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Why Everyone Does Better When Employees Have a Say in the Workplace

To succeed on the world stage, companies in the U.S. need a stronger employee voice.
 
 
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In manufacturing plants all over the world, both managers and workers have discovered that when employees are involved in workplace decision-making, productivity rises. So in the United States, it made national news when on Feb. 14, 2014 workers at the Volkswagen auto plant in Chattanooga, Tennessee rejected representation by the United Automobile Workers by a vote 712 to 626. 

Unfortunately, the Chattanooga workers said no to just the type of employee involvement in productivity improvement that will be necessary to sustain their jobs going forward. To compete on the world stage, a strong employee voice in the workplace matters.

The UAW’s Chattanooga campaign would have made Volkswagen the very first foreign car company to a have a unionized plant in the U.S. More importantly, a victory for the UAW was a precondition for the creation of a works council at the Chattanooga plant — a form of worker-management plant-level collaboration for improving manufacturing productivity that is a fixture of German industrial relations, but virtually unknown in the U.S. Through information-sharing and problem-solving, the managers and employees on a works council improve product quality, speed up production processes and reduce materials waste. It's a win-win.

If American workers want to ensure the competitiveness of their manufacturing jobs, they should jump at the chance of instituting this type of forward-looking arrangement, one that enables their voice to influence the productivity of the work that they do. A large body of evidence shows that the involvement of workers in enhancing productivity increases both the earnings of workers and the competitiveness of the products that they produce. Our forthcoming book, Corporate Governance, Employee Voice and Work Organization: Sustaining High-Road Jobs in the Automotive Supply Industry (Oxford University Press, 2014), co-authored with Inge Lippert of the Confederation of German Trade Unions and Ulrich Jürgens of Science Center-Berlin, provides fresh evidence of the importance of worker involvement in the productivity improvements that contribute to making their own jobs, and the companies for which they work, competitive on a global scale.

Based on in-depth case studies of automotive supply companies in Germany, Sweden, and the U.S., our book compares governance regimes and work organization at the plant level. We find that the automotive supply industry requires creativity and learning from its workers to generate products that are competitive in terms of both quality and cost. The ability and incentive of workers to use their insights and intelligence to contribute to productivity improvements depends on the organization of work at the plant level. High-performance workplaces, characterized by “high road” jobs in which productivity improvements and pay increases go hand in hand, are critical to sustained competitive advantage. 

Our research reveals the important role of employee voice mechanisms in high-road work designs, not just in German and Swedish automotive suppliers where worker involvement is formally recognized, but also in supplier firms in the U.S. where productivity is generally viewed as solely management’s concern. Employee representation in strategic decision-making substitutes a stakeholder approach for the one-sided emphasis on "maximizing shareholder value”—a flawed ideology embraced by business schools over the past 25 years in which all that matters is the company’ stock price. Our research confirms, and helps to explain, a larger body of industrial experience that shows that compromises between the financial interests of shareholders and the productive interests of employees have had considerable success in continental Europe. To succeed in global competition, the U.S. automobile industry needs more, not less, employee voice.

Different nations favor different forms of employee voice. German firms have works councils at the plant level, and in companies with 2,000 or more employees, under the system known as co-determination, equal representation of workers and shareholders on the board of directors, plus one neutral seat. Whether at the plant level or the board level, change requires workers’ input and consent.