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Reinventing the Workplace:
How Business and Employees Can Both Win:  Managerial,
Union, and Business Partner Support

by Dr. David I. Levine

Managerial Support:
       Lower and Midmanagement Support
       Top Management Support
Union Support
Business Partner Support
Supplier Relations at NUMMI
Problems with Just-in-Time Delivery
Worker and Supplier Participation
The Importance of Integration
Total Quality Management
Reinventing The American Workplace Home

Policies that enhance the ability and willingness of employees to participate effectively in their place of employment, although critical, are not sufficient for employee involvement to succeed. A company must maintain support of its managers, unions (where present), and business partners such as suppliers and customers.

Managerial Support

Ninety-five percent of American managers today say the right thing. Five percent actually do it. -JAMES O'TOOLE

Most directly, employee involvement requires changes in companies' management systems, both for low- and midlevel managers and for top-level executives.

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Union Support

We want more school houses and less jails; more books and less arsenals; more learning and less vice; more constant work and less crime; more leisure and less greed; more justice and less revenge; in fact, more of the opportunities to cultivate our better natures. -SAMUEL GOMPERS

Establishing and maintaining union support for employee involvement is both crucial and difficult. Understanding the role of the union in the high-involvement workplace requires knowing about the three bases of union power in the traditional U.S. workplace and how employee involvement challenges each of them.

The first source of union power is an ideology based on worker solidarity, united against management. In the traditional setting, managers make all investment, technological, and production-related decisions; thus unions are left free to fight for workers' interests with minimal regard for productivity. In an extreme case of management-worker conflict, such as at
GM-Fremont, the union fought the dismissal of workers who were caught stealing or were routinely incapacitated by drugs or alcohol.

Employee involvement challenges solidarity based on opposing management by emphasizing labor-management cooperation. Cooperation in dispute resolution puts union leaders in a quandary. Even if joint problem solving leads to more fair outcomes on average, in any given grievance the affected worker wants the union to be a strong advocate, not a fair judge. Furthermore, many gainsharing and bonus plans reduce solidarity by turning workers against their slower colleagues. In addition, some autonomous work teams determine pay and discipline blurring the sharp line between managers and workers that unions have sought to maintain.

The second source of power is a detailed contract that limits managerial favoritism. Employee involvement, by contrast, leads to flexibility, which opens up possibilities of managerial favoritism and playing workers off against each other. Moreover, the contract is often disregarded when workers make suggestions that contradict it. In addition, in a high-involvement workplace, new nonunion forms of employee representation often compete with the union as mechanisms to resolve problems. These alternative sources of power are often threatening for the union leadership.

The third source of union power is the set of detailed work rules that permit workers to "work to rule" as a form of job protest; that is, workers precisely follow all rules when they want to slow down work and punish management. Employee involvement's flexibility removes this source of bargaining power. Workers often offer their good ideas, leading to management demands for a faster pace of work. In many cases, managers embrace the additional flexibility of weakened work rules and increased ability to reassign workers, but they do not deliver substantive participation as a quid pro quo. The result is often unhappy workers with fewer job rights and a distaste for participation.

Tensions between unions and employee involvement are augmented when the threat of plant closures is one force motivating managers to propose employee involvement. Many workers come to participate and share their ideas because they fear that their plant or office will close down otherwise. Critics claim that employee involvement introduced under the threat of job loss is hardly "involvement." In defense of employee involvement, the threat of plant closure is present for workers whether or not their jobs include involvement; employee involvement merely makes it more likely that surviving jobs are more interesting (although they may have less slack time). This point does not address critics' claim that an economic system based on the threat of job loss to motivate employees has a built-in element of stress and injustice. Furthermore, no amount of cooperation at the workplace or the corporate level eliminates the struggles workers may have with owners at the industry, national, or international level over the appropriate amount of wages and profits.

