Despite such barriers, many organizations get it right. Their practices are not perfect, but they're good enough. The organization benefits from a talented, motivated, loyal, and free-spirited workforce. Employees in turn are more productive, innovative, and willing to go out of their way to get the job done. They are less likely to make costly blunders or to jump ship when someone offers them a better deal. That's a potent edge—in sports, business, or anywhere. Every organization with productive people management has its unique approach, but most include variations on strategies summarized in Exhibit 7.1 and examined in depth in the remainder of the chapter.

Develop and Implement an HR Philosophy

Step one is developing a philosophy or credo that makes explicit an organization's core beliefs about managing people. The credo then has to be translated into specific management systems and practices. Most organizations have never developed a philosophy, or ignore the one they espouse. A philosophy provides direction; practices make it operational.

Basic Human Resource Strategies.

In the 1990s, Federal Express explained the company's philosophy in its Manager's Guide: "Take care of our people; they in turn will deliver the impeccable service demanded by our customers, who will reward us with the profitability necessary to secure our future. People—Service—Profit these three words are the very foundation of Federal Express." FedEx's philosophy might have been empty words if the company had not been diligent about reinforcing it. Managers were rated annually by subordinates on a leadership index with questions about how well they helped subordinates and listened to their ideas. Managers with subpar scores had to repeat the process in six months—a distinction no one wanted. If the collective index fell below the standard, the top three hundred managers lost their bonuses (Waterman, 1994).

Hire the Right People

Strong companies know the kinds of people they want and hire those who fit the mold. Southwest Airlines became the airline industry's most successful firm by hiring people with positive attitudes and well-honed interpersonal skills, including a sense of humor (Farkas and De Backer, 1996; Labich, 1994; Levering and Moskowitz, 1993). When a group of pilots applying for jobs at Southwest were asked to change into Bermuda shorts for the interviews, two declined. They weren't hired (Freiberg and Freiberg, 1998).

A focus on customer service enabled Enterprise Rent-a-Car to overtake Hertz and become the biggest firm in its industry. Enterprise wooed its midmarket clientele by deliberately hiring "from the half of the class that makes the top half possible"—college graduates more successful in sports and socializing than in class. Enterprise wanted people skills more than "book smarts" (Pfeffer, 1998, p. 71). In contrast, Microsoft's formidably bright CEO, Bill Gates, insisted on "intelligence or smartness over anything else, even, in many cases, experience" (Stross, 1996, p. 162). Google wants smarts too, but believes teamwork is equally important, one reason that hiring is team-based (Schmidt and Varian, 2005).

This same principle—the idea that selecting the right people gets results—was found in a study of successful midsized companies in Germany (Simon, 1996). Companies in Simon's sample had little employee turnover—except among new hires: "Many new employees leave, or are terminated, shortly after joining the work force, both sides having learned that a worker does not fit into the firm's culture and cannot stand its pace" (p. 199).

Keep Employees

To get people they want, companies like Google and Southwest Airlines offer attractive pay and benefits. To keep them, they protect jobs, promote from within, and give people a piece of the action. They recognize the high cost of turnover—which for some jobs and industries can run well over 100 percent a year. Beyond the cost of hiring and training replacements, turnover hurts performance because newcomers' lack of experience and skills increases errors and reduces efficiency (Kacmar and others, 2006).

Reward Well

In a cavernous, no-frills retail warehouse setting, where bulk sales determine stockholder profits, knowledgeable, dependable service usually isn't part of the low-cost package. Don't tell that to Costco Wholesale Corp., where employee longevity and high morale are as commonplace as overloaded shopping carts. "We like to turn over our inventory faster than our people," says Jim Sinegal, president and CEO of Costco, a membership warehouse store headquartered in Washington State with more than three hundred stores across the country (Montgomery, 2000).

Costco has a unique success formula: pay employees more and charge customers less than its biggest competitor, Sam's Club (a subsidiary of retail giant Wal-Mart). It sounds like a great way to fail, but in recent years Costco has been the industry's most profitable firm. How? In CEO Sinegal's view, the answer is easy: "If you pay the best wages, you get the highest productivity. By our industry standards, we think we've got the best people and the best productivity when we do that." Compared with competitors, Costco has achieved higher sales volumes, faster inventory turnover, and lower shrinkage (Boyle, 2006). It adds up to industry-leading profits and customer satisfaction (American Customer Satisfaction Index, 2007).

Costco is a specific example of a general principle: pay should reflect value added. Paying people more than they contribute is a losing proposition. But the reverse is also true: it makes sense to pay top dollar for exemplary contributions of skilled, motivated, and involved employees (Lawler, 1996).

To get and keep good people, selective organizations also offer attractive benefi ts. Osterman (1995) found, for example, that firms with "high-commitment" human resource practices were more likely to offer work and family benefits, such as day care and flexible hours.

