Research

Time to rethink the 'new employee relationship?'

The much-touted "new employee relationship" model, in which workplace dynamics stress hyper-productivity at the expense of commitment among workers and management, is re-examined in a new book, "The Future of HR: 50 Thought Leaders Call for Change." Anne Tsui, professor of management at W. P. Carey School of Business, wrote a chapter in which she analyzes the prevalent styles of today's employer-employee relationships.

2005-05-06

Job satisfaction is at an all-time low, according to data released at the end of February 2005. The data, based on a survey of 5,000 U.S. households commissioned by the Conference Board, a nonprofit management think tank, show that only half of Americans report job satisfaction — a decline from almost 60 percent in 1995. Disaffection is "widespread among workers of all ages and across all income brackets," according to the survey.

Syndicated columnist Mike Cassidy writes in a similar vein about the malaise of many working people: "It could be that the only thing worse than not having a job these days is having one," he writes in The Seattle Times (March 28, 2005). Cassidy says that the flip side of increasing productivity in this country is that 15 people now have to do the work of 20. In return for having a job, people are being asked to work longer hours, skip vacations, and accept a "frenetic" work pace.

"There is a limit to how much human beings can do," says Anne Tsui, professor of management at W. P. Carey School of Business. "As a nation, is this what we want: people who only work, work, work?"

Tsui is among the authors of "The Future of HR: 50 Thought Leaders Call for Change" where she relates current workplace dynamics to the job market. Citing figures on the numbers of recent job cuts in this country, she writes: "Such work force reduction is unprecedented in American history."

According to Tsui, who has done extensive research on employment relationships, increasing globalization and hyper-competitive markets have led many companies to adopt a shortsighted approach to managing their employees. Instead of a long-term relationship involving loyalty and commitment, as in the past, this "new employment relationship" is based on a contract-like economic exchange. It is characterized by the "quasi-spot contract" or the "under-investment approach" in the workplace.

A typical quasi-spot contract, which holds no expectation of job security, exists when someone is hired for a short period of time, usually to do a very specialized task. It is becoming more prevalent, not just for unskilled, skilled, and even professional jobs, but also for senior executives, she notes. "Clearly, firms use the quasi-spot contract approach to gain flexibility in the employment and deployment of people resources."

The under-investment approach is the other type of "new employment relationship" being adopted by many companies, according to Tsui. This is an unbalanced approach, she says, because employers push employees to increase productivity with limited or reduced resources — and resultant low job satisfaction. "Right now, we're a high-productivity, low-satisfaction country," she states.

A better long-term solution: the 'mutual investment approach'

Tsui doesn't put much stock in the idea of the "jobless recovery," a term that has been used for some time by analysts who argue that deep structural changes are taking place at the economic level. At least as far back as the industrial revolution, she says, economies have been characterized by cycles, usually of 10-year duration. In the current cycle, many firms are "interested primarily in a high level of employee task performance without requiring commitment from the employees.

"When there is a new economic cycle, however, without this employee commitment these same companies will no longer be competitive, as their work forces will head for the door."

— Anne Tsui, professor of management

The tried-and-true mutual investment model is based on a win-win workplace philosophy: the employer treats employees well, but also expects a lot from them. A firm adopting this approach focuses on developing a long-term and open-ended relationship with its employees.

If there is an economic downturn, the employer explains why sacrifices are necessary in the short term, promises rewards when things get better — and then keeps these promises. Employers invest in their employees' future through training, prepare them for their assignments and give them every chance to succeed in the workplace.

In return, employees give their employer excellent work performance, not only in their own assigned duties, but go much beyond that by engaging in what is known as "organizational citizenship behavior" or "extra-role behavior." These are work efforts and contributions above and beyond the call of duty. In this mutual investment employment relationship, the employees and the employer share both good times and bad times.

Research carried out by Tsui and colleagues bolsters the case for the mutual investment model. A study of the different types of employment relationships was carried out in 10 companies in five competitive industries, covering more than 85 jobs and involving nearly 1,000 employees.

In "The Future of HR" Tsui summarizes the results of this research: "The study revealed that organizations adopting the quasi-spot contract and the under-investment approach reported a number of unfavorable employee outcomes," including reduced job performance, less willingness to help co-workers, and less psychologically engaged with the company.

The mutual investment approach to employment relationships clearly led to the best outcomes both in terms of job performance and employee attitudes. In other words, the economic value of the "new employee relationship" (spot-contract and under-investment approaches) may be less attractive than previously perceived or expected.

