It's silly to object to experimentation. TQM and most of the other programs of the last 10 years have undoubtedly done more good than harm. The best ones have woken up sleepy companies and have helped them compete in a hazardous marketplace. Even so, how those companies will adapt to the markets of the future is less than clear because in many ways the companies haven't changed at all.
Think back to the manager's essential job in a traditional company -- telling people what to do -- and to that same manager's essential problem, motivating workers. Neither TQM nor most other reforms of the last 10 years have changed that equation more than a trifle. Managers (or consultants) are still telling employees what to do. Employees are still trying to do their jobs as management defines them. We're supposed to look for defects? OK, OK, we'll look for defects. Just get off my back.
Granted, nearly every quality program generates interest and brings about improvements. But so did the famous Hawthorne experiments by Elton Mayo and his Harvard colleagues back in the 1920s. Remember those? The experimenters turned up the lighting, and production went up. They turned down the lighting, and production went up again. It isn't difficult to shake up a workplace. What has been difficult, over the years, is to make the changes stick.
III
And now: back to that next generation of companies. Because amid all the groping and all the turbulence, by inspiration or by chance, some managers and CEOs in the last decade began experimenting in a different direction entirely. Rather than fiddling just with management techniques -- compensation programs, quality systems, whatever -- they began rethinking the whole employee mentality. Rather than just telling employees to do new things, they began exploring a set of ideas that has transformed their companies and seems likely to transform other companies in the future. Those ideas had a variety of names, but they all amounted to the same thing: abolish wage labor. Change the way people who think of themselves as employees and people who think of themselves as managers work together in a business.
The experiments have been diverse.
LifeUSA, a six-year-old insurance company in Minneapolis, has no just-plain-employees, only owners. The 275 people on the company's payroll get about 10% of their compensation in the form of stock options. The personnel office is called Owner Services. Founder Robert W. MacDonald, former president of ITT Life, knew from the outset he didn't want to re-create his former employer. "People should not be treated the way I saw corporations treating them. It wasn't right, and it wasn't efficient." LifeUSA has gone from a standing start in 1987 to 1992 revenues of $146 million, with profits of close to $10 million. MacDonald: "We'll write more new business than probably 98% of the companies out there. And we'll do it with fewer people. Because they're owners, they're involved, they run the company."
Springfield Remanufacturing Corp. (SRC), an engine rebuilder in Missouri, started life as a money-losing unit of what was then International Harvester. Independent since 1983, wholly owned by people who work there, SRC runs by a system known as the Great Game of Business. The fundamentals: Employees are trained to understand every detail of the company's financials. Every quarter they get bonuses pegged to goals such as return on assets. In the meantime they play the game: watching weekly income statements and cash-flow reports, comparing projected figures with actual. "What they learn is how to make money, how to make a profit," says CEO and Great Game inventor Jack Stack. "The more people understand, the more they want to see the result." SRC's fiscal year 1993 financials: $74 million in revenues, up 13% from 1992, with profits of $1.5 million.
When Jon Wehrenberg started Jamestown Advanced Products, a tiny parts manufacturer in New York State, he had a customer and a contract in hand. But he could meet price and performance requirements only if labor costs were less than 11% of sales. So he challenged his employees to get costs below that level, promising a big and continuing bonus if they succeeded. Wehrenberg told of his company's three-year journey to profitability in this magazine ("How My Company Learned to Run Itself," January 1991, [Article link]). Jamestown's employees marveled at how the system changed their outlook. "Other places I've worked, you're getting paid by the hour and you don't really care," said one. "You don't take pride in the work like you do here. Here, it's almost like you're working for yourself. The boss? Jon's never out there. He's really not needed."
Inside the Baltimore cardboard-box plant of Chesapeake Packaging Co., a subsidiary of Chesapeake Corp., based in Richmond, Va., are eight separate "companies" created by plant manager Bob Argabright. The companies correspond to the departments of any similar plant. Unlike departments, those companies choose their own leaders, do their own hiring, and determine their own work processes. They take responsibility for budgets, production, and quality levels. They deal with their own customers, internal and external. The Baltimore plant was losing money when Arga-bright took it over, in 1988. It turned a small profit in 1989, doubled that profit in 1990 and again in 1991, and saw profits rise 60% last year, all while sales remained flat. "We now rank second
