3
Changes in the Organizational Contexts of Work

Changes in organizational strategies, structures, and processes are both affected by the external forces reviewed in Chapter 2 and in turn have significant effects on the nature of employment relationships, jobs, occupations, and occupational structures. In this chapter, we focus on the most noticeable of these organizational changes and their effects on work structures and content. We conclude by considering the implications of these changes for occupational analysis and classifications. In doing so, we highlight the organizational decisions that need to be factored more directly into systems for analyzing how work is done today and how it might be shaped in the future.

Organizational Restructuring

In this section, we discuss two important developments in the organization of firms. The first is downsizing and its implications for job security and job stability. The second is the trend toward flatter organizational hierarchies and the implications for how work is divided between managers and nonsupervisory employees. With flatter organizations, lower-level employees are asked to take greater responsibility as equal members of teams (National Research Council, 1997a).



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 73
3 Changes in the Organizational Contexts of Work Changes in organizational strategies, structures, and processes are both affected by the external forces reviewed in Chapter 2 and in turn have significant effects on the nature of employment relationships, jobs, occupations, and occupational structures. In this chapter, we focus on the most noticeable of these organizational changes and their effects on work structures and content. We conclude by considering the implications of these changes for occupational analysis and classifications. In doing so, we highlight the organizational decisions that need to be factored more directly into systems for analyzing how work is done today and how it might be shaped in the future. Organizational Restructuring In this section, we discuss two important developments in the organization of firms. The first is downsizing and its implications for job security and job stability. The second is the trend toward flatter organizational hierarchies and the implications for how work is divided between managers and nonsupervisory employees. With flatter organizations, lower-level employees are asked to take greater responsibility as equal members of teams (National Research Council, 1997a).

OCR for page 73
Downsizing: Changes in Job Security and Job Stability Downsizing, which refers to reducing the size of the workforce, was used by many firms in corporate America during the late 1980s and early 1990s to respond to new financial exigencies. More recently, however, survey results obtained by the American Management Association from its member companies show that workforce reductions are increasingly strategic or structural in nature rather than a response to short-term economic conditions associated with declines in business (American Management Association, 1996:2). The 100 largest companies in the United States reported that 22 percent of their workforce had been laid off since 1978, and 77 percent of those cuts involved white-collar jobs. Approximately 23 percent of companies surveyed in 1997 reported outsourcing as a cause for downsizing. In recent years, firms are hiring at the same time that they are laying off: 31 percent of the large, traditional employers surveyed by the American Management Association in 1996 were adding and cutting workers at the same time, and the average firm that had a downsizing in fact was growing by 6 percent. Smaller firms were creating more jobs than they were cutting, whereas large firms with over 10,000 workers were more likely to see actual declines in overall employment. The telecommunications industry provides a good illustration. At its peak, AT&T employed 950,000 people and around 450,000 after divestiture. Now it employs around 250,000 with plans to cut further. Yet the telecommunications industry still has about the same number of employees as a decade ago. As AT&T has shrunk, through both divestitures and downsizing, smaller competitors have grown up around it (Nocerra, 1996). Looking at data from the labor market on workers who are displaced from their jobs, Farber (1997) finds that the overall rate at which workers have been permanently displaced backed down a bit in the 1980s from the peak of the recession period, 1981–1983, but then rose again—despite the economic recovery—and jumped sharply through 1995. The rate at which workers lost their jobs was actually greater in 1993–1995, a period of significant economic expansion and prosperity in the economy as a whole. It is diffi-

OCR for page 73
cult to think of more compelling evidence that the nature of the employment relationship has changed than this. Perhaps the most telling change in the employment relationship has been the reduction in white-collar and management jobs, which were traditionally the most protected. The 1996 American Management Association survey finds that, although salaried employees held roughly 40 percent of all jobs, they account for over 60 percent of all the employees cut. The number of supervisory employees eliminated as a percentage of all employees that were cut doubled between 1990–1991 and 1993–1994 to 26 percent (Rousseau and Anton, 1991). The rate of displacement was actually higher for managers in the 1980s than for other occupations, controlling for other characteristics (Rousseau, 1995). It rose sharply through the early 1990s but appears to have declined somewhat from 1993–1995 (Farber, 1997), perhaps simply because of regression to the mean. The "churning" of the workforce—hiring and laying off at the same time—had the biggest negative effects on middle management: three jobs were cut for every one created. These are the positions that are the most entrenched within the internal employment system. Professional and technical jobs, in contrast, benefited from it: five new jobs were created for every three cut. These jobs have the skills and responsibilities that translate easily across organizations. The changes associated with churning in some cases go beyond simply rearranging which employees hold permanent jobs. A survey of 500 human resource executives whose companies had downsized found that a third refilled at least some of the positions that had been cut but that 71 percent did so with either temporary or contract workers (Lee Hecht Harrison, 1997). But large employers of the kind represented in the American Management Association surveys account for only a modest percentage of total employment in the economy. Many workers were never employed in internal labor markets with prospects of job security. During the course of the 1980s and especially the 1990s, a widespread perception developed that the employment relationship had changed in fundamental ways. A steady drumbeat of stories in the media fed the perception that employers were less attached to their employees. The overall theme is summed

