Managing In The New Economy Research Paper

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The currently intense phase of international competition and the growing complexities and interconnections of contemporary capitalism have led to widespread assertion that the strategies, organizational forms, and employment systems of large multinational firms have had to undergo radical change. Traditional notions of the security of white-collar workers (especially middle managers) are said to have been sacrificed on the altar of competitiveness. Today’s “global” corporations need, according to many arguments, to emulate Anglo-Saxon “best practice” by downsizing and delayering their managerial bureaucracies, in order to cut costs, speed up decision making, reduce bureaucratic inertia, and become more flexible and responsive to both customer demand and competitive pressures. This research-paper will assess the extent of change in large firms and will discuss, in particular, the impact of organizational reforms on white-collar employees. Given the huge pressures on large firms to restructure, what is the future for middle management in the 21st century?

The research-paper proceeds in three sections. First, we provide a relatively brief overview of the large amount of literature on giant firms and organizational restructuring. Second, we describe the results of our recent research into organizational forms and middle managers in large firms in the United States, the United Kingdom, and Japan (for full details, see Hassard, McCann, & Morris in press). Third, we will draw some conclusions and point to possible directions for future research on this issue. We discuss three general developments in the research-paper, demonstrating (a) that organizational change has been very substantial, but that it has not resulted in the end of bureaucracy; (b) that surviving middle managers—far from being the redundant, nonvalue-adding, and restrictive “grey suits” of popular lore—receive wider responsibilities and much heavier workloads than in earlier days; and (c) that these reforms have had similar results in all three countries, not least Japan, despite being widely described as resistant or reluctant to change.

Restructuring And Its Results: Surveying The Literature

The 1990s were replete with authors, particularly in the United States, urging large firms to rethink their internal governance (see Kanter, 1989). After decades of dependence on hierarchical and bureaucratic multidivisional forms with multiple layers of management and stable career structures for managers and workers based on well-developed internal labor markets, this was a model no longer suited to more volatile market conditions due to an intensified competitive environment presaged upon fierce international competition from Japan and the newly industrialized East Asian countries (Best, 1990).

Many researchers have noted substantial organizational pressures to reform, including greater firm interdependency, the disembodiment of performance from asset ownership, business practice velocity, and power based on knowledge. More critical analysts (notably Lazonick & O’Sullivan, 2000) have noted with concern a new, short-termism emphasis on “shareholder value,” necessitating a shift from New Deal-style “retain-and-reinvest” strategies toward a “downsize-and-distribute” mentality. The prescription offered by the U.S. “guru” literature, meanwhile, was to dismantle the bureaucratic-hierarchical form by downsizing and delayering; to focus on core activities; to introduce flatter, more responsive, structures; and to reengineer the business process (see Kanter, 1989).

The prime focus (or victims) of the restructuring process from bureaucratic to postbureaucratic form is often the middle manager. Certain authors are vitriolic in their criticism of this cadre (Peters, 1992). Indeed, middle managers have rarely had a good press. Historically, classic works such as those of Mills (1953) and Whyte (1960) have described middle managers with a mixture of disdain and condescending pity as rather spineless creatures, currying favor from above and safe in the knowledge of a long, if unfulfilling, career in a large and faceless corporation. Subsequently, Kanter’s Men and Women of the Corporation (1977) was somewhat more sympathetic, but strongly emphasized the stagnation, lack of creativity, and entrenched privilege of the management systems of America’s large firms. Jackall’s fascinating Moral Mazes (1988) is fairly damning of corporations and their staff, describing ruthless, amoral, and self-serving men scrambling to climb the greasy pole. This critical trend continues in the business change literature (Kanter, 1989; Peters, 1992), although this time, it is not the corporation itself that comes in for most criticism; it is the middle layers of management, described as obstructive and “nonvalue-adding.” By the mid-1990s, it was widely argued that excessive managerial levels in organizations were leading to increased bureaucracy, reduced accountability, remote decision making, excessive monitoring, and poor communications.

In the face of the onslaught of restructuring and job loss, more sympathetic treatments of middle layers of management started to emerge (Huy, 2001), arguing that middle managers are unfairly criticized. Contrary to mainstream thinking, middle managers have much closer ties to the actual operations of the firm than top management and, therefore, should be more involved in strategic decision making, rather than attacked. Several authors have argued that the natural reaction of U.S. executives to the first signs of financial trouble—to slash staff—is actually self-defeating. The negative consequences associated with delayering and downsizing are damaging not only to employees (those laid off and those who survive), but also to the firm itself. The fallout from organizational change includes the collapse of internal labor markets and long-term careers, increased workloads and work intensification, reduced commitment among survivors (so-called “survivor syndrome”; Noer, 1998), and a reduction in loyalty (Cascio, 1998; Heckscher, 1995).

