The Materials Analyst, Part 100: Whatever happened to the new world of work we were promised? Part 1

Despite the sprouting of inspired management practices among smaller firms that bred highly motivated employees, today’s companies are getting larger and performing worse than ever.

Twenty-five years ago Tom Wolfe wrote a brilliant article entitled, “The Tinkerings of Robert Noyce.” It chronicled the genesis and rise of the Silicon Valley phenomenon and focused in particular on the events that led to the founding and flourishing of Intel.

It was not a business article in the sense that we have come to understand business writing today. Instead, it examined the cultural ramifications of companies founded on the principles of unbridled passion for the product, a natural egalitarian approach to management structure, and a feverish devotion to speed and innovation. Wolfe described in colorful terms the cultural divide that existed between the East Coast establishment firms that originally funded and owned the emerging technologies that gave birth to the electronic age and the companies that actually developed these technologies and gave them life.

The new companies operated without the trappings of hierarchy and protocol that typified the business world that had come before. They were chaotic, exhilarating, and scary. Every person working for the new upstart firms was intimately connected to the goals and aspirations of the company. And the traditionally organized companies didn’t get it. Flush with vice presidents and a preoccupation with status and position, the established firms that initially bankrolled the technology endeavors could barely communicate with company leaders who didn’t have an executive dining room and made a point of sitting at battered wooden desks in the middle of the production area while giving their staff better ­accommodations.

Long before the business schools began to study the flat organization and the upside-down pyramid, these new companies and models already existed in a natural and unself-conscious form. They represented a new type of participatory management style where everyone was on the line for results in a way that naturally distributed accountability without the need for an organizational chart.

Enthusiasm breeds productivity

This approach to business was not, in fact, brand new. A thorough search of the landscape revealed that a few firms had actually grown up and survived on these new principles in advance of the Silicon Valley explosion. Hewlett-Packard and W.L. Gore & Assoc. both bore the mark of firms established by strong individuals with an unwavering vision of what a creative workplace should be.

Bill Gore was a particularly interesting figure. Involved with the Teflon project at DuPont, he observed his approach and the approach of his colleagues to work when they were involved with developing an exciting new product and how it contrasted with the way people worked when they went back to their regular functions. His objective in founding W.L. Gore & Assoc. was to create a sustained work atmosphere like the one he had experienced at DuPont during the development of Teflon.

What resulted was a unique company without a fixed management hierarchy. Leadership grew naturally out of achievement and the ability to organize teams. Gore had an approach to capital expenditure that would make most products of today’s business schools shudder. He called it the “yes-yes” criterion. Anyone contemplating a major expenditure on a new project had to ask himself two questions. First, if your idea works, will it benefit the company? Second, if it fails in the worst way imaginable, can the company survive? If you could answer “yes” to both questions, you filled out the requisition and went down to accounting to get your check cut.

As the technology sector grew, and the West Coast approach to organizational structure began to impinge on the corporate world, the pioneers of the study of business began to take notice. Tom Peters developed and delivered a seminar in the late ‘90s that presented a vision of the entire business world following the visions of the likes of Gore and Noyce. It was a vision of fragmentation into smaller companies founded to develop specific products and services, leveraging new technologies at a pace that compelled companies to get small and eschew the trappings of the traditional business organization. It was a world filled with people more focused on horizontal career growth than they were on the climb up the corporate ladder. It was a vision that required the evolution of companies and their people at a daunting pace. It was a world of spin-offs, carve outs, and de-mergers based on the realization that going in the other direction had never really been that profitable anyway.

In 2001, Peters published a book entitled Re-imagine. Early in the book he presented a table showing the loss in shareholder value that had occurred in some of the more well-publicized mergers of large firms over the past few years. The message was clear. It was no longer about the big eating the small; it was about the fast eating the slow, or simply outrunning them into a well-deserved oblivion. It was the beginning of the end for the Generals—Electric, Dynamics, Motors, etc.

More importantly to the individual worker, it was the new age where all work would be turned into projects and elevated to a new level of importance within the organization as everyone’s tasks plugged into the objectives of the overall company in a transparent way. It was also a vision of company-wide accountability, where the metrics that had been so assiduously applied to the production floor were now also turned to purchasing, accounting, human resources, and upper management.

A giant step back

It was exciting, exhilarating, and intoxicating. And for the most part, it did not happen. Coincident with this iconoclastic trend, the educational institutions of the country had taken up the business of teaching business. The approach was steeped in the traditions of a strictly economic approach where the company performance was boiled down to ratios, indices, and return on investment as the sole indicators of success or failure.

