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Is the Toyota way the only way?

Toyota’s decision to escort redundant workers off-site using security guard caused “undeserved harm” and may also have undermined morale and potentially affected productivity. AAP

UPDATE: Workers for transport company 1st Fleet were handed redundancy notices when they arrived for work this morning, after the company ceased trading.

Are we seeing something of this same attitude recently employed by Toyota in 1st Fleet administrators’ decision to lock-out employees? When might “mutual interest” trump private interest? Our current ways of handling these tensions seem intractable.

The 350 redundancies at Toyota’s Altona plant raises some larger and awkward questions for management practitioners and academics – ones that go beyond the usual sensationalist adversarial fixations of business and unions.

What leads an organisation that has a proud record of employee relations and workplace performance to engage in processes that result in costly, embarrassing and arguably unnecessary harm – to its employees, its reputation and its broader stakeholders?

These Toyota redundancies present a vital opportunity for us to reconsider our deeper assumptions in regards to what constitutes appropriate business behaviour and processes. Importantly, to consider connections between firm value creation, longer term corporate performance and social well-being.

It is not just the Occupy Wall Street movement seeking change - concerns over values and its connection to economic growth are purported by leading management scholars such as Harvard Professor Michael Porter, and demonstrated by the increasing attention to alternative and successful forms of organising business such as the Mittelstand in Germany.

Porter and Kramer write in The Harvard Business Review that they are concerned at the declining legitimacy of big business in today’s society. This is perpetuated by managers’ outdated approach to value creation and the perceived trade-off between economic efficiency and social progress.

They propose the idea of “shared-value” - more than tokenistic efforts of “corporate social responsibility” but a change in managerial mind set. This involves creating economic value in a way that also creates value for society as a whole (this includes consumers, suppliers, employees and the longer term interests of the broader community).

Part of this approach is recognising that social harms (such as overlooking and disregarding the well-being of customers and employees, and depleting natural resources that are vital to their business) creates costs for businesses.

So in the case of the Altona plant of Toyota, having redundant employees escorted off the site by security personnel causes humiliation and “undeserved harm” - as defined by Emeritus Professor in Philosophy at the University of Albany, John Kekes - and undoubtedly low morale and lower productivity for the surviving employees.

These are of course not new insights. The work of German philosopher Immanuel Kant from the 18th century looms uncomfortably large here – that we need to see people (including employees) not merely as means (that is, as resources or commodities) but always as ends – specifically and uniquely, as individuals, worthy of respect for their inherent dignity.

Nor is this academic proselytising – for we see Kant’s insights embraced by some businesses today – especially businesses like the Mittelstand.

Mittelstand refers to Germany’s small to medium sized enterprises, accounting for over two thirds of the nation’s economy and 80% of its private sector employment. Almost all of these firms (eg Miele, Beckhoff) are focused on top end niche markets, having invested heavily over many decades in highly trained employees and advanced technologies. They are often family-owned and have strong links to regionally based university research and education. Mittelstand companies also compete on securing higher levels of customer satisfaction - they are not fixated on short-term profit maximisation.

Mittelstand operations are now widely seen as having enabled Germany to successfully withstand much of the aftermath of the Global Financial Crisis. They have also positioned Germany for sustainable growth.

A key part of this business structure and culture is co-determination. Mitbestimmung meaning literally “having a voice in”, for instance, business decisions. In Germany this collaborative “voice” is not tokenistic, and is applicable to Mittelstand and public companies alike. It is enshrined in their two-board governance, with employee voices as central to that organisation’s success.

There are of course deeply formative political, economic and historical grounds to explain the long and complex gestation for Mitbestimmung as part of business law in Germany. However, a confluence of recent and disparate examples indicate that ideas of co-determination and ‘shared-value’ are worthy of serious consideration.

For example, as topics at the World Economic Forum in January 2011, in a favourably reviewed special feature in a recent issue of The Economist, and selected writings concerned with the background, origins of and lessons from the ongoing GFC (including authors such as Rakesh Khurana, JC Spender, Robert Locke, and Jonathan Tasini).

We imagine that there is abiding interest in addressing concerns about how we view people not least in business and how we view the role of business in society. As Hungarian philosopher Karl Polanyi wrote in 1944’s The Great Transformation, this is about thinking not in terms of a “market economy” but as “an always embedded market society”. It is this kind of thinking that is needed for Australian business and management practices, and in our management education.

EDITOR’S NOTE: This story has been updated since first being published with a reference to redundancies at 1st Fleet, at the authors’ request.

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