WORKPLACE OF THE FUTURE A Report of the Conference on the Future of the American Workplace July 26, 1993 U.S. Department of Commerce Ronald H. Brown, Secretary U.S. Department of Labor Robert B. Reich, Secretary ____________________________________________________ Foreword Growing foreign competition, rapidly changing technology, and shifting consumer preferences are radically altering the rules for competing in the global marketplace. Traditional mass production and centralized management approaches increasingly are being replaced by customized, flexible production methods and decentralized, team-based management. In this new environment, change is the only constant. One of the keys to success in this new era is the skill, creativity, and commitment of American workers. The best-run organizations recognize this point and are radically redesigning their workplaces to enhance the skill, autonomy, involvement, and responsibility of their workers. These high-performance workplaces provide real responsibility to front-line workers, give employees a real stake in the performance of the organization, make training and learning a priority for all workers, and create a supportive and safe work environment. High-performance organizations offer great benefits for workers, managers, companies, unions, and the economy as a whole. Unfortunately, too few organizations have taken the road to high performance. On July 26, 1993, the U.S. Departments of Commerce and Labor convened a Conference on the Future of the American Workplace in Chicago, Illinois, to highlight the emerging revolution in workplace practices and to accelerate the needed pace of change. President Clinton offered the keynote address and chaired one of the roundtable discussions, underscoring his commitment to the reinvention of the American workplace. More than 600 leaders from business, labor, academia, and government, as well as front-line workers, participated in the conference. The combination of case presentations, roundtable discussions, and audience involvement led to a fascinating and extraordinarily productive exchange of information, insights, and ideas. This report highlights these discussions. As an outgrowth of the President's commitment, the Department of Labor has created a new Office of the American Workplace to encourage more organizations to adopt high-performance work practices and cooperative labor-management relationships. The Department of Commerce also has created the Office of Global Competitiveness to develop policies that will help American businesses to better compete in the world marketplace. These new offices will work closely together to continue the partnership initiated in Chicago. The Chicago conference owes its success to the generous support of the John D. and Catherine T. MacArthur Foundation, the Joyce Foundation, the City of Chicago, Roosevelt University's Institute for Metropolitan Affairs, the Institute of Illinois, the Sara Lee Corporation, and other organizations that supported and helped plan this event. Staff members of the Departments of Commerce and Labor, the City of Chicago, and the Institute for Metropolitan Affairs are to be congratulated for their hard work and dedication. The real stars of this effort, however, are the people who attended this conference and the thousands of others dedicated to redesigning the American workplace. The Nation has a unique opportunity to enhance the competitiveness of American business and the quality of government services while dramatically improving the standard of living for American workers. The Conference on the Future of the American Workplace was the Clinton Administration's first step in a full-scale effort to seize this opportunity and make change work for the benefit of all Americans. Robert B. Reich, Secretary of Labor Ronald H. Brown, Secretary of Commerce ________________________________________________ THE FUTURE OF THE AMERICAN WORKPLACE Introduction Remarks by Martha Quesada, Team Member, New United Motors Manufacturing, Inc. "Fifteen years ago, American auto manufacturers more or less dominated the world marketplace. California alone had five auto plants. Today, the world marketplace is extremely competitive. Higher quality, increased productivity, and highly skilled, involved workers are crucial to the survival of any company. Fifteen years ago, the auto plant I worked for provided no avenues for employees' involvement. You were told how to do your job, you did it as you were told, and you went home. "Today I work at the same plant, but the working conditions are as different as night and day. Before, if you worked in one department, you had no idea what was going on in the next. Now, we make sure that every new employee follows our process from start to finish so they become familiar with what happens in every department and the role of that department. Every employee is encouraged to ask questions, to make suggestions, and to change anything that can improve our jobs, our products, or our company. "Today the emphasis at my company is on teamwork, on training, and on participation. At every level of the company, from the clerical staff to our vice presidents, we participate in teams, teams that do everything from plan changes to recheck quality, teams that allow input and feedback from management. We eliminated many of the divisions between employees and management, such as separate cafeterias and separate parking lots. We require managers to be accessible to workers. Anybody who works on the line can go up to management and talk to them about their concerns. Management is very open to this. "We implemented numerous training programs. There is training in problem solving, creativity, professional advancement, training for team members, team leaders, group leaders, assistant managers, managers alike. We even have a program that allows our employees to get their high school diplomas. We have a four-year apprenticeship program. This program trains workers in all areas of skilled trades, because the company feels that the more employees know, the more well-rounded they are, and the more valuable they are to the company. "We look at the work differently now. We understand that everybody is vital to our company. That's a basic premise that we all accept. These changes have instilled in workers the fact that everyone is part of the whole team. The result can be seen in the initiative that workers take today. People feel more responsible and more a part of the company now. They feel they have something invested in the company. They are more involved. Any worker on the line can stop production if they see a problem. They're encouraged to do so. They're actually required to do so. Why? Well, because quality depends on it, and the survival of our company depends on our quality. Only because of this level of involvement on the part of every employee were we able to take No. 1 on the J.D. Power survey last year. "Now I don't want you to think that everything is perfect, because it's not. It's not always a honeymoon. We still have a lot of problems and there are still some conflicts, but we're working constantly to keep improving. We have a foundation for communication and teamwork, and that's what's important. "My name is Martha Quesada. When I started at my company 8 years ago, I was a production worker on the line. Today, I am an electrician. I fix the machines that build the cars at the only remaining auto plant in California. And today, I'm worth more to my company than I ever was, because anything that I see that I want to change or make better, I can. Often, I don't even ask. I just do it. "I'm a team member at the New United Motors Manufacturing, Incorporated (NUMMI), and I'm honored to be here, sharing my views on the future of the American workplace." + + + Albert Einstein, noted physicist and prognosticator, said after the first atomic reaction in 1942, that "everything has changed, except our way of thinking." Nowhere are his words more prophetic than in the American workplace at the brink of the 21st century. In the last two decades, tremendous changes in technologies, markets, and competition have swept away the old rules for competing in the global, and even domestic, marketplace: + Large U.S. manufacturers that once dominated key markets, such as consumer