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 / Second Quarter 1997 / Issue 7(originally published by Booz & Company)


The Triumph of People Power and the New Economy

Furthermore, the changing relationship between companies and employees is reflected in our communities. From the perspective of many communities, an era of corporate social responsibility has largely passed. Relationships between companies and communities are increasingly strained. In a period of continuous restructuring to achieve and maintain competitive advantage, stability, equity and job growth can be hard to come by in many places.


Continually improve performance and enhance value to shareholders.

Enable the company to attract and retain top talent.

Motivate all employees to work to their fullest potential.

Develop the skills of white- and blue-collar workers.

Balance the interests of all stakeholders, including shareholders,employees, unions, government and society.

Consider the case of Aaron Feuerstein, the owner of Malden Mills, a $127 million manufacturer of Polartec fabric based in Massachusetts. When fire destroyed the company's plant facilities, Mr. Feuerstein was hailed as a hero in the press around the country. Why? For what was perceived as his unusually high commitment to the community and to employees by keeping people on the payroll throughout the extended rebuilding effort.

The reality today is that Malden Mills is a true exception. Wall Street often reinforces announcements of job cuts with significant stock price increases. Beyond the issues of economic stability, relationships between communities and companies have also been strained by recent press accounts and court cases involving racial and gender equality in hiring and promotion. Community groups are placing increasing pressure on companies to make visible changes to what are considered unfair practices.

In many ways, these are worldwide issues as companies everywhere -- from Latin America to Europe to Japan -- face the ongoing challenge of restructuring.

The irony in all of this is that if you examine most corporate declarations of values, vision or strategy, you will spot something like the following statement: People are our most important asset.

It sounds awfully nice. Alas, the paradoxical fact is that the statement usually just sits there as little more than a mute reminder of what could be. If companies only behaved in a manner consistent with such endearing rhetoric, we would have a much more productive and contented society of workers, and much sturdier and more successful corporations. But, loquacious as they are in touting the worth of workers, most companies fail at what matters most, and we are paying the consequences.

In one recent survey, nearly two-thirds of those questioned said that employers are less loyal than they were a few years ago. In turn, 58 percent said that employees are less loyal to their employers. Only half of employees feel especially secure in their jobs. Hardly the foundation for a successful enterprise.

The bottom line is that a successful corporation must be able to craft a new relationship with its employees -- it must be able to live the ideals of people power, rather than merely talk about them. This "New People Partnership" must fulfill the business need to:

continually improve performance and enhance value to shareholders.

enable the company to attract and retain top talent.

motivate all employees to work to their fullest potential.

develop the skills of white- and blue-collar workers.

balance the interests of all stakeholders, including shareholders, employees, unions, government and society.

Accomplishing these goals requires navigating a tricky road -- reconciling the stated concern about people and the understanding that people are the key enablers of corporate success with the waves of downsizings, attacks on corporations and rampant insecurity rippling through the work force.


What exactly is the New People Partnership? Reduced to its simplest terms, the partnership is the full implementation of the new realities that exist between the corporation and its employees. Specialized skills are increasingly required by firms, yet these skills are what make employees more mobile in the marketplace. Since companies can no longer guarantee lifetime job security, a new quid pro quo is needed. Thus, in the New People Partnership, the company assumes responsibility for investing in the employee and providing work that makes the individual "employable" in the marketplace. The employee owns his or her career and takes on the burden of building the capabilities that add value to the organization and insure his or her own marketability. The employee and the company work together to insure that the organization meets market needs and is successful, since ongoing success provides the context for ongoing employment.

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