Rather than being viewed as the folks who made the company mission happen, the line worker was reduced to measurements of how well his or her activities supported the achievement of the numbers. The notion of manager as coach rather than cop had a short-lived renaissance in the trends of the early ‘80s that resulted in the participatory management techniques such as quality circles and cellular manufacturing. These, in turn, were inspired by the teachings of Deming, who informed the world that 85% of the problems within any given company resided within management.

Such a worldview was incompatible with the status that was supposed to be accorded the cadre entering the workforce with the new ticket of entry, the formal business education. This group placed their faith in overarching software systems that delivered to their terminals, on demand, all the important numbers that a manager needed in order to make sound strategic decisions going forward. There was no need to understand the actual business you were in; your degree ensured that you could manage anything as long as you were provided with enough data.

The fact that these systems threw the manufacturing floor into total chaos and engendered practices that were directly at odds with good manufacturing principles was of no consequence. It was the job of the person on the line to make it work and report up to the next layer the essential numbers so that decisions about the company’s future could be made far from the maddening hum of the machines.

Under this system, the image of the individual employee as the center of creative activity, a talented free agent who brought his or her passion and ingenuity through the company doors every day, was replaced with a newer version of the old industrial revolution view of the worker as cog. The demotion represented a broken promise.

A misguided love of big companies

I vividly remember going to a Tom Peters seminar in Milwaukee in 1999, where he spoke about the contrast between his father’s world of work and what he saw coming for the world of work as we headed into the 21st century. Like most of us who grew up in the 1960s, his memory was of his father going through the same door and sitting at the same desk for 41 years. It was secure, stable, and to those of us who watched it as kids, stultifying. The order of the day was keep your head down, your nose clean, and don’t make waves, and you would find your reward in the security of Mother Company. According to Peters, those days were over. Now it was about, as he put it, “Keep your head up, get your nose bloodied, and splash like hell, and you still might not make it.”

It was an encouraging vision for those of us who did not look forward to a career at the same desk for 41 years passing paper from the left side to the right side. But, less than 10 years later, as I speak to people in the workforce—highly skilled professionals who have the capacity to change things in significant ways for themselves and the firms they work for—I hear a disheartening amount of language that includes phrases like “keeping my head down” and “trying to stay under the radar.”

The reasons are fairly obvious. Despite the encouraging vision of fragmentation into smaller, faster, more focused companies that afford greater autonomy for the individual employee, the business world is still in love with the notion of large companies, despite the fact that these firms underperform even by traditional business metrics.

Even a casual review of recent business history points out famously debilitating mergers and acquisitions such as Hewlett-Packard’s purchase of Compaq or the putting together of Sears and Kmart. Anyone who has been around long enough to remember the Sears of old knows that at one time it was committed to the notion that customers would want to buy their insurance and get their teeth cleaned at the same place where they bought their underwear. They were forced to take the conglomerate apart when it was clear that they weren’t doing any of these very well. But memories are short. So in 2005, Sears joined with Kmart. Since then, to use the metrics of the traditional business world, the stock is down 19% and the company regularly misses its earnings targets.

Competitive advantage: The motivated employee

The plastics industry has not been immune to this influence. Every year lists are published of the 50 or 100 largest processors based on metrics such as number of employees, number of presses, or pounds of resin consumed. But an objective survey of these large companies shows that most of them are financially unhealthy. An article in a recent trade publication showed that the large processors who serve the automotive sector, and are the biggest of the big, operate on an average profit margin of 0.77%. If you are not fast, size is not an advantage; it is an anchor.

The traditional fix for two financially hobbled firms is to put them together into one bigger entity. These events are accompanied by press releases that contain the usual business lingo about “economies of scale” and “strategic focus,” but they almost always fail to live up to expectations. And in the process, the management team becomes further removed from an understanding of the core business and is therefore doomed.

When the endeavor fails and has to be taken apart again, or worse yet, when it collapses altogether, another stream of equally obtuse language accompanies the announcement regarding “price pressures, rising raw material and labor costs, and low-cost foreign competition.” But a discerning look at the management style of most of these firms makes it evident that the notion of the highly motivated employee as a competitive advantage was not part of the culture. It isn’t taught in business schools.

So why does all this concern someone who spends his time focused on technology? Simply put, there is a strong connection between sound implementation of technology and a company culture that gives the individual worker the power to try new things. All the hardware, software, and banners trumpeting compliance with the latest certifications will not guarantee success if the halls and production floors of the firm are not populated with people dedicated to a vision that is bigger than themselves and more enticing than an 8% ROI.

Work, any work, should have intrinsic value. People like Bill Gore proved that this is an attainable goal and that this approach actually results in the type of success that those educated in traditional business models long for. In Part 2 we will look at the characteristics of companies that understand and embrace this goal as the key to getting everything else done.