The antidownsizing literature coincided with exhortations for greater commitment from managers and employees via strengthened psychological contracts (Pfeffer, 2005) and the elevation of middle managers’ jobs and roles as “change agents.” Firms were therefore encouraged to perform delicate balancing acts; on the one hand, there is pressure to simultaneously cut costs and wring better performance out of white-collar staff, but on the other hand, there is an acute need to protect the best staff in the company to stop them from leaving for competitors or “burning out” under excessive workloads. Restructuring pressures therefore pull in two separate ways, and it is extremely difficult for top management to find the “right” strategy. Even when a reasonable balance between external demands and internal stakeholders is found, the competitive pressures never ease, meaning further change is always on the horizon. All of the competitors are enacting similar changes, and many firms that delivered poor financial returns or offered uncompetitive products and services before restructurings continue to do so afterward, regardless of changes to managerial structures (Baumol, Blinder, & Wolff, 2003, pp. 209-213; Froud, Johal, Leaver, & Williams, 2006, pp. 109-122).

We have established that large firms face increasingly tough times. But what have they actually done to combat these difficulties? What evidence exists of new organizational forms emerging in the United States, the United Kingdom, and Japan? The classical, multidivisional form, typified by GM and AT&T and characterized by centralized control of operations, a bureaucratic hierarchy of seven management layers, vertical integration, an internal labor market, and relative managerial job security, is said to be replaced by vertical disintegration. This entails a concentration on core activities, a more open labor market, flatter structures, and increasing managerial job insecurity in the “postbureaucratic” organization (Heckscher & Applegate, 1994). The shifting paradigm was introduced in response to intensified international competition (ironically, from Japan; see Best, 1990) and sharpened institutional investor scrutiny. Giant firms were widely criticized by investors as bloated and inefficient. Poor returns to capital were highlighted (Lazonick & O’Sullivan, 2000) as the logic of shareholder value came to dominate top management thinking. Widespread evidence exists that firms operating under “Anglo-Saxon” corporate governance systems, chiefly those in the United States and the United Kingdom (see Dore, 2000), have introduced reform measures designed to raise efficiency, cut costs, and dump noncore activities. In many cases, these reforms have been brutal (see Froud et al., 2006, pp. 299-388, on GE), but this is not the case for all firms (see Jacoby, 2005). Some Anglo-Saxon firms continue to offer good terms and conditions to workers, including long-term employment, and have embarked on job cuts with great caution and only as a last resort (see, e.g., Pfeffer, 2005, p. 96, on Southwest Airlines; Cascio, 2006, on the budget retailer Costco).

Other authors question the extent to which large U.S. firms have actually changed. The first major study exclusively on the subject of downsizing (Baumol, Blinder, & Wolff, 2003) concluded that the majority of large firms in the United States actually grew in employment size over the last twenty years, despite the ubiquitous concerns about shrinkage, and that decline in employee numbers has only really been the case in manufacturing, a sector long known to be in decline since the late 1960s. Furthermore, firms’ announcements of job cuts to the stock market and publicized in news media are often simply false signals designed to stimulate a quick uplift in share prices, with top management unlikely to actually implement major cuts (see Littler, 2006).1

We also see similar signs in Japan. Although Japanese corporate governance has never been as closely connected to shareholder value logic as the Anglo-Saxon firms of recent history, Japanese firms, nevertheless, have faced tremendous difficulties with low-cost competition from the rest of Asia and declining market share and profitability. Its firms and employees, therefore, have suffered fifteen years of painful cost-cutting measures. What is more, shareholder scrutiny is starting to gather pace even here, partly due to legislative reforms and to rapidly growing North American ownership of shares traded in Tokyo (Dore, 2000, pp. 95-104; Jacoby, 2005). The Japanese case is somewhat different in that, traditionally, large Japanese firms have been vertically disintegrated, but within a context of an integrated enterprise group (Jacoby, 2005, pp. 21-26). Again, however, there is evidence of moves toward less hierarchical structures, of reduced job security, and of changes to HRM practices (Dore, 2000; Graham, 2005; Matanle, 2003; Morris, Hassard, & McCann, 2006). Accompanying these changes is a cultural shift among Japanese salarymen toward grudging acceptance of, or outright admiration for, Western executives who have enacted unpopular and tough reforms in Japan, which delivered improved results. Such a change is symbolized by the deification of the Brazilian CEO of Nissan, Carlos Ghosn, in Japanese and world media (Graham, 2005; O’Connell, 2005).

Ample evidence of vertical disintegration exists in the United States and the United Kingdom. There is also clear evidence of downsizing in certain industries, such as telecommunications and automotives (Batt, 1996; MacDuffie, 1996). This downsizing was, in part, a result of vertical disintegration and volume reductions and started in the late 1980s, but was also a consequence of changes to work design (Budros, 1997).

Delayering in the United States and the United Kingdom is less well documented, but is reported across industries by, for example, Batt (1996) in telecommunications, MacDuffie (1996) in automotives, and Heckscher (1995) and Worrall and Cooper (2001) across industries. Junior and middle managers have been particularly affected with greater workloads and spans of control. The implications of such vertical disintegration, downsizing, and delayering in the United States and the United Kingdom are an end to managerial job security, fewer promotion opportunities, more open managerial labor markets, and changing career patterns.