To maintain union support in the long run, employee involvement must not eliminate the role of the union leadership, reduce union solidarity, or lower the union's bargaining power. Thus strong pressures exist to extend the scope of participation beyond the shop-floor level, if for no other reason than union officials are permitted to become involved in the participative process. At NUMMI, for example, the union participates in committees that resolve disputes that occur at a lower level; for example, when a work group feels a suggestion will increase safety, but the supervisor disagrees. Labor-management committees are also important when issues span multiple work groups. Finally, these forms of participation can provide benefits to all workers that no single worker has an incentive to provide.

As with management support, participation is more likely to enjoy union support at low levels if it is also supported by higher-level union officials, as is increasingly the policy of both the AFL-CIO and many national union leaders.(9) Companies that implement participation at one plant while fighting unionization at another will often run into difficulties with higher levels of the union hierarchy.

The union is understandably less likely to resist if it is an equal partner in designing the participative program, as is occurring increasingly. Employee involvement must be implemented with carefully crafted agreements, so that workers have no incentive to punish their peers, such as those who emphasize safety or quality at the expense of productivity and short-run bonuses.

Finally, successful employee involvement in the long run requires that the workers' collective bargaining power not decline. Critics of employee involvement are correct when describing how the typical employee involvement plan does little to truly empower workers.(10) At the same time, low-power employee involvement programs are not long-lived, given that workers are rarely repeatedly fooled. If employee involvement is only a cover for a speed-up, the flow of new ideas usually dries up. In almost all cases, sustained employee involvement is coupled with reduced managerial oversight and increased reliance on workers' suggestions and creativity. The result is a workplace where productivity will decline immediately if workers protest or even if they passively fail to share their ideas. Management's reliance on workers for continuous improvement can strengthen workers' bargaining power. For employee involvement to be sustained, this increased bargaining power must be coupled with implicit or explicit gainsharing with workers.

Empirically, QCs introduced in unionized settings are more likely to last than those in nonunion plants for at least two possible reasons: (1) unions may screen out badly designed plans; and (2) unionized employees may be less afraid to express their opinions, even if they are critical of management.(11) Guarantees of job security and gainsharing are significant as means of reducing employee resistance. These promises become more credible if the union is in a position to guarantee them. Because of the advantages to worker representatives, some nonunion employers in the United States and abroad (especially Japan) have introduced forms of representative participation. They include American counterparts of works councils, in which workers elect representatives and employees to sit on appeals committees for grievances and dismissals. Some of the forms of representative participation have been judged illegal in the United States.(12)

Union involvement is more common at successful high-involvement companies. In the 1987 Fortune 1000 survey, unionized companies that reported above-average success with employee involvement also reported higher union participation in the employee involvement effort. Companies with more union participation also reported that their employee involvement program was more successful in improving union-management relations, in increasing employee trust in management, and in decentralizing power.(13)

Other studies supported the positive effects of union involvement with employee involvement. Maryellen Kelley and Bennett Harrison also found that worker-management committees raise productivity in unionized establishments, but not in nonunion ones. Kelley and Harrison's measure of committees was ambiguous, encompassing both direct participation such as quality circles and representative participation such as union-management quality of worklife committees. One possible interpretation of their findings is that the combination of quality circles and union-management committees is effective, while QCs alone have negative effects. Similarly, William N. Cooke concluded that teams are more useful in raising productivity in union than in nonunion settings.(14)

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Business Partner Support

Paralleling the change in employment relations, many high-involvement organizations made modifications in their customer and supplier relations, turning customers and suppliers into business partners. A new business partner model emerged. At NUMMI, as at other examples of successful quality programs, "The organization establishes a partnership with suppliers and customers to assure continuous improvement in the quality of the end products and services."(15)

In contrast, in the days of GM-Fremont, GM's relationships with outside suppliers were adversarial and were held at arm's length. If one supplier had rising costs or declining quality, GM quickly switched to another supplier. To maintain a credible threat to terminate a relationship, GM employed many suppliers per part and negotiated only short-term contracts. To facilitate comparison among prospective suppliers, GM did virtually all of the design.

