattoo the bar and shield logo on multiple locations of
their body. For others, remaining committed to the firm’s

mantra that owning a Harley “is a journey, not a desti-
nation” and participating in company-sponsored events
with others sharing this belief accounts for their loyalty.
Regardless of the reason for it, customer loyalty to the
Harley brand appears to influence these individuals to
purchase Harley products other than motorcycles such
as clothing and a wide range of product accessories.
Historically, loyalty to the brand has resulted in a large
percentage of Harley customers choosing to buy another
Harley when it is time for a new motorcycle. However,
the “graying” of Harley’s customer base is potentially a
problem as at some point, this group of customers will
no longer be purchasing new products.14
Keeping It Simple15
In 2011, Harley-Davidson generated 88 percent of its
revenues from a single business area (Motorcycles and
Related Products) and 12 percent from its second pri-
mary segment (Financial Services). This composition of
sales revenue is consistent with previous years and sug-
gests that Harley may continue business as usual to help
the firm reduce its idiosyncratic risk. It will also try to
expand its business in other countries with a primary
focus on providing quality product and services. Harley-
Davidson has been able to earn positive returns while
focusing on just two businesses because it has developed
strengths that allow it to create value for customers.
Moreover, there are fewer challenges in managing only
two businesses. This approach allows Harley-Davidson
to not only gain economies of scale, but also use its
resources efficiently.
Marketing
Historically, males between the ages of 29 and 55 have
been Harley-Davidson’s target customer. However, this
is changing.16 Recently for example, the firm is also

targeting female customers with motorcycle models that
have a lower seat height and pink, purple, and light blue
color schemes. Its marketing has also reflected an effort
to attract more female riders. It has even tailored its rid-
ing classes (the Riders Edge Program©) to have all-female
sessions and to make new women riders feel more com-
fortable. A woman could walk into a Harley-Davidson
dealership having never sat on a motorcycle and within
an hour purchase a motorcycle for as little as $8,000. She
could then join a riding class that would grant a motor-
cycle endorsement on her driver’s license.
Thus, Harley-Davidson is beginning to market to a
multi-generational and multi-cultural audience. In this
regard, the firm is working to attract a more diversi-
fied audience in terms of age, gender, and ethnicity.17
Harley-Davidson is a market leader in the U.S. heavy-
weight segment. The average median household income
of a Harley-Davidson purchaser is $89,000.18 Harley-
Davidson primarily uses advertising and promotional
activities via television, print, radio, direct mailings,
electronic advertising, and social media to market its
product. Moreover, local marketing efforts in con-
junction with dealers are highly encouraged. Harley-
Davidson uses its customers’ experience to continuously
develop and introduce innovative products. The market
is flooded with high quality, low price Japanese bikes.
However, Harley-Davidson does not seek to imitate these
bikes. Instead, it uses direct input from its customers to
improve its product. Harley-Davidson modifies its prod-
uct based on input generated through customer surveys,
interviews, and focus groups. Thus, some believe that
“The real power of Harley-Davidson is the power to
market to consumers who love the product.”19

In 2010, the company introduced “Creative Model” –
a Web-based method for marketing its product. In this
model, passionate fans are enabled for the purpose of
helping Harley develop creative approaches for targeting
new customers. Customer experience has traditionally
been the main source of Harley-Davidson’s marketing
strategy. It all started in 1983, when the company intro-
duced Harley Owners Group (H.O.G),20 which has now
grown to more than 1 million members worldwide.21
Harley-Davidson distributes its products through
an independent dealer network that almost exclusively
sells Harley-Davidson motorcycles. These dealerships
are licensed dealers and fully authorized to sell and ser -
vice new motorcycles. They can have secondary loca-
tions to provide additional service to the customers.
These non-traditional outlets are an extension of the
main dealership and consist of Alternate Retail Outlets
(ARO) and Seasonal Retail Outlets (SRO). AROs are
PM
Spans Decades 181
generally located in high traffic areas such as airports,
vacation destinations, tourism spots, and malls and only
sell parts, accessories, and general merchandise. SROs are
also located in high traffic areas, but operate only on a
seasonal basis. AROs and SROs are not allowed to sell
new motorcycles. The parts and apparel orders from the
dealer are not taken at face value. Harley-Davidson’s for-
ward-looking, market-driven allocation system restricts

the number of units a particular dealer is able to order.
In Canada, the company sells its products to one whole-
sale dealer, Deeley Harley-Davidson Canada/Fred Deeley
Imports Ltd., which in turn sells to independent dealers.22
The European, the Middle Eastern and African
(EMEA) region is managed from regional headquar-
ters in Oxford, England. Harley-Davidson distributes
its products through subsidiaries located in Austria,
Dubai, Czech Republic, France, Germany, and Italy. In
the EMEA region, Harley-Davidson distributes all prod-
ucts sold to independent dealers through its subsidiar-
ies located in Austria, Czech Republic, United Arab
Emirates, France, Germany, Italy, South Africa, Spain,
Switzerland, Netherlands, Russia, and United Kingdom.
A headquarters in Singapore manages the Asia Pacific
regions with the company distributing its product to
independent dealers in China, India, Australia, and
Japan. The rest of Asia Pacific is managed through the
U.S. operations.
Financial Services Segment
Harley believes that its Harley-Davidson Financial
Services unit (HDFS) provides sufficient financing to
independent distributors, dealers, and retail custom-
ers. HDFS provides financing to dealers and retail
customers in the U.S. and Canada, but not in the EMEA,
Asia-Pacific, and Latin America regions, although these
regions do have access to financing through other finan-
cial services companies.
Competition
As is the case for many leisure and transportation indus-
tries, the U.S. motorcycle market is extremely competi-
tive. Currently, Harley-Davidson competes with four
classes of competitors with each group competing in a

