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| The PRO-Productivity System (tm) | |
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INVOLVING ALL EMPLOYEES The third, open-ended phase of the PRO-Productivity System (tm) entails all the techniques which may be applied to communicate the nature of the Employee Stock Ownership Plan, or the financial and operational progress of the sponsoring company to the entire employee group. The decisions of the Management Roundtable phase find implementation here.
The
Attitude and Information Survey
The Attitude and Information Survey
The first stage of interaction with the rank and file consists of an assessment of current attitudes and information levels. Communications time is valuable; it is best spent addressing issues that concern or puzzle the employees. (This can be particularly useful when a company with an established Employee Stock Ownership Plan is attempting to move from a non-participative "employee benefit" ESOP to a participative "productivity enhancing" ESOP.)
The employee assessment may take the form of questionnaires circulated among the employees or of live "focus group" meetings led by an outside facilitator who can serve as a neutral conduit of anonymous opinions to the management team. While the questionnaire method is suitable for testing information levels, it depends too thoroughly on predefined categories to elicit an accurate picture of the employees' real perceptions and concerns about their work. The focus group is a useful vehicle for uncovering rumors and recriminations, as well as enthusiastic energy and team spirit which never show up in a written survey. Either approach provides a benchmark for measuring the long-term success of the productivity project. Changes must be monitored in future years using the same or similar instruments in order to adjust and improve communications. Once the assessment is digested by management, the company moves on to active introduction of the new program.
There are four fundamental levels of employee involvement:
Level I--Top-Down Communications:
Education and Financial Disclosure:
Level II--Bottom-Up Communications:
Level III--Delegated Autonomy: Personal Job Site Autonomy:
Chartered Task Forces:
Level IV--Voting Rights:
At Levels I and II, employees receive or give information, but have no authority for particular actions. At Levels III and IV, employees take autonomous decisions. While an increasing number of companies are experimenting with some form of voting rights, few elect this level of involvement without experience at the lower echelons.
Symbolic Action:
Virtually all ESOP companies eventually implement some of the Level I ideas. Symbols can have dramatic effect; they prepare the mind for more substantive change:
"We've tried to eliminate all obvious signs of differences like time clocks, reserved parking, separate lunchrooms, anything that would say 'you fall into this class of citizens and these people fall into another class of citizens.' [...] Everything is designed to make people think of themselves as one team." --Malcolm G. Putnam, Oregon Steel16
Since all the symbolic actions cast the employees in a passive role, they are only a first tentative step toward a participative productivity program. Many companies have used these techniques to good effect in the informal context of smaller companies where "Walk-Around Management" rather than formal participation programs elicits interaction among all levels of the organization. Even a large organization like Avis claims good effects from its "Owners Try Harder" button program: the buttons alert not just customers, but the employees themselves of the underlying message.
Education and Financial Feedback:
Even the most rudimentary Employee Stock Ownership Plan is mandated to provide a summary of the plan in written form to employee participants. Some employers who have elected Option 1: Keep Total Control distribute nothing more than this rather legalistic brochure. Most companies, however, at least sponsor a communications meeting to kick off the plan. After a slide or video presentation by a person who explains the legal structure of the plan, rules of eligibility, annual participation, vesting, and the timing of distributions, employees have the opportunity to ask questions and clarify their understanding of the program as a retirement plan.
The kick-off briefing also provides selling shareholders an opportunity to announce their intentions for integrating employee ownership into the culture of the company. If an employee survey is to be used, it can be distributed in this forum. A subsequent meeting to analyze the results of the survey effectively inaugurates the productivity enhancement program itself.
