The automobile, which many people use to get to work or perform their work, has for the last 100 years determined the nature of work.
The manufacture and sale of autos has been a principal influence on how organizations, large and small, manage their affairs.
The typical top-down company organization chart of today was invented in the early 20th Century by U.S. automakers seeking to bring logic and order to the production and sale of cars in the face of booming worldwide demand. Layers of management, with vertical chains of command that are the norm in U.S. business, are inventions of early auto industrialists.
Much of the upheaval in management practices today can be traced to postwar threats by the Japanese to U.S. dominance in automaking. More recently, environmental and lifestyle concerns are changing the public’s appetite for the auto, which has remained essentially the same product for a century.
How the U.S. auto industry responds to global competition on the one hand and changed consumer demands on the other will alter the way organizations view themselves and define work.
In his Pulitzer Prize-winning book, “The Visible Hand” (Belknap Press, 1977), Harvard University professor Alfred Chandler Jr. noted that entrepreneur Henry Ford was able to cut the price of his autos to half that of the competition and still amass a personal fortune greater than that of John D. Rockefeller or Andrew Carnegie.
Ford achieved that by forcing an unprecedented marriage between labor and capital known as the moving assembly line. Ford’s auto parts were interchangeable, and so were the workers paid to perform simple, repetitive functions along the line. Management’s role was to keep the assembly line moving. The concept of work as a skilled craft disappeared in the U.S. auto industry and in industry generally.
William Durant, founder of General Motors, was a financial wizard in the same sense that Ford was a production wizard. But, like Ford, Durant was a failure as a manager of people and business organizations.
In their five-year study on the future of the auto that began in 1985, researchers at the Massachusetts Institute of Technology noted that GM’s lenders insisted that someone with management skill be hired to make sense of the collection of auto companies Durant had assembled. The man hired was Alfred Sloan Jr., the father of the decentralized business organization.
Sloan’s vision, which survives in hundreds of companies, was a small headquarters operation that gave general directions to largely autonomous divisions. Each division, with its own management hierarchy, carried out its mission and reported its financial results upward to headquarters. Unforseen shortfalls in those results often resulted in a divisional head rolling. One result of Sloan’s structure was a corporation that could make the best use of mass production’s uniformities while providing a more varied product to increasingly discriminating auto buyers.
At the time GM’s bankers were bringing in Sloan to make sense of Durant’s automaking conglomeration, Walter Chrysler quit GM in a dispute with Durant. Chrysler was then retained by a different set of bankers to reorganize several struggling automakers. By the time Chrysler put his name on his company in 1925, he had adopted Sloan’s multidivisional structure for the new Chrysler Corp.
In both cases, the demand by lenders to implement better financial controls and control costs dictated the definition of rank-and-file work. Employees were viewed as variable costs, like raw materials and electricity. When times got tough and auto sales fell off, auto companies simply laid off employees.
Japanese automakers in the 1950s familiarized themselves with the techniques developed by Ford, Sloan and Chrysler. But they took a new tack.
Labor laws imposed by the Americans occupying Japan after World War II prevented Japanese automakers from transferring to Japan labor practices of U.S. automakers. Thanks to that, Japanese workers had more power in negotiating working conditions. They demanded and got better job security. Their labor-management bargain-loyalty in return for job security-was unknown in the U.S.
In addition, a lack of capital and relatively low demand for autos in post-war Japan made the massive assembly plant, with numerous presses stamping out thousands of parts, unwieldy and uneconomic in Japan. The result, pioneered by the Toyoda family for the Toyota Motor Corp., was a manufacturing system that used less capital and more brains.
Workers were trained to produce a greater variety of parts from one stamping machine. Costly parts inventories were reduced-a precursor of today’s popular “just-in-time” inventory management techniques. Parts quality became a paramount concern, because the leaner Japanese production system didn’t have the slack of the more capital-intensive U.S. plant.
“If workers failed to anticipate problems before they occurred and didn’t take the initiative to devise solutions, the work of the whole factory could easily come to a halt,” the MIT researchers wrote in “The Machine That Changed the World” (Rawson Associates. 1990). “Holding back knowledge and effort-repeatedly noted by industrial sociologists as a salient feature of all mass-production systems-would swiftly lead to disaster in (the Toyota) factory.”
This distinction between U.S. and Japanese production techniques-and the superior quality achieved by Japanese auto exports as a result-gave rise to the much ballyhooed idea of the “knowledge worker.”
Because of the Japan success, most U.S. companies, whether or not they are unionized, have agonized over how to make workers feel involved without abandoning Henry Ford’s cog-in-the-wheel labor-management philosophy.
Union negotiations in the U.S. auto industry now involve the issues raised by the Japanese experience. And not a moment too soon. The Japanese style of lean production that encourages genuine worker involvement is better suited for the days ahead, when the definition of the automobile-a mass-produced passenger vehicle with four wheels propelled by an internal combustion engine-may change.
Individual consumer demands for a low-cost yet tailor-made automobile and environmental concerns over the viability of the internal-combustion engine cannot be addressed by management practices wedded to Ford’s prime directive of keeping the assembly line moving.
Despite strides by the Big Three U.S. automakers toward progressive labor policies, many critics believe the U.S. auto industry has lost its place as the leader in the evolution of the workplace. They point to smaller, more entrepreneurial companies in high-tech industries as the crucibles of progressive employer/employee relations.
Yet the transformation of U.S. mass-production industries, led by the auto, toward the leaner style of the Japanese auto industry will affect far more Americans. Despite its troubles, the U.S. auto industry has more influence than any other over public- and private-sector policy-making in the workplace.
What work you do, what pay and benefits you receive, what power you have on the job, to whom you report, how you are trained and, indeed, whether you have a job at all, depend largely on how the U.S. auto industry evolves in the next few years.
Though the MIT researchers concluded that Japanese management techniques are a better answer, they blamed the Japanese for the failure of these techniques to be more widely employed. Japanese racial and political nationalism has belied the spirit of worker involvement on a global basis.
They cited Americans employed by Japanese companies who realize they cannot aspire to top management positions.
“Western companies and employees will need to embrace the concept of reciprocal obligation, making a long-term commitment to the company or the group. Japanese companies, in turn, will need to abandon their narrow national perspective and quickly learn to treat foreigners who accept the obligations as full citizens.”
