Managing in the leaner organization.

Roundtable participants stress need for communication, training and employee involvement in creating flatter, leaner organizations.

Lean is in. Not just for body-conscious fitness fans, but for corporate bodies as well. Even the giants are rethinking the way they are organized. General

To explore HR's role in whipping the corporate body into leaner shape, HRMagazine conducted a written roundtable discussion among human resource professionals from various regions of the country. Participants responded to initial questions and then to each other's comments.

The HRMagazine roundtable participants are:

* Robert R. Morris, vice president of human resources for Accuride in Santa Fe Springs, Calif. Accuride is a metal fabricating company that produces ball bearing linear-suspension systems.

Morris, who has been with Accuride for more than eight years, says that companies in California began feeling the pinch a few years ago.

"We felt it about four years ago. We did it (restructured) very early on; we could see the handwriting on the wall," says Morris. "It probably saved us a lot of aggravation."

* Daniel Amann, vice president of human resources, R.A. Jones & Co., Cincinnati, a designer and manufacturer of custom-made packaging machinery.

Amann, who has been with the company for 20 years, says R.A. Jones has not been through restructuring but, like many in the HR field, he has had extensive contact with others who have gone through the process.

He is proud of his company's focus on communications and training, which he says has resulted in 40 years without a layoff.

* Ursula F. Fairbairn, senior vice president, human resources, Union Pacific Corp., Bethlehem, Pa. Fairbairn, who has been with Union Pacific since April 1990, says that when the railroad went through the restructuring process, it cut layers out of its operating departments.

"The use of employee involvement teams--there are more than 100 today--and an aggressive communication effort have kept morale unexpectedly high," Fairbairn says. "In addition, we have used state-of-the-art training, and added peer trainers to the equation to help our people become more productive."

The result, in Fairbairn's view, is that "today, Union Pacific Railroad is the best in the industry."

* Gary W. Eckhardt, vice president, human resources of American Tool Companies Inc., five tool-manufacturing companies with headquarters in Lincoln, Neb.

Eckhardt has been with American Tool Companies since October 1989.

Eckhardt's personal experience with restructuring came when he worked for a Texas company that produced oil-field products during the 1980s. When the Texas oil business declined dramatically, the number of people employed at the company followed suit, dropping from 250 to 65.

The company eventually began producing a new product and cautiously adding employees. The workforce finally reached almost the size it was before the downsizing, "but it was structured much differently," Eckhardt says. "There were many more hourly employees and fewer exempt employees."

By then the company had transformed itself, having learned to use employee involvement, self-directed work teams and increased training to cope with the reality of fewer workers doing more kinds of work.

"Necessity tends to make you very creative," Eckhardt says.

And, as a result of front-office and back-shop employees pitching in to help each other out, "there was more respect between the two groups."

Cheerleader role

Restructuring, the participants agree, is both prevalent and necessary in today's corporate world. And, they believe, HR's role is integral to the success of any restructuring effort. To be successful, the panel repeatedly stressed the need for a strong commitment to the basics of communication, training and employee involvement.

"HR has been the communicator, the cheerleader and the leader in (explaining) why a flatter and leaner organization is necessary," says Morris.

Eckhardt concurs, adding that "the influencing role of HR will continue to grow in importance."

Human resource professionals need to be involved from the very beginning of the restructuring process, Fairbairn believes.

Amann agrees: "The first thing HR professionals need to do," he says, "is understand why their organization is moving to a flatter and/or leaner structure. They should be very involved in the decision-making process, making certain everyone understands the human aspects of these decisions, both good and bad."

He believes employees need answers to some basic questions: "Why? What is in it for the organization? What is in it for them? How will we get there?"

Human resources should be involved in the redesign and re-engineering of functions, Fairbairn says, "because HR can ask questions that ensure the new structure has the right skills and management processes in place to help it succeed. It can implement a plan to fill any gaps in skills or process.

"Human resources also can assist management to help employees with the stress associated with the changes of restructuring," she says.

HR professionals need to be sensitive to the advantage of being part of the strategic process versus being part of the tactical response to strategy, Fairbairn adds.

