Study Finds That Work Strategies Yield Profits

But critics call innovations fads

THE "21" Club is a perfect sanctuary for back-room politics. One can fade into the club's dimly lit old-world charm to consummate deals and patch up alliances. That's why it seems an unlikely choice for a press conference on results of a study on progressive management techniques in the workplace.

At the Labor Department's request, the study was conducted by Ernst & Young LLP and Harvard University and Wharton School of Business researchers. It concludes that companies that invest in retraining workers and implementing innovative workplace strategies will garner higher productivity and profits.

Labor Secretary Robert Reich calls the two-year, $36,000 project "path breaking" because it proves companies succeed by treating employees as assets rather than looking to them for layoffs when it's time to trim costs. "The old ways of doing business, using top-down theories and the economics of scale, are no longer applicable," he says. "This study gives us concrete results, for the first time, that workplace strategies like Total Quality Management, Just-In-Time inventory management, and retraining employees work."

Companies use TQM to give workers more say in the manufacturing process and JIT to have parts available at the most opportune time.

Reich will use the study to complement President Clinton's push for "high performance" workplaces and to rebut complaints from groups claiming studies are unnecessary. One group is Citizens Against Government Waste. "Studies on TQM have been done to death. Everyone knows it works," says spokeswoman Leslie Paige.

Critics call the techniques praised in the report fads and claim they don't always lead to higher productivity. One survey shows that 80 percent of British firms see no gain from using TQM; another tabulates that two-thirds of American executives report no competitive gain from their investment in quality management.

But Terrence Ozan of Ernst & Young maintains that implementing "a rapid and continuous innovation of a company's workplace will ... lead to more markets, more products, and more jobs."

Motorola is getting a positive return on its investment; it earns $30 for every dollar spent in training. Edy's Grand Ice Cream claims its employee-empowerment program is responsible for an 830 percent increase in sales, and Xerox Corporation says employee involvement in production and research and development helped slash manufacturing costs by 30 percent.

Sarah Mavrinac, an Ernst & Young researcher, estimates that if the Business Week 1000 companies were to use similar workplace practices to improve customer satisfaction, they would each see a sales return of $94 million.