Managers, labor, and productivity, parts I and II

Managers, labor and productivity (May 6, 2008)

By Ben Teehankee

Managing For Society column, The Manila Times

GMA did not announce a minimum wage increase on Labor Day this year. Instead, she has asked the wage boards to work “overtime” to decide on pending wage increase petitions. It will be interesting to see how the wage boards will resolve the minimum wage issue this year given the upward spiral in fuel and rice prices. With the president’s now legendary micro-management on the matter, I’m quite sure increases will be granted all around.

But would this be a good thing? By itself, I don’t think so. Lest I be misunderstood, I must make my position clear that the workers must be paid more. But the trouble with focusing too much on the minimum wage is that, firstly, it conditions companies to think that they’re paying workers fairly as long as they pay the minimum wage. We must note that the minimum wage is not a living wage and, therefore, cannot support a decent life.

Secondly, the emphasis on the minimum wage hides the need for a better partnership between labor and capital owners for mutual prosperity. Such a partnership is envisioned by the constitution and is in the best interest of everyone. While a minimum wage increase can help alleviate the short-term needs of a cash-strapped working class, by itself, it threatens to make the industrial situation worse as resentful companies resort to inventive contractual arrangements to deprive even more workers of job security and social protection benefits. Some companies will not even be subtle about it. They will just violate the minimum wage law and brace themselves for the penalties. They figure that they will still come out ahead.

The paradoxical situation is that as the minimum wage increases, more companies learn to cope with the additional costs by using work arrangements that render workers even more insecure and miserable than before. How do we escape this self-defeating paradox? Where else should higher worker pay come from aside from an increase in minimum wage? It should come from increased worker productivity, of course. And who should be the main agent for enabling such an increased productivity? It can only be managers.

The need for improving the productivity of Filipino workers has been recognized for a long time. Unfortunately, the solution that has been adopted by most companies to improve worker productivity is to keep pay and benefits low. This seems reasonable on the face of it. After all, getting more revenues while keeping labor cost as low as possible is considered “best practice” in our retail and fast-food sectors. But this is bad management and a waste of precious human capital. How can managers take pride in using business strategies which can only work by keeping workers cheap and desperate? Managers have to snap out of this unimaginative, exploitative and ultimately self-defeating approach to worker productivity.

Gary Hamel, writing in The Future of Management, deplored the tendency of managers to treat workers as expensive entities to subjugate rather than creative partners to be productively engaged for the benefit of the company. He observed that “the machinery of modern management gets fractious, opinionated, and free-spirited human beings to conform to standards and rules, but in so doing it squanders prodigious quantities of human imagination and initiative. It brings discipline to operations, but imperils organizational adaptability. It multiplies the purchasing power of consumers the world over, but also enslaves millions in quasi-feudal, top-down organizations.”

Is this the best that management can do?

Managers, labor and productivity -- Part 2 (May 13, 2008)

By Ben Teehankee

Managing For Society column, The Manila Times

Good management is the key to increased labor productivity in companies. It ensures not only that companies are financially sustainable but also that they are fit for human beings to work in. Unfortunately, while companies want to grow financially, they do it by limiting worker judgment as much as possible. Common management practice is so controlling and oppressive that it fails to inspire commitment and value-adding creativity from workers. The mentality of management was captured by Henry Ford’s classic complaint: "Why is it that every time I ask for a pair of hands, a brain comes attached?" Under such dehumanizing leadership, workers learn to drag themselves to the workplace more out of necessity than from any belief that they can make a difference.

But people do make a difference, and good managers know this well. The basic principles for bringing out the best in workers were laid down by writers on humanistic management decades ago and they harped on two crucial elements: personally meaningful growth and the opportunity to contribute ideas.

Help workers grow

Douglas McGregor, writing in The Human Side of Enterprise, explained that “the essential task of management is to arrange organizational conditions and methods of operation so that people can achieve their own goals best by directing their own efforts toward organizational objectives.”

In the US, Whole Foods is a master of helping people grow and achieve their own goals. A nearly 200-store, $6 billion a year retailer of natural and organic foods, the company is not only dedicated to selling food that is good for people, it is managed in a way that helps its workers grow in freedom and accountability. The company’s workers (“associates”) make decisions about staffing, pricing, ordering, and in-store promotion. As a result, each store has a unique mix of products and the company grows at nearly triple the industry average.

Listen to and empower ideas

Compliance-oriented managers are not keen on getting ideas from workers. They fear that this will harm operational discipline and, worse, may lead workers to think that they know more than the bosses. This self-limiting view leads to much lost opportunity to really engage workers. Toyota, arguably one of the most operationally disciplined companies in the world, has a well-developed system for enabling workers to continuously propose ideas for improving product quality and work processes. Over the forty years that Toyota has been implementing its employee suggestion system, the company has yielded 20 million improvement ideas or about an average of one suggestion per employee a week. What is most remarkable is that the company has implemented 99% of these ideas! Many managers hardly ever ask employees for improvement ideas, much less implement them. Such managers simply expect workers to follow rules and SOPs.

In essence, managers elevate productivity by enabling committed workers to create more value by, first, improving products and services such that customers want them more (more revenues) and, second, by improving work processes so that products and services can be delivered more efficiently (less cost). Unfortunately, most companies increase sales mainly through marketing and reduce costs by keeping worker pay low or simply reducing head counts altogether. With such an approach, what role can worker involvement and creativity have? I only hope that enough enlightened managers assert themselves soon enough to save the countless Filipino workers who languish under quasi-feudal management. This will release the pent-up productivity that our country needs to finally achieve the development we seek.

Dr. Ben Teehankee is the Sen. Benigno Aquino Jr. associate professor of corporate social responsibility and governance and chairman of the human resource management department of the graduate school of business of De La Salle Professional Schools. He may be emailed at