The Double Games of Participation: Pay, Performance and Culture [Reprint 2017 ed.] 9783110851182, 9783110129724

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de Gruyter Studies in Organization 43 The Double Games of Participation

de Gruyter Studies in Organization Organizational Theory and Research

This de Gruyter Series aims at publishing theoretical and methodological studies of organizations as well as research findings, which yield insight into and knowledge about organizations. The whole spectrum of perspectives will be considered: organizational analyses rooted in the sociological as well as the economic tradition, from a socio-psychological or a political science angle, mainstream as well as critical or ethnomethodological contributions. Equally, all kinds of organizations will be considered: firms, public agencies, non-profit institutions, voluntary associations, inter-organizational networks, supra-national organizations etc. Emphasis is on publication of new contributions, or significant revisions of existing approaches. However, summaries or critical reflections on current thinking and research will also be considered. This series represents an effort to advance the social scientific study of organizations across national boundaries and academic disciplines. An Advisory Board consisting of representatives of a variety of perspectives and from different cultural areas is responsible for achieving this task. This series addresses organization researchers within and outside universities, but also practitioners who have an interest in grounding their work on recent social scientific knowledge and insights. Editors: Prof. Dr. Alfred Kieser, Universität Mannheim, Mannheim, Germany Prof. Dr. Cornelis Lammers, FSW Rijksuniversiteit Leiden, Leiden, The Netherlands Advisory Board: Prof. Anna Grandori, CRORA, Università Commerciale Luigi Bocconi, Milano, Italy Prof. Dr. Marshall W. Meyer, The Wharton School, University of Pennsylvania, Philadelphia, U.S.A. Prof. Jean-Claude Thoenig, Institut Europeen d'Administration des Affaires (INSEAD), Fontainebleau, France Dr. Barry A. Turner, University of Exeter, U.K. Prof. Mayer F. Zald, The University of Michigan, Ann Arbor, U.S.A.

Marcel Bolle De Bai

The Double Games of Participation Pay, Performance and Culture

Translated by Irene Shayler

W DE G

Walter de Gruyter • Berlin • New York 1993

Marcel Bolle De Bai is Professor at the Solvay Business School of the Free University of Brussels lecturing in human relations and organizational behaviour. He is also President of the Scientific Board of the Institute of Sociology, Director of the "Centre de Sociologie du Travail", and Head of the Social Psychology and Applied Sociology Departments. As Honorary President of the "Association Internationale des Sociologues de Langue Française", he has published fifteen or so works and about a hundred articles, most of them dealing with problems related to human resources management.

With 24 tables © 1990 Presses Interuniversitaires Européennes Mastricht —Bruxelles. Title of the French Edition: Les doubles jeux de la participation. Rémunération, performance et culture. Collection Travail & Société n° 10 This work was made possible thanks to the aid of the Ministère de l'Education, de la Recherche et de la Formation de la Communauté Française — Direction Générale de l'Enseignement Supérieur et de la Recherche Scientifique. © Printed on acid-free paper which falls within the guidelines of the ANSI to ensure permanence and durability. Library of Congress Cataloging-in-Publication

Data

Bolle De Bal, Marcel. [Doubles jeux de la participation. English] The double games of participation : pay, performance, and culture / Marcel Bolle de Bal ; translated by Irene Shayler. p. 23 x 15,5 cm. — (De Gruyter studies in organization ; 43) ISBN 3-11-012972-8 (alk. paper) 1. Wage payment systems. 2. Wages. 3. Industrial sociology. I. Title. II. Series. HD4926.B6613 1993 658.3'225—dc20 92-33198 CIP

Die Deutsche Bibliothek — Cataloging-in-Publication

Data

Bolle De Bal, Marcel: The double games of participation : pay, performance, and culture / Marcel Bolle De Bal. Transi, by Irene Shayler. — Berlin ; New York : de Gruyter, 1993 (De Gruyter studies in organization ; 43) ISBN 3-11-012972-8 NE: GT © Copyright 1993 by Walter de Gruyter & Co., D-1000 Berlin 30. All rights reserved, including those of translation into foreign languages. No part of this book may be reproduced in any form — by photoprint, microfilm, or any other means nor transmitted or translated into a machine language without written permission from the publisher. Typesetting: Converted by Knipp Satz und Bild digital, Dortmund — Printing: RatzlowDruck, Berlin. — Binding: D. Mikolai, Berlin. — Cover Design: Johannes Rother, Berlin. Printed in Germany.