Japan has experienced less vertical disintegration for the reasons outlined earlier. Evidence exists, however, of reforms to the keiretsu system in the 1990s and 2000s, due again in part to competitive pressures and the low-growth, no-growth economic cycle in Japan that persisted between 1989 and 2003. More arms-length, fluid, commercial relationships are also emerging—for example, between enterprise group firms—partly due to the growing influence of foreign ownership in, for example, the automotive sector.

Downsizing and delayering follow the U.S. and U.K. patterns, although Japanese firms have proved far more reluctant to downsize than U.S. firms, fearing adverse publicity and experiencing less exposure to the forces of shareholder value logic than Anglo-Saxon firms. Nevertheless, Ahmadjian and Robinson (2001) and Usui and Colignon (1996) report widespread downsizing among large Japanese firms in the 1990s affecting both managers and blue-collar workers. Delayering has also been noted in Japanese organizations, with Okubayashi (1998), for example, reporting on the emergence of “softer,” less hierarchical, organizational structures.

While these new organizational forms have important implications for middle managers in the three countries, potential changes arising to HRM practices in Japan are, perhaps, the most far reaching, given that practices such as lifetime employment (LTE) and seniority-based pay (SBP) have been core to large Japanese organizations (Matanle, 2003). Both LTE and SBP are under significant pressures to reform. The literature suggests that LTE is fairly robust, though offered to fewer managers and for a shorter tenure, whereas SBP is being eroded, with moves to more individualized pay (Lincoln & Nakata, 1997). Indeed Watanabe (2000) argued that SBP is being sacrificed to maintain LTE.

How do these new organizational developments impact middle managers? Certainly, the U.S. trends would point to reduced job security, less career certainty, and work intensification (Batt, 1996; Cascio, 2005; Gowing, Kraft, & Quick, 1998; Heckscher, 1995), although this is disputed (Jacoby, 1999). Similar trends are apparent in Japan (Matanle, 2003). The United Kingdom has a larger literature on this theme, but it provides mixed findings. Certain authors have argued that changes empower middle managers (Dopson & Stewart, 1990), while others point to intensified work regimes, greater insecurity, and less sanguine promotion prospects (Thomas & Dunkerley, 1999; Worrall & Cooper, 2001).

Having reviewed the extensive literature on firm restructuring and its impact on white-collar working life, we now turn to an overview of the findings from our recent study of middle managers and new organizational forms in the United States, the United Kingdom, and Japan.

Managing Under Pressure? An Outline Of Our Research Findings

Our research explored these change issues in depth across the United States, the United Kingdom, and Japan. In particular, we researched the nature and extent of new forms and compared their introduction across a range of organizations. Further, we studied the impact on middle managers using the voices of human resource (HR) managers and of the middle managers themselves.

We interviewed HR and general managers in a minimum of ten organizations per country plus a large number of middle managers in each of the organizations. These covered a cross section, including organizations from private and public sectors, manufacturing and services, and high-tech and standardized technology sectors. All were consciously large firms (ranging from 4,000—10,000 employees). The sample in all three countries included a cross-section of segments of the economy, including manufacturing and services and private and public sector concerns. Sectors included Automotive, Brewing, Electronics, Steel Manufacturing, Financial Services, Machine Building, Health Care, and Local Government. Where possible (which was everywhere except Electronics in the United Kingdom and Health in Japan, where access could not be arranged), the cases were sector matched across the three countries.

The first stage of our research involved interviews with senior HR and/or general managers, based on a semi-structured schedule. The schedule covered the following issues: company information, organizational change, job security, career development, and changes to work tasks. The second-stage interviews were with middle managers themselves, drawn from across the firm’s functions, and, again, based on a semistructured schedule covering similar themes to the first one. Open questions were asked in both schedules. (For more details on our methodology, see Hassard et al. in press.)

The next sections of the research-paper outline our findings. Broadly speaking, we uncovered four major trends that were common to all the firms.

Trend one: organizational boundaries were shifting and shrinking as organizations concentrated on core competencies in the provision of goods and services.

This was particularly pronounced in the United States and the United Kingdom where, traditionally, large firms had been vertically integrated, but had undergone, in some cases, a process of vertical disintegration. In the United States, for example, two large, relatively old firms had divested themselves of parts divisions and outsourced any production or service not seen as a core competency. In the United Kingdom, an automotive firm, a brewer, and a steel producer had all pursued similar strategies.

