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Jobs and People: The impact of Workforce Management on Competition Competition in the U.S. auto industry has undergone fundamental changes in the last 10 years, primarily because of increased penetration of the market by foreign manufacturers. The recent acceleration of this trend has heightened awareness of the changing parameters of competition and raised questions about the viability of domestic production. We have presented evidence that suggests that the Japanese manufacturers have developed a highly productive manufacturing process, a process that produces cars of standard-setting quality. While several elements of the Japanese success are familiar and indeed represent refinements and extensions of concepts and practices developed in the United States, there is a growing recognition that certain, apparently critical aspects of their approach to production are either not incorporated in U.S. practice or have been accorded much less emphasis. Prominent in the latter category is the whole range of policies and procedures connected with workforce management. . ... . . . . . while the notion that people are important has been a standard U.S. business cliche for some time, the emergence of the Japanese In worm markets In the 1970s has demonstrated both the truth of the proposition and the extent to which U.S. business practice has departed from it. In the auto industry, it is becoming increasingly clear that the work force--the people who design, monitor, maintain, operate, assemble, inspect, supervise, coordinate, and plan--plays a significant competitive role. This role extends not only to the traditional concerns of productivity and cost but also to the quality and performance of the vehicle. It has always been obvious that people were a necessary part of the business, but the Japanese have driven home the point that the work force can be a key weapon in the competitive arsenal. And it is not only in the innate talents of individuals that competitive advantage lies but also in the ability to coordinate and direct those talents, to create a work force capable of outstanding performance. 109

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110 Some have argued that the competitive advantage of the Japanese (at least as far as workforce management is concerned) is deeply rooted in Japanese culture.) In this view, U.S.-Japanese competition is not so much a matter of specific companies' strategies and capabilities as it is a contest of national values, mores, and social goals. While it is true that such factors will influence competition, it seems far too pessimistic to conclude that individual companies have little ~ r . . .. . . . control over their competitive fortunes. Indeed, the success of several U.S.-based plants of Japanese companies suggests that whatever advantage the Japanese have attained in their work force is less a matter of culture and more a matter of the way the operations are managed. These considerations suggest that change in the management of people will be a key aspect of any attempt to restore the com- petitive position of U.S. auto production. Such change must focus on the work force at all levels. While much public discussion of work innovation has been concerned with workers on the assembly line, salaried and managerial personnel and indirect production workers now constitute a large fraction of the industry's work f orce. Bringing change to the management of salaried and managerial personnel involves a somewhat different set of issues than change among production workers represented by the United Auto Workers (UAW). In this chapter of the report, we focus on the employment relationship at the plant level and in particular on union-management relationships and their impact on workforce capabilities. Many of the issues raised, however, apply (with some modification) to the salaried work force as well. We first trace the impact of technology, unionization, and management practice on the evolution of the employment relationships and then examine a number of innovations that have appeared in the last several years. TECHNOLOGY AND THE NATURE OF EMPLOYMENT The employment relationship that prevails in the U.S. auto industry today is the result of a long, evolutionary process that mirrored the development of process technology. We have argued that the course of technology change, at least until 1974, can be seen as an evolutionary process in which a flexible mode of production was transformed into a far more efficient but highly structured form. The evolution from early fluid stages of development to the more rigid specific stage has had a profound impact on the nature and management of work. In the very early days of the industry the highly skilled, all-purpose machinist played a dominant role in productions Tasks were generally of long duration, requiring a relatively high level of skill. A good deal of art was involved in the metal-work