To Marion and Pierre, Born, nurtured and brought to maturity at the same time as the substance of this book, this other child of mine that is a little their brother too.

Foreword by David J Hickson This is a book which carries the authority of a lifetime's study by its author. It is about pay. Or, stated more fully, it is about the participation of people in organizations, and in this book 'participation' means financial participation. What share do employees get, and in what form do they get it? It is a subject that has been the focus of attention for Marcel Bolle de Bal throughout his career, and about which he has thought deeply. Curiously, much of the sociology of organizations and, even more so, of organization theory, is written as if pay and financial rewards generally were not the lifeblood of organizations. Yet the organizations which are analysed would not be there without it. They might exist as a hierarchical chart on paper, but not as functioning social entities. There would be no one there to perform the designated roles. No one to take on the jobs. For whilst it has been amply demonstrated that much else matters besides money, everything begins with money. Except, of course, for the special category of voluntary organizations. Marcel Bolle De Bal is keenly aware that pay systems are not mechanical systems. They are for him the fulcrum of the interests of all those who do 'participate' in organizations. They are enmeshed in the interplay of 'double games' of political manoeuvre, full of political significance. Moreover, they are part of, and a response to, the societies in which organizations operate. The view in this book spans Europe West and East, the United States, and China and Japan. Marcel Bolle De Bal's aims are both to understand and to improve. He does not want to stand idly by and discuss problems without also trying to contribute to their solution. He aims in this book "to prove the viability and feasibility of a sociology that is not afraid to get its hands dirty", to link theory and practice, to think but also to advise. David J. Hickson Bradford Management Centre England

Preface to the English translation The French version of this book was written in 1988 — 1989, just before the Iron Curtain and Berlin Wall came down. Much of the information on wage systems and payment by results or by performance in socialist economies was gathered in the years preceding the economic, social and political revolution. In some respects, it can be regarded as obsolete, outdated by these events. In point of fact, the information collected and presented was revealing of the changes undermining the system, the search for a more "marketable" approach to compensation problems and management in general, the efforts to develop more stimulating systems of payment, the quest for better economic performances through remuneration by performance. Due to the evolving situation in these countries and to the difficulties of obtaining reliable documentation on the impact of the new reforms, it was considered untimely to rewrite the data and analyses concerning these countries. The basic sociological interpretation of the evolution of payment by performance systems is more confirmed than invalidated by the implosion of planned economies and by their transition into a new cultural system (the Culture of Performance). Hence the title of the book — "The Double Games of Participation: Pay, Performance and Culture" — seems apt to describe the past, present and future of workers' financial participation systems.

Marcel Bolle De Bal Prémian Summer 1992

Table of Contents Foreword - Two Old Stories

1

Introduction - From An Old Story To New Adventures: Double Games And Third Way

9

Part One - The Stakes of Participation

19

Chapter I - Pay and equity I. Just Wage and scholastic thought II. Just wage and just performance III. Fair pay and responsibility IV. Fair pay and technical progress V. Fair pay and equitable pay structure VI. Fair wage, fair income and right price VII. Equity and rationality VIII. Equity and equality IX. The fair wage: a few sayings X. The double game: equity and inequality

20 20 21 21 22 23 24 25 26 27 28

Chapter 2 - Pay and productivity I. Productivity and technical progress II. Productivity and output III. Productivity and motivation IV. Productivity and work organization V. Productivity and innovation VI. Productivity and socialism VII. The double game: quantity and quality

