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 They teach their children to believe that work is unrewarding and hopes for advance- ment are slim. Researchers in the 1960s began to note that children of farmers grew up believing hard work paid off, while the offspring of urban blue-collar workers did not. As a result, many U.S. companies began to move facilities away from old industrial states like Michigan (where Ben Hamper worked) to more rural states like North Carolina and Tennessee, in search of employees who still embodied the work ethic. Argyris predicted, however, that industry would eventually demotivate even the most committed workforce unless management practices changed. In recent decades, manufacturing and service jobs have been moving offshore to low-wage enclaves around the world, continuing the search for employees who will work hard without asking for too much in return.

Hamper’s account of life on the line is a vivid illustration of Argyris’s contention that organizations treat adults like children. The company assigned an employee to wander

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through the plant dressed in costume as “Howie Makem, the Quality Cat.” (Howie was mostly greeted with groans, insults, and an occasional !ying rivet.) Message boards were plastered with inspirational phrases like “Riveting is fun.” A plant manager would emerge from his usual invisibility to give an annual speech promising to talk more with workers. All this hypocrisy took its toll: “Working the Rivet Line was like being paid to !unk high school the rest of your life. An adolescent time warp in which the duties of the day were just an underlying annoyance” (Hamper, 1992, p. 185).

The powerlessness and frustration that Hamper experienced are by no means unique to factory work. Bosses who treat of”ce workers like children are a pop culture staple—including the pointy-haired martinet inDilbert and the pathetically clueless boss in the television series The Of!ce. In public education, many teachers and parents lament that increasing emphasis on high-stakes standardized tests alienates teachers and turns them into “deskilled clerks” (Giroux, 1998). Batstone sees frustration as pervasive among workers at every level: “Corporate workers from the mailroom to the highest executive of”ce express dissatisfaction with their work. They feel crushed bywidespread greed, sel”shness, and quest for pro”t at any cost. Apart from their homes, people spend more time on the job than anywhere else. With that kind of personal stake, they want to be part of something that matters and contribute to a greater good. Sadly, those aspirations often go unmet” (2003, p. 1).

Argyris and McGregor formed their views on the basis of observations of U.S. organizations in the 1950s and 1960s. Since then, investigators have documented similar con!icts between people and organizations around the world. Orgogozo (1991), for example, contended that typical French management practices caused workers to feel humiliation, boredom, anger, and exhaustion “because they have no hope of being recognized and valued for what they do” (p. 101). She depicted relations between superiors and subordinates in France as tense and distant because “bosses do everything possible to protect themselves from the resentment that they generate” (p. 73).

Early on, human-resource ideas were often ignored by scholars and managers. The dominant “assembly-line” mentality enjoyed enough economic success to persist. The frame’s in!uence has grown with the realization that misuse of human resources depresses pro”ts as well as people. Legions of consultants, managers, and researchers now pursue answers to the vexing human problems of organizations.

HUMAN CAPACITY AND THE CHANGING EMPLOYMENT CONTRACT In recent years, global trends have pushed organizations in two con!icting directions. On one hand, global competition, rapid change, shorter product life cycles and the rise of

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mobile apps have produced a turbulent, intensely competitive world, placing an enormous premium on the ability to adapt quickly to shifts in the environment. One way to adapt is to minimize “xed human assets. Beginning in the late twentieth century, more and more organizations turned to downsizing, outsourcing, and using part-time and temporary employees to cope with business !uctuations. In the United States, public universities have coped with a decline in state funding by shifting to more part-time adjunct instructors and fewer full-time faculty. Uber, emblematic of the “gig economy,” has fought doggedly to keep its drivers classi”ed as “independent contractors” rather than employees. Volkswagen opened a manufacturing plant in Brazil in which subcontractors employed 80 percent of the workforce. Even in Japan, traditional notions of lifetime careers have eroded in the face of “a bloated work force, particularly in the white collar sector, which proved to be an economic drag” (WuDunn, 1996, p. 8). Around the world, employees looking for career advice have been told to count on themselves rather than employers. Give up on job security, the advice often goes, and focus instead on developing skills and !exibility that will make you marketable.

