“Corporations are at war with their own employees, and they can’t win a war like that . . . not when people right and left are falling under friendly fire,” says Lundin, who, along with his wife, Kathleen, recently penned “The Healing Manager: How To Build Quality Relationships and Productive Cultures at Work.”
As casualties mount, the nation will see more and more frustration, often manifesting itself in violence and sabotage, says Lundin, who consults with corporations from his base in Whitewater, Wis.
The Michael Douglas character in the film “Falling Down”-a man who loses his job, his family and eventually his mind-may not be such an anomaly in a world in which people feel driven to engage in guerrilla warfare against corporate America, he says.
According to the Chicago-based National Safe Workplace Institute, violence by bitter workers toward employers has climbed dramatically in the last few years. Last year alone, research by the institute revealed there were 111,000 incidents of workplace violence, including assaults, threats and sabotage. There were 60 incidents of workplace homicides involving angry employees in 1992. The annual average was just 20 in the 1980s.
“There is pain and anger out there,” Lundin says. “When IBM announced its layoffs last year, we found people wiping computer disks clean of data and urinating on equipment. For every person who does something violent, there may be 10 others who haven’t yet acted it out. People simply aren’t prepared to cope with these devastating feelings of betrayal.”
David Messick, a social psychologist who specializes in business ethics and organizational behavior at Northwestern University’s J.L. Kellogg Graduate School of Management, says there traditionally has been an implicit relationship between employees and their firms in which companies have strived to create the feeling of a big happy family.
“That invokes a sense of loyalty among employees, and when the firm downsizes, they feel they have been betrayed and this implicit relationship (has been) violated,” Messick says.
Nevertheless, he adds, a company isn’t obligated to honor that implicit relationship if its survival is on the line. If a company must downsize to survive, then it must, he adds. But there are ways it can be done that are less excruciating than the way it’s happening now. For example, firms can deal with the eventuality of downsizing up front when they hire people by outlining the company’s downsizing policy and explaining what it will do to help a person get retrained or find a new job.
“The problem is companies don’t feel it’s to their benefit to remind workers when they hire them that in times of economic downturn they may lose their jobs,” Messick says. “This is a huge problem, a pervasive problem. It’s everywhere. And the big risk is that companies will feign trustworthiness and commitment to their workers in order to evoke those same things from their employees.”
Another problem, says Jerry Harris, managing partner in the Chicago CPA firm of Checkers, Simon and Rosner, is what happens to those who survive downsizing.
“A well-run company is a lot like an extended family,” Harris says. “Family members have certain loyalties to one another. They will take care of one another no matter what. That’s the way we grew up, and I believe business organizations truly aren’t much different. I believe that organizations develop relationships with suppliers and customers that aren’t much different either.”
What happens during a cycle of downsizing can have permanent repercussions on the corporate family just as it might have on a person’s real family, he says.
“If your father and mother made a decision to get rid of two of seven children in the family, you know how the two who are discarded would feel,” says Harris. “But what about the five who remain? How do you think they will relate to the mother and father?”
Some rather surprising answers to that question were provided by a study conducted recently by Loyola University’s Department of Management and by Kellogg at Northwestern.
That study, which examined the feelings of some 1,000 managers in 20 Fortune 500 companies, found that many of those who survive recurrent rounds of corporate turbulence adjust to feelings of betrayal and mistrust by transferring the loyalty they once felt to the company to their own careers.
This so-called “career loyalty,” says Anne Reilly, assistant professor of management at Loyola, has steadily increased as corporations have downsized.
“You don’t have to be a brain surgeon to realize that in today’s workplace, you won’t be working for the same company for 40 years like your dad or your mother (did),” Reilly says. “The result is you have a lot of bright, talented, capable managers jumping from company to company with no expectation of the company providing job security.”
An environment like that is sure to have a significant impact on a company’s ability to compete in what Drucker and others say will be an era in which knowledge is the new commodity. How will companies protect proprietary information such as strategic marketing plans, pricing data, financial intelligence and research and development projects?
The highly publicized case of former General Motors Corp. purchasing chief Jose Ignacio Lopez de Arriortua and seven associates defecting from GM for Germany’s Volkswagen provides a good lesson.
GM contends that Lopez, with the help of his lieutenants, systematically compiled and made off with stacks of secret documents, from plans of future models to exhaustive lists of parts and suppliers.
German and U.S. prosecutors are investigating charges that last March about a dozen volunteers copied the documents and entered data and tables into computers at a Volkswagen office near Wolfsburg, Germany. Volkswagen admitted recently that it had, in fact, possessed what might have been sensitive GM documents. However, VW contends all such documents were destroyed.
