Employee Rights

They measure the genuineness of innovation

One of the articles in Living Business (IC#11)
Originally published in Autumn 1985 on page 45
Copyright (c)1985, 1997 by Context Institute


Grant Ingle is an organizational psychologist who specializes in developing programs of workplace innovation. He can be reached at the Office Of Human Relations, University of Massachusetts, 202 Middlesex, Amherst, MA 01003.

WORKPLACE INNOVATION IS IN VOGUE TODAY. It’s talked about in best sellers, in the newspapers and magazines, on television and radio, and maybe even in our own workplaces – quality circles, employee involvement groups, labor-management committees, quality of worklife programs, parallel organizations, employee ownership plans, workers and union representatives on boards of directors, profit-sharing, autonomous workgroups, worker cooperatives and on and on. How can we make sense of all these different innovations? Are some better than others? How can we tell when these innovations are sincere efforts to improve organizational work life or merely window dressing?

One way to begin answering these questions is to focus on the question of employee rights. Companies with a firm commitment to improving both the quality of work life and productivity see increased employee rights as an essential counterpart to innovative programs that require more employee responsibility. Firms like Digital and General Motors have used this principle in their newer, innovative plants to give a clear signal to employees that management takes employee involvement seriously. Far too often, however, firms less sure of innovation or those only interested in increasing productivity and profits avoid the issue of employee rights. In short, these companies want workers to take on new roles and responsibilities, but are reluctant to also pass on the management rights (or "prerogatives") that go with them. The managers of these companies want major change for employees, but not for themselves. Not surprisingly, workplace innovation programs in these companies are typically less successful and often disintegrate as employees begin to understand this inconsistency.

To get a better picture of what employee rights can be involved in workplace innovation programs, it is necessary to look first at extreme situations, and then at some common examples.

In a conservative firm, employees typically have no rights at all – unless they are members of a union. On the other end of the spectrum, the employees of a fully- democratized firm have all the rights traditionally associated with ownership – rights to the net book value of the firm, rights to profit (and loss), rights to ultimate decision- making, as well as the basic political rights common to a democracy (e.g., freedom of speech, due process, etc.). These rights are specified in a formal constitution which can be changed only by amendments voted on by all employees. From this perspective, a critical assessment of any particular program of workplace innovation requires us to identify first what rights it gives to employees, and secondly, the extent of these rights.

What rights and how extensive? Most workplace innovations involve employees in one or more of the following areas:

  • Shop floor or workgroup decision-making;
  • Management decision-making;
  • Boardroom decision-making;
  • Distribution of profit, surplus, gain, or cost savings;
  • Ownership of the firm through equity or stock.

A wide range of employee rights is possible in each one of these five areas. If we consider the extent of rights in each of these areas as a dimension running from none to absolute, we can generate a simple chart:

The typically conservative firm lies on the far left on all of the dimensions – employees have no explicit rights in any of these areas. In contrast, the worker cooperatives of Mondragon, Spain – almost 100 firms and 20,000 workers – lie on the far right-hand side, except for the first dimension. While these firms have only recently begun to experiment with shop floor and work group decision-making, employees have well-established rights regarding full ownership of these firms, distribution of the profits, management decision- making at several levels, and hiring and firing of management through all elected boards of directors. Furthermore, the rights of these employees in all these areas are firmly guaranteed by constitutions within each firm. For these reasons, the Mondragon cooperatives currently represent the most advanced example of democratized workplaces.

But what about the middle ranges of these dimensions? How do current efforts at workplace innovation fit into this schema? A few examples may be helpful:

Shop floor / work group decision-making Undoubtedly the most popular innovations in this country have been quality circle programs. Typical quality circle programs are based upon weekly meetings of shop floor or work group employees and their supervisor. The purpose of these meetings is to encourage employee problem-solving of quality issues regarding the group’s product or services. Suggestions for improving quality are developed in the group and then presented to management for approval and implementation. Within this basic format, many other aspects of programs can vary, such as the extent of employee training in problem-solving techniques, the role of the supervisor in the quality circle, and so on.