30 30 30 31 32 32 32 33

Chapter 3 - Pay and flexibility I. Flexibility and security: the Japanese model II. Flexibility and the labour market III. Flexibility and planning: the wage drift IV. Flexibility and debureaucratization V. Flexibility and decentralization VI. Flexibility and power VII. The double game: deregulation and regulation

34 34 35 36 36 38 39 39

Chapter 4 - Pay and solidarity I. Lonely crowd and group solidarity II. Pay and micro-economic solidarity: collective bonuses III. Pay and macro-sociological solidarity: trade union strategies. IV. The double game: binding and unbinding

43 43 44 44 45

X

Table of Contents

Chapter 5 - Pay and freedom I. Freedom and individual autonomy II. Freedom and collective autonomy III. Freedom and corporate autonomy IV. Freedom and sectorial autonomy V. The double game: independence and interdependence

47 48 48 49 49 50

Chapter 6 - Pay and society I. Liberalism and socialism II. Freedom and responsibility III. Culture and counter-culture IV. The double game: production and reproduction

52 52 53 54 54

Part Two - The Game of Participation

57

Chapter 1 - Payment by results in theory

58

Section 1 - Structural classification: systems of payment by results viewed in terms of their theoretical forms and features I. Classifications based on wage structure II. Classifications based on the definition of the result III. Classifications based on the relation between wages and results IV. Classifications based on the method of sharing

61 61

Section 2 - Functional classifications: systems of payment by results viewed in terms of their theoretical objectives

62

Section 3 - Synthetic classifications: systems of payment by results viewed in terms of their structural-functional aspects I. Factors of wage "sensitivity" A. Time of payment B. Range of application C. Relative importance of the variable portion of the wage D. Slope of the bonus curve E. Influence of lost production or stoppage time II. The two fundamental "built-in" design features A. The "time" criterion: wage complements and supplements . . B. The "space" criterion: payment by output and productivity pay III. Basic types of systems of payment by results

58 59 59

65 65 66 66 66 66 66 67 67 68 69

Chapter 2 - Payment by results in practice

73

Section 1 - The practice of stimulation systems I. The "vitality" of payment by output

74 74

Table of Contents

A. B. C. II. A. B. 1. a. b. c. 2. a. b. 3. 4. 5. 6. 7. 8. 9. 10. 11. C. 1. 2. 3. 4. III. A. B. 1. a. b. c. d. e. f. 2. a. b. c. d. C.

Progression of payment by output Recession of payment by output Stabilization of payment by output The "crisis" of payment by output Significance Symptoms Output rationing On the workers' side: quota restrictions On the managerial side: secret funds On the employers' side: rate-cutting Production "fiddling" On the workers'side: "goldbricking" On the employers' side: "touching-up" Bargaining of standards Flattening out of the slope of bonus curves Extension of payment times "In-house" corporatism "Competition" bonuses Bonuses not related to results Recourse to compensatory overtime "Provisionally" fixed wages "Permanently" fixed wages Causes Technical evolution Economic evolution Social evolution Cultural evolution The "outrunning" of payment by output Significance: a structural-functional dialectic Symptoms: an evolution of forms and features Evolution of "internal" forms and features The slope of bonus curves The range of application The time of payment The incidence of lost production or stoppage times The reference factor The combination of variables Evolution of "external" forms and features Wage penalties The basic wage and merit-rating Benefits not related to results The "cafeteria" system Causes: an evolution of functions

XI

78 78 81 82 84 86 86 87 88 88 88 89 89 90 93 94 94 95 96 96 96 97 98 98 99 100 101 102 103 103 104 104 104 105 105 106 106 107 107 108 110 Ill 112

XII

1. 2.

