Time to get serious about workplace change

Issues in Science and Technology, Summer 1997 by Jarboe, Kenan Patrick, Yudken, Joel

Big productivity increases are possible for companies switching to highperformance work systems; government can aid the transition.

In the early 1990s, Lockheed Martin's Government Electronic Systems plant in Moorestown, New Jersey, was suffering from the decline in defense markets. Layoffs were widespread. By 1992, it looked as if the plant would have to shut down, eliminating hundreds of jobs. But management made an enlightened decision: It formed a joint partnership with the International Union of Electrical Workers Local 106 to implement a high-performance work system. The company stopped outsourcing subassemblies and ordered new technology. Workers, in cooperation with management, redesigned the work flow and created a new training program. In short order, they turned the plant around. Between 1992 and 1995, productivity increased 64 percent. Scrap and defects were reduced by over 80 percent. Product cycle time was cut by 50 percent, inventory by 80 percent, and manufacturing costs by 25 percent. Not only have jobs been saved, but the job loss was reversed.

In the midst of massive downsizings and plant closings, some of the United States's most forward-looking companies have transformed themselves with the aid of high-performance work systems: Corning, Folgers Coffee, Harley-Davidson, John Deere, LTV, Magma Copper, Mercury Marine, Reynolds Metals, Rockwell, Union Carbide, Weyerhauser, and Xerox, among others. Their success, bolstered by a growing body of research about the organizational importance of deep worker involvement, indicates that high-performance work systems are the best way to leverage the capabilities of a company's workers to achieve impressive gains in quality, productivity, and profits.

A high-performance work system seeks to enhance organizational performance by combining innovative work and management practices with reorganized work flows, advanced information systems, and new technologies. Most important, it builds on and develops the skills and abilities of frontline workers to achieve gains in speed, flexibility, productivity, and customer satisfaction.

Unfortunately, only a relatively few companies are pursuing this approach. Most chief executive officers and directors of large companies see high-performance work systems as risky because they require a sweeping change in operations. They find it easier to cut costs by laying people off. Although this may improve the bottom line for a few quarters, it does little or nothing to ignite growth, addjobs, or improve competitiveness. And small and mid-sized companies-the economic bulwark of small towns and the engine of this country's economic growth-simply don't have the knowledge, tools, or resources to implement these systems.

Neither the marketplace nor current public policy seems to be able to provide sufficient incentives for companies to develop high-performance work systems. Without this investment, however, U.S. companies will continue down the well-trodden lowroad path, laying off more and more workers, outsourcing more work, and further weakening our nation's ability to compete. We cannot cut our way to jobs and growth.

With only modest changes in a variety of existing federal programs, government can play a role in countering this trend. The government can help break down the barriers to implementing high-performance work systems and speed the diffusion of this new form of work. As an enabler, the federal government can support the development and diffusion of training, tools, technologies, technical assistance, standards, and resources that will make it possible for companies to reap the benefits of this vital approach.

Ultimately, however, businesses and workers must take the lead in fostering change. Success will depend on how well the system performs in the competitive marketplace. But public policies can help companies overcome the initial hurdles. With minimal investment, the government can help preserve and expand jobs, bolster economic growth, and improve industrial competitiveness.

Worker involvement is key

In recent years, a majority of U.S. businesses have adopted one or more innovative work practices. These include quality circles, flexible job classifications, cross-functional training, pay-for-performance compensation systems, and various forms of employee involvement. However, very few have adopted the full complement of innovative work practices associated with a high-performance work system, which has three main components.

Worker participation. The key characteristic of a high-performance work system is extensive worker participation in all aspects of the company. Many companies already practice some form of worker participation, from suggestion boxes and quality circles to self-directed work teams. The extent of discretion given to workers in influencing and making decisions varies greatly. The payoffs are higher quality goods and services, improved workforce productivity, and greater company flexibility.

Studies indicate that most forms of worker involvement are an improvement over the traditional mass-production approach, in which workers perform manual tasks that require little thought and provide them with few opportunities to improve the process. The recent Commission on the Future of Worker-Management Relations (known as the Dunlop Commission) found that employee participation, when sustained over time and integrated with other organizational policies and practices, results in positive economic gains. A 1990 interindustry survey of 495 major businesses concerning their participation and employment practices, by Daniel Mitchell of the University of California at Los Angeles, David Lewin of Columbia University, and Edward Lawler III of the University of Southern California, concluded that the extensive participation of clerical and production workers led to significant improvements in return on investment, return on assets, and productivity. Other studies show that deep worker involvement is also essential to corporate flexibility and quick customer response; in today's volatile product markets, only the innovative and responsive survive.