While these programs are innovative in that they allow employees to perform important problem-solving functions previously considered the sole domain of management, it is important to note that most programs do not confer any special rights to employees. Consequently, typical quality circle programs fall on the extreme left-hand side of this dimension. In some firms, however, quality circle programs have specific rights associated with them, such as the right to meet, the right to speedy management responses to suggestions, the right to consider any topic in group discussions, etc. These rights are usually spelled out in a formal document of agreement between managers and the employees. Programs which guarantee specific rights are located somewhere between the "none" end and the midpoint of the dimension – these rights allow some employee influence, but not control. In even more progressive innovations, such as autonomous (or semiautonomous) work groups, employees may be given additional rights to hire and fire co-workers and supervisors, the right to meet for any reason, the right to schedule their own hours and more. Programs of this sort are clearly located to the right of this dimension’s midpoint – employees lack absolute control of shop floor or work group decision- making, but still wield considerable influence over the production process.

Management-level decision-making One popular form of this innovation is the labor-management committee, which provides an opportunity for top management and top union officials to meet regularly to discuss topics of mutual concern other than grievances and contract issues. Labor-management committees can vary greatly in terms of the extent of employee rights involved. On one hand, the role of the committee may be solely advisory; on the other hand, many firms have given considerable decision-making power to these committees, especially regarding workplace innovation programs and long- range planning. These decision-making rights may be extended as well to lower level labor-management committees in each department of a firm, creating a "parallel organization" of problem-solving committees with local authority. In evaluating labor-management committees, it is crucial to examine carefully the letter of agreement between the two parties, with special attention to the decision- making process. Ideally, labor and management should exert equal voting power on the committees.

Boardroom decision-making The most common example of this innovation is the placement of employees on the Board of Directors. Clearly, a single employee on a board affords only a small degree of influence. In several European countries, however, federal legislation requires that a significant number of employees sit on the Board, an arrangement called co-determination. And in fully- democratized firms, of course, employee rights to this type of decision-making are absolute, since the entire Board of Directors are employee representatives, elected by all the employees on a one-vote, one-person basis.

Profit/surplus/gain/cost sharing In this country, most programs in this area have no employee rights associated with them – typically they are systems of rewards, like commissions, or bonuses whose level and continuation is solely up to management. One important exception is the Scanlon Plan, in which savings in labor costs are regularly distributed to all employees. These plans are quite formal in terms of specifying employee rights to the surplus, although it is possible for management to terminate such a plan without consultation.

Ownership of equity or stock The most popular ownership plan at present is undoubtedly the Employee Stock Ownership Plan or ESOP, in which stock in the firm is regularly distributed to all employees, usually on an annual basis. The motivation for establishing an ESOP is rarely a management interest in employee-ownership, however. ESOPs are popular with management because of the considerable tax breaks they make possible and the promises of increased productivity. A close look at the rights involved usually reveals that many of these plans are little more than glorified retirement plans – employees "own" the stock, but do not really have the right to sell it until retirement and rarely have any voting rights normally associated with stock ownership. More progressive ESOPs do exist which correct these deficiencies by giving employees a greater share of ownership rights. In wholly employee-owned firms, like the plywood cooperatives of the Pacific Northwest, employees have absolute rights associated with ownership. As owners, they "vote their stock," have the right to sell their share of the firm if they wish, and are also entitled to any profits generated by the firm.

Other possibilities Clearly, some programs of workplace innovation can involve two or more of these dimensions at once. Quality circle programs often add a profit or gain-sharing component after three or four years of operation, providing employees a financial share in the productivity increases that usually result from these programs. Scanlon Plans for sharing reduced labor costs are usually coupled with an employee-suggestion mechanism that influences management level decision-making. And at the worker cooperatives of Mondragon, of course, each of the dimensions is relevant.

Another important dimension In addition, there is a sixth dimension that is often overlooked:

Many quality circle programs, for example, restrict employee decision-making to the productive process immediately surrounding them, and make it clear that employee suggestions regarding the quality circle program itself, or other possible innovations, are inappropriate. On the other hand, some autonomous work group programs such as those within Digital have gradually given an increasing amount of control to employees to generate additional innovations. As work teams have become more competent at managing the production process, they have been given more say regarding gain-sharing and ownership options, even to the point of designing their own programs in these areas. And within many labor-management committee efforts, it is the committee itself which has the responsibility for shepherding and developing workplace innovations within a firm.