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1 1 1 operations, and consequently there was much more reliance on individual responsibility and pride in craftsmanship than on standards or supervision to achieve desired levels and quality of output. Even where supervision was involved, the supervisor tended to be a senior journeyman and the content of the super- vision was more likely to be technical and artistic, rather than simply checking up. Personnel policies as we think of them today were rudimentary: the wage structure was chaotic, criteria for job assignment and transfers ware ill cl~fin-rl Al hiring `~r:.c haphazard. __ ^. ~ , ~ . l .~ ~ ~ With the emergence of relatively high volume production and consequent standardization and mechanization, production work was transformed. Tasks were significantly reduced in duration and skill content. Machinery operator or tender became the dominant work classification, and dexterity, quickness, and judgement became the dominant skills. The increasing division of labor permitted by mechanization fundamentally altered the relationship between the worker and the product. With tasks highly specialized and fragmented, the connection between any particular individual's efforts and the quality or performance of a recognizable end product became tenuous. Whereas the older, all-around machinist could point with pride to a particular engine block of his work, the engine assembly-line worker who mounted head gaskets had no such ability. In effect, the skills embodied in the old machinist had been transferred to the equipment, and it was the complex equipment rather than the worker that became the subject of wonder and awe. As the frequency of product change diminished (particularly in the Model T era), as tasks become routinized and the process more m echanized, management practice and the methods of organizational control also changed. The standardization of tasks made possible precise measurement and the development of work standards. Supervision increased in importance as a means of ensuring regular production, adherence to standards, and steady throughput; asset utilization became an increasingly important criterion. To ensure the most effective use of the vast resources embodied in equipment, the auto firms developed an increasingly hierarchical, bureaucratic organization. In managing the large numbers of people at the plant level, for example, the wage structure was rationalized to reflect the skill content of jobs, and policies for hiring and transferring people were formalized.3 Thus, long before the advent of unionization, an individual worker's employment relationship with the company was structured by r ules, standards, and procedures. Most production jobs involved few tasks, and the hierarchical organization structure placed responsibility for control, coordination, and planning of production in a staff group far removed (organizationally) from the actual process.

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112 It is tempting to see the organization and management of production--the locus of responsibility for decisions, the par- ticular methods of control, and so forth--as flowing inevitably from the technology. But this seems to be unjustified. Experi- ence with production in various parts of the world has demon- strated that a given set of machines, processes, and techniques can be managed in different ways. Cultural factors, historical experience, and even management strategy can affect the choice of organizational form. Certainly the technology is important and will create similarities in the nature of tasks and even the design of jobs. But to affect is not to determine. This is particularly true in the "depth" of job definition--that is, how involved workers are in goal setting, planning, coordination, process improvement, troubleshooting, and so forth. It is our view that the emergence of a hierarchical, bureaucratic organization and narrow, shallow jobs in production should be seen as a management choice, conditioned by technology but influenced by a variety of other factors. While a full analysis of the origins of the management structure and process is beyond the scope of this study, one thing is clear: the organization f irms chose to manage the evolving process technology, and the technology itself put a considerable distance between the average worker and the competitive for- tunes of the enterprise.4 The close relationship between the craftsman and the product, a relationship mediated by pride of craftsmanship and involvement in some aspects of design and planning, was gradually replaced by a relationship whose principle nexus was cash. THE UNION-MANAGEMENT RELATIONSHIP Changes in technology have continued to influence the character of work and the employment relationship in automobile produc- tion, most notably through massive automation in the late 1950s. But the basic direction of change, the move away from artisan skills to operating, monitoring, and maintaining complex pieces of equipment, was established in the Model T era. Since the 1930s, however, collective bargaining has added a new and significant dimension to the process. Unionization added a new institution, and the process of organizing the industry crystallized the views, principles, concepts, and categories of thought that guided the decisions of management and union leaders for years thereafter. The story of the organization of the auto industry in the 1930s is well known, and its specifics will not be repeated at length here.5 It was a bitter struggle, characterized by acts of violence and rampant illegal behavior on both sides. The bitterness

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113 reflected in part the nature of the times; in part the legacy of arbitrary, heavy-handed supervision and mistreatment on the shop floor; and in part a fear that radical change in power and control would follow union recognition. These perceptions were not com- pletely fanciful. In the 1 920s work in the plants had become onerous, especially at Ford, and methods of control increasingly abrasive. Likewise, the demands of the Congress of Industrial Organizations (CIO) and the UAW were radical--a 30-hour week, . . . joint un~on-management control of line speeds--and the sitdown strike at General Motors (G M) underscored the ability of an organized work force to exert control over operations. In this context, it is no surprise that Alfred Sloan, Chairman of GM, would resist organization and no surprise that he would refer to the union leaders as "labor dictators." Writing to employees in January 1937 in response to UAW demands, Sloan posed the funda- mental issues as he saw them: Will a labor organization run the plants of General Motors Corporation or will the management continue to do so? On this issue depends the question as to whether you have to have a union card to hold a job, or whether your job will depend in the future, as it has in the past, upon your own individual merit. In other words, will you pay tribute to a private group of labor dictators for the privilege of working, or will you have the right to work as you may desire? Wages, working conditions, honest collective bargaining have little, if anything, to do with the underlying situation. They are simply a smoke screen to cover the real objective.6 While GM recognized the UAW in 1937, Ford held out until 1941. The reaction of Ford's managers to unionizing efforts was f ar more vigorous than Sloan's. Members of the Ford Service Department beat up union organizers in the famous "battle of the overpass" in 1937, and suspected sympathizers were fired, harassed, and intimidated. These actions reflected and reinforced the psychological distance between production workers and the firm. In 1941, when Ford finally capitulated, only 5 percent of the workers at the giant Rouge plant voted with the company; 70 percent voted for the UAW, while 25 percent voted for the American Federation of Labor (AFL). The original demands of the UAW, laid out in 1937, focused on recognition of the union, compensation, seniority rights, establish- ment of procedures for resolving disputes, and mutual determina- tion of line speeds.7 Except for the issues of line speeds, all these issues were dealt with in contracts signed by GM in 1937 and by Chrysler and Ford in later years. Line speeds and other