In all of these respects, GM was like most of the organizations in the American public and private sectors. Purchasing decisions were based on the outcome of a competitive process for supplier selection. On the one hand, this strategy maximized GM's bargaining power and made monitoring the purchasing agents easy. On the other hand, it cut GM off from suppliers' ideas about product design and limited suppliers' willingness to invest in equipment and skills that were useful only for GM products.(16) The result was a cumbersome purchasing bureaucracy that maintained comparability among suppliers while stifling communication between suppliers and the purchaser's engineers (because that might lead to favoritism). Taking an example from another big purchaser, the military specifications for chocolate-chip cookies run to sixteen pages of tiny, single-spaced type.(17)

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Supplier Relations at NUMMI

Partly to promote close supplier relations and partly to avoid protectionist pressures, NUMMI has rapidly increased the proportion of its parts that are made in North America. Unfortunately, few North American suppliers had ever dealt with the
Toyota Production System.

Toyota and NUMMI engineers initially worked closely with seventy North American suppliers. In some cases, the company responsible for supplying Toyota in Japan helped its North American counterpart establish a lean production process. During the production start-up period, NUMMI found three times as many defects in North American supplied parts as in Japanese-supplied parts. But between 1985 and 1989 North American suppliers improved steadily to achieve quality, delivery, and cost levels comparable to their Japanese competitor.(18)

The NUMMI production system leads suppliers, like workers, to continuously work to improve the production process. While GM would often have a dozen or more suppliers producing a single part, NUMMI has one source for each major component. GM's strategy maximizes bargaining power but requires GM to perform all design work in-house.(19)

When a supplier was late in delivering parts or did not deliver sufficient quality, GM threatened to cut off purchases. NUMMI works closely with the supplier to discover the root cause of any problem that arises. As with just-in-time production, just-in-time deliveries from suppliers increase opportunities for learning each blip in production leads to a stoppage of the assembly line. The procedure greatly increases incentives for understanding root causes of problems and preventing recurrences. As part of the process, engineers (and even production workers) often move back and forth between NUMMI and its suppliers.

During start-up of a new model year, engineers from the supplier work in the NUMMI plant, just as they worked with the Toyota design team during the previous year. The goal is to jointly optimize, eliminating operations that are expensive for the supplier but add little or no value to the product. For example, one NUMMI supplier discovered it was painting the surface of a piece that, when installed, could never be seen by a consumer. When a supplier better understands the use of a part, operations that are not cost effective are eliminated. Similarly, the automakers better understand the cost of their design decisions, permitting future models to be built more cheaply. Under the old arm's-length regime, suppliers did not want to share information with purchasers. They feared that if the automaker knew how much a part cost, then the price would be lowered to that level.

New forms of supplier relations have spread throughout the United States since the mid-1980s. One indicator of the magnitude of the change is that the percentage of U.S. auto suppliers that provide detailed information about their production process to their customers has doubled over the last ten years, from 38 percent to 80 percent.(20) The basis for this change has been mounting evidence that long-term, information-rich relationships between suppliers and customers lead to faster product development, increased flexibility, and higher quality. For example, Kim Clark estimated that supplier contributions accounted for one-third of the Japanese automakers' advantage over their U.S. counterparts in total engineering hours required to develop a new car.(21) In the mid-1980s defect rates of parts supplied by Japanese companies were one-tenth the rate of those supplied by U.S. companies.(22) In the United States, suppliers with long-term contracts are significantly more likely to invest in computer-controlled equipment investments that increase productivity, quality, and flexibility.(23) In all of these long-term relations, quality and innovation count as much as or more than price in determining sales.

The contracts between purchaser and supplier are mostly implicit. Michael Smitka described the arrangement as "governance by trust."(24) For example, if the supplier experiences a problem with cost or quality, the automaker will attempt to work things out before switching to another supplier perhaps by sending its own personnel to help resolve a supplier's production problems. The high degree of trust engendered by such a process means that complete contingent contracts are not necessary. Instead, the parties continuously renegotiate their agreements. Each side is confident that if it loses a little bit (compared with its expectations) in one instance, it will come out ahead in the next.

