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OCR for page 109
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
OCR for page 110
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
OCR for page 111
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.
OCR for page 112
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
OCR for page 114
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
OCR for page 115
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
OCR for page 116
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
OCR for page 117
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
OCR for page 118
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
OCR for page 119
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.
OCR for page 120
120
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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.
Representative terms from entire chapter:
workforce management
