A growing number of business owners are adopting a whole new approach to managing their people.
Back in the glory days of Silicon Valley, companies like Data Design Associates Inc. seemed to be the wave of the future. It was one of those high-flying, high-tech, high-touch outfits -- a software developer in Sunnyvale, Calif., to be exact -- and, for more than a decade, it sailed along with revenues and profits growing at a rapid pace, rising to $11 million and $2 million, respectively, in fiscal 1985.
Nobody benefited from this growth more than the company's 100 employees. In fact, it often seemed that founder and president David Lowry was intent on giving away his own share of the corporate riches. He offered all of the employees stock and bought memberships in fancy health clubs. He set up a bonus system and let the employees determine the size of the bonus pool. They settled on 20% of pretax profits -- whereupon Lowry boosted the total, adding 50% of all profits above the stated goal. The employees seemed delighted with all of this, as well they might, but Lowry was still not satisfied. He continually sought their advice on ways to make the work environment even better.
Which is how it came to pass that Data Design's managers found themselves jumping out of airplanes, plunging over waterfalls, scaling mountains, and sleeping in the snow.
The idea originated with the managers themselves, who felt that the company's growth was making it more and more difficult to maintain their esprit de corps. Meetings over lunch, they said, just didn't do the trick anymore. Someone suggested that they try going away together, maybe spend a little time out in the wilderness. The next thing they knew, they were barreling down the Yuba River on white-water rafts, one of which shot out over a 10-foot waterfall and capsized, nearly drowning Lowry's 33-year-old assistant, Ola Harris.
Then there was the grueling, 10-day trek through the Rocky Mountains, under the auspices of Outward Bound. Before it was over, the managers had to climb a 13,000-foot mountain with 40-pound packs strapped to their backs and camp out in the snow. The director of marketing, an IBM Corp. veteran named Desmond Crain, proved to be a source of inspiration, often hoisting the weight that others couldn't carry. But when Crain declined to participate in the six-mile run at the end of the expedition, he was denied his Outward Bound diploma. Lowry broke down and wept. So did Crain.
Next, they took up skydiving.
Oddly enough, this stuff seemed to work. To a person, the managers swore that they had never felt closer or worked together more effectively. Meanwhile, sales and profits continued to soar. And at a time when turnover rates among small technology companies often approached 50%, Data Design's was less than 5%.
To be sure, Data Design wasn't the only high-tech company with a slightly bizarre corporate culture back then. The Valley was filled with legends about companies doing extraordinary things to promote a better, more productive work environment. Rolm Corp. had its steam rooms and saunas. Tandem Computer Inc. held Friday afternoon beer busts. Activision Inc. sponsored ski trips to Lake Tahoe and took its entire staff to Hawaii. At one point, Apple Computer Inc. even hired masseurs for the workers in its Macintosh division. That idea appealed so much to Apple Computer president and chief executive officer (and former PepsiCo senior vice-president) John Sculley that he started getting massaged, too. "I'm a cerebral person," he explained. "This lets me meditate and clear my head."
Clearing heads was only one of the goals of such programs, however. The real payoff, proponents argued, lay in high productivity, low turnover, and soaring profits.This stuff wasn't just fun; it was smart business. Even if you couldn't measure the benefits of, say, having your chief financial officer take a roll on the rapids, the results eventually showed up where they counted: on the bottom line.
And smart business it may have been, but not smart enough to protect technology companies from the realities of the marketplace. Data Design may still be doing well, but Rolm's steam now comes courtesy of IBM; Tandem's bar tab is being subsidized out of somewhat watered-down profits; and Activision's employees travel to local college football games rather than the playgrounds of Tahoe and Hawaii. As for Sculley, once his heard cleared, he proceeded to dissolve the Macintosh division and get rid of both the massage program and the company's founder and chairman, Steven Jobs.
In retrospect, it's hard not to wonder whether this notion of being nice to workers was just a passing fad -- a brief moment in the history of a very young industry. Granted, it was a neat idea, and one that may even have made sense during a period when markets were booming, competition for labor was fierce, and skilled workers were in short supply. But times change, and in business, like baseball, nice guys finish last, right?
So how do you explain a company like Fel-Pro Inc.?