The survey will almost invariably reveal that another type of education is necessary if employees are to learn to make responsible decisions with a proper eye on the bottom line. It is remarkable how often managers and employees alike admit to basic business ignorance, even among otherwise skilled professionals:
"Most people who work in companies don't understand business," says Jack Stack of Springfield Remanufacturing Corp. "They think profit is a dirty word. They think owners slip it into their bank accounts at night."17 "It was genuine shock to find that the majority of the employees had no understanding of financial planning, investment, or profits--indeed no understanding of business--and that their primary concern was the next paycheck." --Warren L. Braun, ComSonics18
At ComSonics, Braun devotes 16 hours of instruction in 32 half-hour sessions (now provided to all new employees on video tape) to explain "what stock is, its purpose, and its functional relationship to the employee's future financial status."19
At SRC, Jack Stack tells new employees "70% of the job is disassembly--or whatever--and 30% of the job is learning." [...] "No one ever explains how one person's actions affect another's, how each department depends on the others, what impact they all have on the company as a whole. Most important, no one tells people how to make money and generate cash. Nine times out of ten, they don't even know the difference between the two."20
A natural adjunct of basic financial education will be some discussion of the role of capital investment in personal financial planning. This topic, of course, affords the company a chance to reinforce the value of the ESOP stock investment. Until this sort of comprehensive financial education has been completed, however, it is generally counterproductive to disclose the company's formal accounting statements to employee-owners. Unless employees have sophisticated training, the array of GAAP accounting categories is likely to distract from the primary productivity message.
Because developing an appropriate curriculum and presenting it to the employees is a time-consuming task in itself, managers are usually best advised to distill benchmarks of performance from the company's normal records to provide employees with feedback which is relevant to their particular tasks and permits them to react to changing business conditions and alter their behavior in a timely manner. Such feedback should be available at least monthly in order to provide employees with some sense of control over the changing variable.
"Employees will have a good understanding of financial constraints only when the financial data is reduced to relevant, current financial information that is exactly targeted to their operations." -- Warren Braun, ComSonics 21
While the availability of appropriate numbers obviously influences the potential feedback, devising mutually agreed-upon measures is a crucial first step in the participatory process. Employees must understand and value the measurement system. In the jargon of organizational development, they must "own" the system. If the system is imposed from above, as in the time and motion measures promoted by scientific efficiency experts like Frederick Taylor earlier in the century, employees feel uninvolved at best and manipulated at worst.
The identification of relevant feedback is related to a less mathematical approach that functions better for some companies or positions. In the responsibility analysis exercise, employees who interact with each other clearly define their job tasks as they are actually performed. The objective is to unite decision-making authority with the actual responsibility for execution of tasks wherever appropriate. Even in companies with well delineated job classifications and descriptions, actual practice frequently deviates far from the book. Investing the person who really accomplishes a task with adequate information and authority to make appropriate decisions can often generate major improvements in productivity, to say nothing of less friction in the workplace.
With experience, managers become more comfortable discussing comprehensive financial results with the employees. Some firms, concerned about revealing proprietary information in a competitive environment, take the precaution of displaying financial results only in nonpermanent fashion during a talk or on-screen using overheads. Several other companies have developed special ESOP reporting formats which highlight the most important items and explain them in attached commentary. These Annual Employee-Owners' Reports maintain the clear understanding that participation and disclosure are not ends in themselves, but a means towards enhancing the financial condition of all the stakeholders in the company. Accounting statements are, after all, designed to reveal the overall financial condition of a company. Improving that condition is the ultimate goal of stockholders. In the last analysis, guiding employee-owners to a reasonable understanding of the statements is an appropriate long-term goal for an ESOP company, though it is seldom a first priority. Without the strictures of formal GAAP accounting or SEC disclosure rules, the best Annual Reports make the company's financial information come alive to the employee-owners.
Advocates of participatory management conventionally disparage the suggestion box mentality. It discourages real interaction, they contend. It elicits ideas only from the most aggressive employees and provides no automatic forum for participation. It allows some outlet for complainers and inventors, but promises no change in the company's overall culture.
Most of this is true, but suggestion boxes do have virtues. They permit anonymous comments which might not be expressed even in the most interactive venues. They allow managers pause to think through their responses and abbreviate time wasted on truly stupid ideas in meetings, where people must maintain some measure of polite respect for expressed opinions. Solid suggestion box systems require that prompt and reasoned responses be combined with an appropriate array of rewards. If you maintain a system like this, don't abandon it.