Software powerhouse SAS is an example: In the software industry, where turnover rates hover around 20 percent, SAS maintains a level below 4 percent, which results in about $50 million a year in HR-related savings, according to a recent Harvard Business School study. In addition, the company believes that its stable workforce enables it to produce new versions of its data-mining and statistical-analysis software more cheaply and efficiently. "The well-being of our company is linked to the well-being of our employees," says SAS CEO Jim Goodnight (Stein, 2000, p. 133).

Protect Jobs

Job security seems anachronistic today, a relic of more leisurely, paternalistic times. In a turbulent, highly competitive world, how is long-term commitment to employees possible? It's not easy, and not always possible. Companies (and even countries) historically offering long-term security have abandoned their commitment in the face of severe economic pressures.

From the early 1980s to the mid-1990s, electronics retailer Circuit City was so successful that Collins (2001) identified it as one of his "good-to-great" companies. But success can be fickle. Circuit City subsequently faded from great to mediocre. After missing sales estimates and reporting losses for the third and fourth quarters in 2006, the company announced a layoff of 3,800 of its highestpaid retail staff. Archrival Best Buy reported big sales and profit gains in the same period, and its CEO, Brad Anderson, attributed success to a belief that it's "all about the customer—and the employees." Circuit City ranked last in its industry in customer satisfaction, and experts predicted the layoffs would make it even less competitive with the more customer-friendly Best Buy (Kavilanz, 2007).

Sometimes, an entire nation has to change employment practices. The largest downsizing process in history has been taking place in China. Economic reforms of the 1990s and early 2000s forced state-owned enterprises to sink or swim in a competitive market. Many foundered and abandoned the traditional guarantee of lifetime employment (Smith, 2002). In three years, from 1998 to 2001, a government report counted more than 25 million layoffs from these firms, many of them unskilled older workers ("China Says 'No' ...," 2002; Lingle, 2002; Smith, 2002). Many remained unemployed years later. Estimates of unemployment in China in 2005 ranged as high as a quarter of the workforce (Wolf, 2004).

Still, many firms continue to honor job security as a cornerstone of their human resource philosophy. Publix, an employee-owned, Fortune 500 supermarket chain in the southeastern United States, has never had a layoff since its 1930 founding. Not coincidentally, in 2007, Publix had the highest rating of customer satisfaction in its industry for the twelfth consecutive year.

Similarly, Lincoln Electric, the world's largest manufacturer of arc welding equipment, has, since 1914, honored a policy that no employee with more than three years of service would be laid off. This commitment was tested in the 1980s, when the company experienced a 40 percent year-to-year drop in demand for its products. To avoid layoffs, production workers were converted to salespeople. They canvassed businesses rarely reached by the company's regular distribution channels. "Not only did these people sell arc welding equipment in new places to new users, but since much of the profit of this equipment comes from the sale of replacement parts, Lincoln subsequently enjoyed greater market penetration and greater sales as a consequence" (Pfeffer, 1994, p. 47).

Japan's Mazda, facing similar circumstances, had a parallel experience: "At the end of the year, when awards were presented to the best salespeople, the company discovered that the top ten were all former factory workers. They could explain the product effectively, and when business picked up, the fact that factory workers had experience talking to customers yielded useful ideas about product characteristics" (Pfeffer, 1994, p. 47).

Promote from Within

Costco promotes at least 80 percent of its managers from inside the company. Similarly, 90 percent of managers at FedEx started in a nonmanagerial job. Promoting from within offers several advantages (Pfeffer, 1998):

Share the Wealth

Many employees feel little responsibility for an organization's performance. They expect gains in efficiency and profitability to benefit only executives and shareholders. People-oriented organizations have devised a variety of ways to align employee rewards more directly with business success. These include gain-sharing, profit-sharing, and employee stock ownership plans (ESOPs). Scanlon plans, first introduced in the 1930s, give workers an incentive to reduce costs and improve efficiency by offering them a share of gains. Profit-sharing plans at companies like Nucor give employees a bonus tied to overall profitability or to the performance of their local unit.

Both gain-sharing and profit-sharing plans have been shown to have a positive impact on performance and profitability. Kanter (1989a) suggests that gain-sharing plans have spread slowly because they require significant changes: cross-unit teams, suggestion systems, and more open communication of financial information to employees. Similar barriers have slowed the progress of ESOPs:

Nevertheless, there have been many successful ESOPs. Rosen, Case, and Staubus (2005) estimate that thousands of firms participate in ESOPs. Evidence suggests that most of the plans have been successful (Blasi, Kruse, and Bernstein, 2003; Kruse, 1993; Blair, Kruse, and Blasi, 2000). Employee ownership tends to be a durable arrangement and to make the company more stable—less likely to go under, be sold, or lay off employees (Blair, Kruse, and Blasi, 2000). When first introduced, employee ownership tends to produce a 4 to 5 percent increase in productivity, and the increase persists over time (Kruse, 1993). Rosen and others (2005) argue that a plan's success depends on effective implementation of three elements of the "equity model" (p. 19):

Bonus and profit-sharing plans spread rapidly in the boom years of the 1990s. Top managers were more likely than other employees to benefit, but many successful firms shared benefits more widely. Skeptics noted a significant downside risk to profit-sharing plans: they work when there are rewards but breed disappointment and anger if the company experiences a financial downturn. A famous example is United Airlines, whose employees took a 15 percent pay cut in return for 55 percent ownership of the company in 1994. Initially, it was a huge success. Employees were enthusiastic when the stock soared to almost $100 a share. But, like most airlines, United experienced financial difficulties after 9/11. Employees were crushed when bankruptcy left their shares worthless and their pensions underfunded.