This commitment leads both sides to make many investments whose value depends on the relationship continuing. Suppliers make large, fixed investments in areas such as quality-control training and in maintaining a product-design staff. The parties also invest in mechanisms for information flow. Intensive communication over the course of a long-term relationship means that the parties come to understand each other's products and processes very well. Typically, a Japanese automaker will not design a part that it requires for a new model. Instead, it will specify exterior dimensions and performance characteristics, then allow a specialist supplier to design the part to best match its process.(25)

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Problems with Just-in-Time Delivery

Just-in-time deliveries from suppliers to automakers put pressure on suppliers to be perfect. When JIT is coupled with successful problem solving, suppliers rapidly learn about their own production problems. When JIT is not coupled with successful problem solving, suppliers hold on to inventory buffers instead of the purchaser, leading to no net savings on inventory cost. (Inventory shifting is common at GM suppliers.) (26) NUMMI, for example, works with its suppliers to integrate JIT delivery with JIT production and to reduce set-up times on its suppliers' machines.

Integration of JIT delivery and production poses difficulties for U.S. auto suppliers. They dislike modifying their production process for a single customer, particularly one known to be as fickle as GM. Most important, suppliers distrust
GM engineers investigating their production process. They fear losing their trade secrets and anticipate that sharing true cost information will remove their bargaining power. To counteract these worries, NUMMI depends on only one or two sources for each of its major components. For example, because of the subtle interactions between a stamping press and the chemical composition of steel, NUMMI requires two years to switch suppliers for its rolled steel. GM prided itself on being able to change most suppliers within a matter of weeks.

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Worker and Supplier Participation

A linkage between supplier and employee participation can be expected for several reasons.(27)

First, the process of continuous improvement is more effective if good communication flows from the supplier's shop floor to the manufacturer's marketing department and on to the consumer. For example, in 1991
Honda of America found that its customers wanted a continuously variable heater control, instead of the initial design that allowed the vent to be only on or off. A team of engineers and operators at Honda's supplier realized that they could achieve variability with the existing design if they could tighten the tolerances enough so that the plastic louvers could come to rest anywhere in their range of motion, not just at their endpoints. Implementing the change, however, meant modifying the production process at five or six places. Operators contributed many of the suggestions to reduce variability by understanding the different steps in the manufacturing process. The supplier's high level of employee participation made supplier participation work, and Hondawas able to implement the change quickly and with minimal cost of redesign and new tooling.

Continuous improvement requires that employees' ideas be spread to suppliers. For example, when Hondaof America introduced a new paint system, more than one thousand suggestions were made by Honda to its paint supplier.

In addition, worker participation can improve processes as well as products. The U.S. Japan quality gap in automobile parts is both a cause and an effect of Japanese companies' widespread use of JIT techniques, which, as described at NUMMI, increase incentives for and ability of suppliers and workers to understand the root causes of problems and prevent recurrences.(28) Employee participation can be crucial in permitting problems to be solved quickly so the line will begin running again, even with minimal inventory buffers.

Close business partner relations can make employee involvement more effective because suppliers' workers, by visiting the plant and witnessing the production process, see the big picture of what they are doing. Suppliers also can help troubleshoot problems at the customer's site, promoting closer relations.

Finally, both forms of participation require significant and similar changes in management vision. The company must move from a low-trust environment to a more cooperative system based on high levels of communication, skills, and relationship-specific investments, supported by a foundation of trust and commitment to a long-term relationship.(29)