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114 production-related matters, such as work standards, the design of jobs, and so forth, were regarded by the companies as manage- ment prerogatives, and attempts by the UAW to give the union and workers a larger voice in these matters were strongly resisted by the companies. Over time the union succeeded in introducing work rules and in obtaining influence in the production process through the grievance procedure and administration of the con- tract. But as far as the individual worker and his daily tasks were concerned, input into decisions about the work and influence over the nature of the fob were indirect and I im itr?`i hv management policy. The organizing effort of the 1930s and the collective bargain- , O ing contracts that grew out of it made explicit an adversarial relationship that had begun to form in the interaction of tech- nology and the organization chosen to manage the technology in the early years of the industry. Furthermore, the bitterness of the struggle and the ideology that infused it obviously influenced the character of the new institutions (negotiations, grievance procedures, shop steward/foreman relations) that emerged; the relationship was not only made explicit but also was solidified. As Sloan's statement noted, the basic issue, the principal concern of the companies was not the particulars of wages and working con- ditions but the fundamental prerogatives of management. These became an end in themselves and the foremen and supervisors their day-to-day guardian. The employment relationship that developed under the collec- tive bargaining agreements of the 1940s and 1950s was structured by a complicated set of rules and procedures. Compared with the 1 920s and 1 930s, workers had a greater voice in determining conditions of employment and greater protection from arbitrary action. While the work itself had undergone changes because of increased mechanization and automation, the pressure for produc- tion, for meeting budgeted volume and cost objectives, was no less intense. Most public attention focused on the issues of com- pensation as they surfaced in the periodic negotiations. But the labor-management relationship on the shop floor was dominated by the issues of production--work standards, work pace, attendance, staffing requirements, and so forth. Although the employment contract became complex, the basic principle seemed to be "a fair day's work for ~ fair day's nav." ~ r ~ ~ r ~ _% . . ~ . . . . . . Palrness IS, ot course, relative, and, within the framework of the contract and the grievance process, management used and protected its prerogatives to secure the work it needed to meet its objectives. Standards and supervision remained dominant, and technology aided the control of production through machine pacing. The union sought to protect the contractual rights of its

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115 members in the grievance process and negotiated increasing levels of compensation. Although the adversarial nature of collective bargaining and of the employment relationships persisted and was manifested in occasional strikes and disputes, it seems to have provided a work- able approach to workforce management throughout the 20-year period from 1945 to 1965. At the plant level the primary com- petitive objective was production, an objective well suited to methods of control based on machine pacing, supervision, and work standards. Moreover, workers were relatively well payed, had some control over employment conditions, and had a process at hand for resolving disputes. It was also important that the larger An, , ~ ~ . . . . . . . . .. . . .. ~ arms In the Industry had similar contracts and a similar employment relationship. Differences in style and substance in . . . .. . . . labor relations existed among the Big 3, but compared with styling, dealership networks, and economies of scale, workforce management was a relatively neutral factor in competition. The employment contract proved workable in a competitiv e environment that emphasized production and acceptable quality and with workers familiar with the depression and World War II. As conditions and people changed in the late 1 960s, it became increasingly unprofitable. In retrospect it is clear that, while the traditional employment relationship gave the worker a limited voice in setting conditions at work and while it Daid well. it did not secure loyalty of commitment. . . . . . . . . . ~ - , Nor was it intended to. Neither the competitive situation nor managerial organizational strategy placed a premium on loyalty or commitment. Production objectives required people to operate the equipment, but as long as minimum standards were met (and supervisors ensured they were) loyalty or commitment was not essential. Changes in the work force in the late 1960s and Japanese and European competition in the 1970s placed new demands on the employment relationships. The problems of younger workers, the issues of alienation, boredom, and aversion to production work have been well documented.8 -^ in ettect, these problems indicate the extent to which the employment relationships relied on forms of compensation not as highly valued by a new generation. These developments provided a source of internal pressure for change. At GM, for example, concern about the performance of the workers led to a range of studies and projects in organizational development in the late 1960s and early 1970s. But even at GM, innovations in workforce management diffused very slowly in the organization. In contrast to the lack of substantive change in the employ- ment relationship before the 1970s (despite all the popular atten- tion afforded the "blue collar blues"), the current competitive crisis seems to have convinced management leaders of the need