Last month George Fisher, chairman and chief executive officer of Motorola Inc., stunned that company when he announced he was leaving to take over the top spot at Eastman Kodak Co. While the parting was apparently amicable, some at the Schaumburg-based electronics giant felt betrayed by Fisher’s move to a company that is positioning itself to move more heavily into electronics and could conceivably compete with Motorola.
Such behavior will be common in an era of mercenary managers, say Reilly and other experts. Loyalty to the company will be difficult to inspire-especially when corporations are themselves telling employees they are “temporary” by withholding or drastically reducing benefits packages.
“It’s depressing to think of a corporate world in which everybody is out contracting as a free agent and where everybody has had multiple jobs at a dozen different companies,” Reilly says.
Columbia University anthropology professor Katherine Newman, who recently explored that Arctic-looking world in a book called “Declining Fortunes,” agrees.
“American business owners can look forward to a much more alienated workforce than ever before-one that will always be looking over its shoulder for the next opportunity,” says Newman, who specializes in the study of American culture.
In fact, that’s the way it already is, she adds.
“Those who say loyalty is already dead are probably right,” says Newman. “Loyalty has eroded severely, and we are paying a price for it. There is skepticism and fear among those who are still working. They have no confidence about the future, about what will happen to them. They don’t spend money because they are afraid of what lies ahead. That creates low demand, which in turn creates more downsizing. It’s an endless vortex.”
Today, she says, managers and CEOs are given a lot of brownie points by their boards of directors for being lean and mean with subordinates while giving lip service to such “touchy-feely” ideas as team-building and employee empowerment which are geared to creating a sense of loyalty in employees.
“Much of this team-building, empowerment stuff is a lot of smoke and mirrors,” Newman says. “It isn’t really happening in most companies that say they are doing it. Some are imitating Japanese techniques, but they can’t import the bedrock infrastructure of Japanese society, just the veneer. So they borrow from New Age psychobabble psychology to dress it up. It’s nothing more than a corporate form of encounter group therapy, and that certainly hasn’t improved worker loyalty or job security.”
The danger, Newman adds, is that the touchy-feely psychobabble may backfire on companies because it is built only on the illusion of cooperation and corporate caring. Employees see their pay raises and benefits shrinking while watching their CEOs and other senior managers draw high six-figure and sometimes seven-figure salaries, fat bonuses and lucrative stock options.
At the same time older employees, who were once valued by corporations for their experience, knowledge and past contributions see themselves and their accomplishments being systematically “devalued” by managers in annual reviews that are skewed to validate perceptions of an employee’s declining value.
“It doesn’t take long before cynicism for the whole enterprise sets in,” Newman says. “It’s a dangerous situation because it is difficult to resurrect the kind of worker confidence that you need in a company to run it profitably. I think the cost in terms of loyalty is so large and the problem is so big, that we need to recognize it as a national issue.”
There is another issue that needs to be looked at, too, and that is the kind of backbiting and scapegoating that is occurring in the downsized workplace between minorities and women and white, middle-management males who feel threatened by corporate hiring quotas and affirmative-action programs, Newman says.
“The pathetic part of what is happening is that white, middle-aged males who used to feel very secure and safe no longer are,” Newman adds. “They are going through what minorities and women have had to go through in the past. That’s unfortunate, because this downsizing and this diminishing of loyalty is a hardship we are facing together. We are all losing.”
We also need to understand what differentiates today’s corporation from those of the past.
In the past, Newman says, management tended to be drawn from the shop floor. These people were steeped in the culture of the companies they were asked to manage. They had a sense of loyalty to what was being produced and to the people involved in production. And their salaries, bonuses and stock options, while generous, certainly didn’t equal sums 50 to 100 times larger than the lowest-paid worker the way they often do today.
“Loyalty was there, but it was sometimes circumscribed by tense labor relations,” Newman says. “Steel, automobiles, mining; many of these industries were in company towns in which there was a very long history of paternalistic association between the town and the firm.”
Of course, when you look at America’s often-turbulent history of labor relations, it is sometimes difficult to see where loyalty ended and exploitation began.
For example, it isn’t hard to show an accelerating pattern of loyalty toward workers as corporations terrified of organized labor watched unionism grow. There is little doubt that in many cases expressions of corporate loyalty were thinly disguised attempts to head off union organizing.