The U.S. organizational boundaries had also shifted, albeit in different ways. The most radical changes were at the U.S. automotive manufacturer (AAuto), which had undergone an extensive strategy of divestment and outsourcing. This included AAuto selling off major parts divisions as independent business units and outsourcing anything not regarded as core to automotive assembly. Both contributed to downsizing. The U.S. sample electronics and telecommunications firm (AElectric) had also outsourced and/or divested to third party manufacturers. Elsewhere in the U.S. sample, a bank (AHBank), a utility (AUtility), and a (private) hospital (AHos) had all undergone widespread outsourcing of standard services. AHos, for example, had outsourced hotel and housekeeping services but had encountered quality problems and were trying to reduce their reliance on agency nurses. The U.S. local government (ALG) had contracted out certain services, such as waste collection, but this had been in the early 1990s and was limited. Elsewhere in the sample, the second U.S. bank (ALBank) had expanded rapidly while the steel producer (ASteel) was a relatively new and “lean-run” company. Interestingly, the U.S. retail firm (ARetail), again a young company, was relatively vertically integrated, keeping distribution, trucking, and warehousing in-house.

Other U.K. and U.S. organizations have increased their use of outsourcing. Banks had, for example, moved call-center and back-office work offshore. In the U.K. sample, a majority of respondents also reported shifting boundaries. Again, it was most pronounced in some of the larger, older organizations. The car producer (BAuto), steel producer (BSteel), brewer (BBrew), telecommunications firm (BTel), and utility (BUtil) had all, for example, moved from large, relatively vertically integrated manufacturers to disintegrated ones. BAuto had sold off parts manufacturing divisions and outsourced considerable parts of noncore operations, with BSteel operating a similar strategy.

Those U.K. and U.S. firms that had not increased outsourcing and so forth were, nevertheless, characterized as being relatively flat and lean. Outsourcing was not confined to the private sector. Local government authorities had outsourced services to private, third-party providers, notably in the United Kingdom. Public sector health service providers had also shifted to a quasi-market and mixed public-private provision. While flexibility and quicker decision-making processes were cited as reasons, overwhelmingly, cost-cutting measures were paramount.

The boundaries of the private Japanese firms have been somewhat different. Traditionally, Japanese firms have been vertically disintegrated, but within the context of a vertically integrated network in the form of the enterprise group (or keiretsu). These boundaries were largely unchanged. Certain firms were outsourcing more (to cut costs), while others were bringing outsourced work in house (in order to maintain employment levels). One large Japanese automaker had, however, dismantled its keiretsu and moved to a more arms-length and global form of sourcing and imposed severe cost-reduction policies.

Trend Two: Downsizing and delayering were widespread across organizations and this applied to managerial positions.

Consistent with the literature outlined earlier, downsizing employee numbers was evident in Japan, the United States, and the United Kingdom. Such downsizing, however, started much earlier in the United States and the United Kingdom than in Japan. Downsizing was found across the Japanese sample but, of course, this did not imply organizational restructuring per se. At the Japan steel producer (JSteel), for example, technological change had played an important part. Nevertheless, JSteel had restructured massively, downsizing from 25,000 in 1988 to 3,500 in 2003, including managerial jobs. JAuto, meanwhile, had the most radical recent downsize, losing 21,000 jobs since 1999 while maintaining production volume. The Japanese electronics and telecommunications firm (JElectric) similarly had reduced its workforce by 20% (12,000 jobs), but had changed its product and service focus. At the local city government (JLG), 30% of the workforce had been cut, partly by privatization. Several of the Japanese firms (JSteel, JElectric, and the industrial robotics manufacturer JRob) were downsizing their Japan-based workforce while investing overseas, principally in China.

Given a continued commitment to employment security (see below), the Japanese case study organizations employed a variety of alternatives to compulsory redundancies for managers. These included hiring freezes or dramatic hiring reductions (JElectric and JLG), early retirements (as young as 45 at JSteel and an automotive component supplier JAutoComps), and transfers of older managers to affiliates on inferior terms and conditions. Middle managers were hit heavily by this.

A more mixed pattern of downsizing was evident in the U.S. sample. AElectric and AAuto, both large and relatively old companies, had significantly downsized. AElectric’s workforce had fallen from 155,000 to 85,000 employees, with plans to drop to 65,000. This was a consequence of divestments, volume reduction, and delayering. AAuto had reduced its managerial workforce by more than half and its blue-collar employees by a third, again by a combination of volume reduction, organizational restructuring, divestment, and outsourcing. Both of the U.S. banks (AHBank and ALBank) and the utility (AUtility), despite expansion, had downsized through delayering and offshore outsourcing, with jobs lost after mergers and acquisitions. AHos and the city government (ALG) had also experienced managerial downsizing. ASteel and ARetail, meanwhile, had expanded employment levels through organic growth and acquisitions, but ran on “lean” employment principles.

U.S. downsizing methods varied, but where they differed from Japan was in the use of compulsory redundancies, sometimes in a brutal fashion. AElectric, which formally had an implicit lifetime employment guarantee for managers, had introduced a ranking system for their managers, with the lowest 10% made redundant in a so-called “rank-and-yank” scheme. Similarly, AAuto had made large numbers of compulsory redundancies, with factory closures plus a hiring freeze. Consequently, the average age of the workforce was 52 (at AUtility, it was 47).