different market and in different ways. The four compet-
ing groups are commonly classified as Metric Cruiser,
Metric Sport, U.S. Cruisers, and Custom Cruisers.
Metric Cruiser Competitors. The industry uses the
term Metric Cruiser to denote motorcycles made outside
the United States with traditional styling. Traditional
styling is commonly reflected through an exposed engine
and non-integrated body panels. Japanese motorcy-
cle makers such as Honda, Star (Yamaha), Suzuki, and
Kawasaki dominate these models. It is important to note
that not all metric cruiser competitors are considered to
be heavy motorcycles (over 650 cubic centimeter displace-
ment). These competitors compete with Harley-Davidson
on price, but also use the individual model’s unique fea-
tures to garner a competitive advantage. Honda intro-
duced the Fury©,23 a regular production chopper based
on the 1300 VTX power plant in 2009. In 2004, Kawasaki
introduced the Vulcan© 200024 with a 2,053 cubic centi-
meter engine, the largest mass-produced V-Twin motor-
cycle ever. Most of these competitor models of similar
size are comparable in features to Harley-Davidson mod-
els. The presence of smaller competitor models forces
Harley-Davidson to keep entry-level models like the 883
cubic centimeter Sportster©. Smaller metric cruisers like
the Suzuki Boulevard 40©, retailing at $2,600 less25 than
Harley-Davidson’s least expensive model, keep downward
pressure on introductory model prices.
Metric Sport Competitors. Metric …
Running head: NAME OF CASE STUDY
1

NAME OF CASE STUDY
2
Name of Case Study
Learner First Name and Learner Last Name
Washington University
Course (example: BUS500 )
Date
Instructor Name
Washington University Case Study Format
Format
Introduction
The introduction of the case problem is the essential first step
and requires a succinct problem statement and scope problem
definition with a concise summary of the critical decision issues
to be addressed in the case presentation. A paragraph of no
more that 100 words is adequate.
Analysis
The analysis of the case problem requires a thorough review of
the critical elements of the case and provides a clear set of facts
that on their own merit offers an in-depth review of the
essential issues to solve the problem statement. The analysis
section should be approximately 300 words.

Solution
The solution section of the case study presents the
recommended way to solve the problem statement and addresses
the main points outlined in the analysis. The solution section is
a description of the recommended problem application including
details as to application and references specific to solving the
problem definition. The solution section must also cite specific
text materials in support of the recommended course(s) of
action. No more that 300 words should be used for the solution
statements.
Justification
The justification provides the overall reasons why the selected
solution recommended course(s) of action are correct and fit the
case problem. The justification section of the case sells the
solution and offers reasons to implement the course of action
and substantiates the methods of solving the problem statement.
Justification should be in a bullet list format and be no more
than 200 words.

Summary
The Summary is a 100-word final set of key points on the
problem analysis, solution and justification of the problem
scope.
Recommended Method
1. Read or view the first few paragraphs or statements, then go
through the case almost as fast as you can turn the pages or
view the video. Ask what broadly this case is about and
especially what types of information are being given to analyze.
2. Read or view the case very carefully and outline key facts,
notes, commentary, and sequence of events.
3. Note the key problems and issues and restate them.
4. Sort out the relevant considerations for each problem area.
5. Do appropriate qualitative and quantitative analysis – rely on
the text to provide proper analysis techniques where applicable.
Use analytical concepts from the text to frame and define
problem sets.

6. Develop a set of recommendations based on analysis that
support your findings and conclusions of the case data.
Case Study Summary
· The case system is problem statement, analysis, solution,
justification, and summary in 1,000 words with cited references
from the text where needed.
· Use the case study format to organize and populate each
section.
· Get consensus from others as to your proposed solution.
· Use your own experiences and your company as a testing
place.
· Consult with your company or personal experts on topic
application.
· Be practical and creative in driving your solution and
justification.
· Sell your ideas with logic, evidence, and application

examples.
· Logically write your rationale with clear reasons on your
solution.
References
Kreitner, R. & Kinicki, A. (2013). Organizational behavior
(10th ed.). New York, NY: McGraw-Hill Publishing Company.
(Example).
A separate page in APA format included with your submittal
with references listed is required. You should consider at least
three to five references per submittal. More may be required to
support your conclusions. The references should be the most
current data. Searching the databases in the Washington
University Library can help you find current source material.
APA Writing:
Please follow APA writing format when you write your essay
and case study.
APA (American Psychological Association) style is most
commonly used to cite sources within the social sciences. The

following video clip, revised according to the 7th edition of the
APA manual, offers examples for the general format of APA
research papers, in-text citations, endnotes/footnotes, and the
reference page. For more information, please consult
the Publication Manual of the American Psychological
Association, (7th ed.).
How to Write in APA Style
https://www.youtube.com/watch?v=Q7TBmi8-9G0

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