OCR for page 73
up by an article in Time (Church and Greenwald, 1993) suggesting that Americans are realizing that the great American job is gone and that they should forget any idea of career-long employment with a big company. These perceptions affected employees' expectations about what it means to work in an organization and the role of loyalty to the employer. Empirical research on changes in the employment relationship for the workforce as a whole suggests a more temperate view. There are some changes evident in the data, but some empirical measures of the employment relationship do not point to changes. When changes do appear, they are not overwhelmingly large. Furthermore, evidence of a long-term trend toward declining attachments in the workforce as a whole is modest and appears to be concentrated in the early 1990s, the most recent past. This raises the question of whether we are witnessing a period of short-term restructuring that may portend little about the future. It is possible, for example, that the evidence so far of modest change is driven by rather significant changes by large corporations, balanced by stability in the relationship for the majority of the workforce employed under other arrangements. Empirical studies of the employment relationship based on large, random samples of the population and workforce available over a long span of years have focused primarily on two salient features of the employment relationship: job stability and job security. Job Stability Job stability is defined in the recent literature as a measure of how long jobs last (or how quickly they end), irrespective of the source of turnover. Changes in job stability are driven either by voluntary quits or by employer-initiated separations such as layoffs or firings. Employer-initiated separations tend to be greater and employee quits fewer during recessions (because most employees who quit do so to take jobs elsewhere that are scarce in recessions), offsetting tendencies reflected in the overall measures of job stability. Diebold, Neumark, and Polsky (1997), examining the temporal evolution of job stability in U.S. labor markets over the 1970s

OCR for page 73
and 1980s, used data assembled from a sequence of Current Population Survey (CPS) tenure supplements. They use these CPS supplements to construct artificial cohorts, with which job retention rates (i.e., the probability of retaining one's job) over various spans of years can be computed and compared over time. This is preferable to looking at distributions of incomplete tenure spells at a point in time, which can be affected by, among other things, new entrants to the labor market, and hence obscure information on how long jobs are lasting. Through the 1980s to January 1991, they found little or no change in average job stability for the workforce as a whole in the U.S. economy (see Table 3.1). Columns (1), (2), and (4) in Table 3.1 summarize these results for 4-year retention rates. Columns (1) and (2) report the estimated rates, and column (4) reports the changes. As shown in the first row, the overall change is a very slight decline of .002. As shown in the other rows, at a disaggregated level, job stability fell for those with 2–9 years of tenure and rose for the least and especially the most tenured workers (15 or more years of tenure). By age group, job stability fell only for the youngest workers. Column (7) reports changes in estimated 10-year retention rates, over a longer sample period. Here, too, the overall change is negligible (-.001), although the pattern by age and tenure group is somewhat reversed. Columns (3), (5), and (6), as well as column (8), report newer results from Neumark et al., (1997), updating the estimates through 1995 (Wyatt Company, 1995). The estimates reported in the table reflect a relatively consistent picture: first, 4-year retention rates still show essentially no overall change, if anything rising slightly compared with earlier 4-year spans. However, in the 1991–1995 period, job stability declined rather substantially for workers with 9 or more years of tenure, a finding that may reflect the types of stories that have appeared in the media regarding changes in job stability for "career" employees. In the 8-year retention rate results reported in column (8), similar (although less sharp) declines for more-tenured workers appear. Moreover, for the period considered, 8-year retention rates fell modestly overall, by .021. Finally, the results disaggregated by age indicate non-trivial declines for all age groups except those age 55 and over. This suggests that conditional on age, job stability has declined