Invest in Employees

As products, markets, and organizations become more complex, the value of people's specialized knowledge and skills increases. Undertrained workers harm organizations in many ways: shoddy quality, poor service, higher costs, and costly mistakes. Pfeffer (1994), for example, reports that a high proportion of petrochemical industry accidents involve contract employees. In post-invasion Iraq, some of America's more damaging mistakes were the work of private security contractors, who often had less training and discipline than their military counterparts.

Many organizations are reluctant to invest in developing human capital. The costs of training are immediate and easy to measure; the benefits are elusive and long-term. Training temporary or contract workers carries added disincentives. Yet many companies report a sizable return on their training investment. An internal study at Motorola, for instance, found a gain of twenty-nine dollars for every dollar invested in sales training (Waterman, 1994).

The human resource-oriented organization also recognizes that learning must occur on the job as well as in the classroom. Carnaud et Metal Box in France, the world's third-largest packaging company, puts great emphasis on creating a learning organization: "Learning in an organization takes place when three elements are in place: good mentors who teach others, a management system that lets people try new things as much as possible, and a very good exchange with the environment" (Aubrey and Tilliette, 1990, pp. 144–145). Carnaud's chief executive, Jean-Marie Descarpentries, has said that the biggest flaw in managers is their failure to be aggressive and systematic about learning.

Empower Employees

Progressive organizations give power to employees as well as invest in their development. Empowerment includes keeping employees informed, but it doesn't stop there. It also involves encouraging autonomy and participation, redesigning work, fostering teams, promoting egalitarianism, and infusing work with meaning.

Provide Information and Support A key factor in Enron's dizzying collapse was that few people fully understood its financial picture. Eight months before the crash, Fortune reporter Bethany McLean asked new CEO Jeffrey Skilling, "How, exactly, does Enron make money?" Her March 2001 article in Fortune pointed out that the company's financial reports were almost impenetrable and the stock price could implode if the company missed its earnings forecasts.

Over the last twenty years, a very different philosophy—called "open-book management"—has begun to take root in many progressive companies. This movement is inspired by the near-death experience of an obscure plant in Missouri, Springfield Remanufacturing (now SRC Holdings). SRC was created in 1983 when a group of managers and employees purchased it from International Harvester for about $100,000 in cash and $9 million in debt. It was one of history's most highly leveraged buyouts (Pfeffer, 1998; Stack and Burlingham, 1994). Less debt had strangled many companies, and CEO Jack Stack figured the business could make it only with everyone's best efforts. He developed the openbook philosophy as a way to survive. The system is built around three basic principles (Case, 1995):

Open-book management works for several reasons. First, it sends a clear signal that management trusts people. Second, it creates a powerful incentive for employees to contribute. They can see the big picture—how their work affects the bottom line and how the bottom line affects them. Finally, it furnishes information they need to do a better job. If efficiency is dropping, scrap is increasing, or a certain product has stopped selling, employees can pinpoint the problem and correct it.

Encourage Autonomy and Participation Information is necessary but not sufficient to fully engage employees. The work itself needs to offer opportunities for autonomy, influence, and intrinsic rewards. The Theory X approach, still alive and well, assumes that managers make decisions and employees follow orders. Treated like children, employees behave accordingly. As companies have faced up to the costs of this downward spiral in motivation and productivity, they have developed programs under the generic label of participation. This gives workers more opportunity to influence decisions about work and working conditions. The results have often been remarkable.

A classic illustration comes from a group of manual workers—all women— who painted dolls in a toy factory (Whyte, 1955). In a reengineered process, each woman took a toy from a tray, painted it, and put it on a passing hook. The women received an hourly rate, a group bonus, and a learning bonus. Although management expected little difficulty, production was disappointing and morale worse. Workers complained that the room was too hot and the hooks moved too fast.

Reluctantly, the foreman followed a consultant's advice and met face to face with the employees. After hearing the women's complaints, the foreman agreed to bring in fans. Though he and the engineer who designed the manufacturing process expected no benefit, morale improved. Discussions continued, and the employees came up with a radical suggestion: let them control the belt's speed. The engineer was vehemently opposed; he had carefully calculated the optimal speed. The foreman was also skeptical but agreed to give the suggestion a try. The employees developed a complicated production schedule: start slow at the beginning of the day, increase the speed once they had warmed up, slow it down before lunch, and so on.

