In February, workers in a Tennessee Volkswagen plant voted against union representation, something that William Lazonick and Tony Huzzard say is unfortunate. They write that to compete on the world stage, a strong employee voice in the workplace matters. Using case-studies of automotive companies in Germany, Sweden and the U.S., they argue that compromises between the financial interests of shareholders and the productive interests of employees can lead to considerable success. High-performance workplaces, characterized by “high road” jobs in which productivity improvements and pay increases go hand in hand, are critical to sustained competitive advantage

Huzzard, Tony

Lazonick, William

LSE Research Online

blogs.lse.ac.ukhttp://blogs.lse.ac.uk/usappblog/2014/05/10/why-everyone-does-better-when-employees-have-a-say-in-the-workplace/Credit: Chrysler Group (Creative Commons BY NC ND)Why everyone does better when employees have a say in theworkplaceIn February, workers in a Tennessee Volkswagen plant voted against union representation,something that William Lazonick and Tony Huzzard say is unfortunate. They write that tocompete on the world stage, a strong employee voice in the workplace matters. Using case-studies of automotive companies in Germany, Sweden and the U.S., they argue that compromisesbetween the financial interests of shareholders and the productive interests of employees canlead to considerable success. High-performance workplaces, characterized by “high road” jobs inwhich productivity improvements and pay increases go hand in hand, are critical to sustainedcompetitive advantage.In manufacturing plants all over the world, both managers and workers have discovered that whenemployees are involved in workplace decision-making, productivity rises. So in the United States,it made national news when in February workers at the Volkswagen auto plant in Chattanooga,Tennessee rejected representation by the United Automobile Workers (UAW) by a vote 712 to626. Unfortunately, the Chattanooga workers said no to just the type of employee involvement inproductivity improvement that will be necessary to sustain their jobs going forward. To compete onthe world stage, a strong employee voice in the workplace matters.The UAW’s Chattanooga campaign would have made Volkswagen the very first foreign car company to a have aunionized plant in the United States. More importantly, a victory for the UAW was a precondition for the creation ofa works council at the Chattanooga plant — a form of worker-management plant-level collaboration for improvingmanufacturing productivity that is a fixture of German industrial relations, but virtually unknown in the UnitedStates. Through information-sharing and problem-solving, the managers and employees on a works councilimprove product quality, speed up production processes, and reduce materials waste. It’s a win-win.If American workers want to ensure the competitiveness of their manufacturing jobs, they should jump at thechance of instituting this type of forward-looking arrangement, one that enables their voice to influence theproductivity of the work that they do. A large body of evidence shows that the involvement of workers in enhancingproductivity increases both the earnings of workers and the competitiveness of the products that they produce.There is fresh evidence of the importance of worker involvement in the productivity improvements that contributeto making their own jobs, and the companies for which they work, competitive on a global scale.In-depth case studies ofautomotive supply companies inGermany, Sweden, and theUnited States — comparinggovernance regimes and workorganization at the plant level —have shown that the automotivesupply industry requires creativityand learning from its workers togenerate products that arecompetitive in terms of bothquality and cost. The ability andincentive of workers to use theirinsights and intelligence tocontribute to productivityimprovements depends on theorganization of work at the plant level. High-performance workplaces, characterized by “high road” jobs in whichproductivity improvements and pay increases go hand in hand, are critical to sustained competitive advantage.Our research reveals the important role of employee voice mechanisms in high-road work designs, not just inGerman and Swedish automotive suppliers where worker involvement is formally recognized, but also in supplierfirms in the United States where productivity is generally viewed as solely management’s concern. Employeerepresentation in strategic decision-making substitutes a stakeholder approach for the one-sided emphasis on“maximizing shareholder value”—a flawed ideology embraced by business schools over the past 25 years inwhich all that matters is the company’ stock price. Our research confirms, and helps to explain, a larger body ofindustrial experience that shows that compromises between the financial interests of shareholders and theproductive interests of employees have had considerable success in continental Europe. To succeed in globalcompetition, the US automobile industry needs more, not less, employee voice.Different nations favor different forms of employee