OCR for page 73
TABLE 3.1 Changes in Job Retention Rates   Changes in 4-years retention rates 4-year retention rates Rate Comparisons Change in 10-year retention rates Changes in 8-year retention rates   83–87 87–91 91–95 83–87 87–91 87–91 91–95 83–87 91–95 73–83 to 81–91 83–91 to 87–95   (1) (2) (3) (4) (5) (6) (7) (8) All workers .539 .536 .544 -.002 .008* .005 -.001 -.021* Tenure groups                 0 to < 2 years .329 .346 .391 .016* .045* .061* -.004 .031* 2 to < 9 years .586 .548 .564 .-038* .016* -.021* .012* -.052* 9 to < 15 years .827 .816 .748 -.010 -.069* -.079* .063* -.047* 15 or more years .630 .702 .633 .072* -.070* .003 -.043* -.020* Age groups                 16–24 .305 .281 .292 -.025* .011 -.014 .040* -.030* 25–39 .585 .577 .573 -.009 -.004 -.012* -.005 -.037* 40–54 .686 .683 .674 -.004 -.009 -.012 -.044* -.029* 55 and over .469 .468 .451 -.000 -.018 -.018 -.005 .005 Estimates are adjusted for heaping of tenure responses at multiples of 5 and 10 years, rounding, changes in tenure questions, and the business cycle. Estimated changes statistically significant at the 5-percent level are indicated with an asterisk. SOURCE: Diebold et al., (1996, 1997) and Neumark et al., (1997).

OCR for page 73
more, while the overall decline has been moderated by the effects of an aging workforce coupled with higher job stability experienced by older workers (through age 55). Thus, the evidence of declines in job stability is a bit stronger if we compare the experiences of similar age groups over time than if we consider the workforce as a whole. Furthermore, when examining these changes by occupational group, the results suggest that managers have experienced a significant decline in job stability in the 1990s (Neumark et al., 1997). Some studies have reported sharper evidence of declines in job stability (e.g., Swinnerton and Wial, 1995; Rose, 1995; Boisjoly et al., 1994; Marcotte, 1996). However, these findings are largely artifacts of changes in survey methods or errors in classifying workers (see, e.g., Diebold et al., 1997; Polsky, 1996; Schmidt and Svorny, forthcoming). In addition, the last two of these studies that report declines measure year-to-year separations, so they could be detecting more turbulence for those on new jobs, and the probability of a long attachment between workers and firms may not have fallen. Overall, then, there is some evidence that average job stability declined modestly in the 1990s. The relatively small aggregate changes mask sharper declines in stability for workers with more than a few years of tenure. These sharp declines are partially offset in the aggregate by gains in job stability for low-tenure workers at the beginning stages of attachment to an employer. The changes by tenure group contrast with the 1980s, and along with the declining stability of managers are more consonant with the increase in job loss among "career workers" described in the popular press. However, because these changes appear principally in recent years, it is difficult at this point to know whether there has been a permanent change in job stability. Job Security In contrast to the preceding section, the concept of job security is presented from the perspective of the employee and focuses on involuntary terminations. Since voluntary terminations are likely to be beneficial to workers, whereas involuntary terminations are likely to be costly to them, a shift in the composition

OCR for page 73
of terminations toward involuntary ones could help explain the perception of increased anxiety over job loss. A number of studies show evidence of increased involuntary job loss (Fortune, 1994; Valletta, 1996; Polsky, 1996; Boisjoly et al., 1994; Farber, 1996). This evidence appears to be consistent with changes in the employment relationship toward a less secure relationship. The data reported in Table 2.3 of the previous chapter echo this trend. The job insecurity of U.S. workers increased between 1985 and 1996 for all occupational categories, with most of the increase occurring in the 1990–1996 period for most categories. However, some caution is in order regarding both the interpretation of the evidence and the evidence itself. The fact that the composition of job separations has shifted from voluntary quits to involuntary separations does not necessarily imply the disappearance of long-term jobs. Just as reasonably constant job stability does not necessarily mean no change in job security, declines in job security do not necessarily imply reductions in job stability. It simply means that the employer—as opposed to the employee—is now more likely to be the one ending the relationship. The fact that employees who want long-term relationships may no longer have the same possibilities as in the past is a change of some importance, however. Although workers are being involuntarily terminated at a higher rate, they are also voluntarily staying on the job longer, perhaps because there are fewer alternatives elsewhere. This trend is supported by the data shown in Table 2.3. They reveal a large decrease, between 1985 and 1990, in intention to leave current employment for all occupational categories and little or no change between 1990 and 1996. Valletta (1996) suggests that reduced quits may reflect increased insecurity, as adverse labor market developments make workers unwilling to cut their ties to their existing employers and try their luck on the market. It is also possible, however, that many workers are finding their present employers relatively more attractive than in the past—whether because of higher wages, better long-term prospects, or other factors—and as a consequence are quitting less. Finally, changes in the state of the labor market, particularly the overall rate of unemployment, may moderate some of the trend toward greater involuntary separations. Although there are some ambiguities in the findings, on bal-