Table of Contents

From stimulation of effort to participation in resourcessavings From the cult of macro-social antagonisms to the culture of micro-social compromises

113 116

Section 2 - The practice of participation systems I. The history of participation systems II. Functioning of participation schemes A. Participation bonuses and workers' attitudes 1. Participation bonuses and worker satisfaction 2. Participation bonuses and worker participation 3. Participation bonuses and corporate integration 4. Participation bonuses and corporate attachment 5. Participation bonuses and attitudes towards trade unions . . . . B. Participation bonuses and labour relations 1. Participation bonuses and social struggle 2. Participation bonuses and social negotiation 3. Participation bonuses and social reform III. The future of participation bonuses

120 121 124 125 125 127 127 128 129 130 130 131 131 134

Chapter 3 - Payment by results in perspective

142

Section 1 - Payment by results as a management tool I. Diverse motivations A. The hierarchy of motivations B. The nature of motivations C. The diversity of motivations II. Functions and dysfunctions A. Functions for the employer 1. Psychological functions: employee attitudes 2. Organizational functions: improvement of methods 3. Economic functions: price of products and price of labour. . . 4. Political functions: decentralization and corporate autonomy. B. Functions for the worker 1. Economic functions: raising of income and income control.. 2. Psychological functions: personal fulfilment and satisfaction. C. Dysfunctions for the employer D. Dysfunctions for the worker III. Multiple factors IV. Complex systems V. Dialectic situations VI. Multiform evolutions

142 143 143 144 144 145 145 145 146 146 146 147 147 147 148 149 150 150 151 152

Section 2 - Payment by results as a bargaining tool I. Payment by results and individual bargaining

154 154

Table of Contents

XIII

II.

155

Payment by results and collective bargaining

Part Three - The Theatre of Participation

159

Chapter 1 - Theoretical stage-setting: sociology of remuneration. . . .

160

Section 1 - Participation: objectives and forms

160

Section 2 - Participation: contributions and rewards

164

Section 3 - Participation: functions and dysfunctions I. A functional analysis II. An actionalist perspective III. A synthetic approach IV. Functions of the pay/performance link: summary table V. Dysfunctions of the pay/performance link: summary table. . . VI. Functional dynamics VII. Dysfunctional dynamics

165 166 167 168 168 169 169 173

Section 4 - Participation: actions and actors I. Traditional actors II. Institutional actors III. Individual actors

175 175 177 177

Section 5 - Participation: supply and demand

178

Section 6 - Participation: ideologies and realities I. East/West divergences II. East/West convergences III. Internal divergences IV. Internal convergences

180 181 183 185 185

Section 7 - Participation: determinants and indéterminations I. Determination and indétermination of the "meaning" of pay . II. Determination and indétermination of wage payment systems

186 186 187

Chapter 2 - Practical stage-setting: participation strategies

194

Section 1 - Participation: from the technical to the economic

195

Section 2 - Participation: from the social to the political

196

Section 3 - Participation: from the psychological to the cultural . . . .

198

Section 4 - Participation: from actions to retroactions

202

Conclusion From The Third Way To The Third World: Participation, Culture, Development

205 205

XIV

Table of Contents

Pay for performance Performance of pay Culture of performance Performance of culture Participation and development Third way, threefold function, Third World Participation, culture and existence: performance and then what? . . .

206 206 207 208 209 212 213

Statistical Note

214

Bibliography Presentation Index of References A. Books quoted B. Articles quoted C. Papers quoted D. Reports quoted E. Documents quoted F. Other bibliographical references G. Bibliographical data specific to certain countries H. Publications of the "Centre de Sociologie du travail" (Free University of Brussels) in connection with the theme of this book

