Stubborn firms and poor decisions
28 Oct 2013
I recently spoke at a conference in Rome on work life balance and work innovation and their impact on organisational performance. The conference was organised by the Italian Department for Labour and brought together several speakers who could comment on the situation in Italy or bring an international perspective. I was there reporting on some cross-European research we at IES had undertaken exploring how work itself was being innovated to create greater flexibility, team working, involvement, efficiency and well-being. I'm well used to being at UK conferences where the performance or practices of the UK give cause for concern so it was fascinating to watch another nation in the same situation. Italy is not as flexible as it would like to be and this is seen as limiting the contribution of women and holding the country back in competitiveness terms.
Speaker after speaker was able to reel off evidence that flexibility was good for workers and good for the economy and show that Italy was too rigid with relatively few workers enabled to work flexibly. Something needed to be done.
What though? There was much talk about education, information, perhaps a few tax breaks. I pondered whether any of these were likely to make very much difference. The UK has been banging on about high performance working, better leadership and management, better skills utilisation etc etc for decades with relatively little shift in employer behaviour. Education certainly doesn't seem to work particularly well; throwing money at it might help a bit but probably not enough to justify the spend. Lessons from the evaluation of Train to Gain - a heroic (and costly) attempt to get organisations to do something about training levels - showed that the hard to reach remain stubbornly out of grasp and far too many take the money for training they would have provided anyway. Hardly the intention.
Underlying the policy thrust is an argument that goes something like: there are a bunch of work/people management practices that make a difference in terms of lots of unarguably good things (productivity, innovation, business survival, adaptability to change). Organisations (being rational) should therefore seek to adopt these practices. Those organisations that do adopt them should do much better than those who do not and will thrive and grow whilst those organisations which choose not to (presumably for some unfathomably irrational reason) will do less well and be more likely to fail. The 'good' practices should spread and prevail. Except that is not the case. Adoption of high performance working practices is still relatively low despite decades of evidence that they have been associated with high performance.
As I listened to my Italian co-speakers I wondered why firms have been, and remain, so reluctant to take the medicine prescribed for them. Of course these things are never simple and it is likely to be a wide range of embedded and systemic issues that will be acting to thwart the ambitions of policy makers. Perhaps if we understood better the 'why they do not', it would help us better argue the 'why they should'.
The most blindingly obvious one may well be because things are good enough as they are. Global warming is a reminder to us all that we are not good at reacting to the threat of Armageddon tomorrow if it is fine today. Firms are no different. If performance is good enough, if innovation is OK, if the supply of labour and skills is acceptable, then potentially disruptive change may need to wait until there is a more compelling case made.
Organisations cannot judge their own performance. Associated with our first point that many organisations are happy with good enough, for some this will be because they see themselves through rose-tinted lenses and believe they are doing better than they really are.
Another fairly obvious consideration is that change doesn't come cheap. The adoption of new and innovative work practices requires investments in time, re-skilling, communication, and considerable management and leadership effort. All at a time when the day job still needs doing and may be getting harder as competition intensifies.
Then there is the fear that perhaps it won't work. Effort will be made and a case communicated to employees but in reality it proves hard to get the changes supported, planned, implemented, embedded and sustained. Organisations may be rightly fearful of failure, they may be unsure that they have the capability to make it work, or they might have had their fingers burnt before. All of these may contribute to a reluctance to risk it.
The evidence base may not be sufficiently compelling as a spur to change. By definition, the evidence linking people management activities or practices to firm performance is backward looking and possibly irrelevant. The link reports historic data and data about other firms. Just because it happened to those firms, doesn't mean it will happen to this firm now.
Another problem is that firms understand that performance data are generic. Average gains hide much of the nuance and detail of who gains and by how much. Firms may look at themselves and judge that for them the returns for efforts made may not be worthwhile. Smaller organisations, those under other pressures, those with subdued ambition are likely to need greater certainties to act.
Organisations also have to make choices about where to place their efforts. Normally there are too many options to consider and only a few can be progressed. Firms have to make judgements about likely costs and returns of the investments they could make and there may be other more compelling opportunities.
There is one more reason that occurs to me: most of the changes being suggested in work organisation reflect a philosophical belief in the power and contribution of people (or for Italy a belief in the contribution women especially could make if given more of a chance). Sadly not everyone has the necessary level of faith in the potential power of their workforce.
So if we unpick these issues it suggests change requires a stronger business case, a more honest self-assessment (or some good hard evidence that wipes away the soft focus of misplaced self-belief), some support and advice on what to do to make a difference and how to do it, an appraisal of what might be possible for each organisation given where it starts from, lots of good examples of how organisations have succeeded in embedding change so that the cynical can find something that resonates with their own situation, and finally an ongoing debate on the value of people at work. None of these are easy, and together they may appear daunting, but a more realistic appreciation of the barriers may help rather more organisations tackle and overcome them.
Penny is an associate director at IES specialising in management and leadership. She initially joined IES in 1993 and for 13 years worked on projects related to race issues in organisations, human capital, management and leadership and the impact of workforce/management development. Penny has published and spoken widely on these subjects, conducted research and evaluation studies and worked with organisations and policy makers to understand better and improve their practice on leadership, people development and workforce capability. In 2007 Penny joined The Work Foundation where for three years she headed up their programme of research and consultancy on leadership and people effectiveness. Penny returned to IES in 2010.
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