"Being involved in the strategy decision making helps to anticipate more, to position training and development initiatives, communication strategies and other system initiatives. By focusing on responding to change, we place ourselves in a reactive mode with less than full insight into what the change is all about," she says.

Passe pyramids

The changes to the flatter, leaner organization makes the pyramid style of management passe.

"The traditional pyramid, as we have known it, is going away," says Eckhardt. There still remains, and probably always will, differentiated responsibility levels, he says, because there will always be someone who wants to be a leader, an innovator--someone who wants additional responsibility.

To eliminate some levels, Eckhardt suggests integrating responsibilities, which means that people will need to broaden their formal education and experience base. This will lead to broadened responsibilities and accountabilities.

"Employees have to be trained and educated that the customer is no longer satisfied with someone who comes in and runs a machine eight hours a day. The marketplace wants more. We are going to be asking them to think and contribute to improvement."

Fairbairn sees advantages to a flatter organization, but says its success depends heavily on good communication and teamwork.

"Objectives, processes and operating philosophies need to be clearly understood by everyone," she says. "Teamwork becomes more important than ever in a flatter organization. So does skills training, so everyone can work together as a team across an array of projects."

Morris would like to see a happy medium, an organization that is "flat, but not totally flat."

The real issue, Morris says is that "organizational structure won't make or break an organization, but the skills in managing employees will."

Fairbairn counters that structure can make or break an organization "to the extent structure reflects management competency and values; to the extent structure influences effectiveness of communication, the degree of shared vision and commonality of purpose; and to the extent structure is supportive of organizational intent.

There are many organizations that are not successful today because no matter how well-intentioned we are as managers, the structure gets in the way," she says. "But there are many organizations where there is a strong, healthy value system, where managerial skill is rewarded, where there is shared trust. In these organizations, as long as a structure is supportive of values, these organizations can thrive."

More, less or different

The participants emphasize different words when describing how this leaner organization will affect the people who work there.

Amann says that flatter organizations "do not necessarily mean doing more with less. Flatter structures mean doing more differently."

"I think to most of us, it means fewer people," Morris says. But, he adds, "it doesn't always mean those left do more. They think differently and perhaps perform the task differently because their perspective has changed. Those left often approach tasks much smarter than before."

With fewer layers and decision making being done at lower levels in the organization, departments and processes are then structured and managed by the people doing the jobs rather than by someone who is not as close to the operations. That way, departments and functions work together to better understand the requirements.

And, says Amann, "you will unleash the hidden talents of more employees and you will be pleasantly surprised once ownership of the job is assumed."

For Eckhardt, the operative phrase is "doing more."

"Whether it is doing more with less, or doing more in a different way, we are still requesting that employees take an active part in helping us improve the business."

Each employee has experiences and knowledge that, if developed, "can add value to the business and assist in eliminating waste," Eckhardt says, and the successful companies he has observed "have one common element--getting employees involved in the process. Having a team concept that facilitates participative management is essential," he says.

Whatever words are used, Fairbairn says, companies are "definitely looking to have better quality, more volume and less cost. The leverage point is using different tools and processes to engage the intellectual as well as physical capacity of our employees. We can accomplish this through making technology a partner with our employees, through employee involvement and empowerment, by having managers as leaders and by sound training and development."

Or, as Amann boils it down: "Unleash the minds of your employees, not just their hands."

Employee buy-in

Getting employees to buy into the restructuring process, to unleash their minds as well as their hands, is difficult because their minds are likely to be dwelling on the fear that any restructuring will take place at the expense of their jobs.

You must remove that fear, Amann says. "You do that by talking and listening to your employees. Memos and speeches are not the answer."

Furthermore, he says, "You must be willing to let attrition be the main vehicle to get you flatter and leaner; otherwise, your next problem will be dealing with turnover."

To relieve employees' doubts that they will lose their jobs, Eckhardt likes to point out that job security is enhanced by producing a high quality product at a fair market price, and "high quality product and fair market price are both items to which employees contribute."

Morris believes that most employees are realistic enough to understand the need for restructuring, even for the elimination of jobs.

He suggests that employees can be made into true believers by pointing to the companies that have survived, even prospered, as a result of restructuring.

To get employees involved, start by conducting formal or informal opinion surveys and creating employee/management task forces to develop written action plans, suggests Eckhardt.