218 218 220 224 227 230 234 235 237 246

Index Index of Subject Matter Index of Countries Index of Names and Proper Nouns

253 253 258 259

250

Foreword

Two Old Stories This book came about by chance and by necessity. The chance came with the first studies entrusted to me as the budding researcher I was then more than some thirty years ago. As for the necessity, it manifested itself in the coming together of two long and old stories. The first of these stories is that of systems linking pay to individual and collective performances. It is a subject that is very much in vogue today, cropping up as it does, subject to time and place, in the form of payment by output, merit-rating, incentive bonuses, profit-sharing schemes and a good many other designations. In the West and the East, it is back on the agenda, with renewed interest having been sparked off by talk of flexibility and deregulation. It is a complex issue and a topic of conflict. Beneath the veneer of words modernized by the culture of performance is silhouetted an age-old story, the never-ending return of which merits unveiling. Such is one of the main aims of this study. It is a study that will hopefully help to relativize a few over-exalted plans and schemes nurtured by ideologies of a seemingly long-forgotten past. Some cultural Utopias die hard. A third of a century's experience of the question inoculates one against advocates of half-baked and prejudiced notions. For one, such as myself, who has not been afflicted by the slow ravages of pessimism, it inspires the desire to share with the young - and not-so-young - generations, some thoughts and views that might help them avoid repeating the errors - both theoretical and practical - of the past. It is here that the second "old story" joins up with the first. It is the story of this book. A story that is both simple and complex, new and old. Simple and new, in that it is the result of what at first glance appeared to be an easy enough undertaking: the updating, decided upon two years ago, of a study made by the International Labour Office in 1972, and which has remained in its archives ever since. Complex and old, in that this task proved much harder than had been anticipated. And more stimulating, too, when it actually came to bringing into a new perspective research work that had spanned a full third of a century. From nuances to addenda, from corrections to adaptations, from theoretical elaborations to practical illustrations, emerged another book, drawing its substance from the initial report yet integrating it into a broader and updated vision of the relations between pay, performance and culture.

2

Foreword

It all started in the late fifties, when the C.E.C.A. (E.C.S.C - European Coal and Steel Committee) on the one hand, and the O.B.A.P. (Office Beige pour l'Accroissement de la Productivité) on the other hand, commissioned our "Centre de Sociologie du Travail" to carry out various investigations on the practice of payment systems linked to output and productivity, that is to say, to the results of the production activity, or again, to use modern-day parlance, to performance. The investigations carried out over ten years or so by our team or I should say teams, for their composition evolved over the years - led to the publication of eight works1, as well as numerous reports, articles and papers2. In overall charge of these projects, I was assigned by the I.L.O. (International Labour Organization) in 1972 to carry out a study with a twofold objective: updating the basic work on payment by results published by the I.L.O. in 19513 and replacing its somewhat technical and economic approach with a precis of the psychosociological research done since then on the actual practical functioning of the systems in the corporate environment. This project appealed to me for several reasons. First of all, it was to give me the opportunity of making a comprehensive assessment of a whole mass of national and international research findings on a subject with many theoretical and practical ramifications and, through the medium of a prestigious international institution, of being able to ensure unhoped-for circulation of studies that had hitherto been limited to select specialist circles. It was similarly to allow for the setting up, in cooperation with the I.L.O. and with a view to future research-action and/or research-development, of a programme of specialized seminars aimed at East European countries and developing countries, and the subsequent publication of a work based on the lessons drawn from these seminars and the discussions taking place within the scope of them - which work was to be adapted to the different contexts, stressing the cultural dimension of management techniques in general, and of the linking of wages to results in particular. Which is how the report entitled "Les salaires aux résultats dans les sociétés industrialisées. Tendances évolutives. Aspects psychosociologiques" came into being. It was published by I.L.O. in 1972, on roneotyped paper, in its series "Informations sur les conditions du Travail"4. The term "Les salaires aux résultats" (payment by results) was adopted in the title of the report to convey the twofold perspective of tradition and evolution in which I wished it to be placed. Tradition, for it made implicit reference to the title of the work, "La rémunération au rendement" ("Payment by results") published by the I.L.O. in 1951. Evolution, for in relation to this book, it denoted two characteristic differences in the evolution that had taken place since the first publication: the replacement, in the French language version, of the words "au rendement" ("by output") by "aux résultats" ("by results"), to evidence the broadening field of application of these methods of payment in relation to technical, economic and social developments. Use of the plural "les salaires" ("systems of payment") was intended to denote