Gurus like Peter Drucker and Tom Peters have long popularized the idea of "Walk-Around Management" as the sine qua non of efficient communication among organizational levels. To be effective, this apparently informal technique requires just as much resolute and systematic observance as any other approach. Unless the managers consistently and often interact with a large number of employees, their occasional appearance on the shop floor or in the word processing room will take on Great-Event status. What's really going on is usually suppressed during Great Events. The formal participatory structures sketched in the PRO-Productivity System (tm) are more likely to produce a focused response from employees than casually deployed Walk-Around techniques. On the cusp between autonomous decision-making and mere communication is the evolving custom of the ESOP Advisory Committee. As a legal entity, the Employee Stock Ownership Trust is overseen by a directed Trustee who takes his direction from an ESOP Plan Committee appointed by the Board of Directors. This Committee exercises the actual voting power of the ESOP-owned shares. The Trustee merely executes their instructions. Both the Trustee and the Plan Committee--often the same person or people--are legal fiduciaries. Because Plan Committee membership represents voting control, very few companies treat membership as a democratic function of the employee group. The ESOP Advisory Committee, however, is another matter. Frequently constituted by election of the employees on a one-person, one-vote basis regardless of seniority or stock in their ESOP accounts, the Advisory Committee is not a fiduciary. Its charter may cover any appropriate tasks, from publishing the Annual Employee-Owner's Report to arranging for employee education to serving as a conduit for recommendations developed in departmental meetings. In some companies, a representative from the ESOP Advisory Committee is an ex officio nonvoting (or voting) member of the Board of Directors. As the company's experience with participation grows, this approach affords an appropriate outlet for some level of democratic participation in corporate governance.
The Delegated Autonomy category is the focal point of most fully-developed productivity enhancement programs. While the techniques of Levels I and II enhance communications, they rely on executive initiative to effect real cost saving changes. This is far from tapping into the responsible, informed decision making capacities of the employee owners. Training employees to take informed, coordinated, yet autonomous decisions, however, calls upon the greatest skills of the manager as coach.
"This employee participation kind of goes against the grain with me. I'm more the kind to tell people how to do things, delegate it all out. I have to work at this stuff. -- Cecil Ursprung, Reflexite Corp.22
Everyone with experience agrees that participatory decision making ultimately yields better decisions and a more profitable company, but all concede that the process, especially in the beginning, is more time-consuming and frustrating than conventional command and control management: "Since the heart of corporate ESOP/Participatory problem solving is to share in the risks and rewards of corporate life, each individual needs to participate in the progress of the firm by solving problems appropriate to his or her level of understanding of the problems the firm is experiencing. Under no circumstances should this become a 'democratic' or 'communal' decision making process. Great errors are made when this process is understood in terms of one-worker, one-vote 'democracy.' Hierarchical structures do exist, both of necessity and by good common business sense. The buck does stop at the CEO's desk. But the 'top dog' is no longer 'De Boss'; rather the boss becomes the 'coach,' involving the players in 'winning the game.' Worker input is sifted through a consensusmaking process so that all can 'buy in' to the solution." --Warren Braun" Great coaches lay groundwork so their players succeed first and build the habit of success. The company's playbook is consensus on the feedback benchmarks which guide the employee in his or her decisions. Too much information can be worse than too little, yet the feedback must convey enough information to permit corrective maneuvers and to reinforce success. Monitoring the employee decision process, like tracking the skill development of a playing team, requires tact and a way to keep score. The feedback benchmarks are of equal importance to the manager-coach and the employee-players. Managers must encourage participation in increments that the employee group can handle; yet decisions must be meaningful to the employee and important to the bottom line. Otherwise the vaunted "participation" will be recognized as an empty phrase. You can't educate people to higher responsibility by giving them trivial tasks or completely foreclosing the right to fail.
"But what is 'participation' in practical terms? Simply put, it is: involving people in the process of making decisions that affect them about their company and their work. It does not mean making everyone a manager, giving up control, courting chaos, or instituting paralysis from endless disputation. It means inviting--even insisting--that everyone become involved. -- Peter B. Thompson Human Resource Management Systems24
"We teach people the rules. We show them how to keep score and follow the action, and then we flood them with the information they need to do both. We also give them a big stake in the outcome--in the form of equity, profits, and opportunities to move ahead as far as they want to go." -- Jack Stack, Springfield Remanufacturing25
The easiest autonomous decisions are those directly involving the employee's own job performance. If it is feasible in a particular operation to organize work so that employees can have more discretion over the time and possibly even the site of their work, employees value the autonomy very highly and companies at least suffer no ill effects. Valid feedback benchmarks assure that work is accomplished and allow everyone to determine whether the greater autonomy is in fact enhancing productivity. Flex time and working at home, where they are possible, are clear indices that the company expects the employee to function as a responsible professional. Other examples of increased autonomy on the individual level include extending the authority for pricing or establishing service contracts, or for developing and maintaining client contacts. Each company, obviously, must extend employee responsibilities in ways appropriate to the particular business.
