"The Rebellion Against Paternalism": The Employee As Entrepreneur

Summary: In Charles Heckscher's pioneering analysis of business restructuring and the decline of lifelong security within a corporation, Walter Donway finds the seeds of business ethics on an Objectivist basis.

BOOK REVIEW: White-Collar Blues: Management Loyalties in an Age of Corporate Restructuring. Charles Heckscher. New York City, Basic Books, 1995.199 pp., plus notes, appendix, index. $23.00

When I was growing up in Worcester, Massachusetts, in the 1950s, I was surrounded by neighbors and relatives who were "Norton men": employees of the "Fortune 500" Norton Company headquartered in Worcester. "Norton takes care of you," they said. "Norton takes care of its people." Individuals (mostly men) who had retired from Norton after 25,30, or 35 years of "service" were everywhere. They nodded their heads in comfortable gratitude: "Norton really takes care of you."

It made me uncomfortable even then. It seemed so . . . sheltered? Complacent? Dependent?

Charles Heckscher, chairman of the Labor Studies and Employment Relations Department at Rutgers University, puts it in other terms: the loyalty of middle managers within the paternalistic American corporation. His book, based upon confidential interviews with middle managers at compa­nies such as General Motors, Dow Chemical, DuPont, and AT&T, is about the smashup of the paternalistic bureaucratic corporation, the forced abandonment of the loyalty-for-security arrangement, and the beginnings of a new relation­ship between employee and corporation.

On one level, White-Collar Blues is a management study of the sociological sort, offering executives and executives-in-training insight into how a dozen or more big corporations responded to the collapse of the paternalistic model—and how their different responses affected their economic success. On another level, White-Collar Blues is about what Mr. Heckscher calls the "rebellion against paternalism." On yet another level, this is a philosophical inquiry into the relationship between the individual and the organization (or "community," in Mr. Heckscher's term).

How does an authentically independent individual, who takes full responsibility for his own "security"— and whose loyalty is not to the corporation as an entity but to the interests that he joins the corporation to pursue—actually seek his own self-interest in his relationship with the corporation? How should the corporation structure its management to take advantage of this self-interest?

THE SECURITY BARGAIN COLLAPSES

Mr. Heckscher suggests that the severe limitations of classi­cal bureaucracy (rigidly hierarchical adherence to rules) were eased, in the American corporation, by a more flexible pattern: loyal employees exercising their intelligence and initiative (albeit in limited "domains") on behalf of the corporation in exchange for economic security, a known career path, and a comforting sense of belonging to a "family."

In interview after interview, Mr. Heckscher fills in this picture. Very few middle managers understood or wanted to under­stand corporate strategy, the competitive position of the corporation, or the "turf" of other managers. Strategy, market position, economic forces—those were the turf of top management, the corporate leader­ship, said the managers; while their domain (in which they demanded considerable autonomy) was implementation of the strat­egy.

In the "domain" of the corporate lead­ers, however, were powerful new forces from which those leaders could not for­ever shield the "family." Mr. Heckscher argues convincingly that these forces were not the usual suspects: interna­tional competition and technological change. Rather, he points to change per se—relentless, unremitting change in the whole competitive environment, and upheavals in the demographics of a work force once dominated by white males.

"Loyalty requires stability," writes Mr. Heckscher, "and is at odds with continuous flexibility, because it is based on long-term promises of security....

Large corporations offered high sta­bility until the 1970s; they did not expect to change fundamentally over the course of an individual's career. But that time is past and there is no prospect that it will return. Virtually all of the companies in my study were publicly assuming that they would look very different in five years, for reasons of technology and market shifts, and that they would prob­ably again look very different five years after that. (p. 173)

THE STORY OF THOSE LEFT BEHIND

How widespread is such change?

"Annual surveys by the American Management Association show that over two-thirds of their member firms downsized between 1988 and 1993, and that while middle managers make up 8 percent of the work force, they have accounted for 19 percent of the cuts." (p. 3)

The shock, pain, and resentment of the white-collar workers who were laid off have been widely reported. Mr. Heckscher tells, instead, the story of those left behind. A legion of corporate "loyalists" relate their stories in White-Collar Blues in terms that make clear that the system of loyalty and paternalism represents a philosophical belief: specifically, a moral premise to the effect that if one works hard "by the rules," renders unquestioning obedience, and puts the corporation above "competing interests" (such as family, choice of friends, and commitments to causes) one has earned security—lifelong security, no questions asked.