On the other hand, some of the same global forces push in another direction— toward growing dependence on well-trained, loyal human capital. That was why the online real estate “rm Red”n chose to run counter to the usual pattern for both tech start-ups and the real estate business. Employing more than 1,000 agents in 2016, Red”n “gives its agents salaries, health bene”ts, 401(k) contributions and, for the most productive ones, Red”n stock, none of which is standard for contractors” (Wing”eld, 2016), because CEO Glenn Kelman believes that full-time employees provide better customer service.

Organizations have become more complex as a consequence of globalization and a more information-intensive economy. More decentralized structures, like the networks discussed in Chapter 3, have proliferated in response to greater complexity and turbu- lence. These new con”gurations depend on a higher level of skill, intelligence, and commitment across a broader spectrum of employees. A network of decentralized decision nodes is a blueprint for disaster if the dispersed decision makers lack the capacity or desire to make sensible choices. Skill requirements have been changing so fast that individuals are hard pressed to keep up. The result is a troubling gap: organizations struggle to “nd people who bring the skills and qualities needed, while individuals with yesterday’s skills face dismal job prospects.

The shift from a production-intensive to an information-intensive economy is not helping to close the gap. There used to be more jobs that involvedmaking things. In the “rst three decades after World War II, high-paying jobs in developed nations were heavily

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concentrated in blue-collar work (Drucker, 1993). These jobs generally required little formal training and few specialized skills, but they afforded pay and bene”ts to sustain a comfortable and stable lifestyle. No more. Whereas workers in manufacturing jobs accounted for more than a third of U.S. workers in the 1950s, by 2010 they were less than a tenth of the workforce (Matthews, 2012), dropping to a low of around 11.5 million jobs in early 2010. During the next “ve years, there were signs of a rebound (U. S. Bureau of Labor Statistics, 2016), and manufacturing jobs began to come back to traditional factory states like Indiana, Michigan, and Ohio (Baily and Katz, 2012). But the growth was concentrated in high-skill jobs in industries like aerospace, medical equipment, and automobiles. When U.S. automobile manufacturers began to replace retiring workers in the mid-1990s, they emphasized quick minds more than strong bodies and put applicants “through a grueling selection process that emphasized mental acuity and communication skills” (Meredith, 1996, p. 1).

This skill gap is even greater in many developing nations. Until late in the twentieth century, China’s population of 1.3 billion people consisted largely of farmers and workers with old-economy skills. Beginning in the 1980s, China began a gradual shift to a market economy, reducing regulations, encouraging foreign investment, and selling off fading state-owned enterprises. Results were dramatic: China’s economy shifted from almost entirely state-owned in 1980 to 70 percent private by 2005. China became one of the world’s fastest-growing economies, with compound growth at 7 to 8 percent a year in the early twenty-“rst century, but unemployment mushroomed as state-owned enterprises succumbed to nimbler—and leaner—domestic and foreign competitors. China’s reported unemployment rate was low by comparison to many western nations, but it still meant millions of Chinese were looking for work, and many observers suspected that the of”cial numbers understated the problem.

Simultaneous pressures to increase !exibility and employee skills create a vexing human resource dilemma. Should an organization seek adaptability (through a downsized, out- sourced, part-time workforce) or loyalty (through a long-term commitment to people)? Should it seek high skills (by hiring the best and training them well) or low costs (by hiring the cheapest and investing no more than necessary)?

Lean and Mean: More Bene!ts Than Costs? The advantages of a smaller, more !exible workforce seem compelling: lower costs, higher ef”ciency, and greater ability to respond to business !uctuations. After the recession in 2008, the U.S. economy shed roughly 5 million jobs (Coy, Conlin, and Herbst, 2010), albeit just a fraction of the some 50 million lost worldwide (Schwartz, 2009).

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Downsizing works best when new technology and smart management combine to enable fewer people to do more. In recent decades, manufacturing jobs have been shrinking around the globe because of changes in technology (Kenny, 2014). Yet even when it works, shedding staff risks trading short-term gains for long-term decay. “Chainsaw Al” Dunlap became a hero of the downsizing movement as chief executive of Scott Paper, where he more than doubled pro”ts and market value. His strategy? Cut people—half of management, half of research and development, and a “fth of blue-collar workers. Financial outcomes were impressive at “rst, but employee morale sank, and Scott lost market share in every major product line. Dunlap did not stay around long enough to “nd out if he had sacri”ced Scott’s future for short-term gains. After less than two years on the job, he sold the company to its biggest competitor and walked away with almost $100 million for his efforts (Byrne, 1996).