Summary and implications Several points should be made about this brief overview of workplace innovations:

Looking carefully at the extent of employee rights within any particular program of workplace innovation can provide a no-nonsense assessment of what, in fact, is being changed. If a program expects employees to change their roles and responsibilities in significant ways, but without providing specific rights and ways of modifying them, then the program is suspect. Managers who are reluctant to distribute rights as well as responsibilities to employees are either unwilling or unable to commit themselves to real workplace change. Their programs may succeed in the short term, but will usually backfire over the long run.

The willingness of firms to look at workplace innovation in an evolutionary way is also of paramount importance. Unfortunately, too many organizations approach workplace innovation in an overly simplistic way – as simply a static program that will enhance productivity and employee satisfaction. Period. What they overlook is that programs of this sort tend to raise employee expectations for change in the workplace – many employees that are given new responsibility, will, in time, want even more. At this point in time, fewer than 50% of the quality circle programs that were started in the past ten years still exist. While some failures can be chalked up to poor initial implementation, recent research suggests that programs which continue successfully have also added other timely innovations such as profit-sharing. These additions not only rewarded employees materially for changing their roles, but also served as concrete demonstrations that management is sincere enough about innovations to reward people for it. Viewed in this light, even a low-level quality circle program with minimal rights is fine for starters, provided that management understands the program as the first step in an ongoing process. Without management commitment to an evolutionary perspective, however, such a program is likely to be only a short-term device for increasing productivity at the employees’ expense.

For the progressive firm that wants to develop a longterm, evolving plan for workplace innovation, there is no single path. The particular mix of innovations and their sequencing in time needs to be tailored to local conditions and to the particular culture of each organization. The most effective way to ensure the appropriate mix of innovations is to involve employees or their representatives right from the start in the decision-making about the process of workplace innovation. While the results are less predictable than a program solely developed by management, and the initial planning stage may take longer, a high degree of employee involvement from the beginning has several benefits. It guarantees that whatever program is developed has a high degree of acceptance, and is tailored to the needs and wants of both management and employees. It serves as an early demonstration of management’s openness and desire for collaboration with employees, an important step for reducing resistance to change. And lastly, because employees are involved in the process, the resulting program of innovation will include important features that management would have overlooked or ignored, aspects that give employees a real sense of ownership regarding the whole enterprise.

In this article I’ve tried to share very briefly a framework that I find useful in explaining the range of workplace innovation to business clients who want to increase employee involvement in their firms. I use these dimensions to explain the range of what is possible and to convey the long-term, but evolutionary nature of changing workplaces. Feel free to use this article to stimulate thinking about your own workplace. Where is it now according to these six dimensions? Where would you like it to be? Who else in your workplace needs to be involved in exploring the possibilities? When is your first meeting?


WORK ALTERNATIVES


The Changing American Workplace: Alternatives in the ’80s,
a recently released survey on work alternatives, conducted by Goodmeasure, Inc. for the American Management Association (135 W. 50th St., New York, NY 10020, 1985), provides grounds for optimism about the degree to which American business is incorporating a variety of innovations in the workplace. Based on responses from 1,618 businesses about the use of 21 different work alternatives, the survey found:

  • 45% use cross-training (training people in skills beyond those they use in their job).
  • 27% use job enrichment (increasing variety, range of tasks, decision-making responsibility of individual jobs).
  • 35% use flex-time
  • 36% use quality circles
  • 26% use formal training in participative management
  • 12% use work or communication councils (groups representing all levels of an organization used as forums for discussion of organizational issues)
  • 22% use matrix or multiple reporting structures (formal systems in which people are simultaneously responsible to two or more separate areas of the organization)
  • 28% use project-based organization
  • 17% use semi-autonomous work groups
  • 7% use internal venture funds or other entrepreneurial opportunities (18% of firms with over 20,000 employees have such opportunities)
  • 12% use employee-owned organization or equity participation (17% of firms with over 20,000 employees; 28% of communication and publishing firms)

Of the 21 alternatives, 8 have typically been in use for longer than 5 years, suggesting that these alternatives are "here to stay"; these alternatives include: cross-training; project teams; matrix organizations and employee ownership/equity participation. The survey also found a strong link between workplace innovation, product innovation and superior financial performance.

The survey authors conclude with several propositions based on the results:

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