OCR for page 73
ance the evidence points to recent declines in job stability for at least some groups of workers during the first half of the 1990s. How fundamental these changes are depends on whether they reflect the beginning of a long-term trend, a question that can best be addressed by examining other aspects of the employment context. Flatter Hierarchies: Changes in Management and Teamwork Changes in the organization of work have made it possible to eliminate many jobs from organizations and may also facilitate their rapid restructuring. We examine two such changes: changes in managerial jobs and the rise in team-based work. Managerial Jobs Managerial jobs may well be the ones that have experienced the greatest transformation in their structure in recent years, and their transformation has been the subject of considerable attention from the business press. To understand what has changed, it is sensible to start by describing the characteristics of the "old" internal labor market of managers. The distinctive characteristic of traditional managerial careers is the existence of a promotion ladder and the notion of moving up it (Rosenbaum, 1984; Baker et al., 1994). Ladders of upward mobility were well defined. One implication of these ladders is that most movement was in the upward direction. Managers either were promoted or stayed where they were. Lateral shifts were very rare; demotions were essentially unheard of. All observers agree that managers did not face serious risks of layoffs until the late 1970s (MacDuffie, 1996). Nor was pay at risk. Senior managers began the 1980s with the vast majority of their pay package in the form of base or guaranteed pay that did not vary with either their performance or that of the organization (Useem, 1996). Another aspect of managerial employment systems was the strong bias toward continually increasing the proportion of managerial jobs in the workplace. In 1929, American manufacturing firms employed 18 administrative workers for every 100 employ-

OCR for page 73
ees; by 1950 the figure was 24; by 1960 it was 29; and in 1970 it was 30 (Gillen, 1994:66, 82). In part this reflected the impact of increased organizational size and the planning requirements. But American firms as a group are also more managerially intensive than are companies in other developed nations (Gorden, 1994). There are a number of explanations for this pattern. The most consistent finding in the executive compensation literature has been that managerial salaries in compensation systems based on the U.S. model rise with the size of the unit reporting to the manager (see, for example, Milgrom and Roberts, 1992). All of these characteristics of managerial employment seem to have changed dramatically in recent years. Press accounts of downsizing in large corporations suggest that managerial jobs are at substantial employment risk. This impression is supported by evidence from the Dislocated Worker Surveys, which suggests that the risk faced by managers was actually greater than for other employees, other things being equal (see below). Case study evidence also supports this conclusion. Managerial compensation has also changed radically in the direction of variable, at-risk pay. The fraction of managerial pay that is contingent on performance has increased (Useem, 1996). The percentage of managerial compensation associated with bonus payments rose from 1986 to 1992, as did the returns to skill (measured by job evaluation scores: Scott et al., 1996). Risk has gone up as firms seek to use compensation to align more tightly the behavior of managers to the presumed goals of shareholders. For most managers, upward mobility is much less probable than it used to be. The use of task or project teams that come together for specific, temporary tasks and then disappear replaces permanent bureaucratic hierarchies and, in the process, reduces the number of levels in the organizations. The use of teams among production and first-line workers sharply reduces the need for supervisors and the managers whose jobs had been to manage the supervisors. These changes have removed several rungs from promotion ladders, and case studies of a variety of firms suggests that the chances of managers to move up have diminished (Batt, 1996; Scott et al., 1996). In some industries, such as the high technology community of Silicon Valley, networks of companies seem to have replaced the large, vertically integrated

OCR for page 73
organization. Managerial and professional employees in these communities advance by moving across organizations rather than moving up within them (Saxenion, 1994). Teams, Teamwork, and Team-Work The rise of team-based work structures is perhaps the most ubiquitous change affecting the workplace in the past two decades. The shift from individualized work structures to teams spread from production work to the executive suite and every area in between, forcing revisions in compensation systems, organizational charts, and corporate culture. The increased use of teams and teamwork appears to have implications for a number of issues related to jobs, occupations, and occupational structures. The most obvious of these are that teamwork broadens jobs and blurs boundaries between them. Teamwork also flattens hierarchies within organizations, as authority moves from what had been managerial and supervisory positions to the team. As a result, job ladders must be redefined as promotion prospects inside organizations erode. The benefits of using teams in firms, laid out as far back as the 1920s by the well-known management observer and author Mary Parker Follett, include decisions that are better informed, greater commitment by employees to the work being performed, and a reduced need for formal supervision and administration (Graham, 1995). However, in the next several decades (1930s and 1940s), little real-world emphasis was given to the deliberate use of teams in organizations, although academic scholars were doing considerable basic research on topics related to group dynamics. Since the 1980s, some attention has been given in industry to the use of specialized teams (such as Scanlon Plan Teams and Quality Circle Teams), and a small number of innovative companies were starting to make greater use of teams in their organizations. In the 1990s, the popular business press has been replete with articles about the increasing use of teams in corporate America, often with a tendency to exaggerate their positive effects. When a traditional workplace with narrowly defined jobs is replaced with a cross-functional team, the low-skilled, entry-level