electronics, automobiles, and machine tools, have been challenged by foreign competitors who have emphasized quality and productivity. This has generated tremendous pressure on American companies to reduce costs and raise quality. + America's traditional competitive strength--high-volume, standardized production--is ill equipped to produce the kind of specialized, high-value goods and services demanded by today's sophisticated consumers. + The pace of technological change is accelerating. To keep up, workers must innovate continuously, redesigning their own jobs as well as products, manufacturing processes, and delivery systems. + Consumers are no longer loyal to brand names; today they demand innovative, high-quality products. Keys to success in this new economic environment are a flexible, supportive workplace and a highly skilled, creative, and loyal work force. Many of the best-run U.S. companies and government agencies have figured this out, dramatically altering the way they organize work and treating their employees as assets rather than costs. These companies depend heavily on their workers' knowledge, creativity, and ingenuity. In their training, employee involvement, employee security, commitment to quality and customer satisfaction, and workplace innovations, these companies have been variously dubbed "high-performance work organizations," "best-practice workplaces," and "advanced-practice workplaces." On July 16, 1993, President Bill Clinton, Secretary of Commerce Ronald H. Brown, and Secretary of Labor Robert B. Reich convened a conference on the Future of the American Workplace to explore innovative work practices of these companies and to encourage more companies to adopt them. The 1-day conference, cosponsored by the John D. and Catherine T. MacArthur Foundation, the Joyce Foundation, the City of Chicago, and Roosevelt University's Institute for Metropolitan Affairs, brought together leaders from business, labor, academia, and government, as well as front-line workers. Case study presentations opened the first three discussion panels. Like the audience generally, the panelists consisted of a cross-section of leaders from business, labor, government, and academia, and front-line workers. Martha Quesada, a team worker at NUMMI, kicked off the conference with the personal and moving statement about the importance of high-performance work practices to the front-line employee (page 1). Introducing the conference, Adele Simmons, head of the MacArthur Foundation, termed high-performing organizations "one of the better kept secrets of the last 20 years. Getting out the message on high-performance workplaces is absolutely critical to ensuring America's global competitiveness and future prosperity," she said. "America must be a leader in the global marketplace," Simmons added. "If we are to lead, we must have firms that value and involve their employees, companies that are profitable, flexible, intensely competitive, and a great place to work." Clearly, adopting high-performance workplace systems offers significant benefits for companies and their workers as well as for the American economy: + Companies can lower costs while increasing flexibility, speed, and quality. Many companies have found that these changes reduce labor conflict, safety costs, and employee turnover. + Workers benefit from a greater voice in decisions, safer and better working conditions, respect, job security, and more opportunities for pay increases, advancement, and skills improvement. + As a nation, these new work systems offer an opportunity for real economic growth and vitality based on globally competitive enterprises and a highly skilled work force. Although there are no accurate estimates of the number of companies that have taken the high-performance approach, most analysts agree the percentage is relatively small. "Today's conference is the first step in a series of initiatives designed to spark a rapid increase in the number of companies that will adopt high-performance practices," said Simmons. "Make no mistake about it, this isn't another attempt to figure out how to get more slices out of the same old pie," said Labor Secretary Reich. "This conference is about redesigning the kitchen to make a bigger pie for everyone." "This conference will give visibility and voice to the people embracing change in the workplace and making it work," said Commerce Secretary Brown. "We're here to get that word out. "More than anything else," Brown added, "the Conference on the Future of the American Workplace is about the experiences and ideas of the people in that workplace." It is a collection of the ideas and experiences of the more than 600 conference participants; it is their recommendations and visions for a better and more productive future. "You are the heroes of this story," commented Secretary Reich to the workplace leaders in attendance, adding that President Clinton, Secretary Brown, and he were there to learn and listen. "There's no magic bullet. But hopefully, this kind of an effort will launch a series of initiatives that we [the Federal Government] will be undertaking and you and the private sector will be undertaking to get the word out. This is revolutionary change; it's beginning, and we want to celebrate it." The politics, work experiences, backgrounds, and ideas of the participants differ widely. But they share a common belief that adopting the standards of high-performance organizations, effectively creating a new American workplace, is a critical step toward a richer, better, and more secure life for all Americans. ____________________________________________________________ THE REVOLUTION IN THE AMERICAN WORKPLACE: REORGANIZING WORK AND INVESTING IN HUMAN RESOURCES Case Study: The L-S Electro-Galvanizing Company Cleveland, Ohio Moderator Robert B. Reich, Secretary of Labor Presenters Cal Tinsley, Plant Manager, L-S Electro-Galvanizing Company Thomas Zidek, President, Local 9126, United Steelworkers of America L-S Electro-Galvanizing (L-SE), producer of galvanized sheet steel for the auto industry, is a joint venture between LTV Corporation and Sumitomo Metals of Japan. When it was formed in 1985, its management group was asked two questions: What would you want out of your company? What are your wants and needs? A few weeks later, the newly hired members of the plant's employee bargaining unit were asked the same two questions. Both the management and labor groups produced documents outlining their individual needs and goals. To their surprise, they found the two were nearly identical. "Between labor and management, we have to sit down and learn to talk to one another, and we'll find out that we have a lot more in common than not in common," said Tom Zidek of the United Steelworkers. "I think that's one thing that has helped L-SE be successful-that we'll sit down and talk to one another face-to-face and try to work out our problems inside the plant rather than let someone outside solve our problems for us." L-SE's Cleveland operation--started under an experimental agreement with the United Steelworkers of America--provides for a high degree of employee empowerment. Employees participated in the original design of plant work stations, in its skill-based compensation system, and in a broad range of committees credited with reducing turnover, producing cost savings, increasing productivity, and improving employee morale. The plant has no personnel department; hiring is handled by an employee committee with one or two management members. "There are a lot of things we try to do to eliminate traditional barriers within the organization, whether they are physical barriers or psychological barriers," said Cal Tinsley, the plant's manager. "The brown khaki uniforms that all employees wear are part of the elimination of psychological barriers. We're trying to promote equality within the workplace, so that was one thing we did." Other nontraditional L-SE practices include management and workers sharing a common locker room, eliminating assigned parking places in favor of a first-come, first-served lot, and banning time clocks. Those kinds of changes reflect L-SE's philosophy that its 95 employees are its key asset as a supplier in the highly competitive auto industry. Those employees run their own workplaces, contact customers