“Yet,” Newman says, “even in firms that did unionize, you had this cradle-to-grave kind of organization in the early part of the century. And this style of labor management survived the Great Depression when people, towns and companies were in much worse shape than today. The question I ask, is `Why did it fall apart now?’ “
The answer, of course, is as complex as the world itself. In an era of global markets, competitors are no longer located only down the road, in the next town or even the next state. They are just as likely to be based in Nagoya or Kuala Lumpur or Stuttgart. It’s a world in which trade barriers have never been lower while the demands of customers and markets have never been higher.
The transportability of technology and knowledge, the continuous and easy movement of capital, the convergence of cultures and markets-all have combined to turn the world into one huge Wal-Mart of goods and services.
That means what was good enough in the past is more than likely not good enough today. In a world in which manufacturing processes and management systems are undergoing unprecedented change and in which quality requirements are rapidly becoming standardized, companies are finding that survival means playing by entirely new sets of rules.
“Are you obligated to keep making a product that nobody wants in order to keep a factory open and people employed?” Newman asks. “The answer is no.”
But neither should you declare people deadwood, Newman adds. “People are our treasure,” she insists. “And if you want young people today to feel motivated, then you must do something for their parents other than putting them on the unemployment line.”
Craig Moore, CEO of West Suburban Kidney Center in Oak Park, whose 800 employees operate renal dialysis centers in Wisconsin, Illinois, Indiana and New York, agrees. But, he adds, the kind of loyalty we once gave and expected from employers is undergoing dramatic change.
“My feeling is that you need to get back to loyalty, but a different version of it,” says Moore, who began his career with U.S. Steel Corp. in 1966 in Pittsburgh before moving to American Hospital Supply in 1973. “In the 1950s and 1960s there was the feeling people could rise to their own level of competency at their own speed. Security wasn’t an issue at that time. We didn’t have the competitive pressures we have today. We were all looking for excitement. It was the era of `The Man in the Gray Flannel Suit,’ in which security, stability and so forth was taken for granted.”
And loyalty was something else we took for granted, like the gold watch your grandfather got when he retired from the railroad.
The problem, says Moore, who has run the kidney center since 1986 when he left American Hospital Supply following its buyout by Baxter International, is that for much of this century American management has siphoned the life out of work by investing more heavily in systems than in people.
“American companies that survive in the 1990s will have to find ways to position themselves so that their strategic resources are their people,” Moore says.
“I feel very strongly that I have a responsibility to 800 families,” Moore says. “And my ability to manage strategically, to create dollars and growth will depend on my people. If that resource is out of balance, I can’t perform anywhere near the maximum.
“But loyalty doesn’t only go one way,” he adds. “My work force must say, `I have an obligation as an employee to be a player on this team. I must continually be learning, improving. For example, I must move from being computer illiterate to being computer literate.’ “
The challenge for companies who still place a value on employee loyalty, Kellogg’s Messick says, will be learning to be more creative in their hiring and firing practices.
“It might be possible to offer employees two different kinds of compensation packages when they are hired,” Messick says. “You might offer one package that comes with guaranteed lifetime employment and long-range benefits, but with a lower salary. And you might offer one that comes with no guarantees, few benefits but a higher salary. At least conceptually, companies could insure themselves against the loss of employee loyalty. And at the same time the employee has made a psychological choice.”
When times get tough, Messick says, those employees who chose option No. 2 can’t complain if they find themselves out on the street. And those who took option No. 1 can’t complain about low annual raises because when times get tough, they will at least still have their jobs.
It’s not a solution, Messick says, just an idea.
But as interesting an idea as it is, it’s also an idea that has little relevance for Frank O’Reilly, Glenn Schrader and Gary Peterson and hundreds of thousands of out-of-work middle-aged Americans like them.
The frigid corporate tundra envisioned by many of the best minds in the best business schools of America is a world they probably could never feel comfortable in-not when they were brought up during a time when loyalty meant fidelity, not free agency.
How will corporations survive in this audacious new world? O’Reilly, Schrader and Peterson wonder as they sit around their small conference table in Chicago’s Loop. What will loyalty look like? How will it feel?
After a few moments of thought, Peterson offers the following scenario:
“People may still feel inside that they should be loyal to the company and make sacrifices and be innovative. But then they might say, `Why should I help them eliminate my job? If I do something that makes the process better, then I may be out the door. So I’d better leave things the way they are, even if I know I could make them better.’ “
Peterson pauses a moment, his eyes on the table and the legal pad upon which he has listed the accomplishments of his working life.
Then, after a quick glance at the men sitting across the table, he says, “I’m not sure American companies can survive that kind of loyalty.”
“Yeah, with loyalty like that, who need competitors?” quips somebody else.
Another ripple of laughter spills out of the conference room. But this time it is nervous and joyless and very, very short.