OCR for page 73
force). Nonstandard work may help individuals secure permanent jobs elsewhere by helping them gain work experience or skills, but it does not appear to lead directly to permanent jobs, at least on average. Certainly some nonstandard work also meets the needs of individuals who, for a variety of reasons, prefer the schedules such work provides. Some part of the increase in nonstandard work may reflect a changing preference of employees for such schedules. Independent contractors and other self-employed persons who have nonstandard work, however, do not appear to have high job insecurity or employment instability (Houseman and Polivka, 1998) and perhaps neither need nor are interested in making a transition to a permanent job. The growth of nonstandard work arrangements represents a change in the work context that has implications for a number of issues discussed in this book. Instead of the employer controlling one's work, for example, persons in some nonstandard work arrangements either control their own work (along the lines of independent contractors and other self-employed persons) or are supervised by someone other than their employer (as are employees of temporary help agencies). Employees of temporary help agencies and contract companies also work in locations other than their employing firm, such as in a client organization. Moreover, some nonstandard work arrangements, such as independent contractors, are characterized by multiple employers. These arrangements represent important challenges to traditional definitions and classifications of employment that rely on the single, long-term employer, including most labor and employment law. Nonstandard work arrangements may also involve the transfer of control over work from the organization in which a person works to occupational groups (such as those to which independent contractors belong) or to other organizations (such as contract companies). This transfer of control has implications for the object of the worker's attachment (e.g., the occupation rather than the organization) and who should be responsible for training the worker. The importance of occupational analysis—particularly in describing the content of work as performed in a variety of organizations—is therefore increased, since the organization may well become less relevant as the unit within which work is primarily defined and structured.

OCR for page 73
Training and Employee Development Training is an important barometer of changes in work, including those that affect its structure. When the context of work changes significantly, organizations often alter their training to help people adjust. Information trends in training practices can shed light on the changing nature of work. Changes in the topics of training reflect a different competitive environment. For example, a comparison of the Training Magazine surveys in 1988 and 1997 shows increasing proportions of organizations offering courses in creativity, strategic planning, and managing change (Lakewood Research, 1988, 1997). New technologies were the most significant issue affecting training practices, according to a Human Performance Practices survey conducted by the American Society for Training Developers (ASTD). A high proportion of firms responding to the survey offered courses in computers (91 percent), exceeded only by the proportion offering an orientation to the firm (93 percent) and management training (94 percent) (Bassi et al., 1997a). Among companies responding to a survey of workplace skill, 75 percent cited computerization as a factor contributing to needs for additional skills, and 67 percent cited greater teamwork and employee participation practices (Olsten Corporation, 1994). In a study by the Bureau of Labor Statistics (1996a), establishments reported that computer training consumed 20 percent of their training hours—more than were devoted to any other single subject. The next most important issue affecting training practices among the Human Performance Practices respondents was restructured and redesigned jobs (Bassi et al., 1997). Most establishments provided related training, including technical (88 percent) and quality assurance (76 percent) courses. Among training respondents, the percentage offering technical training rose from 76 percent in 1988 to 91 percent in 1997. Fewer offered quality training—63 percent, up from 50 percent in 1991 (Lakewood Research, 1988, 1991, 1997). The restructuring trends noted earlier are altering the content of training. The mode of lesson delivery is also changing. Instead of printed sheets handed out in a classroom, electronic delivery provides lessons at the time and place that the worker needs them, a feature that offers learners a significant advantage.