directly, and reject goods for shipment on their own authority. Employees receive continuous on-the-job training. In fact, L-SE spends 10 to 12 percent of its total payroll on employee training, much greater than average for an industrial operation. L-SE's heavy emphasis on employee development has made L-SE the premier supplier of electro-galvanized material in the auto industry, the preferred supplier to Ford, General Motors, Toyota, Nissan, and Mazda. The plant won Ford's coveted Q-1 Quality Award, General Motors' Mark of Excellence Award, and the Quality Cup from USA Today. Tinsley pointed out that the actual machinery to do electro-galvanizing is available to anyone and that the specific electro-galvanizing process LTV purchased from Sumitomo is also available to anyone "for the right price." "So if the machinery is available pretty much to anyone, and this is fairly 'high technology'--it's state of the art but anybody can get it--what exactly is the value that you and other workers there are doing that improves the quality and enhances the productivity and the value?" asked Secretary Reich. "I think it's empowering the workers to actually think on the job and make the decisions that are critical to the customers' needs," answered Tinsley. Zidek, who came to the new L-SE plant when his previous steel mill closed, agreed: "The big thing where I came from was production numbers out the door.... We didn't have much input about the quality.... It's [the plant] no longer in existence. "I think at L-SE, our opportunity to have input about quality and input about whether something should ship or whether it's okay for a customer--I think that's very important and what makes us successful." said Zidek. Both Zidek and Tinsley agreed that L-SE had two strong advantages when it was formed: First, it was a so-called "green field," or newly built, site; and second, its original 45 workers were laid-off steelworkers. "Believe me, it's one heck of an incentive to do something different when you're laid off," said Zidek. "When you're laid off for a little over 2-1/2 years, off and on over a 4-year period, it makes you realize that something you were doing in the past, whether it be union, management, or whatever, was not working.... We were real anxious to try something different." _________________________________________________________ Discussion: What is working and what isn't in the American workplace? Panelists Lawrence Bankowski National: President, American Flint Glass Workers Union Robert J. Darnall, Chairman, President, and CEO, Inland Steel Industries, Inc. Robert D. Hoover, Plant Manager, Corning, Inc., Blacksburg, VA Ashley Korenblat, President,: Merlin Metalworks, Inc. Joe W. Laymon, Director of Corporate Industrial Relations, Xerox Corporation Joan Patterson, Executive Co-Director, UAW-Chrysler National Training Center Martha Quesada, Team Member, New United Motors Manufacturing, Inc. Lynn R. Williams, International President, United Steelworkers of America In a free-wheeling discussion moderated by Secretary Reich, Panel 1 participants and audience members discussed, in Reich's words, "what's working and what do we know about what's working" --not just at L-SE but at companies and plants around the country. The high-performance practices at L-SE are representative of a growing management trend toward employee empowerment and participation. Many other companies represented at the conference--including Inland Steel Industries, Inc., and Corning, Inc.--have successfully adopted all or part of a high-performance work organization. Like L-SE, many of these companies began making major organizational changes in worker-manager relationships in response to trouble in their industries and markets. At companies like Inland Steel and Xerox, the loss of market share to foreign as well as domestic steel and copier manufacturers provided the impetus for change. "The element I think is critical is that people have to be dissatisfied with what they've got," said Inland's Robert Darnall. "There's got to be some reason that brings dissatisfaction to them, both from a management and from a labor standpoint. And they've got to want to change." After seeing its share of the global steel market seriously eroded by Japanese competitors over the last decade, Inland began a new relationship with the Steelworkers union that led to a new company-wide contract. "The key element to what we call the partnership agreement...is union involvement and input to the decision-making process at all levels of the company...and we will have a Steelworker-nominated director on our board [as part of the partnership agreement]," said Darnall. "I think the second element is a willingness to do much more disclosure of information--information sharing at all levels. "We're no longer playing the old zero-sum game, where it's either us or them and we divide up the pt," he said. "We're all in this together." United Steelworkers President Lynn Williams calls this approach "workplace democracy" and is using it as a cornerstone for future contract negotiations. "Because of the terrible circumstances in the steel industry and the loss of jobs and the devastation, [we developed a concept] across the industry that workers really have a right to a voice in what goes on in their workplaces," said Williams. "This isn't just a privilege, it's a responsibility, too." An important part of all new steel contracts is employment security--in other words, no layoffs. That's because, as Williams said, "We cannot expect American workers to contribute all their good ideas and all the things they understand about the workplace--and they're the people who really make the workplace go--if the result of doing so is that they get laid off as a result of [Productivity] improvements." That policy has worked well at L-SE, said plant manager Tinsley, as Zidek nodded in agreement. When the mill goes down for its normal, twice-monthly maintenance, L-SE uses outside contractors for the work, a common practice in the steel industry. But when business slows and the mill is shut down for longer periods, L-SE's own work force is able to handle the work because of its intensive cross-training. Rather than laying off workers, L-SE not only assigns them to do maintenance but also to take extra job training, visit customers' plants, or perform some other task. According to Tinsley and Zidek, that policy has meant additional productivity gains at the plant and a substantial boost in the quality of its products. Employee participation and empowerment were a key part of the successful turnaround at Xerox in the early 1980s. Xerox employees received extensive training in problem solving, statistical analysis, interactive skills, benchmarking, and customer satisfaction. Based on a suggestion by a group of employees, Xerox asks its customers what features they want on their machines and tailor make them instead of building machines with features customers don't want and won't buy. "[That allowed us] to tremendously reduce our costs--which were way out of line with our competition's--and increase our delivery ability, quality, and production," said Xerox's Joe Laymon. "When we began to sell a more competitive machine, with that came job security and growth." Bob Hoover calls the workplace at the Corning, Inc., plant in Blacksburg, VA, a "carbon copy" of what L-SE is doing at its Cleveland plant--a copy that Corning is adopting in its 30 other facilities, thanks to a new partnership contract negotiated with the American Flint Glass Workers Union "I want to reinforce that it works," said Hoover. "I've worked for 25 years under an old-style structure and now, since 1988, in a new-style structure. Our plant is a lot more fun, people have a greater sense of self-worth. We're very productive, we have no American competitors, we compete against two Japanese companies--and we've been successful." "The participation of our hourly workers since 1988...has allowed us to tap into the greatest asset any company in America has and that's the brainpower of its workers," said Lawrence Bankowski, president of the American Flint Glass Workers, which represents Corning workers. Merlin Metalworks, which manufactures titanium bicycles and wheelchairs in Cambridge, MA, had no choice but to rely on the brainpower of its five