Results of this inadvertent experiment were stunning. Morale skyrocketed. Production increased far beyond the most optimistic calculations. The women's bonuses escalated to the point that they were earning more than workers with more skill and experience. For that reason, the experiment ended unhappily. The women's production and high pay became a problem as other higher-skilled workers protested. To restore harmony, management reverted to the earlier recommendation: a fixed speed for the belt. Production plunged, morale plummeted, and most of the women quit.

Successful examples of participative experiments have multiplied across sectors and around the globe. A Venezuelan example is illustrative. Historically, the nation's health care was provided by a two-tier system: small-scale, high-quality private care for the affluent and a large public health care system for others. The public system, operated by the ministry of health, was in a state of perpetual crisis. It suffered from overcentralization, chronic deficits, poor hygiene, decaying facilities, and constant theft of everything from cotton balls to X-ray machines (Palumbo, 1991).

A small group of health care providers founded Ascardio to provide cardiac care in one rural area (Palumbo, 1991; Malavé, 1995). Participation was a key to remarkably high standards of patient care:

Studies of participation show it to be a powerful tool to increase both morale and productivity (Appelbaum, Bailey, Berg, and Kalleberg, 2000; Blumberg, 1968; Katzell and Yankelovich, 1975; Levine and Tyson, 1990). A study of three industries—steel, apparel, and medical instruments—found participation consistently associated with higher performance (Appelbaum and others, 2000). Workers in high-performance plants had more confidence in management, liked their jobs better, and received higher pay. The authors suggested that participation improves productivity through two mechanisms: increasing effectiveness of individual workers and enhancing organizational learning (Appelbaum and others, 2000).

Even when it works, participation often creates the need for changes resisted by other parts of an organization, as in the toy-factory example. Another problem is that participation is often more rhetoric than reality (Argyris, 1998; Argyris and Schön, 1996), turning into "bogus empowerment" (Ciulla, 1998, p. 63). Efforts at fostering participation have failed for two main reasons: difficulty in designing workable systems, and managers' ambivalence—they like the idea but fear subordinates will abuse it. Without realizing it, managers mandate participation in a controlling, top-down fashion, sending mixed messages, "You make the decision, but do what I want." Such contradictions virtually guarantee failure.

Redesign Work In the name of efficiency, many organizations spent much of the twentieth century trying to oust the human element by designing jobs to be simple, repetitive, and low skill. The analogue in education is "teacher-proof" curricula and prescribed teaching techniques. When such approaches dampen motivation and enthusiasm, managers and reformers habitually blame workers or teachers for being uncooperative. Only in the late twentieth century did opinion shift toward the view that problems might have more to do with jobs than with workers. A key moment occurred when a young English social scientist took a trip to a coal mine:

Bamforth's observations helped to spur the "sociotechnical systems" approach (Rice, 1953; Trist and Bamforth, 1951). Trist and Bamforth noted that the longwall method isolated individual workers and disrupted informal groupings that offered potent social support in the difficult and dangerous coal mine environment. They argued for the creation of "composite" work groups, in which individuals would be cross-trained in multiple jobs so each group could work relatively autonomously. Their approach made only modest headway in England in the 1950s but got a boost when two Tavistock researchers (Eric Trist and Fred Emery) were invited to Norway. The invitation came from Einar Thorsrud of the Norwegian Industrial Democracy Project, a joint labor-management effort to provide workers more impact.

At about the same time, in a pioneering American study, Frederick Herzberg (1966) asked employees about their best and worst work experiences. "Good feelings" stories featured achievement, recognition, responsibility, advancement, and learning; Herzberg called these motivators."Bad feelings" stories clustered around company policy and administration, supervision, and working conditions; Herzberg labeled these hygiene factors. Motivators dealt mostly with work itself; hygiene factors bunched up around the work context. Attempts to motivate workers with better pay and fringe benefits, improved conditions, communications programs, or human relations training missed the point, said Herzberg. He saw job enrichment as central to motivation, but distinguished it from simply adding more dull tasks to a tedious job. Enrichment meant giving workers more freedom and authority, more feedback, and greater challenges.

Hackman and his colleagues extended Herzberg's ideas by identifying three critical factors in job redesign: "Individuals need (1) to see their work as meaningful and worthwhile, more likely when jobs produce a visible and useful 'whole,' (2) to use discretion and judgment so they can feel personally accountable for results, and (3) to receive feedback about their efforts so they can improve" (Hackman, Oldham, Janson, and Purdy, 1987, p. 320).