voice. German firms have works councils at the plant level, andin companies with 2,000 or more employees, under the system known as co-determination, equal representationof workers and shareholders on the board of directors, plus one neutral seat. Whether at the plant level or theboard level, change requires workers’ input and consent.In Sweden, union representatives have the more prominent role. Since 1976, Swedish companies have beenregulated by an act of parliament, the Co-determination Act, stipulating that company management must consultunions prior to taking decisions on major changes such as corporate reorganization, new work conditions, or theintroduction of new technology. Although this requirement ultimately does not displace managerial prerogative, itdoes give time for unions to investigate the matters being decided and consult with members at central and plantlevels prior to decisions being made. In practice, the co-determination regulations are codified in collectiveagreements across the companies concerned. Not only do these arrangements for employee voice allow for betterroad-tested decisions in firms; they also confer greater legitimacy on the management of change. For this reason,initial employer opposition to this form of employee voice has now given way to broad acceptance.In the United States, in publicly listed companies, the ideology of maximizing shareholder value reigns supreme,even though, it is an ideology that enables top executives and corporate raiders to extract value from companiesat the expense of value creation. Nevertheless, one of the US companies that we studied had a 100 percentEmployee Owned Stock Plan (ESOP) in which the scope for self-dealing by top executives is much moreconstrained. And in two publicly listed US companies, plant managers had instituted programs for tapping workers’knowledge, with UAW members involved in one of the cases. Indeed, the workers at the unionized plant had onlyrecently elected to have the UAW represent them because of the protection that it afforded against their jobs beingshipped overseas.The UAW has been seeking to become more proactive in questions of labor’s voice in productivity improvement.UAW president Bob King assumed his position four years ago, coming off his work as UAW vice-president instructuring wage concessions to Ford Motor Company that helped to keep it solvent in the 2008-2010 automotiveindustry crisis, while General Motors and Chrysler went bankrupt and had to be bailed out by taxpayers. But asKing made the cost-cutting bargains at Ford, he also placed worker-management productivity agreements on theagenda as a sustainable way to keep automobile plants competitive in the United States.UAW rules hold that King, now age 67, cannot run for re-election as UAW president at the end of his term in Juneof this year. But the “high road” drive to improve the productivity of manufacturing jobs rather than pursue the “low-road” alternative of cutting workers’ wages needs to transcend his presidency. The evidence shows that to sustainhigh-road jobs while maintaining workers’ standards of living in advanced economies such as Germany, Swedenand the United States, workers’ voice in improving competitiveness needs to extend beyond the plant level toinclude restraints on corporate financial policies that enable rapacious company executives and Wall Streetpredators to appropriate corporate cash while leaving workers with low pay or out of work.German-style works councils are by no means a complete solution to the problem of generating competitiveproducts in high-wage nations. As a foundation for engaging workers in the process of productivity improvement,however, the “high road” alternative presented by the VW Chattanooga union election was a choice that Americanworkers should have embraced.A version of this article originally appeared on Alternet, and at the OUPblog. Please read our comments policy before commenting.Note:  This article gives the views of the author, and not the position of USApp– American Politics and Policy, norof the London School of Economics. Shortened URL for this post:  http://bit.ly/1qmF2Lf _________________________________About the authorsWilliam Lazonick – University of Massachusetts Center for Industrial CompetitivenessWilliam Lazonick is professor of economics and director of the UMass Center for IndustrialCompetitiveness. He cofounded and is president of the Academic-Industry Research Network. Hisbook, Sustainable Prosperity in the New Economy? Business Organization and High-TechEmployment in the United States (Upjohn Institute, 2009) won the 2010 Schumpeter Prize._Tony Huzzard – Lund University School of Economics and ManagementTony Huzzard is professor of organization studies at the Department of Business Administration,Lund University School of Economics and Management. Inge Lippert, Tony Huzzard, UlrichJürgens, and William Lazonick are the authors of Corporate Governance, Employee Voice, andWork Organization: Sustaining High-Road Jobs in the Automotive Supply Industry.CC BY-NC-ND 3.0 2014 LSE USAPP

Why everyone does better when employees have a say in the workplace

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