employees when it began, said Ashley Korenblat. "Every day, we got more orders than we could fill...so I had no choice but to use any skill or experience the people there had, to try to fill the orders," she said. "...And of course they did the hiring. I didn't have time. I had to go find money." But Korenblat said employee participation allowed the fledgling company, which now has 40 employees, "to progress much more quickly than if we had a traditional setup where all the decisions had to go through me...there's no way we could have grown as quickly as we have." Toward the end of the first discussion session, Secretary Reich commented that the achievements described by the panelists required a lot of time and effort and were not necessarily completed in one quarter of the business cycle. He then asked for reactions from representatives of the investment community in the audience, wondering if the discussion was of particular use to them. An audience member-William Crist, CEO of the CALPERS (California Public Employees Retirement System) pension fund, one of the largest U.S. investors-praised the new-style organizations. "The fact that there is no personnel director at one company, the fact that you're talking about long-term job security, and making wise use of interest-based bargaining techniques as opposed to traditional [confrontational] techniques, I think is something that we will be taking a harder look at as we screen for which companies we want to put our money into," he said. "I think that investors must be heartened by the notion that American companies are made more competitive, more viable, because workers are involved in the decision making," Crist added. In summarizing the discussion from the first session, Secretary Reich commented that the Federal Government is attempting innovative workplace practices through its new "reinventing government" initiatives. "I don't want any of you to think that we are not working very hard on the same principles that you're working on," he said. Panel 1 Summary The conference's first discussion of the day highlighted innovative workplace strategies that are providing "win-win" opportunities for both American employers and employees. Summarizing the discussion, Secretary Reich pointed to five workplace strategies commonly mentioned by panelists as characteristic of today's high-performance workplaces. These workplace practices have been used by several successful organizations to achieve a competitive advantage and provide workers with a greater stake in organizational outcomes: -- Worker participation in organizational decision making; -- Sharing of organizational rewards through profit sharing, gainsharing, and other compensation programs that link pay to company performance; -- Open employee access to financial and other company information; -- Extensive employee training opportunities; and -- Employment security. _____________________________________________________________ OVERCOMING THE BARRIERS TO CHANGE Case Study: Cin-Made Corporation and the United Paperworkers International Union Moderator Ronald H. Brown, Secretary of Commerce Presenters Robert Frey, Owner and President Cin-Made Corporation Howard Wells, International Representative, United Paperworkers International Union Joyce Bell, President, Local 989, United Paperworkers International Union Ocelia Williams, Metal Slitter Operator, Cin-Made Corporation Cin-Made, a small, unionized specialty packaging company in Cincinnati, OH, is a study in dogged perseverance--a story of encountering barriers and overcoming them, only to encounter still more barriers. The company, which manufactures paper-based composite cans and tubes for the home, garden, and agricultural chemical industries, was bought by owner Robert Frey in 1984. It wasn't a promising purchase: The company was failing, its industry was shrinking, and it hadn't changed the way it did business in more than 20 years. "Cin-Made had antiquated equipment and antiquated techniques," recalled Frey. "The managers made all the decisions, and the workers didn't have to think. They had a normal adversarial relationship, and they seemed to like it like that. And then conditions got worse." Shortly after Frey purchased the 82-year-old company, Cin-Made's markets began declining, and its 37 employees began chafing under the new labor agreement they had reluctantly negotiated with him--an agreement containing many concessions. "After that first contract, labor relations between the union employees and the company became really atrocious," said union international representative Howard Wells. "This negative relationship presented many barriers to change--to the point that the company was almost forced to go out of business." Frey agreed: "To survive, we needed to stop being worthy adversaries and become worthy partners." Change occurred when the company's union leadership came before their coworkers-with Frey-and said enough is enough, says Wells. "[They said] it's time we change our work habits in order to improve the company's competitive position in the marketplace and also to preserve our jobs." One barrier was overcome: Union and management agreed to work together to save the company and the jobs it provided. But Frey says two other barriers promptly presented themselves. "First, we had a lack of common goals and interests, and we solved that with a very unique profit-sharing system [which guarantees union employees 18 percent of the company's pretax operating profits]," said Frey. "The second barrier was fear--fear on the part of managers of letting go of power and secrets and control, and fear on the part of the workers about assuming responsibility," he said. "We think we solved that problem with an open, shared management system." As president, Frey--who described himself as once being a barrier to change--had to overcome his own fears. The first was that the company would go out of business, and the second was a fear of change. Finally, he wryly admits, the fear of going out of business overcame his fear of change. Cin-Made employees, who weren't aware of the company's crisis until Frey took over, were reluctant to believe him at first, says Ocelia Williams, union steward at the company. "We thought he was trying to rip us off and shaft us and bust our union," she said. "We weren't aware of the extent of the problems until he took over and wanted us to take a 25 percent cut in our hourly pay and give up other benefits that we had earned over the years." Trust came slowly, along with respect for Frey, says Joyce Bell of the union local. She remembers: "He made us a promise that if we went along with him and we joined forces with him, he would turn this company into a profitable company. Once we saw he was doing that, it was a little easier." Information sharing was also critical to building trust, says Bell. The company now has a monthly state-of-the business meeting where the books are wide open to managers and employees alike, she said. "We know profits made, expenditures that went out, how close we stayed to budget," said Bell. "There are no secrets there any longer." All the company's employees are empowered to schedule their own hours, layoffs, and recalls; decide on merit raises for fellow employees; approve all new hires, including managers; run the training, review capital expenditures, run promotion and safety and repair programs, and schedule work and job assignments. All are involved in the annual reviews of Cin-Made's mission and the establishment of its strategic goals and action plans. Since 1985, Cin-Made's sales per employee have increased from $41,000 to $103,000, fixed payroll costs have steadily declined, and the company's variable awards system has generated more than $4,000 in profit sharing for each employee over the last 4 years. _______________________________________________________ Discussion: What are the barriers to creating a "win-win" workplace? How can we overcome them? Panelists Kenneth L. Coss International President, United Rubber Workers Patty DeDominic, CEO, PDQ Personnel Services, Inc. Richard L. Gunderson, President and CEO, Aid Association for Lutherans Robert 0. Haas, Chairman and CEO, Levi Strauss & Co. Michele Hunt, Director, Federal Quality Russell W. Maier, President and CEO, Republic Engineered Steels, Inc. John