Experiments with job redesign have grown significantly in recent decades. Many efforts have been successful, some resoundingly so (Kopelman, 1985; Lawler, 1986; Yorks and Whitsett, 1989; Pfeffer, 1994; Parker and Wall, 1998; Mohr and Zoghi, 2006). Typically, job enrichment has a stronger impact on quality than on productivity. There is more satisfaction in doing good work than in simply doing more (Lawler, 1986). Most workers prefer redesigned jobs, though some still favor old ways. Hackman emphasized that employees with "high growth needs" would welcome job enrichment, while others with "low growth needs" would not.

Recent decades have witnessed a gradual reduction in dreary, unchallenging jobs. Routine work is either redesigned or turned over to machines and computers. But significant obstacles block the progress of job enrichment, and monotonous jobs will not soon disappear. One barrier is the lingering belief that technical imperatives make simple, repetitive work efficient and cheap. Another barrier is the belief that workers produce more in a Theory X environment. A third barrier is economic; many jobs cannot be altered without major investments in redesigning physical plant and machinery. A fourth barrier is illustrated in the dollmanufacturing experiment: when it works, job enrichment leads to pressures for systemwide change. Workers with enriched jobs often develop higher opinions of themselves. They may demand more—sometimes increased benefits, other times career opportunities or training for new tasks (Lawler, 1986).

Foster Self-Managing Teams From the beginning, the sociotechnical systems perspective emphasized a close connection between work design and teamwork. Another influential early advocate of teaming was Rensis Likert, who argued in 1961 that an organization chart should depict not a hierarchy of individual jobs but a set of interconnected teams.^[8] Each team would be highly effective in its own right and linked to other teams via individuals who served as "linking pins." It took decades for such ideas to take hold, but an increasing number of firms now embrace the idea. One is Whole Foods Markets, a successful grocery chain based in Texas. Everyone who works at Whole Foods is a team member. The firm cites "featured team members" on its Web site, and its "Declaration of Interdependence" pledges, "We Support Team Member Excellence and Happiness."

Each Whole Foods store is a profit center, organized into about ten selfmanaged teams. Team leaders in each store make up another team, as do store leaders in each region and the company's six regional vice presidents. New hires have to be approved by two-thirds of team members. An elaborate system of peer review puts strong emphasis on people's learning from one another (Pfeffer, 1998).

The central idea in the autonomous team approach is giving groups responsibility for a meaningful whole—a product, subassembly, or complete service— with ample autonomy and resources and with collective accountability for results. Teams meet regularly to determine work assignments, scheduling, and current production. Supervision typically rests with a team leader, who either is appointed or emerges from the group itself. Levels of discretion vary. At one extreme, a team may have authority to hire, fire, determine pay rates, specify work methods, and manage inventory. In other cases, the team's scope of decision making is narrower, focusing on issues of production, quality, and work methods.

The team concept rarely works without ample training. Workers need group skills and a broader range of technical skills so that each member understands and can perform someone else's job. "Pay for skills" gives team members an incentive to keep expanding their range of competencies (Manz and Sims, 1995).

Promote Egalitarianism Egalitarianism implies a democratic workplace where employees participate in decision making. This idea goes beyond participation, often viewed as a matter of style and climate rather than sharing authority. Managers—even in participative systems—still make key decisions. Broader, more egalitarian sharing of power is resisted worldwide. Managers have particularly opposed organizational democracy, the idea of building worker participation into the formal structure to protect it from management interference. Most U.S. firms report a form of employee involvement, but many approaches (such as a suggestion box or quality circle) "do not fundamentally change the level of decision-making authority extended to the lowest levels of the organization" (Ledford, 1993, p. 148). Pfeffer (1998) and Ledford (1993) argue that American organizations make less use of workforce involvement than evidence of effectiveness warrants.

Formal efforts to democratize the workplace have been attempted in some parts of Europe. Norway legally mandated worker participation in decision making in 1977 (Elden, 1983, 1986). Major corporations pioneered efforts to democratize and improve the quality of work life. Three decades later, the results of the "Norwegian model" look impressive—Norway is at or near top of rankings for "best country to live in," with a strong economy, broad prosperity, low unemployment, and excellent health care (Barstad, Ellingsen, and Hellevik, 2005).

The Brazilian manufacturer Semco offers a dramatic illustration of organizational democracy in action (Killian, Perez, and Siehl, 1998; Semler, 1993).

Ricardo Semler took over the company from his father in the 1980s and gradually evolved an unorthodox philosophy of management:

At Semco, workers hire new employees, evaluate bosses, and vote on major decisions. In one instance, employees voted to purchase an abandoned factory Semler didn't want and then proceeded to turn it into a remarkable success. Semco's experiments produced dramatic gains in productivity, and the company was repeatedly rated the best place to work in Brazil. Even after Semler no longer saw a need for his company to grow, it grew anyway because innovative employee groups kept inventing new businesses.

Harrison and Freeman (2004) ask, "Is organizational democracy worth the effort?" and conclude that the answer is yes. Even if it does not produce economic gains, it produces other benefits. Despite positive evidence, many managers and union leaders oppose the idea because they fear losing prerogatives they believe essential to success. Union leaders sometimes see democracy as a management ploy to get workers to accept gimmicks in place of gains in wages and benefits or as a wedge that might come between workers and their union.