Close supplier relations are more common at high-involvement companies. Employee involvement efforts are substantially more common in companies with long-term customer contracts. According to a 1989 survey, auto suppliers with contracts one standard deviation above average in length had 10 percent more of their work force in quality circles or related employee involvement groups than did suppliers with contracts one standard deviation shorter than average (56 percent versus 46 percent). (By contrast, a supplier's report of the difficulty its main customer would face in switching to another supplier was not correlated with employee involvement.) For reasons that are unclear, this relationship disappeared in preliminary analyses of a 1992 follow-up: Auto suppliers with close relations to their customers (that is, the Big Three and Japanese producers) were no longer more likely to have high levels of employee involvement. Automobile suppliers, however, who had close relations with their suppliers were more likely to have high levels of employee involvement.(30) In a separate study of machine tools users, Maryellen Kelley, Bennett Harrison, and Cathleen McGrath found that group problem solving and gainsharing are more common at companies with collaborative ties (for example, mutual technology assistance, joint product design and development) to subcontractors and customers.(31) Companies with high levels of employee involvement also have more employees in units that undertake collaboration with suppliers in quality efforts, although the companies report similar proportions of employees with direct exposure to customers, according to the 1990 Fortune 1000 survey. In the 1992 survey of steel plants, companies with work teams were three times as likely to have frontline employees visit customers as were those with no teams. At companies undergoing workplace restructuring, collaboration with suppliers is positively correlated with team structure, skill variety, and having multilevel participation.(32)

Close supplier relations are more common at successful high-involvement companies. Companies that report success with employee involvement have more employees in units that undertake collaboration with suppliers in quality efforts, although the companies report similar proportions of employees with direct exposure to customers, according to the 1990 Fortune 1000 survey. Similarly, at companies undergoing workplace restructuring, collaboration with suppliers is positively correlated with higher quality and lower accident rates.(33)

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The Importance of Integration

A systematic approach to employee involvement is substantially more likely to bring sustained success than an individual element, such as a quality circle, a training program, or a small employee-stock ownership plan.

The Power of Integration

Numerous studies have addressed the effects of employee involvement on productivity and other measures of corporate performance.(34) A multiyear study of steel finishing lines is one of the best and yielded results representative of the larger literature.(35) The authors used statistical techniques to identify four distinct human resource management systems. For example, production lines that adopted System 1 used much more innovative practices than System 4, while Systems 2 and 3 fell between the extremes.

The presence of more innovative systems was associated with significantly higher productivity. The highly innovative System 1 plants ran 98 percent of the scheduled time, while the untransformed System 4 plants ran 88 percent of the scheduled time. Systems 2 and 3 were in between. System 4 plants lagged in product quality as well as productivity. In a separate study, Jeffrey B. Arthur concluded that high-involvement plants not only excel in quality and productivity but also enjoy lower turnover.(36)

The results are not unique to the steel industry. A worldwide study of the automobile industry found that a coordinated change to an involvement-oriented human resource system can simultaneously improve workers' autonomy, product quality, and productivity.(37) Similar results were reported in the electrical components industry and with flexible manufacturing systems.(38) Although most of the famous cases are in manufacturing, the basic set of human resource policies giving all employees the ability, incentive, and power to constantly improve their workplace and the product also appears relevant in service industries as varied as airlines, insurance companies, and department stores.(39)

Industry-specific studies have the advantage of measuring performance fairly accurately, because they focus on specific operations common to different sites. However, they suffer from concerns about generalizing to other industries and technologies. A few studies have linked financial performance to human resource practices, but most have suffered from problems of small sample sizes and unusual samples.

The largest of these data sets was created by Mark Huselid, who surveyed 850 publicly held companies.(40) He found that human resource policies cluster. Companies with high participation in employee involvement programs tended to have a high proportion of workers in formal information-sharing programs. More of the workers are administered attitude surveys and have access to profit-sharing or gainsharing plans as well as to a formal grievance or complaint resolution procedure. The workers also received more training. Huselid also discovered that high-involvement companies have above-average promotion from within, use of formal job analysis, and administration of formal employment tests before hiring.

In Huselid's sample, high-involvement work practices predicted organizational performance. He found that a one standard deviation increase in his measure of high-performance work practices correlated with a reduction in turnover of more than 1 percentage point (for example, from 14 percent to 13 percent per year). It also correlated with 16 percent higher sales per employee (controlling for capital per worker and research and development spending), raised annual cash flow by $3,800 per employee, and raised the market value of the company by more than $18,000 per employee.