Dilbert and 'The Donald': popular culture gets in on the act

Problems with the "new employee relationship" are in evidence not just in job-satisfaction surveys but also in popular culture — just ask the millions of Americans who read the Dilbert comic strip. People are trying hard to make fun of what is happening in the workplace, but there are serious undertones to the laughter. The character of Dilbert's boss obviously appeals to the many working people who share a negative image of their employers: "He's every employee's worst nightmare," according to the Dilbert web site. "…Of absolutely no concern to him is the professional or personal well-being of his employees."

Donald Trump's reality TV show "The Apprentice" raises another set of issues. University of Texas Journalism Professor Bob Jensen, a frequent commentator on the mass media, sees the show's popularity as reflecting the lack of strong labor unions in the country. "In a society in which labor unions are weak and most people are "at-will" employees (i.e. they can be fired without cause), it's not surprising that mass media would reflect that in their programming," Jensen says in a recent interview.

"Why else would people watch a show as degrading as Trump's "The Apprentice" with its 'You're fired!' trademark line? In a society with a strong labor movement, such a show would be considerably less popular."

For Shubhra Ramchandani, a stakeholder management practice leader in the market information company TNS, which carried out the Conference Board's job-satisfaction survey, what is going on in the workplace is no laughing matter. "Shrugging off employee disengagement would be a disastrous, shortsighted view creating lasting global repercussions for American business," he said.

Psychological dimensions of the situation

The current dynamics of the workplace are spawning an entirely new body of research in organizational psychology. As job loss becomes more pervasive, new coping mechanisms are being studied, says Joshua B. Wu, a doctoral student in organizational behavior working with Professor Anne Tsui. In the past, Wu says, most people coped with a job loss in one of two ways: either they began to search for a new job or they took an "emotional escape route," usually some form of denial.

The most current research coming out of the field of organizational psychology focuses, instead, on new coping mechanisms for job loss such as spiritual sustenance and networking, as well as practical measures such as adopting a daily structured routine.

Wu also has looked into the psychology of senior managers at large corporations. Many at some point were entrepreneurs who ran their own businesses. He believes that workplace relationships would improve if the senior leadership of corporations could return to this "original idea" that motivated many of them as entrepreneurs.

He also says that employers should be creative when seeking new ideas to improve the workplace. Some companies are now offering a "funny room" on the job, he says, which is a place where stressed-out workers can go to relax, read a comic book, or even play with a toy.

Long-term planning: companies that go the extra mile

Professor Tsui believes that HR executives can play a vital role in bringing about positive changes in the American workplace. In her contribution to "The Future of HR" she urges these executives to use the Mutual Investment Employee Relationship "as a competitive tool and to design human resource systems to realize competitive advantages."

Fortunately, there are a good many American companies which are already realizing competitive advantages by "doing the right thing" by their employees. These companies are virtually always excellent workplaces for employees and very profitable firms — a reality that supports Tsui's research.

Dallas-based Southwest Airlines is one of the companies often cited as a "people-friendly" firm. In addition to its reputation for having a happy, fun-loving work culture, Southwest was the first U.S. airline to adopt a profit-sharing plan. Employees now own at least 10 percent of the company stock. The airline is also approximately 81 percent unionized.

In the midst of one of the nation's worst periods of crisis in the airline industry, Southwest hired rather than laid off employees, and has posted a profit every quarter since the Sept. 11 terrorist attacks in 2001, while all other airlines showed record losses or even sought Title 11 protection by declaring bankruptcy.

SAS, the computer software company, has been among the top 20 companies in all eight of Fortune magazine's annual "Best Companies" rankings — including six times among the top 10. This consistent performance has earned SAS induction into the magazine's newly introduced Hall of Fame, which honors the 22 companies that have appeared on every list since its inception in 1998.

The software giant's HR staff places a premium on cultivating long-term relationships with its employees. Known for the beautiful work environment of its headquarters in Cary, N.C., SAS has two on-site child care centers, an elder care information and referral program, an employee health care center, wellness programs, a 77,000 square-foot recreation and fitness facility, and numerous other work-life programs.

Many other large companies are making concerted — and creative — efforts to build partnerships with their employees that foster both well being and productivity.

"The best companies have certain common traits," says Tsui. "They don't treat people casually. They put a very high premium on valuing the employees."

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"The Future of HR: 50 Thought Leaders Call for Change" (Ulrich, Losey, and Meisinger, editors, New York, Wiley) will be published in Spring 2005.

Management Faculty