Organizations that stop short of formal democracy can still become more egalitarian by reducing both real and symbolic status differences (Pfeffer, 1994, 1998). In most organizations, it is easy to discern an individual's place in the pecking order from such cues as office size and access to perks like limousines and corporate jets. Organizations that invest in people, by contrast, often reinforce participation and job redesign by replacing symbols of hierarchy with symbols of cooperation and equality. Semco, for example, has no organization chart, secretaries, or personal assistants. Top executives type letters and make their own photocopies. At Nucor, the chief executive "flies commercial, manages without an executive parking space, and really does make the coffee in the office when he takes the last cup" (Byrnes and Arndt, 2006, p. 60).

Reducing symbolic differences is helpful, but reducing material disparities is important as well. A controversial issue is the pay differential between workers and management. In the 1980s, Peter Drucker suggested that no leader should earn more than twenty times the pay of the lowest-paid worker. He reasoned that outsized gaps undermine trust and devalue workers. Corporate America paid little heed. In 2005, with an average annual compensation of $18.9 million, CEOs of large American companies earned more than four hundred times as much as the average factory worker (Strauss and Hansen, 2006). In the year it went bankrupt, Enron was a pioneer in the golden paycheck movement, handing out a total of $283 million to its five top executives (Ackman, 2002).

In contrast, a number of progressive companies, such as Costco, Whole Foods, and Southwest Airlines, have traditionally underpaid their CEOs by comparison with their competitors. Whole Foods Markets has had a policy limiting executives' pay to ten times the average salary of employees. It was newsworthy that Southwest's CEO received "less than $1 million in 2006 even as the carrier posted its 34th straight year of profits" (Roberts, 2007). Meanwhile, United Airlines, just out of bankruptcy, managed to unite all five of its unions in protest against the estimated take-home pay of $39 million for its CEO.

Promote Diversity

A good workplace is serious about treating everyone well—workers as well as executives; women as well as men; Asians, African Americans, and Hispanics as well as whites; gay as well as straight employees. Sometimes companies support diversity because they think it's the right thing to do. Others do it grudgingly because of bad publicity, a lawsuit, or government pressure.

In 1994, Denny's Restaurants suffered a public relations disaster and paid $54 million to settle discrimination lawsuits. The bill was even higher for Shoney's, at $134 million. Both restaurant chains got religion as a result (Colvin, 1999). So did Coca-Cola, which settled a class action suit by African American employees for $192 million in November 2000 (Kahn, 2001), and Texaco, after the company's stock value dropped by half a billion dollars in the wake of a controversy over racism (Colvin, 1999). Denny's transformation was so thorough that the company has regularly been at or near the top spot on Fortune's list of the fifty best companies for minorities (Esposito, Garman, Hickman, Watson, and Wheat, 2002; Daniels and others, 2004).

The biggest discrimination suit in history—a class action on behalf of more than 1.5 million women hit Wal-Mart in 2003, with allegations of discrimination in pay and promotion. Wal-Mart tried to block the suit and force women to sue individually, but as of December 2007, federal courts had consistently ruled that the suit could go forward (Dukes v. Wal-Mart, 2007). So far, Wal-Mart has vigorously defended its human resource practices, but adverse publicity and liability risks are likely to pressure the retail giant to seek accommodation with its female and minority employees.

In the end, it makes good business sense for companies to promote diversity. If a company devalues certain groups, word tends to get out and alienate customers. In the United States, more than half of consumers and workers are female, and about a fourth are Asian, African American, or Latino. California, New Mexico, and Texas have become the first states in which non-Hispanic whites are no longer a majority. The same will eventually be true of the United States as a whole. When talent matters, it is tough to build a workforce if your business practices write off a sizable portion of potential employees. That's one reason so many public agencies in the United States have long-standing commitments to diversity. One of the most successful is the U.S. Army, as exemplified in Colin Powell's ability to rise through the ranks to head the Joint Chiefs of Staff and, subsequently, to become the nation's secretary of state.

Many private employers have also moved aggressively to accommodate gay employees:

Promoting diversity comes down to focus and persistence. Organizations have to take it seriously and build it into day-to-day management. They tailor recruiting practices to diversify the candidate pool. They develop a variety of internal diversity initiatives, such as mentoring programs to help people learn the ropes and get ahead. They tie executive bonuses to success in diversifying the workforce. They work hard at eliminating the glass ceiling. They diversify their board of directors. They buy from minority vendors. It takes more than lip service, and it doesn't happen overnight. Many organizations still don't get it. But many others have made impressive strides.