Fel-Pro is a 68-year-old, family-held company located in Skokie, Ill., and no one will ever accuse it of being high tech. Its busiless is the manufacture of gaskets and sealants for internal-combustion engines. Highly profitable, with sales of about $170 million, it is renowned for the productivity of its work force. It is also renowned for some other things, such as the converted horse farm where employees can garden on weekends, or send their children to summer camp, or get married. Then there is the company-subsidized daycare center, not to mention the gym. At Fel-Pro, no holiday goes by without a gift for each worker: a box of chocolates on Valentine's Day, a canned ham on Easter, a tin of pistachio nuts on Thanksgiving, a turkey on Christmas. There are monetary gifts, too, for practically every event in the human life cycle: $100 for a birth, $500 for an adoption, and up to $5,000 for a child's college tuition. And, lest the spirit need elevating as well, the company has a half-time sculptor on the payroll, whose sole job is to create gasket art.
To outsiders, all of this may sound a bit excessive, but Fel-Pro's co-chief executives -- Lewis Weinberg, 70, and Elliot Lehman, 66 -- heartily disagree. "You know, you get out of a relationship what you put into it," says Weinberg. "It's like a marriage. If you don't pay attention to the important things, you won't have a good thing going. But if you bend over backward, you will. We bend over backward at Fel-Pro, and everybody is happy."
Now that is a sappy theory of management if ever there was one, but -- believe it or not -- some people think it represents what business is coming to. They say the American workplace is changing, and not just in high technology. Ask for examples, and you will hear about nutrition-counseling programs, worker sabbaticals, meditation lessons, and job sharing. They will regale you with stories about companies that send employees to graduate school, or hire voice-harmonics specialists to help managers communicate better, or do handwriting analysis to fit workers with jobs. Then, in the next breath, they'll talk about the equity-participation trend, or the cross-utilization of employees at People Express Airlines Inc., or the absence of ranks and titles at W.L. Gore & Associates Inc. It's all part of the same phenomenon, they say. They even have a name for it: workstyle.
This is mushy stuff, no question about it, and yet there is no denying that the trend is real. Already it has given rise to a cottage industry of companies selling workstyle products and services to other companies. It has also spawned its own literature -- most notably Corporate Cultures by Terrence E. Deal and Allan A. Kennedy. It has even produced its own heroes and prophets, people like Donald Burr of People Express, Bill Gore of W. L. Gore & Associates, Harry Quadracci of Quad/Graphics, and Bob Swiggett of Kollmorgen.
Where all this comes from is anybody's guess. People have various theories, ranging from the rise of the baby-boom generation to the decline of industrial America. A few observers even argue that the trend marks an important stage in the evolution of capitalism. But, such issues aside, most people do at least agree on one thing, namely, that the phenomenon is new. And that, strangely enough, just happens to be one thing it isn't.
About 100 years ago, a similar movement was emerging in corporate America, involving efforts by companies to promote "the comfort and improvement, intellectual or social, of the employees, over and above wages paid." Such, at any rate, was the official U.S. government definition of these activities. They included sponsorship of sewing classes for women employees, construction of in-house game rooms and baths, physical fitness programs, profit sharing, worker education, and on and on. In the forefront of the movement were such sterling enterprises as National Cash Register, H. J. Heinz, Westinghouse Electric & Manufacturing, International Harvester, and Marshall Field. Among its supporters were many of the country's leading businessmen, including John Wanamaker, Cornelius Vanderbilt, C. W. Post, and Henry Ford.
But perhaps the greatest "workstylist" of them all was George M. Pullman, founder of the phenomenally successful Pullman Palace Car Co. Inspired by his own good fortune, Pullman spent more than $8 million to design and build one of the most ambitious fringe benefits in American history -- a model town for employees, located just outside Chicago and called, appropriately enough, Pullman. Hoping to encourage "habits of respectability," Pullman provided housing for more than 8,500 workers and their families, built a beautiful church, and named the streets of the town after great inventors. The town's centerpiece, however, was its grand Arcade, the prototype of the modern shopping mall, including a library, an opera house, doctors' and lawyers' offices, a bank, and a post office, as well as 30 small shops. Seldom has one employer done so much to promote the happiness and welfare of his employees.