The U.K. sample also extensively used downsizing. Unsurprisingly, given the outsourcing noted earlier, it was again marked at the older organizations. BSteel, for example, had reduced its workforce from 36,000 to 25,000 since 1999 (on top of extensive earlier reductions). This included a cut in middle manager posts from 7,200 to 4,700. BTel, meanwhile, had halved its workforce, and BBrew had reduced its workforce at its main production site from 5,000 to 300 since 1990. The three banks had all been subject to major mergers in the previous decade which had contributed to large-scale downsizing (13,000 at BLBank and 10,000 at BNBank). Compulsory redundancies were rare, particularly for managers; more typically, organizations used a combination of voluntary redundancies, voluntary early retirements, and hiring freezes. Such downsizing was typically cost driven. As the HR manager at the hospital (BHos) noted, “The merger was cost driven, to decrease management costs and increase clinical expenditure. . . . I know that two turkeys don’t make an eagle, but it was a measure to get out the men in grey suits.”

Managerial delayering was evident across the Japanese sample, but was most prominent at the largest organizations (JAuto, JElectric, JAutoComps, and JSteel). JSteel, for example, had reduced its middle and junior management layers from five to three, motivated by a perceived need to speed up decision making but resulting in work intensification, broader task roles, increased spans of control, and far fewer promotion opportunities. JAutoComps had reduced its layers even more dramatically, from seven to three, again at middle and junior management layers. The result was potentially speedier promotion for younger managers but with the sting of fewer posts to apply for.

Widespread delayering was also evident in the majority of U.S. sample organizations, with the most radical at the older, larger organizations. AAuto, for example, had removed 6 managerial layers, partly by merging layers but also by removing ones altogether. Moreover, this was accompanied by downsizing at each layer, leading to managerial work intensification. A second large and old U.S. organization (AElectric) had also dramatically reduced its hierarchy, moving from 14 to 7 layers, with an eventual target of 5. AHBank had also reduced 4 layers in a shift from “a hierarchical, empire, model to a lean matrix one,” amid “4 years of bloodshed,” according to a SVP for HR. Interestingly, in the context of the postbureaucracy debate, he added, “But we’re a bank. Hierarchy is part of our DNA. We won’t lose it completely; no one ever does.”

In the U.K. sample, managerial delayering was also widespread. Delayering was found in both the private and public sectors, although it was more pronounced in the former in terms of the numbers of layers cut. Typically between one and three layers were cut, although a local authority (BBLG) cut four and BSteel cut seven. Respondents cited a number of reasons for cutting layers, including flexibility and communications, but cost reductions were the main reason, in public and private sector alike. The layer merger method was used frequently. BSteel, for example, introduced “broadbanding” with pay bands of up to £7,000 (before they were around £500). BAuto also merged layers.

As for job security, none of our case study Japanese firms used compulsory redundancies. Rather, they used a range of measures to downsize, all short of compulsory redundancy (Usui & Colignon, 1996), including a reduction in bonuses; reassignment and dispatch of managers, or shukko (JSteel and JAutoComps); loss of status (JElectric); dismissal of temporary and part-time staff (JElectric and JSteel); factory closures (JAuto and JSteel); reduction in recruitment and hiring freezes (all organizations); and voluntary early retirements (JElectric, JAuto, and JAutoComps).

In several organizations (JAuto, JElectric, and JAuto-Comps), new graduate hire freezes were accompanied by a rapid increase in midcareer hires, a fairly novel development in Japan. At certain companies, some middle managers were under considerable pressure to retire early (in JSteel’s case, as young as 45). Thus, while lifetime employment was still widely practiced, it was of a shorter duration and privileged to fewer managers.

Managerial job security, or the lack of it, has also become a prominent issue in the United States. At AAuto, for example, the “internal labor market—career progression—secure jobs” managerial model had been eroded over a period of 20 years. At AElectric, for example, an implicit understanding existed that managers with 10 or more years of tenure had jobs for life, but the significant delayering and downsizing had ended this, as it had at AAuto and at AUtility. AHBank and AHR respondents reported much less managerial job security. ALG, on the other hand, reported relative job security, although it had moved from an internal labor market to a more open one. Job security was reported at ARetail and ASteel, but these were relatively young and expanding companies, and there was no sense of implicit jobs for life as there had once been at AElectric, AHR, and AAuto.