There must be full communication to employees about what is going on, he says, "along with the fact there are no perfect solutions to these situations, only that we want to learn and grow together."

This is necessary to reach a deeper degree of involvement--"employees need to have a comfort level that comes from trust in order to make decisions and take chances," Eckhardt says.

He believes that a good way to teach people to become risk takers is through example.

"Employees need to know how and why managers make certain decisions. Communication of the thought processes in making a decision is as important as communicating the decision itself. Employees need to know that it is all right to ask questions, take risks and make mistakes," Eckhardt says.

The greatest reward

A good reward system is a necessary component of employee involvement. Rewards may come in many forms, ranging from a thank-you letter from the president to a full-blown profit-sharing program.

"The greatest reward is a feeling of having made a contribution and being appreciated," says Amann. "Knowing your job is secure is the other reward."

The most important aspect, according to Eckhardt, is that the reward process "have flexibility in addressing your business, your employees and the cultural environment you are operating under."

Fairbairn adds that rewards should be fair and should be tied to achieving the organization's desired results, not to old behaviors.

Employee-involvement teams can help decide what should be rewarded and how, she believes, citing new areas of focus such as teamwork, peer coaching, leadership and the productivity ethic.

"It's time to be creative," Morris says. "Ask employees what they want."

The right path

Once employers and employees buy in to the need for the move toward a flatter organization, both the employer and the employees must begin to rethink traditional career paths.

The flatter organization reduces the number of advancement opportunities, but it increases the opportunities for all employees to expand their roles and contributions to the organization, says Amann.

Eckhardt believes that career enhancement in flatter organizations must be redirected and come from broadening one's education and experiences.

He sees growth coming from "having a holistic approach to the organization. You must know how different functions integrate into providing a product that is customer-desired.

"So long as the individual continues to learn, grow and remain challenged, there will be satisfying experiences. This, coupled with rewards, can make for a positive career."

Roundtable participants see less separation between functions, which requires more cross-training and leads to more cross-functional experiences.

Getting employees to buy into being risk takers and being a part of the decision-making process is a long road, Morris says, because "our educational system has traditionally done a mediocre job of preparing the incoming worker for this approach. Therefore industry is left to do it."

But employees who do not want to expand their role will experience limited career growth, Eckhardt says, and this needs to be communicated to them so that they clearly understand their situation.

These employees are the ones truly at risk, says Fairbairn. "They will, in time, be left behind. While they will be given every chance, eventually they will not be on the team. And since there is no free lunch, they will ultimately leave the organization."

HR career path

Ultimately, the flatter, leaner organization can change the human resource career path as well, because it challenges HR professionals to learn new skills and to better use basic communications and training skills.

What challenges await the HR professional in the restructuring process?

Fairbairn presents a list of challenges.

"As layers are compressed and become leaner, our compensation systems, staffing processes, training programs and organizational development processes all will be challenged," she says. "Team-based pay and performance reviews, self-directed work teams and peer coaching are just a few of the concepts we'll all get more experience with in flatter, leaner organizations."

"Communications, hands down," is Morris' most challenging area. He also sees the need for compensation that recognizes the really good performers when positions are viewed almost equally.

Amann and Eckhardt also mention communications as a particularly challenging area for HR to deal with in the restructured environment.

Perhaps surprisingly, roundtable participants cited the importance of recruitment, as well as retention, efforts.

"Special emphasis must be placed on selecting the right people, people who will grow and prosper in this type of environment. It is not right for everyone," says Amann.

"The diversity of the workforce, the competition for the best talent, the need to be an attractive employer to that diverse labor market are very touchy assignments to cope with," says Fairbairn.

She lays out a series of challenges for the HR professional in the restructured '90s.

"Having looked at all our challenges from the flatter structure viewpoint, most likely our greatest challenge will be the organizational capability of our own groups.

"We will need to bring in new people with necessary expertise and credibility; we will need to train and develop our people for new roles; and unfortunately, we will need to let some people go.

"We will move from controllers and administrators to consultants, leaders and change agents, while still being advocates and agents of the corporation," Fairbairn says.

In the end, she says, "our greatest challenge may be changing ourselves."