Of course, none of these noble gastures stopped Pullman from calling in federal troops to shoot his employees when they went out on strike in 1894.
So what are we to make of all this? If history doesn't offer any meaningful clues, the answer can come only from taking a closer look at the current practice of workstyle. What, for example, do employee stock ownership plans have in common with massages or Friday afternoon beer busts? Not much, on the face of it. If they have anything in common at all, it is the motivation that lies behind them -- the belief that, as People Express's Donald Burr would say, people are the enterprise.
Ask Irwin H. Mintz, for example, why he is so concerned about the quality of work life at JBM Electronics Co., based in St. Louis, and he will give you three reasons, in reverse of importance. "Number one, I like to be liked. I'll admit it. And the better environment you create for your employees, the more they're going to think of you as one heck of a guy."
Second, he points out that JBM, with 60 employees and $2.5 million in sales, has to compete for talent with such large companies as McDonnell Douglas Corp. "If salary were all we could offer, we'd never be able to attract and keep really first-rate people. There's got to be something else, something more important than money."
Third, and most important: "If this is a good place to work, a place where someone can do really good work and have fun doing it, feel full of excitement instead of full of fear, then we're going to get employees who will stay here longer and be more productive -- we're going to be able to put out a superior product on a consistent basis, in a more efficient manner. So you see," Mintz concludes with a laugh, "you can't accuse me of altruism. It comes down to the bottom line."
As conventional as all that sounds, it pretty well sums up the management philosophy of most workstyle practitioners. Some might shift the emphasis slightly. But, generally speaking, most would agree with Mintz that workstyle is, quite simply, the best, most efficient, most profitable way to run a business.
Which raises an obvious question -- namely, how does any of this differ from plain, old-fashioned "good management"?
As a matter of fact, most workstylists would say that, in principle, there is no difference. Workstyle is good management, or rather a particular approach to good management -- one that differs from traditional approaches not in its goals, but in its premises and means.
Virtually all traditional systems of management start with the premise that employees need and want clear, strong direction. The manager's job is to provide that direction, and then make sure that employees follow it. Toward that end, even the best-managed traditional companies develop rules and regulations, rewards and penalties, all designed to keep employees from wandering off the corporate path. The underlying assumption is that, left to their own devices, employees will not, indeed can't be ecpected to, act in the best interests of the company.
Workstyle starts with the opposite assumption.Good employees, say the workstylists, will always act in the best interests of the company, provided they have the information, the tools, and the opportunity to do so. Moreover, they will act more creatively, more productively, and more efficiently than any manager, or any set of rules, could make them. That will only happen, however, if there is an atmosphere of mutual trust -- trust that is based on communication, respect, and a strong team spirit.
To create that atmosphere of trust, there is almost nothing that the practitioners of workstyle won't do. To begin with, they pay an extraordinary amount of attention to the hiring process, many of them interviewing each prospective employee themselves. In any case, they make sure that their companies hire with workstyle in mind. "If you don't, you're building a time bomb," says Stan Bentley of Diversified Systems Inc., an Indianapolis engineering-services firm. "I'd rather have an employee with half the academic credentials and twice the team spirit, because without that, you've got nothing."
Hiring the right people is not enough, however. Workstyle demands an entire corporate structure that promotes teamwork. Compensation is obviously a critical issue. It goes almost without saying that equity is widely distributed in workstyle companies. Most of them have elaborate and well-funded bonus systems as well. Performance reviews are held often and tend to be very specific. And when employees make exceptional contributions, workstyle managers go out of their way to offer compliments and thanks. At North American Tool & Die Inc., in San Leandro, Calif., for example, president and CEO Tom Melohn holds monthly "Super Person" meetings to honor outstanding performers.
Beyond individual feedback, workstyle practitioners place great emphasis on companywide communication, often sharing the most sensitive information with employees.They put up bulletin boards, publish newsletters, and hold frequent company meetings. Action Instrumegnts Inc., a San Diego electronics manufacturer, even has an "infocenter" where employees can find complete, up-to-date financial information about everything from orders and shipments to profits.
