LABOR-MANAGEMENT ROLES IN THE NEW AMERICAN WORKPLACE Leadership and the high performance organization Robert Reich -- US Secretary of Labor Two men are hunting in the woods, all of a sudden a bear appears out of nowhere and begins to chase them. One of the men quickly leans down to put on his running shoes. The other man says: "Hey, what are you doing? The bear is going to catch you. You'll never outrun the bear." The man replies, "I don't have to outrun the bear. I just have to outrun you." Beating the bear American companies, even the most successful ones, are facing challenges that require fundamental rethinking of the workplace. For the leaders of this change, whether a CEO, plant manager, union president, mid-level manager, or team leader, these challenges also call for a redefinition of their roles. The global marketplace has changed the rules of the game forever for all the players. We're no longer operating in the old world of us against them. Our greatest challenges today are not zero-sum games. Quite often they are either win-win, working together to beat the bear, or lose-lose, fighting against one another, while others seize the opportunities created by our haggling. In this new economic era, the bear chasing us is not just tenacious competition; it's also obsolete ways of working and organizing production. The key to prosperity in the future will lie in developing a new compact for the workplace that goes something like this: "As a manager, I will do everything I can to make my employees increasingly valuable. And as a worker, I will do everything I can to make my company profitable." The theme is that all of us -- managers, workers, and labor leaders -- are responsible for being leaders of change. The new leader Leaders of change strive to create organizations that are flexible, adaptable and highly productive. Recognizing that competitive firms can no longer compete on the basis of price alone, companies are focusing their organizational strategies on customer service and quality to gain a competitive advantage. To realize the full potential of their workers, these corporate leaders are redesigning workplaces and work practices to enhance the skill, autonomy, and responsibility of their workers. Implementing such change will require a style of leadership that goes far beyond anything we have experienced in the past. In fact, it has turned the traditional view of management on its head. A long-term perspective, a propensity for sharing information, and a workforce that shares a common vision are the tools of the new leader. HIGH PERFORMANCE WORK ORGANIZATIONS There is no dearth of terminology to describe this new vision. Yet despite the overuse and misuse of the jargon related to the changing workplace, very few understand its real implications. For simplicity's sake, I'll use the term high performance work organization to describe this new vision. However, let me not fall into the trap of claiming high performance to be an absolute. There is no universal recipe to create high performance workplaces or single roadmap to show how to get there. Nor will there be cheering crowds at the finish line to signal that you have arrived. High performance is a constantly changing target at the end of a long continuum of change. However, there are several characteristics commonly mentioned as critical. High performance workplaces integrate workplace and workforce practices with broad business strategies. They encourage worker input in all aspects of the company and invest in training and opportunities for continuous learning. In many cases, work is organized in self-managed teams or cross- functional groups. Front-line workers have significant influence in the decision-making process, such as implementation and design of new technology, and often have authority to correct problems in service or process on the spot. In addition, compensation systems link pay to performance, and give employees a degree of employment security by tying their wages to profits or to productivity gains. Workers are assured that innovative thinking will not cost them their jobs. When layoffs are unavoidable, the company provides retraining and outplacement assistance. They provide supportive work environments and recognize the effect outside demands have on workers' lives. High performance companies bring together cutting-edge technology and highly trained workers in an environment that emphasizes productivity. A 1994 study of high performance work systems by Paul Osterman indicates that 35% of private sector establishments with more than 50 employees made extensive use of innovative work practices. Osterman's research indicates companies are more likely to adopt high performance work practices when managers have worker-oriented values, when companies have technology that requires high skills, when companies compete in a competitive international market, and when companies follow a high-road corporate strategy emphasizing quality, service, and product variety rather than low cost. The key to high performance is that new workplace practices are implemented and integrated as part of a coherent business strategy with a strong commitment from top management and the involvement of all employees. The high performance workplace requires a new kind of leader. The command and control style characteristic of mass production is no longer economically viable. Leaders must have a conceptual understanding of what high performance truly means and reflect that understanding in their actions. Before leaders can inspire change, they must themselves understand the consequences of their old attitudes and behaviors. Leading the charge to high performance requires a more entrepreneurial spirit that is customer-focused and communicative. By sharing information -- detailed business information -- with their workers, these leaders can tap into the wealth of knowledge