Needed: A Two Way Social Contract In The Workplace

America's best corporations are caught between two opposite first principles. One prizes the engaged, empowered employee. The other views employees as expendable costs. Reconciling these views is like squaring the circle.

It is hard to pick up a business magazine without encountering compelling tales of companies that improved productivity through the "high road"--a policy of empowered employees, teams, and high-performance work. This model implies a reciprocal commitment between management and employees, but in an economy of relentless downsizing something appears to be lacking. The company can only insist that high-performance work is necessary to stay in business: It does not guarantee that high performance will be rewarded or even that the employee will keep a job. The corporate social contract in America today, says Anthony P. Carnevale, chairman of the National Commission on Employment Policy, "is the sound of one hand clapping."

You might think this one-sided social contract would have costs to employee morale and hence to productivity. But, evidently, fear is a powerful motivator. In his study of corporate loyalty, White Collar Blues, Charles Heckscher was granted access to middle managers at eight large corporations undergoing major restructurings, including General Motors, Dow Chemical, and AT&T. Heckscher, who chairs the labor studies and employment relations department at Rutgers University, found that employees were highly dedicated but had scant confidence that their devotion would be repaid. Yet they retained a surprising degree of loyalty. "Perhaps the principal puzzle in companies undergoing the shock of change," he concluded, "is that it produces so little conflict and disintegration."

GLOWING REPORT. At another conference at the Jerome Levy Economics Institute of Bard College, the keynote speaker was Frank P. Doyle, executive vice-president of General Electric Co. Doyle confirmed Heckscher's portrait. GE today does three times the business it did in 1980--with half the workforce. To get there, Doyle said, "we did a lot of violence to the expectations of the American workforce....We downsized. We de-layered. And we outsourced."

GE is among the most dynamic of U.S. companies, with a deep commitment to imaginative human-resource strategies. For its core employees, GE is an attractive place to work. However even the best of our corporations cannot guarantee career security, no matter how dedicated its workforce. If this is the core, heaven help the periphery.

At a conference at the Radcliffe Public Policy Center, there was much talk about a "new economic equation" to reconcile work and family life. Another corporate manager with a strong commitment to core employees, Robert E. Boruff, vice-president for manufacturing at Saturn Corp., gave a glowing report about how his company offers subsidized child care, flexible hours, and help to workers pursuing more education. But even Saturn uses outsourcing and contingent workers, who do not receive all these benefits.

HIGH-MINDEDNESS? Corporate America is littered with companies that once prided themselves on generous fringe benefits and no-layoff policies--companies that now devalue health benefits and jettison faithful employees by the thousand. Although they talk a good game, America's most successful companies seem to have decided that a workplace compact is necessary only for their most valued workers. So a humane corporate culture for the entire workforce cannot be anchored in the high-mindedness or even the enlightened self-interest of the corporation.

Employment security, as opposed to job security, is assured only when the economy enjoys high growth and full employment. With high unemployment and plenty of job seekers, companies have no need to make a career commitment to employees. Conversely, in a full employment economy, the existence of plentiful job opportunities takes the sting out of downsizing at any one company.

Similarly, if we believe as a society in pro-family workplaces, lifetime learning, pay for performance, and other enlightened principles, these norms must be anchored in national policies. Enlightened corporations may want to pursue a high-road approach, but competitive pressures may make that prohibitively expensive unless all companies are traveling the same road.

The elements of a decent, two-way social contract in the workplace require floors set by either national policies or strong labor unions. It's encouraging that America's most productive companies, in principle, value a high-road approach, but that doesn't guarantee that they will take it. It's also necessary for society to bar the low road.

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