J. Sweeney, President, Service Employees international Union Gary L. Tooker, President and COO Secretary of Commerce Brown describes the process of creating high-performance organizations such as Cin-Made as "the second industrial revolution. "Revolutions don't take place without some trauma and fear and concern and hardship, without attempting to overcome barriers and obstacles and to jump hurdles that are put in your way," he said. Discussion centered around identifying specific barriers to changing traditional corporate structures into open, team-based work systems and around the ways various companies have dealt with those challenges. Like the much smaller Cin-Made, Motorola--one of the world's leading manufacturers of electronic equipment, systems, and components--encountered the same fear of change when it began overhauling company operations 5 years ago as part of a new commitment to quality. "There's nothing like the sight of the gallows to clear the mind," said Motorola's Gary Tooker. "The sight of the gallows for us was the issue of quality and foreign competition, particularly in some of the industry and some of our products." As part of its commitment to quality, Motorola began forming its workers into teams--and ran straight up against many managers' fears of sharing power, which became a major barrier to changing the system. "The attitude of letting go...is critical, because managers or supervisors have a particular job description over a period of time...maybe 5, 10, or 15 years...and then the idea of doing the job differently, of having the [other] people on the team do many of the things that they would do," said Tooker. "To let go and be an advisor is very critical." Overcoming that kind of fear--one of the leading barriers to change--ran through all panelists' remarks. At the Aid Association for Lutherans, employees were afraid changes would mean they would lose their jobs; at Cin-Made, workers feared losing their union, and owner Bob Frey was afraid he would lose authority and control. "One of the main groups that has a lot of fears is first- and second-line management," said Kenneth Coss of the United Rubber Workers. "We've had to work with them more extensively probably than we've had to work with the people in the bargaining units." "We have to empower our front-line workers because they're closest to the product and closest to the customer," said Levi Strauss' Haas. "We invest about 40,000 hours a year--or one week per employee at an average plant-in training just to give people the range of skills they need to make some of these difficult transitions. "But unless we can involve our people in running our company, we're not going to be successful," he said. "We operate in over 60 countries around the globe; and you can be sure from the corner office in San Francisco, I can't figure it out. Our people have to." Levi Strauss is in the process of converting all its North American plants to what it calls "alternative manufacturing" or team-based systems. By the end of 1993, the company will have converted 90 percent of its 26 U.S. facilities, said Haas. In the process, Levi Strauss has run into an unusual barrier to change, says Haas. "If things are going well, it's a lot harder to look at things differently...but we've recognized that we are in the global market [and] things are moving more rapidly." One way to overcome the barrier of past success, says audience member Dave Barram, Deputy Secretary of the Commerce Department and former vice president for corporate affairs at Apple Computer, is to constantly look ahead. "You just have to look ahead at what is going to be and not think about the historical ways many of us became successful, but [about] what we have to do to be successful in the future," he said. "It's very hard, but you have to do it, and you have to share lots of information with people in the company." Other barriers to change include the old corporate--union as well as management--systems and people's willingness to fall back into them in times of crisis. Russ Maier, president and chief executive of Republic Engineered Steels, learned that fact the hard way when the steel industry went into a recession and his company faced an $80 million loss. "I started the meeting [with company and union leaders] by saying, 'The way to do this is maybe the plant managers and union presidents could come back to me with a plan.' It was going to mean some job cuts. "By the end of the meeting, the union said, 'Let's do it the way we've always done it. You tell us what we have to do. We'll fight about it and then we'll do it.' You know what? I slipped into that. I did. "As an employee-owned company, we went into absolute turmoil; within 60 days I came back into that meeting and said, 'I've made a mistake. It won't work.' "But it was so easy to slip right back--for both sides to slip--into that old structure," said Maier. "The barriers to change [in our businesses] are things we can control," said Haas. "It's management attitudes; it's traditional labor-management relationships. It's extending trust and responsibility so that we can empower our people. It's investing in training. It's re-examining work-family practices. It's workplace organization. We can do something about all of that. "The pride is there. The desire to do good work is there," said Haas. "We just need to enable our people to make it happen." Several audience members asked about such institutional barriers to change as racism, sexism, and exploitation, problems that might be addressed by putting more women and minorities on corporate boards of directors. Haas suggested more diversity training among all levels of employees, as well as more extensive, business-funded outreach programs to deal with those problems in the community. Minorities also need to see role models in company management, instead of glass ceilings, said audience member Ernest Moreno, vice president of human resources for Ruiz Food Products, a California manufacturer of frozen Mexican food. "You will continue to have problems as long as a worker can look up and say, 'There is no chance for me getting in there.'" Another audience member, Phil Condit, president of The Boeing Company, pointed out that airplane programs have life spans of at least 15 years, which forces companies like Boeing to think long term, a concept that is not always popular with the returns-oriented investment community. "But I'm convinced that if you're going to think about change, you have to think about it with a long-term perspective," he said. "If you try to force it to happen too quickly, the organization can't follow." Real change doesn't happen quickly, agreed Maier and Frey. Maier estimated that in a mature organization, change takes "between 5 and 10 years" and Frey pointed out that Cin-Made's took about 8 years to become effective. "Lots of little improvements finally come together to make a quantum change," said Maier. "There aren't a lot of home runs to be hit any more. We have to use bunts and singles." "For years many of us invested in new machinery and technology...and I think the lesson of today is we need to start investing in people, that the real technology of the 1990s and the 21st century is our people," added Haas. "The moral of our discussion to me is when a company invests in its people, profits will follow." Panel 2 Summary The panel discussion clearly indicated that many companies consider changing to new work systems during periods of economic crisis. But while crisis may cause companies to consider change, too many fall back on old systems that have worked in the past rather than attempt new ways of organizing work for the future. "The most important barrier seems to be the fear of change," said Secretary Brown summarizing the panel discussion. He pointed out that lack of trust between workers and managers appears to be the major barrier, as well as lack of education and training. He echoed the statements of many panelists by pointing out, "You've got to keep changing every day, every week, every year in order to stay competitive and productive." _______________________________________________________ BENEFITS OF THE NEW WORKPLACE Case Study: U S West and the Communications Workers of America Moderator President Bill Clinton Presenters Jerry Johnson, Vice