Why it's all over for them and us

In part two of a series of articles, David Wheeler and Maria Sillanpaa argue the case for an involved and highly educated workforce

A study was released last week by The European Foundation for the Improvement of Living Conditions which drew apparently paradoxical conclusions. Employers with a more open and consultative approach to workplace relations were statistically more likely to have had some experience of job cuts than traditional "top down" organisations.

In a survey of 5,800 mostly private sector employers in 10 EU countries, it emerged that 36 per cent of "open" organisations had experienced personnel reductions, compared with only 21 per cent of more hierarchical organisations. Was this a cause and effect phenomenon or simply a reflection of the need for good management practice in difficult circumstances?

There is little doubt that companies which maximise worker participation in problem solving and "continuous improvement" (kaizen to the Japanese) tend to perform well in business terms. Indeed, there are many who ascribe the spectacular success of Far Eastern corporations in recent decades to precisely this approach.

Employee-empowered companies tend to have real customer focus and deliver high-quality products and services in very competitive markets. They deal with their suppliers and business partners well and they seek to eliminate waste and barriers to efficiency throughout the "value chain". Examples of this abound in the automotive industry, from Volvo to Volkswagen in continental Europe to Honda and Toyota in Japan. Rover and Unipart are good examples in the UK.

In a survey of 580 British businesses in 1994 the Industrial Society found that on almost every criterion, empowering employees to take more control of their working lives led to performance expectations being exceeded. Better customer service, faster innovation and reaction to change, increases in productivity and increased competitiveness were all cited by companies as reasons for introducing empowerment programmes. The Industrial Society concluded that "it is becoming a competitive disadvantage not to be moving significantly towards empowerment".

But today's management theorists are struggling to resolve the greatest contradiction of late 20th century organisational life. How can the participation of the workforce be secured when increasing global competition and the pace of technological and demographic change combine to savagely undermine job security and the "psychological contract" between the firm and its employees? Even if team spirit can be maintained, where employee involvement results in significant productivity gains, are workers in danger of participating themselves out of employment altogether?

Some companies have risen to this particular challenge by offering job security in return for continuous improvement, a reasonable enough trade- off. Not all have been so enlightened. In the 1980s, the axe fell very heavily in corporate America. Between 1980 and 1993 companies in the US Fortune 500 list shed more than 4 million jobs. General Motors saved $2bn by axing 40,000 salaried staff. By 1994, two-fifths of American workers expressed concerns that "they might be laid off, required to work reduced hours, or be forced to take pay cuts" during the next two years.

Britain has not been immune to the effects of savage downsizing and de- layering; particularly in the ex-public utilities and in heavy industries: power, oil, gas, coal and steel. A 1994 survey by MORI found that 35 per cent of British middle class respondents were worried about losing their jobs in the next 12 months.

And according to International Survey Research, in 1995-96 British workers were at the bottom of the European optimism league on most of the major issues concerned with employee satisfaction.

In the 1990s, business commentators developed entire lexicons to explain to increasingly troubled corporate salariats that while their immediate loyalty was valued and their self-denying commitment and long working hours appreciated, their job-for-life contract was dead. There has been an explosion of popular management literature to explain the phenomenon and how to cope with it. Managing Chaos, Liberation Management, The Future of Leadership: a Whitewater Revolution, and Welcome to the Revolution were just four titles which reflected the mood. As for the results, The Empty Raincoat was the somewhat mournful image conjured by Charles Handy, only to be superseded by Jeremy Rifkin's more apocalyptic The End of Work.

In response, many companies fudged the whole issue of the psychological contract with talk of portable skill-sets and flexibility while at the same time actively pursuing quite cold-blooded strategies of downsizing, outsourcing and process re-engineering.

Happily there is another way. It links worker participation and safety to concepts of continuous improvement and learning, not just for the individual but for the organisation itself. In the knowledge-hungry 1990s and in the increasingly competitive, technology-driven markets of the next century, ignoring opportunities to consolidate stakeholder loyalty may represent something of a corporate deathwish. It starts with a commitment to quality and customer service.

Few companies today take customer loyalty for granted. Management systems standards and quality awards abound. There are well-established national and international standards which businesses of all types and sizes may use as templates for introducing processes of quality management. They include the International Standards Organ- isation ISO 9000 series, the European Foundation for Quality Management European Quality Award (EQA), the Malcolm Baldridge National Quality Award and the Deming Prize (named after US quality guru W Edwards Deming).

We shall return to the subject of quality in next week's article when we examine customer inclusion and loyalty. Our purpose in mentioning these standards here is simply to flag that they are all based on cycles of continuous improvement in performance which unite the entire organisation in understanding its purpose, properly allocating resources, setting targets which everyone buys into and monitoring and auditing progress. Most importantly, they all require a high degree of shared values within the organisation and a commitment to constant learning at individual and organisational levels.

The concept of the Learning Organisation first gained currency in the late 1970s and early 1980s. Chris Argyris and Gareth Morgan developed theories of management strategy and organ- isational development based on cybernetic principles or "feedback loops" similar to those found in nature. Distinctions were drawn between "single loop" and "double loop" learning. An organisation which is able to scan its external environment, monitor changes and spot opportunities for growth may well keep itself on a commercially successful path. Like a bat with a night-time sonar, it may not look too smooth in flight but at least it does not crash too often.

A more sophisticated "double loop" approach to strategy and development requires more than just sensing mechanisms, it requires an ability to intelligently and constantly question existing rules, assumptions, procedures and even direction. Like a flight of swallows which seems to move as one organism, an organisation which can communicate on multiple levels will always maintain a smoother path. And for companies this means institutionalising feedback or dialogue with all stakeholders, especially those in the organisation best able to create, capture and harness knowledge - that is, the workers.

There are many examples of European, north American and Japanese companies which already excel in different elements of the cycle of employee inclusion. In The Stakeholder Corporation we provide numerous case studies of companies which are able to maintain job security and a creative, inclusive work environment for all their employees: an environment based on trust and a shared vision whatever the external competitive pressures (see for example the case studies of Volkswagen and Daimler-Benz opposite/below). We also provide checklists of best practice indicators which any company, large or small, may use to assess its own performance, even before entering into formal dialogue-based processes, such as focus groups and surveys.

For now, we will simply end with a quotation from Japanese electronics magnate Konosuke Matsushita, who famously challenged the traditional model of western industrial capitalism: "We are going to win and the industrial West is going to lose out; there's not much you can do about it because the reasons for your failure are within yourselves ... With your bosses doing the thinking while the workers wield screwdrivers, you're convinced deep down that this is the right way to run a business. For you, the essence of management is getting ideas out of the heads of managers and into the hands of labour. We have gone beyond [this] model. We realise that business has become so complex, the survival of firms so precarious, and our environment increasingly unpredictable, competitive and dangerous, that firms' continuing existence depends on their day-to-day mobilisation of every ounce of intelligence." It is not, however, too late for UK firms to prove Mr Matsushita's pessimism ill-founded.

q The authors may be contacted at The New Academy of Business Centre for Stakeholding and Sustainable Enterprise at Kingston University Business School, Kingston Hill, Kingston Upon Thames, K77 7LB.