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116 for change bunion leaders (national level) have supported changes in workforce management for some time]. The competitive thrust of the Japanese has altered perceptions, while it has altered the standards of comparison in the marketplace. A rethinking of the competitive value of the traditional relationship is under way. Given the new competitive environment. the traditional adversarial relationship can be unprofitable both because of the practices and attitudes it engenders and because of those it does not. We have already noted the lack of any incentive for loyalty or commitment in the bargain. Clearly, high quality requires some measure of care in production. It has apparently been assumed that assembly quality could be insulated from worker influence by dividing tasks, by automating, by closely supervising the work, and by inspecting extensively. While acceptable quality can perhaps be achieved in this manner. ot~tc~t~ndina nrncl'~f~tic~n ran? fired something more. , ~ , rat ^ -~~~~ it is important to realize that even if workers were committed and loyal and sought high quality the organization of work creates significant obstacles. With an emphasis on production, with supervisors under pressure to keep the line moving, a worker has little incentive (to put it mildly) to be more careful than the minimum requires or to check previous operations. Indeed, the pressure of the line often has precisely the opposite impact. The traditional employment contract relies on supervision and standards to ensure an acceptable volume and quality of produc- tion. But it is also true that it relies on the willingness of the worker to be subject to the supervision and the standards. Furthermore, the grievance procedure creates an opportunity for the union to exercise a degree of influence on the production process. If there is not some kind of agreement on short-term objectives, the grievance procedure can be used to play all sorts of games. A typical pattern is for the shop steward to build up a backlog of grievances (some justified, some not) to be used as bargaining chips for reduced workloads that plant management buys off in order to avoid disruption. At the same time, super- visors, under pressure to get production and improve efficiency, harass people to get results, which creates opportunities for more grievances. This kind of vicious cycle is not harmless politics; it can have serious effects on quality and productivity. Another problem with the traditional relationship, one that is often overlooked, is the failure of management to tap the infor- mation and experience embodied in the work force. Suggestion programs notwithstanding, a basic assumption of the bargain and one incorporated into practice is that management knows how to make the cars, and the worker's job is simply to follow instruc- tions. Experience has shown, however, that workers have valuable information and insight that can be profitably employed. An

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117 example from GM's Tarrytown plant--a relocation of trim departments--illustrates the point: At first, the changes were introduced in the usual way. Manufacturing and industrial engineers and tech- nical specialists designed the new layout, developed the charts and blueprints, and planned every move. Two of the production supervisors asked a question that was to have a profound effect on events to follow. "Why not ask the workers themselves to get involved in the move? They are experts in their own right. They know as much about trim operations as anyone else." Old timers in the union report wondering about management's motives. Many supervisors in other departments also doubted the wisdom of fully disclosing the plans. Nevertheless, the supervisors of the two trim depart- ments insisted not only that plans not be hidden from the workers but also that the latter would have a say in the setup of jobs. The supervisors were impressed by the outpouring of ideas: "We found they did know a lot about their own operations. They made hundreds of suggestions and we adopted many of them."9 THE POTENTIAL FOR CHANGE It is now generally recognized among the leaders of both th e companies and the UAW that the old employment contract is increasingly unprofitable. The process of change has begun, and, as the Tarrytown experience illustrates, considerable progress has been made. The magnitude of the adjustment is substantial. If this brief discussion of a complex problem leaves any impression, it should be that the employment relationship--the relationship of the company, the union, and the worker--is a capital resource of the firm. It is a long-lived asset. The character of the relation- ship today is the legacy, in part, of decisions made long ago. To change the management of the work force is to change not only rules and procedures or organizational structure but also the habits of mind, patterns of interaction, and whole categories of thinking. Like any capital asset, change requires investment. What "investments" in changing the employment relationship and workforce management are under way in the industry? What is the potential for successful change? We have already noted the efforts at GM to introduce organizational development and "Quality of Work Life" programs in production operations. This effort began almost 10 years ago and has spread in one form or