Despite eliminating millions of jobs, many “rms have found bene”ts elusive. Markels and Murray (1996) reported that downsizing often turned into “dumbsizing”: “Many “rms continue to make !awed decisions—hasty, across-the-board cuts—that come back to haunt, on the bottom line, in public relationships, in strained relationships with customers and suppliers, and in demoralized employees.” In shedding staff, “rms often found that they also sacri”ced knowledge, skill, innovation, and loyalty (Reichheld, 1993, 1996). Multiple studies have found that cutting people hurts more often than it helps performance (Cascio, Young, and Morris, 1997; Gertz and Baptista, 1995; Love and Kraatz, 2005; Mellahi and Wilkinson, 2006). Nevertheless, more than half of the companies in a 2003 survey admitted that they would make cuts that hurt in the long term if that’s what it took to meet short-term earnings targets (Berenson, 2004).

Downsizing and outsourcing often have a corrosive effect on employee motivation and commitment. A 2009 Conference Board survey found that “only 45% of workers surveyed were satis”ed with their jobs, the lowest in 22 years of polling” (Coy, Conlin, and Herbst, 2010, p. 1). Workers reported that the mood in the workplace was angrier and colleagues were more competitive, and a 2012 survey found employee loyalty at a seven-year low.

Investing in People Employers often fail to invest the time and resources necessary to develop a cadre of committed, talented employees. Precisely for that reason, a number of authors (including Cascio and Boudreau, 2008; Lawler, 1996; Lawler and Worley, 2006; Pfeffer, 1994, 1998, 2007; and Waterman, 1994) have made the case that a skilled and motivated workforce is a powerful source of competitive advantage. Consistent with core human resource

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assumptions, high-performing companies do a better job of understanding and responding to the needs of both employees and customers. As a result, they attract better people who are motivated to do a superior job.

The most successful company in the U.S. airline industry for many decades, Southwest Airlines, paid employees a competitive wage but had an enormous cost advantage because its highly committed workforce was so productive. Competitors tried to imitate Southwest’s approach but rarely succeeded because “the real difference is in the effort Southwest gets out of its people. That is very, very hard to duplicate” (Labich, 1994, p. 52).

Ewing Kauffman started a pharmaceutical business in a Kansas City basement that he grew into a multibillion-dollar company (Morgan, 1995). His approach was heavily in!uenced by his personal experiences as a young pharmaceutical salesman:

I worked on straight commission, receiving no salary, no expenses, no car, and no bene”ts in any way, shape, or form—just straight commission. By the end of the second year, my commission amounted to more than the president’s salary. He didn’t think that was right, so he cut my commission. By then I was Midwest sales manager and had other salesmen working for me under an arrangement whereby my commission was 3 percent of everything they sold. In spite of the cut in my commission, that year I still managed to make more than the president thought a salesmanager shouldmake. So this time he cut the territory, whichwas the same as taking away some of my income. I quit and started Marion Laboratories.

I based the company on a vision of what it would be. When we hired employees, they were referred to as “associates,” and they shared in the success of the company. Once again, the two principles that have guided my entire career, which were based on my experience working for that very “rst pharmaceutical company, are these: “Those who produce should share in the pro”ts,” and “Treat others as you would be treated” (Kauffman, 1996, p. 40).

Few managers in the 1950s shared Kauffman’s faith, and many are still skeptics. An urgent debate is under way about the future of the relationship between people and organizations. The battle of lean-and-mean versus invest-in-people continues. In pipe manufacturing, two of the dominant players are crosstown rivals in Birmingham, Alabama. One is McWane, which compiled an abysmal record on safety and environmental protection—9 deaths, 400 safety violations, and 450 environmental violations between 1995 and 2002 (Barstow and Bergman, 2003b) that “culminated in an $8 million “ne imposed in April 2009. Four former plant managers were sentenced to federal prison for

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