The U.K. sample again followed the trends of the U.S. sample with regards to managerial job security. While the United Kingdom has, similarly, never had the institutionalized practice of lifetime employment, implicit long-term job security was the norm not only in the public sector, but also in private sector organizations such as BBrew, the sample banks, a number of the older manufacturing companies, as well as privatized companies such as BTel, BSteel, and BUtil. Indeed, in firms such as BBrew there had formerly been a sense of intergenerational job security. Such job security had long ceased for blue-collar workers in the large older organizations following the manufacturing crisis of the early 1980s. It began to become an issue, however, for managers in the 1990s and beyond. Elsewhere in the public sector, respondents reported an end to traditional jobs for life. It was in the large private sector manufacturers, banks and privatized companies, however, that it was most keenly felt, which was unsurprising, given the scale of downsizing. The director of HR at BUtil, for example, described middle managers as being caught in “a pincer-movement” and “under siege,” while a respondent at the steel cable manufacturer reported “massive insecurity” and that very good managers had left because of it.

Downsizing was perhaps inevitable in the older organizations in the United States and the United Kingdom, which had divested and/or outsourced. The large U.S. electronics firm, for example, had halved its employment levels in the last ten years, while the U.S. automaker had reduced its managerial staff by half. Only two of the U.S. firms had not downsized, and these were relatively new organizations. Downsizing was also evident in the United Kingdom and Japan. In the U.K. case, the large brewer, privatized firms such as the steel producer, and the banks saw extensive reduction with downsizing; however, the utilities firm up-sized. In Japan, all organizations had downsized, with major downsizing at the larger organizations.

Where the three countries differed was in their timing and methods of downsizing. Compulsory management redundancies were rare in Japan and the United Kingdom, but more prevalent in the United States. Typically, British and Japanese organizations froze hiring and used early retirements. Of the three countries, downsizing reportedly began earliest in the United States (in the early 1990s), whereas the main downsizing period in the United Kingdom was around 1996-2000 and later still in Japan (1997-2002 on average).

Delayering was extremely common in all of the countries. Although the details obviously differed widely between the firms, an estimate of the average reduction of levels of management would be from seven to four. Delayering was not as dramatic in Japan, with usually one level removed via a merger of two adjacent levels and regrading of job titles.

Trend Three: These new organizational forms had a significant impact upon human resource management policies and practices, particularly for middle managers. HR reforms entailed a breakdown of traditional career structures and individualization of pay and conditions.

Across almost all of our case studies, managerial job security was a major issue of concern. In Japan, the lifetime employment system was still largely intact, thought it applied to fewer managers. In the United Kingdom, security was still reasonably strong but widespread perceptions of insecurity existed. In the States, security was eroded in some organizations, amid widespread perception of insecurity in others. Certainly, the notion of jobs for life was almost universally described as a thing of the past.

Pay was more strongly linked to corporate and individual performance using various performance-related pay (PRP) systems. In Japan, even though seniority still played a major role, individualized elements of pay were becoming both more widespread and a more substantial percentage of the total remuneration. In the United States, where PRP is more entrenched, individual managerial performance was being much more closely aligned with pay. In the United Kingdom, pay was largely individualized.

Managerial careers were now substantially less secure, particularly in the Japanese organizations where automatic promotions for graduates on white-collar managerial tracks were once the norm. The keenest issue then felt by HR staff across the three countries was, perhaps, how to recruit, motivate, and retain managerial staff. The removal of traditional internal career ladders for white-collar staff, combined with long-hours cultures, had severe implications for staff morale.

In the U.S. sample, for example, a middle manager at AAuto responded,

In particular, my career has stalled . . . because of the way we’re managing the business now. . . . There’s a lot fewer jobs to go into. I think that the progression of promotions had virtually stalled. . . . It has certainly slowed down to the point where I have no reason to believe that I’ll be promoted before I retire. I’m looking outside the company for a new job.

A second middle manager at AAuto noted,

It’s been very good for me these last couple of years, but if we look at the whole motivation, as well as reward and recognition, it’s not been easy. . . . We’ve gone through some really tough times the last few years. And recognition by way of compensation has been very low—recognition by way of promotional opportunities, career development, people movement has been low.

Middle managers, far from their common portrayal as pen pushers and dinosaurs, had their work and roles expanded in a number of senses. Hours of work stood at around ten to twelve per day. Broader spans of control were common, as surviving managers had to take on the work of managers who had left the company or had seen their responsibilities grow as layers merged.

Trend Four: While middle managers’ experiences varied, they were acutely aware of work intensification, fearful of job insecurity, and conscious of a relative worsening of their career development opportunities.

Work intensification among middle managers in the three countries was universal, both in terms of working hours and the complexity of the tasks. On a more positive side, although the work had become more demanding and complex, these changes tended to make work more interesting and involving. There was some evidence of increased autonomy given to middle managers and some scope for innovation and, in some cases, middle management salaries and bonuses had risen significantly. Job insecurity, however, was a recurrent theme, particularly in downsized organizations in the private sector. Lack of promotion opportunities was observed in the majority of organizations. Even in expanding organizations, the problem of slow or nonexistent promotion associated with flat hierarchies was common.