President, Network and Technology Services, U S West Susan Pisha, Vice President, District 7, Communications Workers of America Kevin Boyle, CWA Internal Consultant, U. S. West What U S West, a nine-state telecommunications company with 65,000 employees, and its chief union, the Communications Workers of America (CWA), are doing is nothing less than beginning to redesign the work of the entire service and knowledge industry. It's a tall order for any business, but particularly for one whose technology has changed rapidly since it split off from parent AT&T in 1984. U S West is composed of three former AT&T operating companies--Mountain Bell, Northwestern Bell, and Pacific Northwest Bell. "U S West is in an era of both uncertainty and opportunity, of rapid marketplace change, of rapid technology change," said Jerry Johnson, U S West's vice president of network and technology services. "We're taking the risk in terms of developing door-to-door information highway networks. We're basically changing our fundamental processes, re-engineering our processes--and this necessitates changing our business." Johnson is blunt about what change means for the people at U S West: "We can't afford to waste energy on business as usual in the workplace. It means full disclosure; it means honest and direct discussion; it means creative collaboration; and it means enlightened union and management relationships." To create that relationship, U S West and the CWA formed a strategic executive council, in which top company and union leaders set up seven committees to address some of the long-term issues, such as employee training, that affect workers and management. As part of its long-term outlook, U S West created the concept of work force renewal, which has three principal components: 1. Skills renewal, called Pathways to the Future, is a joint training and education program in which 10 percent of U S West employees are eligible for training or retraining to upgrade their skills and to prepare for careers inside or outside the company. U S West currently spends between $4 million and $5 million a year on Pathways, says Johnson. 2. Career renewal is implemented at six self-directed learning centers and through tuition-aided programs in more than 1,000 regional institutions in cities such as Phoenix, Denver, Omaha, Salt Lake City and Fargo. 3. Leadership renewal, or Vision 2000, works particularly with front-line supervisors, who face many of the hardest day-to-day challenges in changing their relationships with workers. The program works to create trust between supervisors and employees by teaching individuals how to be trustworthy themselves. Without mutual trust, people will continue to resist change. "We've done a great deal to encourage our members that it is their responsibility to go out and develop their skills, not just to expect the corporation to train them," said CWA's Sue Pisha. "The reason we do this is that our members were very active in telling us they wanted to participate in improving their work life, and they wanted to participate in a meaningful way. "So we're moving quickly to more strategic decision making, and the union expects to be an equal partner," she said. "We expect to have the union involved in setting goals and objectives that benefit the workers, not just the corporation. We want the corporation to be successful--and then we expect our members to get an equal piece of the pie when they are successful." Kevin Boyle pointed out that the company and the union invented their own systems as they went along. There were no models to follow for the changes they had to make. "Through that process...we began to realize that the real technology was in people's heads," said Boyle. "The real cutting-edge competitive piece to this was not the hardware that sat in front of them or the social systems that were around them.... It was the knowledge in workers' heads." To use their knowledge and build the competitive advantage that comes with it, you have to set up systems for continuous learning and improvement, says Boyle. As workers begin to realize this, they also begin to expect businesses to invest in their highest form of technology-the workers as human beings. ________________________________________________________ Discussion: What are the benefits to workers, companies, and the nation from new workplace strategies? Panelists Marca Bristo, President and CEO, Access Living Casey Ichniowski, Professor, Columbia University Graduate School of Business Gerald W. McEntee, President, American Federation of State, County and Municipal Employees Amy Schuman, Manager of Organization Development, Fel-Pro, Inc. Jack Sheinkman, President, Amalgamated Clothing and Textile Workers Union John P. Stack, President and CEO, Springfield Remanufacturing Corp. Gwendolyn Vanover, Candidate, Center for Advanced Technologies Focus:HOPE J. Burgess Winter, President and CEO, Magma Copper Company Robert Zicaro, Slitter Operator, Web Converting One of biggest benefits of new workplaces such as U. S. West, observed President Bill Clinton, the panel's moderator, is that "what turned out to be good for the company was what was most rewarding for the worker, not only in making the job more secure but in making it more interesting. "In a funny way, we may have to make all of our jobs more interesting to make them more secure," he said. "Maybe we can begin to establish these high-performance workplaces as the models for our country's new economy." Discussion centered on why companies such as U S West and public institutions are literally reinventing their organizations. Is it a question of survival? What benefits do workers receive from the new organizations? Why should unions cooperate? Is a company's bottom line affected by the changes? How can these new, high-performance workplaces help improve the country's economic performance? What ties many of these high-performance workplaces together--and often one of the biggest direct benefits to employees--is an employee stake in the performance of the company. Employee ownership, skill-based pay, profit sharing, and gainsharing were some of the innovative compensation programs discussed. "If you all own a company together, you're in it together and the wealth that's being created--corporate wealth--is the biggest form of wealth being created in America," said Robert Zicaro of Web Converting. "The people on the line that I work with...are sharing financial information. Each month we get a three-page document, and we know everything from the cost of the phone calls to the cost of the goods sold-the whole balance sheet is right in front of us," he said. "I guess in a sense we're learning to become business people...to really own a piece of the American dream." Employees at Web Converting, which is located in Framingham, MA, began buying the company from its owner in 1985 and now own 30 percent of it. Company profits are used to buy employee stock annually and workers also participate in a monthly profit-sharing program, said Zicaro. Springfield Remanufacturing is also an employee-owned operation, but one that began by turning what chief executive officer Jack Stack called "one of the worst leveraged buyouts in corporate America"--$100,000 down on an $8.9 million loan, borrowed at 18 percent in 1981--into an employee success story. When employees decided to buy their factory from International Harvester, they quickly discovered that only one person in the plant knew how to read a balance sheet and only two knew how to put an income statement together. Stack recalls visiting more than 50 financial institutions trying to borrow buyout money, often putting business plans together in taxicab rides between lenders. "We didn't really know what was happening in business, so we embarked on a program to teach people profit and loss statements, how profit is generated, where cash goes, and cash flow," said Stack. "Every time somebody asked a question, we added it to the financial statement...and by the end of the year we had 89-page statements." Today, with the company's stock price rising from its original 10 cents a share to $18.75 a share, Springfield Remanufacturing continues to spend 15,000 hours a year teaching economics to workers in all its factories. "We're teaching people that real wealth comes in the health of a