Casey Ichniowski studied sixty-five nonunion manufacturing companies and found, consistent with Huselid's results, that those with more flexible job design and training had substantially higher stock market value and productivity than did other companies. Unfortunately, Ichniowski's sample size was small, consisting of only about 2 percent of the initial population of enterprisessurveyed.(41) Sample selection problems also arose in a result reported by the Department of Labor: Companies that appeared in the 1984 edition of 100 Best Companies to Work for in America had significantly higher stock market returns from 1985 to 1992 than did most companies (15 percent a year for the sixty-three publicly traded companies listed in the book versus 12 percent for the Frank Russell average of 3,000 companies' stock prices).(42) The companies were selected based on nominations, site visits, and interviews with employees. They ranked high on pay and benefits, career opportunities, job security, perceived openness and fairness, and friendliness.

Different sample selection problems affected a detailed study of more than six thousand work groups in thirty-four companies.(43) To enter the sample, companies had to volunteer access to their employees. The study concluded that an emphasis on workplace cooperation and the involvement of employees in decisionmaking were both positively correlated with return on investment and return on sales over five years following the survey. (Performance measures were standardized by industry.) The financial measures took up to three years to show improvement. Dennis Kravetz conducted a similar study of 150 large companies and found similar positive results, with similar problems of interpretation.(44)

Following a different methodology, Barry Macy and Hiroaki Izumi presented evidence drawn from a number of companies by aggregating results from 131 different studies.(45) Each individual study focused on one or a few cases and measured the effects of introducing employee involvement on productivity, quality, or other outcomes compared with the preintervention levels or to a control group. The individual studies typically found beneficial effects from employee involvement; companies with more interventions generally had larger increases in productivity or quality. Tempering the conclusion is that descriptions of individual cases are more likely to be written up when they are successful.

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Total Quality Management

A final set of evidence on the power of an integrated approach comes from evaluations of total quality management (TQM) programs. While not all TQM programs contain much employee involvement, most successful cases of TQM do empower employees.(46)

While TQM has been credited with much of Japan's manufacturing success, an integrated approach has also been effective in American-run workplaces. A General Accounting Office (GAO) analysis of U.S. companies that won the Baldrige award for their quality programs concluded:

Companies that adopted quality management practices experienced an overall improvement in corporate performance. In nearly all cases, companies that used total quality management practices achieved better employee relations, higher productivity, greater customer satisfaction, increased market share, and improved profitability.(47)

A large number of cases of successful TQM are found in the public as well as the private sector.(48) In Madison, Wisconsin, for example, the very first quality team improved preventive maintenance on the vehicle pool and saved the city $700,000. Since then, teams have spread throughout the city government, from administrative offices to cops on the beat.(49)

Unfortunately, at many private and public sector workplaces in the United States, TQM is implemented in ways that do not empower employees. For example, Ken Stockbridge, a GAO expert on TQM, told of a county government quality team that required ten meetings over ten weeks to choose a name for the group.(50) Even worse, in many programs, workers are not rewarded for their efforts or ideas, and both middle managers and unions often resist the new programs because they are seen as poorly conceived and threatening. At its worst, TQM becomes a management speed-up that makes workers work harder but does not lead to sustained improvements in the quality of products.(51) Thus many TQM efforts show only modest success.

Because of TQM's relatively recent implementation on a large scale, empirical analyses with large samples remain rare. One of the largest samples comes from a 1991 GAO survey of more than twenty-eight hundred federal government installations.(52) Two-thirds of the respondents claimed to have some quality program in action, but most programs were less than two years old. As expected, given the newness of the typical program, only 3 percent of respondents claimed that their installation had achieved "long-term institutionalization" integration of TQM into all aspects of the organization's operation. All of this 3 percent reported that TQM had a positive impact on customer service, efficiency, customer satisfaction, and timeliness.