their workforce has developed by being so close to the product and the customer. Leaders of the new workplace are not protectors of the status quo. Instead, they are agents of change that set high expectations for themselves and others. Yet these expectations are not threats or performance ultimatums. They guide change by sharing their vision and by building lasting relationships with employees, stockholders, and suppliers. They are technologically sophisticated and understand the importance of the workforce in designing and implementing new production methods and technologies. These leaders of change are courageous risk takers that venture into unchartered markets in search of a new niche and challenge their employees to come along for the adventure. They have a vision of where they want to be in the year 2010 and a plan to get there. LESSONS IN REALITY There are many examples of leaders who have approached change in innovative and unique ways. These leaders have engaged others in their vision of the future. They understand that the only way to beat the bear is to build partnership and trust with their workers. Change agents are needed as much, if not more, in the public sector. As a leader of change within my own organization, I am striving to practice what we preach -- to make the Department of Labor a high performance workplace. Revitalizing and reinventing the Department of Labor is a partnership between management and labor meant to find ways of fundamentally altering the way we work and the manner in which we deliver services to our customers. I have learned more from this process than I had ever imagined. Information sharing and drawing on the expertise of front- line workers really works. I was recently standing in the middle of hundreds of DOL employees at a Department-wide town hall meeting, and I said to the employees "Look, I want your ideas. I want to know. If you have a good idea of how to make this organization work better, how to help people out there in America, give me your ideas." Two days later, a couple of employees took me up on my offer. They said with unemployment insurance, why don't we provide a little bit of funding so states can identify the people who are going to be long-term unemployed and get them training and get them job assistance right away instead of waiting until the unemployment runs out? I brought that idea up to the President. Four days later, the President said "Terrific, let's go with it." Only three weeks later, it was signed into law. Those two employees who had been trying to sell that idea for seven years were there in the Oval office when the President signed the legislation. Looking at the long-term A long-term perspective and commitment to employees are vital characteristics of the new leaders. Beating the bear will not only require leadership from corporations, but also from other important stakeholders in the change process. Take, for example, the investment community. Our country has the tendency to value short-term time horizons in our investment markets. Such impatience tends to lead to under investments in human capital. Intangibles, such as training and work reorganization, are not recorded as assets in traditional accounting systems. Yet they are crucial for companies who are attempting integrated change. The capital investment that often goes along with building a world class workplace always produce a return in the short-term. Companies who want to implement new work systems that require investments in advance technology, worker skills and reorganized work processes are finding it difficult to get the patient ??patent??? capital they need. The patterns of short-termism cries out for a leadership role by the investment community in the change process. To the extent that investors are gaining increasing power and prominence in corporate decision-making, the criteria they set for investment decisions can actually shape the behavior of managers, labor leaders, and workers, leading to better bottom line results for the firms in which they invest. The question is whether investments based on nontraditional criteria, such as employee training, participation, profit- or gain-sharing, employment security, integration of technology and human resources, and health and safety, provide a means of identifying those companies most likely to yield a secure economic return. We have a lot of anecdotal and case-based evidence to support this theory and now we are finding intriguing quantitative results as well. Recent studies indicate that there is a positive correlation between innovative workplace practices and long-term firm performance. Though more rigorous evaluation is necessary, a clear pattern is emerging. If this linkage can be better defined through research, managers, investors and a variety of other stakeholder groups may be more comfortable in relying on workplace practices as a factor in making prudent and informed investment decisions. It will be these decisions that will make or break the change process. Members of the investment community owe it to their plan beneficiaries to consider and further explore this linkage. Small firms, big problems Great leaders of change come from companies of all sizes and sectors, but those in smaller firms are facing specific challenges rooted in their capital margins and resource constraints. Smaller firms constitute approximately 98% of the manufacturing firms in the US and account for more than half of the value added by all manufacturers. The smaller firms provide approximately 75% of the growth in manufacturing employment and 40% of the new jobs created in the US, making their participation critical to the retraining of our workforce for the jobs of the future. However, there is a growing concern that smaller companies cannot easily make the transformation to high performance workplaces. Often they cannot afford the investments