balance sheet," said Stack. "In 11 years, we have created over 600 jobs as a result of trying to get a healthier balance sheet and then hopefully to get a healthier workplace." President Clinton praised Springfield Remanufacturing's open-book management system: "If we could do nothing other than convince people that the only way to get everybody on the same team is to give them the same information--and the same capacity to evaluate that information--I think that would be a terrific thing." Kevin Boyle pointed out that if educated workers can't save their jobs when an organization is in trouble, they will at least have the skills to develop new work for themselves and to continue to learn, rather than join the ranks of the jobless. Where employee ownership isn't an option, gainsharing programs build tremendous team spirit at companies such as Magma Copper in Arizona. As part of a new and unique 15-year union contract, Magma embarked on a program of full employee participation in its operations 4 years ago, said Magma's CEO, J. Burgess Winter. In 1992, Magma workers reduced costs by $45 million and paid out $19 million of it--$4,700 to each eligible employee--as part of a gainsharing program run by employees. Even with the awards, the company's production costs still decreased by 7 percent that year. "At another of our divisions, Magma Metals Company, a team of workers actually restructured the physical organization, which is now run by a council that includes two union officials," said Winter. "Layers of management have been reduced from seven to three...and they have broken records every quarter since. People can do wonderful things for themselves." Gerald McEntee of the American Federation of State, County and Municipal Employees (AFSCME), commented to President Clinton after hearing about Magma and the other workplaces represented at the conference: "Let us in on it I guess is what I want to say." "We represent, as you well know, government workers," said McEntee. "When we were invited here, we were hard-pressed ... to find workplace environments that were very positive in terms of worker empowerment having to do with government workers." President Clinton responded to McEntee's comments by stating: "I think you are absolutely right, and I think that the Federal, State, and local [government] employees deserve the chance to participate in this cultural revolution. And they have been denied it, by and large, so far. They deserve it, and the rest of us, as taxpayers, need it very badly." Fel-Pro, Inc., a manufacturer of automobile gaskets and other related chemical products in Skokie, IL, discovered its family-friendly employment practices actually showed bottom-line results when a University of Chicago study substantiated a measurable link between the company's policies and work performance, said the company's Amy Schuman. "Our highest performing workers are also our highest benefit users," she said. "When you look at nontraditional work performance--things like participation in problem-solving teams or making suggestions--those employees who participate in our benefits are twice as likely to submit suggestions and be involved in the workplace." However, despite the measurable benefits university studies have found, companies using high-performance work systems still are a rarity in the United States, participants agreed. From the audience, Thomas Donahue, secretary-treasurer of the AFL-CIO, added: "The vast majority of companies, unfortunately, are still hewing to the old line of absolute employer control and trying to impose obedience rather than seeking and soliciting the help of workers in developing these kinds of effective programs." Another member of the audience, Phil Condit, president of The Boeing Company, cautioned those old-line companies--and the rest of America--to remember that "people working together are, in fact, the key to our future success. "Technology is a tool [that] can be easily copied and moves readily," said Condit. "The key to our success is people. If you want a long-term, sustained competitive advantage, it will be because of the asset of our people. If we are going to win...they are absolutely crucial to our future." At the end of the first discussion session, President Clinton turned to Gwendolyn Vanover, a training candidate at the Focus: HOPE Center for Advanced Technologies in Detroit, MI, and asked her to describe her experiences and the benefits she derived from participating in an advanced training program. Vanover, a 35-year old widow who once had no marketable skills, became a machinist through the Focus: HOPE Machinists Training Institute; she is in the second year of a 6-year training program through which she will acquire the equivalent of a master's degree in engineering. "I have been to different places and I haven't encountered a program such as this--where you have the opportunity to not only have academic programs that are 'hands on' [as well]," she said in describing her unique training program. After hearing her story, President Clinton emphasized that it is very important to develop a "higher percentage of our people's skills" and the private sector will not be able to do it alone, especially for people like Gwendolyn Vanover, who are not in a company when they begin their pursuit of training. Panel 3 Summary The stories related during this panel session suggested that high-performance work practices produce positive outcomes for both companies and workers. Companies realize growth in productivity and quality, which helps boost overall stock prices. Workers in high-performance companies typically share in financial rewards, experience personal growth through training and education opportunities, and receive the employment security that comes from working for a competitive enterprise. Throughout the session, panelists referred to high-performance work practices as "taking the high road." President Clinton closed the session by stating: "I guess the best thing we can say, in summary, is that we all ought to leave here committed to more high roads and fewer low roads." ______________________________________________________ ACCELERATING THE PACE OF CHANGE: PUBLIC AND PRIVATE STRATEGIES Discussion: What can the private sector and the government do to accelerate the pace of workplace change? Moderators Ronald H. Brown, Secretary of Commerce Robert B. Reich, Secretary of Labor Panelists Mike Bennett, UAW Manufacturing Advisor, UAW Local 1853, Saturn Corporation Ellen Bravo, Executive Director, 9to5 National Association of Working Women Gaston Caperton, Governor, State of West Virginia Carlton L. Guthrie President, CEO and Co-Owner. Trumark, Inc. Sidney Harman, Chairman and CEO, Harman International Industries, Inc. Laura Henderson, President and CEO, Prospect Associates Larry R. Jackson, President, American Federation of Grain Millers John T. Joyce, President, International Union of Bricklayers and Allied Craftsmen William K. Ketchum, Vice President of Labor Relations, AT&T Thomas A. Kochan, Professor, Sloan School of Management, M.I.T. Ray Marshall, Professor, LBJ School of Public Affairs, University of Texas Robert H. Rosen, Founder and President, Healthy Companies Talking about change and about creating high-performance workplaces is one thing, but figuring out how to actually accelerate the pace of change across the U.S. economy is quite another. To do that, conference participants need to come up with "at least a tentative action agenda," said Secretary Reich. Reich cochaired the panel with Commerce Secretary Brown. One of the most critical areas lies in convincing the investment community that these high-performance, collaborative practices contribute to a company's bottom line. "What do we do about short-termism?" asked Secretary Reich. "Can the investment community be made interested in all of this? Is there a way to get Wall Street to take a long-term look at what is happening instead of focusing on quarterly results and yearly profits?" he asked. "Investors in companies today can largely shape the industrial policy that we're talking about...if they re-establish the recognition that they are the owners of the company," said John Joyce of the Bricklayers Union. "The first step in learning how to measure this...is to measure it from the point of view of an owner