OCR for page 73
The most recent training survey found that 12 percent of companies used such Electronic Performance Support Systems (EPSS), up from 5 percent in 1996. Among organizations with 10,000 or more employees, 28 percent now use EPSS (Lakewood Research, 1997). Outsourcing has also come to the training function. By one estimate, employers spend nearly equal amounts on internal and external training, although larger organizations spend more on internal training (Bassi et al., 1996). The concern that people may move more rapidly across jobs, careers, and organizations has helped increase interest in lifelong learning, especially as employees come to believe that they will need to create their own opportunities for education and training. Data that separate employer-required from employee initiated training are difficult to find.1 But we do know that the proportion of employed individuals taking one or more courses to improve their current job skills increased from 29.5 percent to 32 percent of all workers between 1991 and 1995 (National Center for Educational Statistics, 1997), a modest trend. The WorkTrends™ data summarized in Table 2.3 also indicate that employees believe that training opportunities have increased moderately for most occupational groupings. And the number of older students in college, most of whom are working or have work experience, has been growing more than the number of younger students, especially among women. The question of declining job security and stability raised earlier also has important implications for training. In general, firms with higher turnover are less likely to provide employee training. The Bureau of Labor Statistics reported from its 1995 survey that establishments with high labor turnover trained only 7.2 hours per employee compared with 12.5 hours for medium-turnover and 10.8 hours for low-turnover establishments. High-turnover establishments also spent markedly less for in-house and outside trainers and for tuition reimbursements compared with the medium- and low-turnover establishments (1996). This trend was supported by the WorkTrends™ data. Whether surveyed in 1985, 1990, or 1996, workers in organizations that laid off employees 1   The National Household Education Survey acquired both kinds of information but reported them in aggregate.

OCR for page 73
due to a business downturn during the previous 12 months reported fewer company-provided opportunities to improve their skills (39 percent) compared with those in companies that had not downsized (51 percent). Workers in companies with layoffs also responded less positively than companies with stable employment to the item, "I am satisfied with the opportunities for training and development that my company provides me" (34 versus 47 percent, respectively). Changes in the structure of work also have implications for practices in addition to training. The first of these is employee selection, broadly defined as how employees are recruited and then selected into the organization. If employee attachment to the employer truly is weakening, resulting in more quits, if firms continue to restructure and churn their workforce, or if they hire more from the outside market, then it is reasonable to conclude, first, that employers will be engaged in more employee selection, and that it will become a more important activity for the organization. The second implication is that the criteria for selection will also change. Skills will become more important, and the potential for development less so, if internal development and career ladders inside the firm give way to more outside hiring. And the type of skills needed will also change. Teamwork will place a premium on teamwork skills and self-motivation and self-management, given the decline in direct supervision. Employers may also find that they rely more on trying to create a corporate culture that effectively substitutes for direct supervision by conveying norms and values that govern performance. If so, then issues of employee "fit" with the culture will become more important. The Social/Psychological Contract The relationship between employer and employee has both formal, written characteristics and informal aspects. It shapes the expectations of employees and their attitudes and behavior toward their work. Virtually all jobs are complex enough that it is impossible to specify in advance all of the duties and performance levels that are required. Consequently, it is difficult to govern them through explicit, legal contracts. The unique problems and situations that inevitably pop up in most workplaces can only be

OCR for page 73
addressed if employees are willing to use their good judgment and improvise solutions that advance the interests of the organization. The social/psychological contract is at the center of efforts to secure the compliance of employees, to get them to act in ways that serve the goals of the employer even when those actions are not in their immediate interests. When social/psychological contracts are in force, the assumption is that the employment relationship is long term and that the employer has policies that will benefit the employee in the long run. These include income security, in the form of stable careers and lucrative pensions. But the most important of these policies has been promotions, used to reward good performance and to both reward and motivate superior performance. Promotions do not require that employers specify the exact behavior required of employees nor do they demand constant monitoring. The rewards are very desirable in that they typically represent sizable increases in compensation, increases that several studies have found more than compensate for the additional job demands. What persuades workers that they will get the reward of promotion in the long term for good performance is in part that they have seen it happen before. In addition to these long-term exchanges are psychological mechanisms centered on the notion of reciprocity. The concept of reciprocity refers to the sense of obligation that one feels to repay gifts, a value that has been identified as underlying every culture on the planet (Gouldner, 1960). Studies that follow employees over time find that new entrants believe that they owe their employer a great deal and that the company owes them relatively little, reflecting the sense that they are indebted to their employer. As time goes on, their view of the relationship changes. The longer they are with the company, the more they believe the company owes them (Robinson et al., 1994). This trend may reflect their own investments in the organization. Studies find that, as long as they continue to meet acceptable performance levels, employees tend to get more rights and privileges in organizations the longer they stay (Rousseau and Anton, 1991). If contracts are voluntary agreements based on promises about the future behavior of the parties, then social/psychological contracts are based on an individual's perception of the ap-