One manager said: '"There was a time when the attitude was, you do your job, and the company will take care of you; it was a situation of trust in the company.'" (p. 26)

Another: "[When there are layoffs] 'it's like a husband who has an affair on you.'" (p.26)

Mr. Heckscher summarizes: "For loyal­ists, business is almost a dirty word: it refers to the unfeeling abandonment of those who have given their lives to the company. This is a key reason why loyalty produces resistance [among middle man­agers] to the business focus so widely sought by top management." (p. 101)

Put bluntly, this is the attitude that: I'll do my part, if you'll take care of reality.

WHO SURVIVED?

Mr. Heckscher traces the fortunes of two sets of corporations. One stuck with the loyalist pattern, insofar as possible, or took only limited steps to change it. Leaders of these corporations often chose explicitly to shield their middle managers from knowledge of the extent of the problems, from a frightening reality outside the corporation. In turn, most middle managers worked harder, kept faith in the corporate leaders (even when layoffs made it a one-sided compact), and prayed for the storm to blow over, for the good old days to return. They did not return; things got worse.

Another group of corporations changed very rapidly, ripping off the ban­dage, as it were, and kept telling managers that there might be worse to come. These corporations, to a large degree, jettisoned the system of paternalism—and became surprising successes, dynamic companies, "turnaround stories."

THE NEW DEAL

What characterized the dynamic com­panies was a new relationship with middle managers as professionals: as individuals with skills, interests, and goals congruent with the midterm mis­sion of the corporation. In this picture, manager and corporation come together to create a "community of purpose": shared goals, a much more explicit delineation of mutual obligations, and an assumption that such confluence of goals probably won't last a lifetime.

"A key transformation was that expec­tations of lifetime security and unques­tioning loyalty had largely been aban­doned. . . no one seemed to think that things would eventually return to 'normal."'(p.l21)

How did the middle managers take this? Here is one response: "'If the challenges continue to be here, I'll stay. But I've always followed interesting projects—I like intellectual stimulation.'"

These are some specific elements of this new employee relationship (remember, Mr. Heckscher is describing, not proposing, a new paradigm):

• There were sustained efforts to provide managers with a realistic overview of the corporation's strategy, competitive position, and markets—a context for decisions not limited to "my domain," "my shop." Mr. Heckscher writes: "In a situation of continual change, obedience is not enough.... The ideal of a loyal organization is of people responding quickly to new demands from above. The ideal of a community of purpose is of everyone responding quickly to demands from the outside..." [emphasis added] (p.174)
  
  
• There were teams or task forces that cut across corporate hierarchies, working less by orders than by consensus.
  
  
• There was involvement of managers in training programs, in the corporation and outside, that were less company-specific, more oriented to career-development as such (because both parties assumed some responsibility for life after the employee left the corporation).
  
  
• There was a culture encouraging more, and more frank, confrontation across management levels, because managers were not discouraged from questioning the big picture. "The value of individuals is... that they are willing to think for themselves." (p.175)
  
  
• There was, interestingly, more freedom to bring up personal considerations relevant to work, since the corporation was understood to be one, but not the only, commitment in the manager's life.
  
  

EXPLOITING SELF-INTEREST

Mr. Heckscher builds this picture of a new employee relationship on extensive observation and analysis, not on a consistent philosophy of individualism. Lack of such a philosophy creates a certain confu­sion in White Collar Blues, and limits the scope of its analysis.

For example, Mr. Heckscher reminds us repeatedly that the new manager-corpora­tion relationship he is describing is not "selfish," "naked financial self-interest," or a "Darwinian free-for-all." That kind of noxious relationship, he says, is called "free agency." The supposedly free agent, pursuing his self-interest, apparently considers only financial compensation, develops no long-term interest in the goals of the corporation, and leaps from job to job in search of raises. The free agent is driven by cynicism and bitterness at the corporation's betrayal. He is a jilted lover, never again to enter a relationship in search of anything but a one-night stand.

But how is this a problem of "self- interest"? Isn't the problem a lack of precisely what genuine selfishness requires: aware­ness of the larger context that makes it possible to achieve one's values?