Moreover, workstyle CEOs spend a major portion of their own time talking informally with employees -- partly to build trust, partly to keep people motivated, above all to communicate the values that form their common bond. "I take the opportunity whenever and wherever I can," says John Psarouthakis, president and CEO of J.P. Industries Inc., an Ann Arbor, Mich.-based manufacturer of plumbing products and transportation components with 3,200 employees. "I just look for the right timing. If you make an appointment, it sounds like an order, and philosophies are not implemented by order but by understanding."
Corporate culture also comes into play as a means of promoting team spirit. Hence the extracurricular activities for which workstyle companies are famous -- the canoe trips, aerobics classes, picnics, and the like. At AST Research Inc., an Irvine, Calif., maker of microcomputer add-on boards, managers take time out once a year to prepare and serve breakfast to all 635 employees. At Odetics Inc., an Anaheim, Calif., manufacturer of robots and space-going digital recorders, there is an official Fun Committee, whose mandate is to bring joy to the hearts of the 420 "associates" (employees). The Fun Committee, in turn, has launched an employee-run repertory theater.
In addition, many companies develop their own badges or "icons," such as T-shirts, caps, and buttons, and create their own corporate lore. Hierarchy is discouraged. Titles, if they exist at all, tend to carry little weight. "We have them, but they're not for us," says Tom Ferrante, co-founder and president of Intertec Components Inc., a Longwood, Fla., electronic-components distributor. "They're for the outside world. In here, there are only two titles, junior and senior, and those have to do with experience, not rank."
Most workstyle companies likewise dispense with the usual trappings of corporate status -- things like company cars, preferred parking spaces, executive wet bars, and fancy offices. Some even do without private secretaries. "We had one fellow quit because he couldn't order other people around," says Jim Pinto, founder and president of Action Instruments. "He felt that, in a managerial position, he should be able to give orders and have them obeyed. He wanted a secretary to order around, to run and get him a cup of coffee. We don't do things like that. Anyone who wants coffee gets it himself. . . . Around here, we spell boss backwards, s-s-o-b: stupid SOB."
But perhaps the real test of workstyle has to do with the organization of work itself -- the willingness, in many cases, to sacrifice short-term efficiency for long-term productivity. In effect, the workstyle companies will spend time and money simply to make work more enjoyable for employees. "Let me give you an example," says Mintz of JBM Electronics. "Let's say we're building a printed circuit board. We could do it much faster and somewhat more economically by splitting up the labor into a lot of smaller functions, with each one being done by a single person. That would get the physical job done. But nobody's going to get any satisfaction, any real feeling of accomplishment,out of doing the same small task over and over, with no product to show for it at the end. So we have one person make the board, and it takes a little longer, but the feeling of accomplishment he gets is something you can't buy -- and something you can't do without if you're going to get and keep top people." Evidently, such thinking has not hindered JBM's growth: for the past three years, it has shown up among the most profitable companies on the INC. 500 listing of the fastest-growing private companies in America.
Ultimately, a commitment to workstyle affects every facet of a company -- compensation, worker-manager relationships, the role of the CEO, equity, titles, organization of production, you name it. What lies at the heart of all this, what gives it coherence, are the company's values, an often explicit set of principles by which the company governs itself. These values usually have an almost Boy Scout quality to them, exalting things like hard work, honesty, openness, acting ethically, having fun. But, as abstract as they are, they have a practical function, serving -- in the absence of rules -- as the guidelines by which employees work and act. Perhaps more important, they are the foundation for loyalty and trust.
And, indeed, so long as employees adhere to the company's values, they have no fear for their jobs. "What I'm trying to do is remove distractions," says Ferrante of Intertec. "Nobody can do their best work if there are distractions around, and being afraid of your boss is one of the biggest distractions there is. I'm not talking about coddling employees. Coddling is not in my repertoire. Neither is fear, though. Fear is absolutely counterproductive."
The corollary is that employees have room to fail. "We have an environment here that says it's OK to make mistakes as long as you're doing your best," says Michael Bledsoe, founder and president of Telecalc Inc., a telecommunications equipment manufacturer in Bellevue, Wash. "If someone screws up out of laziness or carelessness, that's not going to be looked on very favorably. But if you mess up because you had a great idea and it just didn't work, that's another thing altogether.