OCR for page 73
propriate obligations (Rousseau, 1995). Long-standing practices, for example, create expectations about obligations that shape employee behavior over their careers. Inside most large companies in the United States, the social/psychological contract for exempt (that is, professional and technical) employees has taken a relatively common form. Employers would buffer employees from the vagaries of the market, offering secure jobs and careers and stable growth in compensation associated with predictable promotions and retirement benefits. In return, employees offered acceptable levels of performance and commitment. Commitment took two forms: a willingness to stay with the company, turning away offers of jobs elsewhere, and an acceptance of and identification with the goals of the company. The contract for nonexempt employees (who must volunteer to work extra hours and be specifically compensated for such work) was surely different. In unionized settings, most of the mutual obligations were set out in elaborate written contracts. The traditional social/psychological contract was probably limited to an expectation that the company would continue to offer long-term jobs (interrupted by periodic but temporary layoffs) and that employees would stay in them. Among progressive non-union employers, the contract may resemble that for white-collar workers; for less progressive employers, it looks more like a simple market exchange. The changes in the way work is organized, including downsizings and restructurings, and the move toward nonstandard work seem to have broken the social/psychological contracts described above. When psychological contracts are violated, declines in employee morale are one consequence and others may include an increase in quit rates and declines in performance. The American Management Association found that 72 percent of its surveyed companies that had cut jobs reported an immediate and negative impact on morale, including an increase in absenteeism and disability claims.2 Employee attitudes also seem to suffer. A 2   Interestingly, all of these effects abated with time. One year later, only 36 percent of these firms reported that morale still suffered (American Management Association, 1996).

OCR for page 73
recent survey by the Wyatt company observed that morale was substantially lower in companies that had downsized compared with those that had not. The WorkTrends™ survey data support this point, showing that, whether surveyed in 1985, 1990, or 1996, workers in organizations that laid off employees due to a business downturn during the previous 12 months reported less satisfaction with the present employer (49 percent answered satisfied or very satisfied to the item, "Considering everything, how would you rate your overall satisfaction with your company at the present time?") than did those in companies that had not downsized (64 percent answered satisfied or very satisfied). Describing the sharp decline in employee commitment observed over time in his polls, Daniel Yankelovich notes that "Companies are unaware of the dreadful impact they are having. They don't realize they are violating an unwritten but important social contract they have with workers" (Fortune, 1994). According to the WorkTrends™ survey, workers in organizations that laid off employees reported less trust in senior management than did those in companies that had not downsized. In response to the question: "Senior management gives employees a clear picture of the direction the company is headed," 33 percent of respondents whose companies had layoffs agreed or strongly agreed, compared with 47 percent of respondents from companies without layoffs. Furthermore, only 26 percent indicated a belief in the truthfulness of senior management, compared with 38 percent in companies without layoffs. Employees may also withdraw their cooperation when they perceive that social/psychological contracts have been broken. A series of studies by Sandra Robinson and her colleagues examine perceptions of psychological contracts and their breach (Robinson et al., 1994). Among recent business school graduates hired into their first job after graduation, for example, she found that they still saw their employers as having substantial obligations to them; the employees trusted that those obligations would be honored. And when those obligations were breached, the employees responded by reducing their own obligations and self-reported measures of performance and commitment (Robinson, 1996). It is difficult, however, to find evidence that employee and company performance declined when companies broke the tradi-

OCR for page 73
tional social/psychological employment contract. To illustrate, the 1994 American Management Association survey on downsizing found that while 86 percent of companies that had downsized reported that employee morale declined, employee productivity rose or held constant in 70 percent of downsized companies; profits rose or held constant in 80 percent (American Management Association). A survey conducted by human resources managers of employers who restructured reported adverse effects on morale and commitment but also increases in productivity, service levels, and greater competence among employees (Wyatt Company, 1993). These reports were based on self-assessments. Despite the enormous changes and the collapse of employee morale, employee performance did not seem to decline enough to affect corporate performance. No doubt the context of downsizing across most of U.S. industry from the 1980s through the mid-1990s caused enough fear among workers to prevent declines in their performance. Employer efforts to articulate a new deal governing the employment relationship have been driven by an understanding within organizations of the profound way in which they have unilaterally broken the old deal and concerns about the possible negative consequences that doing so may have on employee behavior. Most of these efforts have focused on being explicit about the limits on employer obligations, simply being clear that the employer can no longer guarantee job security and that employees have to look out for themselves. The word "employability" is typically used to describe these employer-initiated efforts to craft a new social/psychological contract. It focuses on the new and much more limited obligation of employers to help (but not provide or ensure) their workers develop skills that will continue to be in demand, if not with their current employer then with another. How employees will respond to this and what else might be part of the emerging social/psychological contract is less clear. Some indication about the nature of the new employment relationship can be obtained from employee surveys. A survey of 3,300 employees by Towers Perrin asked respondents about their perceptions of the new deal in the workplace. Employees recognized that lifetime employment with one company is unrealistic—and may also be undesirable for them. Only 45 percent felt