Ironically, the "free agent," as de­scribed by Mr. Heckscher, has a context as narrow as the loyalist: his job, his income, and a little concern for the larger picture of how corporate success makes those possible. Both fail, for different reasons, to take full responsibility for understanding the world in which their self-interest must be achieved.

The genu­inely selfish man—a Francisco D'Anconia, a Hank Rearden—wants to know, even as an employee, everything that might bear upon the course of his career, now and as far into the future as he can look. He is too selfish to leave achievement of his happiness to chance—or to "top management" Actually it is the new manager that Mr. Heckscher describes, the new "professional"—not the "free agent"—that ap­proaches that frame of mind. In particular, this manager always wants to understand, and act within, "the big picture" (and the biggest picture is reality). The single factor that most helped managers to be comfort­able with corporate change, Mr. Heck­scher points out, was making sense of it. Another factor was an independent, self-generated estimate of where the corporation's mission coincided with the manager's priorities, his values. Mr. Heck­scher writes: "Lack of job security did not diminish for managers at Barclay and the other three [dynamic] companies a sense of real pleasure—one might almost say joy—in their work." (p. 126)

"ETHICS" VERSUS SELF-INTEREST?

What Mr. Heckscher has described, in convincing detail, and with many keen insights, is a genuine advance in our knowledge of how to structure the cor­poration. Quite properly, this knowledge rests on a conception of the individual as responsible for his own career, secu­rity, and choices. That is, it rests on a view of the moral and epistemological requirements of genuine security—a se­curity born of taking full intellectual re­sponsibility. From these requirements of the individual follows the relationship with the corporation: a relationship that pre­serves and takes full advantage of the individual's commitment to firsthand re­sponsibility for his life.

There is a great deal more thinking to be done here. Mr. Heckscher spells out some of the practical issues: more "portable" benefits, assessing performance where there is no single supervisor, and develop­ing training programs that are not company-specific. And he also devotes a few pages to "The Moral Question" and "The Reevaluation of Values"; but here the confusion deepens. He writes: "The point I would stress is that the professional ethic is in fact an ethic: that is, it has a definition of obligations among people in pursuit of something beyond self-interest." He then points out, for example, that these professionals stick by their agreements.

The notion that "ethics," by definition, has no application to self-interest, to mere "prudence," that morality addresses only obligations to others, is Immanuel Kant's legacy to modern philosophy. Apart from the fallacy of this in theory, however, I am baffled—just on the level of common sense—how Mr. Heckscher so readily takes it for granted that keeping agreements is not selfish. If a rational, predictable world is to be sustained in a social context, so that one can pursue one's self-interest through human relationships, it is exactly the keeping of agreements (i.e., predictability) that is indispensable.

WANTED: OBJECTIVIST MANAGEMENT CONSULTANT

What is needed to take Mr. Heckscher's analysis that next step is an explicit philosophy of self-interest, so that we can ask: How does one pursue genuine self-interest as an employee of a large organization? What distinguishes the truly entrepreneurial employee? How must the corporation be organized to make the most of such employees? What would be different in the corporate work place if consistent self-interest were assumed?

The starting point, I think, will be the Objectivist principle that each individual is morally responsible for the whole context of his decisions and actions. No organiza­tion, no higher authority, can relieve him of the responsibility of having a firsthand judgment of any issue that bears upon achievement of his values. This does not require knowing everything, of course; but it requires the attitude that effects (in this case, achievement of one's values) have causes—including causes that are part of "the big picture"—and that intel­lectually these are never "someone else's turf." In a corporation of fully respon­sible individuals, everyone's context of knowledge would be "the big picture," but from different and appropriate perspec­tives.

It follows that the corporation would give high priority to making available the information needed by each employee to achieve a valid perspective. It follows, too, that this perspective—rather than notions about corporate "family," en­titlements, "corporate citizenship," or "caring"—would be the framework for the employee's expectations.

Mr. Heckscher might easily have writ­ten White-Collar Blues to make the case that the modern corporation requires implementation of the philosophy of Ob­jectivism. He did not, of course. Instead, he set out to understand how American corporations met the end of an era of triumphant success, and what the end of this era meant for the great middle-level of Americans called "white collar" employees. What he discovered was the story of a group of corporations—still few in number—that prospered by finding a way to ally themselves with the power of the independent mind.

Originally Published in IOS Journal Volume 5 Number 5 • February 1996

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