and not somebody who is simply drawing their monthly dividends." Sidney Harman of Harman International Industries noted that the investment community will always be most impressed by "very good bottom-line performance," But he added that the real need is for model companies--such as Harman--to "demonstrate that there is a direct relationship between this kind of constructive human practice and good traditional performance. "There are a good and growing number of such models...that ought to be out there advertising," he said. But it's still tough to measure performance, says Healthy Companies' Robert Rosen, because we don't look "at the softer side of business--learning and participation, added value, and relationships with customers and suppliers, reputation, and capital. "Our accounting systems don't really measure that, and so we need some new common language and metrics," he said, adding that Healthy Companies has just formed a learning network of companies, including Motorola, AT&T, and others, to do exactly that. "We're now looking at economic value-added measures that measure the long-term value created from an investment, an investment that will hopefully drive not only return but jobs," said William Ketchum of AT&T. "We're also looking at what we call 'customer value-added measures,' which gets at customer focus and customer satisfaction on a long-term basis," he said. "The third ingredient we've added just this year is one that we call 'people value added,' which gets at employee satisfaction. "So we think we've got the makings of a value chain that relies on employees who are satisfied with their jobs, driving customers who are satisfied with our products and services, which drives economic performance for the long term," said Ketchum. The Federal Government can also do a lot to encourage the spread of high-performance organizations by revising policies and institutions to encourage companies to compete mainly by improving productivity and quality. One specific way to do that is by providing school-to-work programs for people who don't go to college, said Ray Marshall of the University of Texas. "Economically, the future of this country depends at least as much on what we do in terms of education and training for people who don't go to college as any other single thing I can think of," he said. "We have the worst school-to-work transition system of any major industrial country. We have the poorest school system of any major industrial country. At Trumark, "We're teaching English as a second language, we're teaching basic math skills to employees that don't understand 2 plus 15 divided by 8...things that are far beyond the scope of a small manufacturing company in Lansing, MI," said president Carlton Guthrie. "We need the government to step in and say, 'Yes. we can help you.'" Harman agreed: "Building training and retraining programs into the workplace seems to me to be absolutely the most constructive way to deal [with things like job loss from foreign competition]." Ellen Bravo, executive director of 9to5, the National Association of Working Women, said there is a need to address the issue of "hiring people part time and temporarily to do the same jobs as full-time people and pay them less and give them fewer benefits." Bravo added, "We have to demand that you pay the same to everybody who does the same job at your company, regardless of how many hours they work or whether they're permanent or temporary. We have to make the minimum wage be what it was supposed to be, a fair day's wage for a fair day's work." In industries where companies can save money by not doing what is healthy or safe for their workers--like eliminating cotton dust from plants in the textile industry--and thus gain an advantage over right-minded competitors, the government needs to step in and set industry-wide regulations, said Marshall. The theory is the same as that used years ago to set national labor standards, he said. "I think you can take the low road and run the high-road people out of business in the short term, especially in economic downturns," said Laura Henderson of Prospect Associates. "If you talk to CEOs with growing businesses on the high road, that's what they fear the most--that cost cutting, employee and benefits reductions will win in the short term." Mike Bennett, a UAW advisor at Saturn Corporation, suggested the government could alleviate some of the unfair short-term advantage by giving incentives to employers to help promote the skills, knowledge, and abilities of workers to compete in the global market. He called the idea a "human resource development tax credit," which would encourage managers to move in the direction of providing increased training and education opportunities for workers Changes in our national labor policy are also needed to keep companies and workers from falling back into traditional management-versus-labor camps and to encourage the kind of collaborative relationships that characterize high-performance organizations, said Professor Thomas Kochan of M.I.T. "This is the first time we have seen business and labor and government sit down and honestly discuss these issues in an open forum, union and nonunion...and saying that we've got to find a policy where we can form a coalition to move these ideas forward," he said. Audience member Elsa Porter, former assistant secretary for administration in the Department of Commerce, suggested the government also develop a national report on human assets that would be issued just as regularly as [Departments of] Labor and Commerce economic reports. "If we really believe that our human assets are so important, then we need to keep a scorecard on them," she said. Ray Marshall suggested several concrete ways government could encourage the spread of high-performance characteristics in the work force, including: -- Using grants and waivers of regulations to encourage companies to move in this direction; -- Disseminating information about these practices; -- Taking any opportunity to encourage employee involvement and worker participation in things such as labor-management safety and health committees, which is part of a bill now pending in Congress. "It all comes back to what we were talking about earlier... about really changing the way we think--the way we think about each other, the way we think about our roles, the way we think about our institutions, the way we think about this whole set of relationships we're trying to redefine," said Secretary Brown. "Workers and managers have got to have the courage of their convictions in terms of moving into this new kind of world," added Reich. "By spotlighting these kinds of successes, hopefully we do give people the courage of their convictions and encourage many others to take this kind of leap." Governor Gaston Caperton of West Virginia offered a final piece of advice to Brown and Reich: "The one thing I've learned is that we've got to speed up everything. Grab a couple of things, the two of you. Decide on a few things quickly, and let's just go do it. Let's make a difference quickly. This country can't wait." Panel 4 Summary: The final session indicated several specific strategies by which the private sector and government can work together to accelerate the development of high-performance workplaces in the United States. Investors can play an important role by influencing managers to pay attention to investments in human resources and workplace innovations. Panelists agreed, however, that this will require the development of new workplace metrics, capable of convincing investors of the bottom-line value of long-term human resource investments. Several panelists pointed to the importance of government incentives to companies that take the "high-road path" of increasing worker skills and involving workers in decision making, as well as the removal of incentives that now encourage short-term investment decisions and plant relocations overseas. Panelists also indicated the important role of government involvement in promoting best workplace practices and in increasing investments in workplace training. A general conclusion was that the conference provided an important and unprecedented first step in creating a new coalition among government, business, and labor for the creation of a new American workplace.