"Salespeople cut sharper deals because (as one marketer puts it) 'they're worried about return on investment, not just making this sale.' Shop-floor managers take the initiative to reorganize packaging, eliminating bottlenecks and freeing up packers for other work. [A] chemicals handler, on the job less than a year, figures out how the company can reuse solvent, thereby cutting the hazardous waste it must dispose of. He even works up a full cost-benefit analysis, mostly on his own time. Simple initiatives--which most companies never see. "26
The ultimate goal of the entire PRO-Productivity System (tm) is to instill a culture of ownership so thoroughly that bottom-line consciousness supplements short term self-interest, as in the examples from Reflexite in the box above. Because they are the most formal participatory arrangements, the group problem solving task forces, called variously Employee Participation Groups, Quality Circles, or Ad Hoc Problem Solving Committees have received the greatest amount of written attention. Theoretical models for their structure and operation abound. Most of these models represent the consensus decision-making process as the essence of the participation group. Professional training in consensus building is a prerequisite for the productive operation of such groups. Participation groups generally mandate input by all members so as to extract hidden truth from the timid and educate everyone to responsibility. At Chevrolet's successful gear manufacturing division in the early '80s, this mandate took the form of a required summation statement by every member of the 20-person production circle at the close of each morning's 20-minute meeting. Less incessant meetings are generally favored today.
"When Americans feel that they are part of a team, and a player, they can outperform most of their opposite numbers in any other culture. But they must feel that they are a part of that team, and an active player, not just a 'bench warmer. --Warren Braun, ComSonics27
Whether voluntary, mandatory, elective, appointive or ex officio, group participants must receive a clear charter and continuing meaningful assignments from management if they are to succeed. Without such guidance, they may be great group therapy, but not a particularly well-directed productivity tool. Generally, a representative from management sits in each group. With guidance, employee problem-solving task forces can convey a spirit of shared responsibility to all employees, even those who do not attend in person. If the assigned tasks are appropriate, participation groups become the training ground for future supervisors and managers. Leadership qualities are tested under fire. Operational expertise is developed on well-defined issues. A broad perspective on the problems and potential of other operating or functional units evolves. Participants are coached in the proper format for reporting their recommendations to managers who make the ultimate decisions. Feedback flows downward to ensure that participants are able to place their recommendations in a company-wide context. As time goes on, responsibility for some decisions may be delegated to the participation group itself.
Great coaches have the capacity to inspire all the players to get involved, to help them develop their innate talent for the quick moves and decisive plays that bring victory out on the field, far from the playbook.
Despite our proud democratic traditions, America offers few examples of democratically managed corporations. This remains true even in companies in which 100% of the stock is held by the employee group through an employee trust. It is certainly true that without the ESOT to insulate voting control from the employee-beneficiaries, hardly any private companies would consider initiating employee ownership programs. Yet there are some companies which are experimenting with the principle. Aside from the extremely limited statutory situations in which a direct vote pass-through is mandated (see ESOP Pros and Cons), a few companies permit the elected representative of the ESOP Advisory Committee to hold a voting seat on the Board. Mathematically, this does not convey actual control to the employee representative, no matter how much of the outstanding stock the trust holds. This approach does, however, confirm the openness of management and its commitment to a "no surprises" style which can alleviate the mistrust that almost inevitably follows when corporate decisions are made behind closed doors. Yet it is important to recognize that even one of the most confirmed advocates of employee participation as the key to corporate success, Corey Rosen of the National Center for Employee Ownership, has reported that voting control is not a concern or a highly valued right of most employee-owners.28
"Since structures of political democracy have proven stronger over time than autocratic forms of government, why shouldn't a democratic business be stronger, more competitive, and more profitable than a traditionally run business?" --Buck & Heitfield29
To date, the experience of American companies in permitting employees to vote the shares in their accounts is so limited that it must be considered experimental. In time, as more companies develop a high percentage of employee ownership, it is to be expected that the vote will be passed through to participants more often. Certainly the theorists of more democratic forms can raise some thought-provoking issues. (See the box above.) In the meantime, employers considering the adoption of a stock-based productivity system should regard passing through voting rights as an unusual option.
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