To fully compete with cheaper economies Irish workers need to be proactive

THE ALARMING SPATE OF job losses in Irish manufacturing led many to believe the high cost of doing business has dealt a death sentence to the sector.

However, a radical change in mindset in the industry's workplaces could guarantee its long-term prosperity, a recent conference heard.

The manufacturing industry, which has shed more than 30,000 jobs in five years, can no longer compete on price with low-wage economies. But if employers in the sector encourage their workers to become more creative and proactive in the workplace, the industry can revive its competitiveness through innovation and new products.

That was the message heard by more than 300 delegates to the annual conference of the National Centre for Partnership and Performance (NCPP) in Dublin. The NCPP was created by the Government in 2001 to promote partnership-led innovation and change in Irish workplaces and is currently running a public awareness campaign to promote this strategy.

Almost 40 per cent of Irish employees work in organisations where they are never consulted or encouraged to participate in decision-making, according to the findings of the Forum on the Workplace of the Future. Some 22 per cent of staff said they rarely receive feedback from management on why decisions are made and a similar proportion feels that little attention is paid to their views when they are consulted.

Stephen Wood, professor of employment relations from the Institute of Work Psychology at the University of Sheffield, gave the conference a range of evidence to show that employee empowerment is a major factor in improving performance and promoting innovation. By encouraging workers to take a broader view of their own roles within an organisation, they are more likely to be proactive and flexible.

"Being empowered inspires confidence and self-esteem," Wood said. "There is a significant relationship between job satisfaction and higher production.

"The last thing you get in over-controlled organisations is self starters. People at the production systems know best but we are not tapping into this knowledge enough."

A study conducted by Wood's institute found that empowerment was the only practice that had a significant effect on performance at all 308 British manufacturing companies it examined. Indeed, performance improved by 7 per cent at companies that empowered their employees.

"Companies can achieve empowerment and pro-activity in the workplace by job design - saying it's okay to be proactive - and by managing expectations and encouraging idea generation, creating team responsibilities and reward systems, and developing creativity training and tools," said Prof Wood.

"They also need staff development reviews and performance monitoring based on the right things - creating a positive non-blame climate to allow people to make mistakes."

Separate studies, presented by Prof Patrick Flood from the University of Limerick's Kemmy Business School, found that productivity increases when partnership and high performance work systems are used properly in the workplace.

A 2004 study conducted with Prof James Guthrie from the University of Kansas showed that the use of high-performance work systems boosted labour productivity by 15.6 per cent and cut employee turnover by 16 per cent. The cost of replacing an employee who leaves a company voluntarily can often amount to 150 per cent of their annual salary, Flood pointed out.

"If a firm moves from average to above-average use of both partnership and high performance work systems, our data suggests an economic value per company of €291,911 in annual sales from new products and services," he said.

Greater use of high-performance work systems, which includes practices such as performance management and remuneration, training and development, communication and participation, is also associated with greater workforce innovation.

Prof Richard Lester, founding director of the Industrial Performance Center at the Massachusetts Institute of Technology, believes globalisation and automation will lead to the decline of rule-based routine activities in the workplace.

Instead, face-to-face interaction will be instrumental to developing successful organisations.

"Sustainable high-wage economies are creative, innovative, flexible and have a high degree of face-to-face interaction," Lester said.

"In a face-to-face economy, the key skill will not be the ability to follow pre-defined rules but the ability to make good judgments in changing situations and using that information to persuade people."

Lester, co-author of the book Innovation: The Missing Dimension, said that innovative organisations need to be both efficient and creative, though it can prove difficult to manage creativity in the workplace.

"Often the best we can do is come up with the phrase 'you have to kiss a lot of frogs before you find the prince'," he said.

"We say that creativity just happens. I argue that we can do better. But we need to rethink the assumptions on how innovation works. To stay innovative you need analytical and interpretive spaces."

While analysis, or rational problem solving, dominates management and engineering practice, interpretation is not widely understood or even recognised. Unlike problem solving, interpretation embraces and exploits ambiguity, the wellspring of creativity in an economy, according to Lester.

The Irish manufacturing sector needs to overcome the challenge of moving from a controlling management system to one that trusts its employees and managers, said Lucy Fallon-Byrne, director of the NCPP.

"We need to create workplaces where people, their ideas and their creativity are nurtured," she said.