OCR for page 73
that they had the opportunity to advance in their current organization, suggesting that the key to advancement in their mind is movement across organizations. A multiemployer survey asking what employees expect from the new deal (based on employee surveys inside each company) found that "secure employment" is ranked fifth in importance out of 10 attributes that employees expect from their companies. Interesting work, open communications, and opportunities for development took the top three spots (The Conference Board, 1997). Focus groups conducted by Towers Perrin report that while employers put commitment and trust as the two most important things they want from the new deal, employees want professional development and training, investments that make it possible for them to reduce their dependence on their current employer and become more valuable in the labor market (Milligan, 1996). There is some evidence from the Towers Perrin survey that employees now seem to have rather positive views about their work situation as opposed to earlier in the 1990s: 79 percent believed that their company had treated them fairly and that they had a sense of personal accomplishment from their work, and 75 percent feel motivated and that they could have an impact on company success. The contrast with much more negative survey results just a few years before no doubt reflects several issues: day-to-day experience in the workplace has changed as growth has replaced downsizing; extensive hiring means that a large percentage of the respondents had little experience with either the restructuring period or the old deal; and people tend to recalibrate their perceptions (Bookbinder, 1996). Conclusions and Implications The arguments and evidence presented in this chapter suggest several general conclusions about changes in the structure of work. First, there appears to be much greater diversity in how work, jobs, and occupations are structured. The rise of nonstandard work is perhaps the best example, but there is also greater variety in how tasks are performed (e.g., the amount of teamwork and employee involvement). In part because the structure of organizations has become more fluid and the boundary around

OCR for page 73
what tasks are performed inside or outside the firm has blurred, the hierarchy and structure of jobs inside firms and organizations has also blurred. In general, narrow jobs have given way to broader jobs; management positions, especially those in middle management, have been cut, leading to flatter organizational charts and much wider spans of control. Traditional boundaries around jobs, such as the distinction between managerial and production work, white-collar and blue-collar jobs, the barriers around craft work, and the narrow job descriptions of production jobs associated with scientific management have all blurred. Finally, the employment relationship defined as the set of mutual obligations and expectations between employer and employee has substantially weakened. Expectations seem to have clearly moved toward more transient relationships, although the data from the labor market have yet to show substantial changes in that direction. Central to the theme of this volume are the implications of the changes in work structure for classification systems. For example, if careers increasingly span several employers, occupational structures based on job ladders within companies may become less important and those that cut across organizations may become more so. Career paths may increasingly be built around temporary and part-time jobs, often in combinations that do not necessarily fit with traditional notions of internal mobility. If individuals in fact will be spending more time in similar jobs, then perhaps occupational classification systems will need to broaden considerably in order to accommodate greater depth in a given occupation. For example, the classifications associated with computer programming might need to be broadened to differentiate the range of programming jobs one might have over a lifetime of doing that work and how different positions might build on each other to create an entire career. As noted earlier, the skills, knowledge, and abilities that are demanded in the changing work structure are also different from those in the past and need to be captured by classification systems. Perhaps the biggest challenges are created by the potential for greater mobility across firms that results in the demand for more lateral hiring. Employers and employees will need better descriptions of jobs and of employee attributes in order to facili-

OCR for page 73
tate more external hiring. This information needs to be standardized in order to be useful, but the demand for standardization militates against the trend toward broader jobs and more permeable boundaries between them, a development that leads toward more variations within job titles. Thus, occupational classification systems may need to allow for this variation and help those designing jobs to better understand the organizational forces that influence how work is done today. Finally, if, as suggested in this chapter, the scope and pace of organizational restructuring is accelerating, then the speed with which jobs are changing is also increasing. To be accurate, occupational classification systems must therefore be updated more frequently. And, as we suggest in Chapter 5, if they are to become a significant aid to decision makers whose actions are shaping work structures, they will need to be transformed from backward-looking tools that describe and classify jobs to more forward-looking analytic tools that generate options for how work might be structured in the future.