On the other hand, workstyle companies are ruthless toward employees who do violate the common bond. At Action Instruments, for example, "lying is primary grounds for termination," says Jim Pinto. "When someone lies, it isn't just one little act. It's a sign of something terribly wrong in that person. I call a liar a "hijacker,' because a hijacker's act affects many innocent people, and so does a liar's. One hijacker causes everyone to be searched. One liar brings everyone else under suspicion."
Tom Ferrante of Intertec Components takes an equally dim view of laziness. "Let's face it: one lazy person is a really big morale problem," he says. "By and large, there's nothing you can do but let the person go. There are no external motivators. You can't make someone work. You can only give him a vehicle."
For Stan Bentley, the issue is loyalty: he refuses to rehire employees who have chosen to leave the company. "I know you should forgive mistakes, but I have to look at the overall effect on the environment. I want people to understand that anything's possible if you're with the company, but once you close the door, it's closed. If they know that, it won't be something they resort to childishly or carelessly."
The goal of all this is to encourage a certain attitude in employees -- a collective identity, a sense that the employees' interests and the company's interests are one and the same. There is, of course, another word for this attitude: ownership. Indeed, it might well be said that workstyle's aim is, quite simply, to eliminate the traditional conflict between employees and owners by giving employees ownership in the broadest sense of the term. This goes far beyond equity participation. As every owner of a privately held company knows, equity is just one of the rewards of ownership, and not necessarily the most important one. By making employees owners in the psychological, as well as the financial, sense, workstylists try to create an environment in which the employees take pride in their work, enjoy it, are challenged by it, have fun, get excited, care -- in short, an environment in which employees feel and act like owners themselves.
Viewed from this perspective, workstyle is, at the very least, a fascinating and challenging theory of management. Moreover, the workstyle companies have the track records to back it up. These are, by and large, outstanding companies -- North American Tool & Die, Data Design, Fel-Pro, Odetics, JBM Electronics, AST Research, Telecalc, J.P. Industries, Intertec Components, Action Instruments, Double Rainbow Gourmet Ice Creams, Diversified Systems, and many more. Granted, they may not be household names, but in terms of profitability, growth, productivity, customer satisfaction -- indeed, by just about every measure of success in business -- they are among the top performers in their industries, including some industries that are otherwise going to the dogs.
And yet it's hard not to wonder: if workstyle is so great, why doesn't every company practice it?
No doubt, the reasons are many. To begin with, workstyle demands a long-term perspective. It doesn't make much sense for a company that is concerned about quarterly earnings or a fast turnaround. There are, after all, other ways to get quick results. Most of them, moreover, are easier than workstyle, and probably more effective in the short run.
Then, too, much of this defies quantitative analysis. How, fow example, do you measure the business-benefits of handing out awards to employees or sending flowers to their sick relatives? There is no way to prove that any particular aspect of workstyle is working, or will ever work. Its practitioners argue that workstyle's effectiveness is an article of faith. Even if their faith is strong, practitioners have to be willing to defend it against the skepticism of all those who do live by numbers, including lenders and investors.
Indeed, workstyle can be a very lonely road for a CEO. There is not much recent precedent for it, and very little support. Business schools don't teach it. The business press tends to ignore it (or, worse, to ridicule it). The investment community is skeptical of it, and it drives accountants up the wall. Labor unions view it with deep suspicion, if not outright hostility. Big business doesn't understand it. Traditional managers feel threatened by it. And although a handful of new management theorists, led by Tom Peters and Robert Waterman, have played a vital role in opening up debate on the subject, too often they commit the cardinal sin of making it sound easy.
Above all, workstyle is not easy. It demands imagination, creativity, and fortitude. There are no manuals to guide you, no rules to fall back on. In effect, a company has to invent its system of management as it goes along. "I honestly don't know how to do what we're doing," says Michael Bledsoe of Telecalc. "We're making it up. No one's written a book that we can just read and follow." Under the circumstances, people inevitably make mistakes, and invariably pay for them usually in the form of bad morale.
And the problems don't get any easier if the approach is successful, and the company grows. On the contary, they get harder. "It's tough to keep everyone motivated all the time," says Stan Bentley. "If I could have face-to-face contact with everyone, we wouldn't have any problems. But as the company grows, this gets more and more difficult. The problem, when we have one, is pure communication."