If human resource management strategies are implemented in a halfhearted, piecemeal fashion, they lead to predictable failure. Success requires a comprehensive strategy and long-term commitment that many organizations espouse but fewer deliver. One example of a comprehensive strategy that combines structural and human resource elements is total quality management (TQM), which swept across corporate America in the 1980s. Quality gurus such as W. Edwards Deming (1986), Joseph Juran (1989), Philip Crosby (1989), and Kaoru Ishikawa (1985) differed on specifics, but they all emphasized workforce involvement, participation, and teaming as essential components of a serious quality effort.

Hackman and Wageman (1995) analyzed the theory and practice of the quality movement and concluded that it represented a coherent and distinctive philosophy, consistent with existing research on effective human resource management. They summarized four core assumptions in TQM:

In practice, many organizations diluted the philosophy by implementing only certain parts, usually the easiest and least disruptive. It is no surprise that a majority of quality programs failed to achieve their objectives (Gertz and Baptista, 1995; Port, 1992), although many companies obtained extraordinary results (Engardio and DeGeorge, 1994; Greising, 1994; Waterman, 1994). One such company, Motorola, reported a total of $17 billion in savings from its quality initiatives as of 2006.

The power of an integrated approach to TQM is illustrated in the case of New United Motors Manufacturing, Inc. (NUMMI), a joint venture of General Motors and Toyota. In 1985, NUMMI reopened an old GM plant in Fremont, California, and began to build cars. It drew the workforce from five thousand employees laid off by GM the preceding year. These workers had a reputation at GM for militancy, poor attendance, alcohol and drug abuse, and even fistfights on the assembly line (Holusha, 1989; Lawrence and Weckler, 1990; Lee, 1988). Two years later, absenteeism had declined from 20 percent at GM to 2 percent at NUMMI, and the plant was producing cars of higher quality at a lower labor cost than any other GM plant. NUMMI's Chevrolets ranked second among cars sold in the United States in initial owner satisfaction; no other GM car was even in the top fifteen.

What accounted for this manufacturing miracle? The answer, in a word, was Toyota, GM's partner in the joint venture. GM provided the plant, the workers, and an American nameplate, but both car and production processes were designed in Japan. Toyota managed the plant, and production was split between Chevrolets and Toyotas. NUMMI's success was built on a comprehensive human resource philosophy. There was symbolic egalitarianism: workers and executives wore the same uniforms, parked in the same lots, and ate in the same cafeteria. Grouped in small, self-managing teams, employees designed their jobs and rotated through different jobs. NUMMI's motto was "There are no managers, no supervisors, only team members."

Both union and management stressed collaboration. If a worker complained to the union, the union representative was likely to be accompanied by a member of the company's human relations staff. The three would try to solve the problem on the spot. If workers fell behind, they could pull a cord to stop the line, and help would arrive quickly. NUMMI's president, Kan Higashi, saw the cord as a sign of trust between management and labor: "We had heavy arguments about installing the cord here. We wondered if workers would pull it just to get a rest. That has not happened." When car sales slumped in 1988, NUMMI laid off no one. Workers were sent at full pay to training sessions on problem solving and interpersonal relations. One worker commented, "With GM, if the line slowed down, some of us would have been on the street" (Holusha, 1989, p. 1).

Even union leaders liked NUMMI. Bruce Lee, a UAW official, said that the team system liberated workers by giving them more control over their jobs and was "increasing the plant's productivity and competitiveness while making jobs easier" (Holusha, 1989). UAW president Owen Bieber said when he toured the plant, "I was most struck that there is hardly any management here at all" (Lee, 1988, pp. 232-233).

NUMMI was not a trouble-free paradise. A dissident union group complained that the brisk pace of work amounted to "management by stress" and that the plant's policy on absenteeism was inhumane. But even dissidents conceded things were better than in the past. Most workers were happy simply for the chance to make automobiles. As one worker said, "We got a second chance here, and we are trying to take advantage of it. Many people don't get a second chance" (Holusha, 1989, p. 1).

GM was sufficiently impressed to try to transfer NUMMI techniques to other plants. Sometimes it worked. At one plant, innovations like self-managing teams doing their own quality audits led to higher quality and lower costs (Hampton and Norman, 1987). But transplants often failed to root because the NUMMI philosophy was implemented piecemeal, with predictably marginal results. "Team decision making" became a fad at GM but often backfired because managers dictated to the teams (Lee, 1988). Kochan, Lansbury, and MacDuffie concluded, "The NUMMI story is well known, so it will suffice to say that GM did a terrible job of learning from that experience" (1997, p. 28).

The NUMMI case illustrates that successful human resource applications are neither as idyllic as idealists might hope nor as soft as old-line managers fear. The NUMMI experiment combined creative human resource management with demanding work standards to produce an automobile highly competitive in terms of both cost and quality. Such combinations have become more and more common in recent decades.