The responses of managers to this new work environment varied. Some welcomed streamlined, delayered organizations and faster decision making. Others felt that working long hours was “their own choice.” The vast majority worked in a state of resigned compliance, however, accepting that the general environment necessitated a worsening of their working experience. The “choice” to work long hours was actually unavoidable; although senior management was not actively forcing managers to work long hours, respondents overwhelmingly stated that longs hours are necessary in order to keep up with the sheer volume of work. Some were reluctant to take vacation entitlement because of fear of overload on return. In general, work-life imbalance was lamentable. Managers cited family conflicts, stress-related illness and absence, and exhaustion. Older managers sometimes spoke of an earlier, gentler environment, whereas younger managers had never experienced anything else.

The organizational trends outlined earlier, including delayering and downsizing, had almost inevitably troublesome consequences for managerial careers. In the Japanese organizations, for example, promotion opportunities were diminished; the long hours/guaranteed promotion tradeoff ended due to fewer available management positions. At JSteel, for example, only 40% of junior managers were being promoted to middle levels compared to 80% formerly, and only 10% were being promoted to level 3 compared to 40% before. This was not atypical, apart from JAuto where the numbers of managers increased. There were, however, some positive impacts of restructuring. The minimum age at which managers could be promoted to level 2 and 3 positions had fallen. At JLG, the minimum first level promotion age had fallen from late to early 30s, while at JRob managers could, hypothetically, jump grades. Such positives, however, were confined to a small number of “high flier” young managers with the majority stuck at the first tier of management.

Similar developments were also noted at the U.S. sample organizations—at least at those which had downsized and/ or delayered. It was of particular concern at the two banks (ALBank and AHBank), at the two organizations with the most pronounced delayering and downsizing (AAuto and AElectric), and at the personnel agency AHR. AAuto and AUtility, for example, had problems of an aging workforce due to hiring freezes and a “LIFO” (last-in, first-out) union agreement on redundancies. The HR director at AElectric, for example, reflecting on his own career noted, “I’ve been here for 27 years, and kept on getting promoted even though I didn’t really try. Now it’s much more difficult and we rotate managers.”

The U.K. organizational sample again mirrored developments in the United States. For some of the smaller, newer, and expanding organizations, promotional opportunities were still available, although this was tempered by the fact that these organizations typically had a flat structure. Elsewhere, however, managerial career development was a thorny issue across public and private sector organizations. Indeed, it was viewed as a major, unintended, consequence of delayering and downsizing.

Job tasks have changed considerably for the middle managers. All of the Japanese respondents, for example, reported increased task environments and increased spans of control, even at the currently highly successful JAuto. Traditional supervision and management roles were added to a new expertise role and project management tasks (JAuto and JSteel). This had led to work intensification. At JElectric, for example, a 12-hour day was the norm—a 15- to 16-hour day not unusual—a feature common across the Japanese sample. All of the Japanese HR managers also accepted that the motivation of middle- and junior-level managers was problematic. JElectric’s HR manager reported individualistic behavior due to performance-related pay, while JAutoComps reported a decline in peer group manager solidarity.

The U.S. sample respondents all also reported managerial work intensification with broader spans of control and a broader task environment, entailing heavy working hours. Labor-saving information and communication technologies had increased middle management workloads due to a major reduction in clerical support (ALG and AHos). Cross-functional teamwork was also in evidence, again adding to workload (AElectric, AAuto, and AUtility). AElectric used job rotation to motivate managers, but accepted its limitations.

A different work environment for middle managers was also reported across the U.K. sample. While managers were typically contracted to work between 35 and 40 hours per week, they actually worked between 42 and 50. The HR manager of a local authority (BBLG) perhaps summed up the general trends when she noted that middle managers’ roles, compared to five years ago, were “harder, broader, and more accountable.” This was, perhaps, an inevitable consequence of delayering. In one of the banks, for example, branch managers had to cover up to three branches. Respondents reported increased stress for middle manages and motivational problems. An HR manager at BNBank, herself a middle manager, reported, “We’re really put upon. If I could, I would leave tomorrow.” At the cable manufacturer, the HR manager reported, “We’ve increased hours, increased the mundane work because we lost clerical staff, and as a consequence our high fliers left. We are more flexible, but we’ve gone beyond the advantages.”

Diminished promotion prospects were also apparent to the middle managers in Japan. A manager at JSteel, for example, noted,

Once upon a time, a graduate person could move up the ten payment rates. Once upon a time, maybe 80 or 90% could get to that very high level. But nowadays, as far as I know, just 40% could get to that very high level.

In the United Kingdom, a middle manager (aged 47) at a local authority (BBLG) encapsulated this feeling: “I joined at 17 as a postboy; my mother encouraged me to do so: good pay, secure job, good prospects. I wouldn’t encourage my children to do it today.” The head of HR at another local authority, BVLG, reflecting on careers, agreed, “Well, put it this way: Would I want my child to go into the public services? The answer is no.” He went on to reflect, “We’ve balanced the books, but what about the scar tissue? . . . We’ve gone too slim and thin.”