in training or work reorganization that are necessary for their survival in the long-term. Instead, they must address the short-term interests of investors and the urgent, everyday production problems. We need to find ways to assist these small business leaders in changing the way they work. Creating strategic alliances for information sharing and collaboration among smaller firms with their suppliers, customers, and other small firms is one way to help lead and support large scale change. Also, tapping into the valuable expertise at the state, regional, and local level through industrial extension services offers an excellent source of low-cost, high quality assistance in the change process. LESSONS IN REALITY Springfield Remanufacturing Jack Stack, CEO of Springfield Remanufacturing, a small Missouri engineer rebuilding plant, has created a business based on employee involvement that has challenged his workers and his competitors. When the employees of Springfield Remanufacturing first thought of saving their jobs by buying the company, Stack says the employees (including himself) couldn't find a bank to back them. They knew little of the business they were in or how to begin the process of saving it. Of the 119 employees at the plant, only two knew how to read a balance sheet, much less prepare a financial statement. With Stack's leadership this company has taken off. Stack utilized all the tools of the new leader to create a true sense of ownership for Springfield's employees. The employees' financial stake in the company -- which includes bonuses of up to 13% of compensation based on quarterly targets -- has been a critical driver of its success. Stack makes sure that every employee receives quarterly reports and learns to understand the information. Because employees are able to identify efficiencies, innovations, and savings, Stack's emphasis on front-line workers has caused sales, profits, and customer service to improve dramatically. Stack solicits employees' opinions on how to improve the plant's operation. Everything from purchasing costs to inventory accuracy is measured and shared with the workers. Employees are also expected to spend at least 100 hours a year in training in areas ranging from basic skills to statistical process control. Open-book management and a common vision have significantly contributed to Springfield's tremendous success. Jack Stack has provided the opportunity for all employees to contribute to and understand their business. Sharing power, information and gains has proven profitable for Springfield Remanufacturing: since the ESOP was introduced, the employees' stock fund has climbed to $5.5 million from $6,000. Jobs have grown by 30% from 525 in 1990 to 750 in 1993. United Steelworkers of America The career of Lynn Williams, President of the United Steelworkers of America, epitomizes the union leadership which has been so critical in creating high performance workplaces in the steel industry and throughout unionized workplaces. Throughout his career, Williams has worked to empower workers, promote employee ownership, and create safe and healthy workplaces. Since becoming President of the Steelworkers in 1983, Williams has been a champion of initiatives to give workers greater input in the workplace. The Steelworkers' pathbreaking New Directions program will, as Lynn writes, "establish the best possible workplaces and enterprises in product quality, productivity, human resources, human needs, safety and health, opportunity, education, and training." The first of the New Directions agreements with Inland Steel last year will create a new labor management partnership that will provide full worker participation in all levels of the company, including the boardroom; restructure and modernize the company under a framework of employment security; and provide significant new training opportunities. Today, under Lynn's leadership, the USWA is one of the leading unions in establishing new labor-management relationships founded on worker participation and empowerment. Steel companies such as National Steel and the L-SE plant in Cleveland, Ohio are industry success stories due to their win-win partnership with the Steelworkers, and today they serve as high performance work models for the entire steel industry. The Steelworkers have forged a similarly successful partnership with Magma Copper Company in Arizona, which has experienced an extraordinary turnaround since becoming a cooperative, high performance workplace. Southwest Airlines Herb Kelleher's leadership at Southwest Airlines also illustrates the changing role of the leader in the new workplace. In an industry where competition is fierce, he credits his employees as the key to his success. Through extensive training, information sharing, innovative compensation plans, and employee involvement, he has given his workforce the opportunity to shape the company around a vision of quality, flexibility and customer service. Kelleher has dared to be different. Described by some as zany he advocates and exemplifies a sense of humor and fun at work, believing that it contributes to a working environment that is productive and committed. He is in constant contact with his employees, sharing information about the company and providing encouragement for their efforts. Kelleher has put a lot of money into training, especially because Southwest promotes from within, filling approximately 80% of higher-level jobs through internal promotion. Ninety percent of the airline's workforce is unionized, and the workers own 11% of the company. Annual turnover is 7%, the lowest in the airline industry. On a typical day, its planes are in the air 11 hours, versus an industry average of 8, and it has an average of 10.5 flights per gate each day compared with an industry average of 4.5. Its lean, six-person ground crews can turn a plane -- ready it for flight -- in just 15 minutes, compared to an average of 1 hour required for most major airlines. Southwest Air has a profit sharing plan with its workers (one of the first in the airline industry) and is noted for its unusual employee loyalty and high ratings for customer service. These results are due primarily to Kelleher's leadership as the organization's coach, risk-taker and change agent. Facing the change together Our goal is to communicate this new vision of the workplace to the millions of businesses and public offices all over the country. Just beginning this process, we have found that the more leaders in companies talk to each other about what works and what doesn't, the faster of the pace of change becomes. Our mantra is that business, labor, and government must work together to outrun the bear. Last July, the Department of Labor teamed up with the Department of Commerce to produce the Conference on the Future of the American Workplace. Over 500 CEOs, plant managers, front-line workers, union leaders, and government, representatives attended and began an important dialogue. [SysOp note: The transcript of this conferences is available for download from the TQM BBS. Filename: WRKPLACE.ZIP.] The discussion among these leaders focused on the benefits and barriers associated with implementing new work systems. It was the first time that these issues were brought to the national forefront with all the major stakeholders at the table at one time. These are the leaders of change in America today. Despite their different backgrounds and perspectives, they all had the same message: to survive, we must change and rethink the way we do business. From this conference, it was clear that the Department of Labor needed to take a leadership role in providing the tools, information, and impetus for change in American workplaces. That's why I created the Office of the American Workplace. The mission of this office is to encourage the creation of better jobs and better business results through high performance work practices and more effective labor-management relations. Our goal is to support and encourage more companies to change, by providing information, inspiration, and technical support, and by working closely with both business and labor organizations. The Office of the American Workplace is a resource for leaders who are ready to take the plunge and a source of information and encouragement for those companies still deliberating. OAW has initiated a Performance Measurement Project to: 1. Develop better measures of workplace practices and provide reliable indicators of firm performance 2. Examine the link between high performance workplace practices and long-term operational and financial results. To accomplish this task, the Office is developing tools to assist stakeholders in evaluating a business unit's high performance investments. Target stakeholders include investors, boards of directors and senior executives. Measures of investment include workplace practices, such as training, employee involvement and total quality management, as well as workplace outcomes, such as employee turnover and customer satisfaction. The project is sponsoring research to determine how well these workplace practices and outcomes predict future financial and operational performance. A large part of our strategy is to help business leaders become the agents of change. A proven tool for this is partnering with other organizations that have a stake in the change process. An example is our work with the National Association of Manufacturers. In a joint effort to raise awareness of the changing workplace, we have reached out to senior leaders of America's small- and medium-sized manufacturing firms. With the help of NAM's vast network of member companies and its knowledge of the manufacturing sector, we have taken our expertise to the field. In turn, the participants of our executive forums have shared important information about the struggles they faced on the road to high performance. Perhaps the most important facet of this activity has been the peer-to-peer interaction among the CEOs. They have commented extensively on the usefulness of this kind of exchange as they help shape their vision and put it into action. Spurred by the accounts of others success, these CEOs have developed networks among themselves and continue to share valuable information with each other. Moving forward Leaders of the new American workplace face many challenges. The important decisions about people and profits are fast becoming daily reminders of these challenges. The leaders of this change must display more entrepreneurial skill than ever before. Though it requires leaders with tremendous amounts of courage, energy, and vision, we must rise to the challenge of changing the way America works. This depth of change requires ingenuity and commitment coupled with a shared sense of responsibility for ourselves and for one another. We can operate in a zero-sum it's either you or me world or we can forge a new spirit of cooperation that will allow all of us to outrun the bear. True leaders of change will find a way to work together. Now is the time to create a vision of the future American workplace and to mobilize the leaders of this vision -- industry, education, government, and labor -- to act on the tremendous opportunities that we face as a nation. This article appeared in the March, 1994 issue of the Journal for Quality and Participation, The Association for Quality and Participation's official Journal. This article and 4,000 other articles and conference presentations on quality and participation may be accessed and purchased for a nominal fee from the AQP's Information Center: Call 513-381-1959 or Fax 513-381-0070 and ask for Sara Olberding. She can run a topic search of our database for articles, presentations and books on your quality and participation management topic.