GM's difficulty in learning from NUMMI is one of countless examples of organizations that espouse but fail to apply noble human resource practices. Why? One problem is managerial ambivalence. Progressive practices cost money and alter the relationship between superiors and subordinates. Managers are skeptical about a compensatory return on investment and fearful of losing authority. Moreover, execution requires skill and understanding that are often in short supply. Beginning as far back as the 1950s, the chronic difficulties in improving life at work spurred the rise of the field of Organization Development (OD), an array of ideas and techniques designed to help managers convert intention to reality.

Group Interventions

Working in the 1930s and 1940s, social psychologist Kurt Lewin pioneered the idea that change efforts should emphasize the group rather than the individual (Burnes, 2006). His work was instrumental in the development of a provocative and historically influential group intervention: sensitivity training in "T-groups." The T-group (T for training) was a serendipitous discovery. At a conference on race relations in the late 1940s, participants met in groups, and researchers were stationed in each group to observe and take notes. In the evening, the researchers reported their observations to program staff. Participants asked to be included in these evening sessions. They were fascinated to hear things about themselves and their behavior that they hadn't known before. Researchers recognized that they had discovered something important and developed a program of "human relations laboratories." Trainers and participants joined in small groups, working together and learning from their work at the same time.

As word spread, T-groups began to supplant lectures as a way to develop human relations skills. But research indicated that T-groups were better at changing individuals than organizations (Gibb, 1975; Campbell and Dunnette, 1968). In light of this evidence, T-group trainers began to experiment with new approaches. "Conflict laboratories" were designed for situations involving friction among groups and organizational units. "Team-building" programs were created to help groups work more effectively. "Future search" (Weisbord and Janoff, 1995), "open space" (Owen, 1993, 1995), and other large-group designs (Bunker and Alban, 1996, 2006) brought together sizable numbers of people drawn from different constituencies to work on key issues or challenges. Mirvis (2006) observes that even though the T-group itself has become passé, it gave birth to an enormous range of workshops and training activities that are now a standard part of organizational life.

One famous example of a large-group intervention is the "Work-Out" conferences initiated by Jack Welch when he was CEO of General Electric. Frustrated by the slow pace of change in his organization, Welch convened a series of town hall meetings, typically with one hundred to two hundred employees, to identify and resolve issues "that participants thought were dumb, a waste of time, or needed to be changed" (Bunker and Alban, 1996, p. 170). The conferences were generally viewed as highly successful and spread throughout the company.

Survey Feedback

In the late 1940s, researchers at the University of Michigan began to develop surveys to measure patterns in human behavior. They focused on motivation, communication, leadership styles, and organizational climate (Burke, 2006). Rensis Likert helped found the Survey Research Center at the University of Michigan and produced a 1961 book, New Patterns of Management, that became a classic in the human resource tradition. Likert's survey data showed that "employeecentered" supervisors, who focused more on people and relationships, typically managed higher-producing units than "job-centered" supervisors, who ignored human issues, made decisions themselves, and dictated to subordinates.

Survey research paved the way for survey feedback as an approach to organizational improvement. The process begins with questionnaires aimed at human resource issues. The results are tabulated and then shown to managers. The results might show, for example, that information within a unit flows well but that decisions are made in the wrong place using bad information. Members of the work unit, perhaps with the help of a consultant, discuss the results and explore how to improve their effectiveness. A variant on the survey feedback model that has become increasingly standard in organizations is 360-degree feedback, in which managers get survey feedback about how they are seen by subordinates, peers, and superiors.

Evolution of OD

T-groups and survey research gave birth to the field of OD in the 1950s and 1960s. Since then, OD has continued to evolve as a discipline (Burke, 2006; Gallos, 2006; Mirvis, 1988, 2006). In 1965, few managers had heard of OD; thirty years later, few had not. Most major organizations (particularly in the United States) have experimented with OD: General Motors, the U.S. Postal Service, IBM, the Internal Revenue Service, Texas Instruments, Exxon, and the U.S. Navy have all employed their own brands.

Surveying the field in 2006, Mirvis depicts significant innovation and ferment emanating from both academic visionaries and passionate "disciples" (Mirvis, 2006, p. 87). He also sees "exciting possibilities in the spread of OD to emerging markets and countries; its broader applications to peace making, social justice, and community building, and its deeper penetration into the mission of organizations" (p. 88).

When individuals find satisfaction and meaning in work, the organization profits from effective use of their talent and energy. But when satisfaction and meaning are lacking, individuals withdraw, resist, or rebel. In the end, everyone loses. Progressive organizations implement a variety of "high-involvement" strategies for improving human resource management. Some approaches strengthen the bond between individual and organization by paying well, offering job security, promoting from within, training the workforce, and sharing the fruits of organizational success. Others empower workers and give work more significance through participation, job enrichment, teaming, egalitarianism, and diversity. No single strategy is likely to be effective by itself. Success typically requires a comprehensive strategy undergirded by a long-term human resource management philosophy. Ideas and practices from organization development often play a significant role in supporting the evolution of more comprehensive and effective human resource practices.