Because communication is such an important part of workstyle, managers often become involved in the personal lives of employees. After a while, that, too, begins to take a toll. "If Action Instruments were gone," says Jim Pinto, "if I quit tomorrow, I would probably write, or become a lecturer, maybe a teacher. I wouldn't start another company. I couldn't do this all over again. It's too hard. . . . You can't get away from stupid, little problems. If you eliminate accidents and acts of God, you're left with people problems. Like, the person who just broke up with a girlfriend or a boyfriend and can't do any good work for weeks. You have to be patient, you have to understand. But while it's going on, it can be hell."
The personal sacrifice may well be the major cost of workstyle -- that and the time it takes. "The most precious resource that any business has is its time," says Telecalc's Bledsoe. "I think that's the greatest cost of putting so much emphasis on people." Then, too, workstyle companies tend to share a great deal of sensitive information with their employees, which means that they have no secrets. "The risk is, we're very open," says Bledsoe. "If you tell all your problems, then all your problems show."
But perhaps the greatest danger is that the visionaries will lose perspective, and begin to confuse the trappings of workstyle with the substance, humanitarian gestures with mutual respect. Indeed, that is one way to view what happened in the ill-fated town of Pullman.
However it ended, the experiment was, in its day, as radical as anything associated with workstyle, and its goals were every bit as lofty. The official company literature proclaimed it "a vast object-lesson [demonstating] man's capacity to improve and to appreciate improvements. . . . It has illustrated the helpful combination of capital and labor, without strife or stultification, upon lines of mutual recognition."
These sentiments were no doubt sincere, and yet, early on, there were hints that Pullman's notion of "improvements" might not coincide exactly with his employees'. He was generous, all right, but his generosity came with strings attached. For example, he charged rent for the beautiful church he built -- enough to give him a 6% return on his investment. That was too much for the local denominations, and so the church stood empty.
But serious problems did not arise until the early 1890s, when the national economy slid into a severe depression. Pullman proceeded to cut his workers' wages by nearly 25%, without lowering rents or prices in the town. By this time, the workers had had about as much of Pullman's "improvements" as they could take. They began to organize a union, leading to one of the bitterest, bloodiest, and most devastating strikes in American history.
To be sure, Data Design, Fel-Pro, and the rest are not Pullman. After all, his generosity had nothing to do with promoting mutual trust or respect, let along giving workers ownership. Rather it represented simple (and fleeting) altruism. For that reason, such activities eventually became known as "welfare work," or "welfare capitalism."
And yet, even so, the questions remain: might not history repeat itself? Aren't there circumstances under which workstyle becomes a luxury that a company simply cannot afford? And doesn't workstyle raise employees' expectations so high that when hard times do arrive, and cutbacks become necessary their fury will know no bounds?
To listen to the practitioners of workstyle, that could never happen. "I'd shut the place down before I'd do it any other way," says Irwin Mintz. "We have some marginally profitable operations that we could eliminate without cutting any employees, if we needed the money. I might do that if things went bad. But I would never change the style of management here. Never."
"The people emphasis is even stronger during tough times," says Michael Sachar of Double Rainbow Gourmet Ice Creams Inc., in San Francisco. "That's what makes people rally. Last winter, we had a cash-flow crisis. Our employees got on the phones and spent extra hours calling up people with delinquent accounts, pulling in money, because they knew the company needed it. Nobody had to force them. They did it because they wanted to."
But, over the long haul, the future of workstyle probably depends less on the goodwill of CEOs, managers, and employees than on the demands of business itself. It was not altruism, after all, that gave rise to the trend in the first place, but rather the hard realities of doing business in late-twentieth-century America. "We're in an industry that changes constantly: if you don't change, you die," says Michael Bledsoe of Telecalc. "Constant change isn't a preference. It's a requirement for survival. People drive change -- resourceful, vital, interested people -- and you don't get those kinds of people unless you're providing a creative, rewarding atmosphere in which they enjoy working and are unafraid to try something new. . . . In a business like ours, the competitive edge has to be: you have great people, they don't."
Indeed, the same can be said of most businesses these days. "A business can't survive without respect for the people who make up that business," says Jim Pinto of Action Instruments. "You know, people aren't stupid anymore. They don't like to be used as slaves."