Barbara Flynn and Roger Schroeder surveyed U.S. plants in the machinery, electronics, and transportation components industries.(53) They found that plants high in use of teams are also high in training, information sharing, gainsharing, and worker-management cohesiveness. Moreover, these companies are high in measures of TQM practices such as just-in-time production, systematic preventive maintenance as well as in worker commitment and cohesiveness. Perhaps most important, companies with these practices enjoyed higher product quality. (Unfortunately, the sample selection included "world-class" plants. To the extent these respondents were chosen based on knowledge of their high performance, the correlations reported may overstate the effects of management practices.) In the long run, a high-involvement work organization appears to translate into stock returns as well as high quality and productivity. Sherry Jarrell and George Easton, for example, used a search of companies' annual reports to reveal those with TQM efforts. Follow-up phone calls identified which companies were fairly thorough in their implementation of TQM; that is, those that would score above approximately five hundred (out of a maximum of one thousand) on the Baldrige award evaluation. They found that the companies had 15 percent excess returns over the five years after the start of the TQM program.(54) No excess returns were evident over the first three years, which was consistent with the stock market failing to observe the quality of the investment in the TQM program until it was already paying off financially.

Similar results are found for companies that won independently administered quality awards, according to a study conducted by Kevin Hendricks and Vinod Singhal.(55) The companies achieved stock market returns greater than those of similar companies only about 0.6 percent in the narrow window of a few days around announcement of the award but more than 6 percent in the years leading up to the award (and after the implementation of the quality program). Both the Jarrell and Easton and the Hendricks and Singhal studies suffer from modest sample sizes a limitation that will be alleviated as their research continues and as more companies have mature TQM programs.

Thomas Heller identified companies with TQM programs from their annual reports and from his meetings with top management. Heller, an independent stock market analyst, used the maturity of a TQM program as a leading indicator of corporate stock returns. He found that a portfolio of such companies that was matched to achieve risk similar to the S&P 500 had excess returns of several percentage points per year.(56) The recent introduction of most American quality programs makes all conclusions tentative. Researchers also have had difficulty discriminating between typical TQM programs and those that are best practice. In addition, several of the studies were possibly biased in their sample based on positive financial results. Nevertheless, so far all research on the relation between mature TQM programs and corporate performance demonstrates that well-designed TQM programs can increase productivity, quality, and returns to shareholders. These well-designed programs, in turn, rely on, for example, employee involvement, training, and rewards for employees who innovate.

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In 1990 Laura D'Andrea Tyson and I summarized forty-three empirical studies on the relationship between employee involvement and productivity:

There is usually a positive, often small, effect of participation on productivity, sometimes a zero or statistically insignificant effect, and almost never a negative effect... . Participation is more likely to produce a significant, long-lasting increase in productivity when it involves decisions that extend to the shopfloor and when it involves substantive rather than consultative arrangements.(57)

Several dozen new studies have been conducted since then, several of which have particularly strong research designs and data quality.(58) Their conclusions reinforce the earlier findings: A small-scale employee involvement plan, just as a small amount of training or a modest change in pay systems, may have some beneficial effects, particularly in the short run. Furthermore, a system of high involvement, strong rewards, and high levels of skill and information, integrated with a corporate strategy that relies on frontline employees' ideas and creativity, is capable of impressive improvements in organizational performance.

The positive effects of a high-involvement system do not appear to be restricted to management goals such as quality and productivity.High involvement companies tend to have lower turnover, and most studies found higher job satisfaction as well.(59) A smaller number of studies examined wages, and again the relationship was generally positive.(60) The effects are typically stronger and more likely to be long-lasting when companies create a high-involvement system instead of adding a single profit sharing, involvement, or training program.

Deep cultural change accompanies the policies and practices of successful high-involvement companies. Despite their important differences, most successful high-involvement companies share one fundamental feature that explains their similarities. According to Masahiko Aoki, "The body of employees is, together with the body of shareholders, explicitly or implicitly recognized as a constituent of the firm, and its interests are considered in the formation of managerial policy."(61) More broadly, employee, managerial, union, and business partner support is maintained by increasing each group's ability to contribute to the organization and by providing incentives for each group to work for the organization's long-term success.

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  Last update 2/8/99.