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118 another to almost 80 percent of GM's plants. The approach has been "bottom up," with managers of facilities in the critical decision-making role. Thus, while there is pressure for plant managers and local union officials to have some kind of program, specific approaches and initiatives are not imposed from the top. An effort to create "employee involvement programs" is under way at Ford. Working with the UAW leadership, and using a com- bination of grass-roots and "top down" methods, Ford has made the need for high quality an organizing theme for its efforts. Programs to create a climate of involvement and commitment are in progress at well over half of Ford's facilities. Significant strides have been made in developing a more cooperative relation- ship, with measurable improvements in product quality a tangible result. In league with the UA W. both Ford and G M have begun to redefine the nature of the employment relationship and the structure and organization of work at the plant level. Success will require not only change at the level of the production worker but also in middle management and at the very highest levels in the organization. Indeed, research at GM and elsewhere has shown that even at the plant level, improvements in workforce management and performance require a commitment and leader- ship from the top plant and union officials and involvement and organizational change among staff and line middle managers. A similar conclusion about commitment applies to the cor- poration as a whole. Recent changes at GM are instructive. Two top-level appointments were recently made that may signal new attitudes and approaches to quality and labor relations. For the ~ ~rs~ time ever, AM nas placed a sen~or-level executive, in this case a vice-president, in charge of quality. Furthermore, GM's new Vice-President of Labor Relations was drawn from the personnel side of the business and has been involved and deeply committed to GM's programs in quality of work life. These developments seem to indicate a recognition of the need for continued organizational innovation. ~ _ ~ ^ ~ : ~ ~ ~ ~ ~ A ~ _ _ _ I _ _ I ~ Prospects for Adaptation The organizations that produce automobiles in the United States are immense. The attitudes and practices, the patterns of thought and action that underlie employment, are deep-seated. How likely is it that such large organizations will succeed in adapting and changing in such fundamental ways? We offer no definitive prediction, but a number of key factors can be identified. Our r esearch on productivity and organizational change in other l

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119 contexts suggests that successful instances of adaptation share four characteristics; these are spelled out in Table 7.1. The available evidence suggests that the impetus for success- ful change comes from both internal and external pressures. When one kind of pressure is absent, firms are less likely to engage in a fundamental examination of the operation of the enterprise. That kind of rethinking of the basic premises of the organizational strategy appears to be a key aspect of successful change. Unless m anagement undertakes a thorough review and calls the basic operating procedures into question, change is likely to be superficial. R eview of procedures is more likely to be fundamental and far-reaching if it is led by a newcomer with influence and exper- tise. The newcomer may be a consultant or a line manager who appears to have the advantage of fresh perspective and few inter- nal political connections. The final characteristic spelled out in Table 7.1 is the style of decision making and problem solving. The evidence suggests that successful change occurs in the context of shared power and authority, when those affected by the decision have a voice in its determination. Table 7.1 presents both an ideal situation in this framework and an assessment of the auto industry's position along these dimensions. It is by now abundantly clear that the industry faces extraordinary internal and external pressures. Whereas declining profitability has been a source of concern over the last 15 years, the question is now one of survival (at least for U.S. operations). Looking at other factors, the industry has begun what appears to be a thorough examination of the workforce issue. Further, there is some evidence in both GM and Ford that the approach to change in workforce management involves a sharing of power between bosses and subordinates; the close involvement of the UAW is also supportive of this view. Finally, there is little evidence of the role that "newcomers" might play, but there is some indication of a search for and a receptivity to new ideas, new approaches, and people to back them. There should be no misunderstanding. The factors sketched out in Table 7.1 are not a recipe, but rather a set of conditions that appear to be important in instituting organizational change. Nor should the magnitude of the task facing the industry be underestimated. In the case of productivity, product quality, and the role of the work force, we are talking about something close to a cultural revolution, about fundamental changes in the way the business is managed and the ways that people at all levels participate in the enterprise. Recent developments suggest a good deal of adaptability in the collective bargaining relationship and thus some reason for optimism.

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121 NOTES 1. A particularly clear statement of this view was articulated in the 1980 Fiat Annual Report. 2. The importance of the all-purpose machinist has been amply demonstrated by Rae (1959~; see especially Chapter 3. 3. This process has been documented by Chandler (1964~. 4. This is obvious in the history of such groups as the Ford Security Service; see Chandler (1964), pp. 215-218. 5. See, for example, Fine (1969~. 6. Chandler ~ 1964~. 7. The history of the contract has been documented. See, for example, Monthly Labor Review (March 1937), pp. 666-670. 8. Some of these have been overblown. For some interesting insights into work on the assembly line, see Guest (1973~. 9. Guest (1979), p. 78.