Work intensification for middle managers was common to all the sample organizations in all three countries. Daily working hours were rarely less than 9 or 10 and regularly more. In the U.S. sample, for example, a middle manager at AAuto reported,

I’ve been in six assembly plants and a stamping plant and engineering staff positions. And the same message is over and over again, regardless of the organization. . . . It’s that the middle ground has been left at the dock as the lean boat is being sailed away.

A second observed,

Yes, there is an incredible amount of responsibility added. . . . You’re to do more with less. . . . We used to compensate the salaried people for working beyond their hours. . . . Now that’s gone, so there is less incentive and more work.

Such added responsibility did not equate to greater autonomy. As an AAuto middle manager wryly observed, “It doesn’t mean I’m empowered anymore; it just means I have more responsibility. Could I say no to any one of the items that are handed to me? Sure, I’ve tried.” He went on, adding, “In this day and age of e-mail and pagers and phones and, you know, immediate questions and immediate responses, it’s awfully easy for anybody to get an assignment from anybody.”

Managerial work intensification was also in evidence in the Japanese sample. A middle manager at JElectric noted,

In the last several years we have seen that the scope of responsibility for each manager had dramatically increased or expanded. . . . There’s no doubt that the manager’s volume of work increased. Yes, to tell the truth the managers work longer hours than before, including myself. . . . Our work is increasing in complexity.

A middle manager (or kacho) at JElectric reported the pressures in these terms: “A kacho’s role is to encourage and motivate other workers, so, therefore, when the company president gets angry and shouts, it’s always the kacho. The target is always the kacho.”

Managers talked about the workplace as being more competitive in terms of promotions and more demanding in terms of hours and quality, with far larger roles and higher demands for quality and knowledge of wider areas—the business in its entirety. Managers at BAuto also talked of having to “work across” chimneys rather than in narrow areas of expertise, which is not only challenging but also demanding in terms of work hours. Nevertheless, managers appeared to be well motivated and committed. One could detect a strong sense of pride for working for a large firm and enjoyment of the challenge. Some spoke of close colleagues and exciting working environments, but this was tempered with widespread complaints over heavy workloads and pressure, and there were some signs that the wells of goodwill were running dry.

Conclusion: The New Toughness Of Middle Management Life In The 21st Century

Middle managers in all three countries faced job insecurity and experienced reduced career development opportunities. Moreover, they had been subjected to work intensification and broader tasks and roles, which had all impinged on their work-life balance. While insecurity was most strongly reported in the United Kingdom and the United States, it was still felt in Japan. Japan’s traditional corporate governance and employment systems may have insulated middle managers from job cuts but not from job change. These changes have been troubling, and “company loyalty” is being questioned on both sides. The evidence of restructuring and changing job roles casts doubt on the idea of Japan as somehow reform resistant. Moreover, if one looks at the encouraging upward trends in the Japanese economy since 2004, one might argue that Japanese companies’ substantial, but slow and piecemeal, response to restructuring pressures has meant a less traumatic and more successful path than some of the more radical changes attempted by many Anglo-Saxon firms.

While confirming much of the evidence in other studies, our research also raises several new questions. In order to develop a more rounded appreciation of the new working lives of middle managers, researchers might be encouraged to turn to more close-up, “internal” methods. Our research interviews represent only a snapshot of working realities; we know little about the deeper, psychological impacts of restructuring or about how managers can resist the incessant calls for greater effort and longer hours. What about resistance? Is there any scope for unions to force top management to limit workloads? More realistically, can unions or other intermediaries such as life coaches step in to ameliorate stress and anxiety in an effective way? We also know little about changes over time. Has all of this pain actually led to improved longer term firm performance? Our observations on this were downbeat, but perhaps this needs to be studied over time, possibly with the use of repeat research visits. Closer analysis of the daily life of managers might involve diary analysis, observation, or even direct participation research methods.

What we can say, however, is that our study (in keeping with many others) has uncovered some very concerning developments for midlevel managers in contemporary large organizations. As managers face up to these increased pressures and heavy workloads, it is worth remembering how much of their time and energy they sacrifice to their employers on a daily basis. Middle managers are valuable people, and many feel alienated and overloaded. Given their vastly increased levels of responsibility and accountability, perhaps it is finally time to defend the “grey-suited” managers from the bad press they have traditionally received and for employers and analysts to show them greater levels of respect and admiration. While firms (especially their HR departments) were certainly aware of these work-life difficulties, their response was usually very limited, amounting to nonbinding “work-life balance policies.” While access to fair treatment guidelines, coaching, and stress counseling was useful, these represent short-term patches. Organizations are very good at giving work to people—they are not so good at taking it away. Firms might do well to consider how they could buck the trend of “doing more with less” and instead look to hire more middle managers, among whom they could share the growing workloads and rising expectations. This, of course, would require a substantial rethink of corporate cost-cutting priorities, and it is an open question as to whether employers have either the capacity or will to overturn such conventional thinking.


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