Two Old Stories

3

the diversity of the types of payment covered in the general title, and herald in the analysis of the transition from the one to the other developed in the book. The study was completed, the book written, my text accepted and appreciated by the I.L.O. experts. Just as we were nearing our goal, the entire project collapsed owing to circumstances that were beyond its own dynamics: the United States suspended their financial contribution to the running of the I.L.O., a move which resulted in immediate and drastic budget cuts. Under the circumstances, it became impossible to consider going ahead with the translation of the work into the main world languages (English, Spanish, Russian...). Just as it was impossible organizing the seminars intended to provide - as is only too rare a real concrete and theoretical follow-up to studies funded by the international community. My text, to the great disappointment of its author and the I.L.O. officials who had held it over the baptismal font, went into the bottom of some dusty drawer to join the hoards of others like it, fleeting glimmers in the congested skies of quiescent learning. Taken up with other tasks, other research work and other preoccupations for ten years or so, I superficially resigned myself to this first class interment. But deep within me slumbered the desire to not leave things as they were, to not accept seeing the result of the hard and sustained effort to which I had devoted the best years of my life as a researcher lost in this way in bureaucratic anonymity. Back in 1976, I had assigned a group of final year students of the Solvay Business School the task of preparing a proposal to update the 1972 report. The kingpin of this group, Alain Eraly, has since become a fully-fledged member of our research team. But the pressing demands of academic life, the institutional responsibilities I had to meet at the time, prevented me from making the most of their contribution as I would have liked. Around 1980, an external circumstance rekindled my regrets and gave new impetus to my desire to revive the I.L.O. work that lay dormant. I was contacted by the European Foundation for the Improvement of Living and Working Conditions in Dublin, asking that our Centre take charge of the Belgian part of an international research project on systems of payment by results, one that was both quantitative (survey of the systems in application) and qualitative (case studies). The idea was at the same time appealing and disappointing appealing because it would give us the chance to update the facts on a subject I was well versed in thanks to many long years' experience, and disappointing because the resources allocated, through no fault of those in charge, were so meagre (one researcher for nine months for an assignment similar to the one for which, twenty years previously, we had been allocated sufficient funds to pay for two full-time researchers and a secretary for four years...). After some hesitation, we accepted the proposal: with our experience we would be able to provide the promoters with a theoretical framework to stimulate collective consideration, while updating the data we already had and offering young

4

Foreword

researchers the opportunity to gain practical experience out in the field. The members of our team produced three reports5 which went to make up the wealth of documentation gathered together by the Dublin Foundation6. With all due deference to the Foundation's effort, I do here have to say how disappointed I was at the time to see, aside from the meagreness of the resources available, the almost general oblivion into which had fallen the major theoretical contributions of the many authors of the debate of the early sixties, a debate which I had tried to echo faithfully in my 1972 report. This gave me renewed vigour to recall it to life. With sources of research funding growing scarce, it was important to make good use of them and to avoid going over - less well for lack of resources the same ground others had already covered. Time was pressing to bring to public attention the forgotten synopsis and to update and complete my earlier work after a critical review of the facts, ideas and trends. Another event allayed any misgivings I might still have had about picking up the threads of a piece of work first taken up many long years ago. It was the publication by the I.L.O. of a new version of its 1951 report on payment by results7. The objective set out in the foreword to it was akin to what ours had been in 1972; "the book goes beyond the usual descriptions of the technical characteristics of various schemes... an attempt is made to synthesize the lessons to be drawn from the available research on the actual operation of payment systems and to present them in an original way..." 8 . Upon reading the book - which is very interesting in many respects, especially with regard to wage payment systems - on this point I was left wanting; the promise of a new synthetic approach remained unfulfilled. What was more, this text made no reference to the numerous findings of the sociological and psychosociological investigations made over the last three decades, particularly within the scope of the European Economic Community, nor to the wealth of French and German literature on wage-payment systems. And, more surprisingly, no reference to the study - though financed by the I.L.O. itself - that I had prepared for it in 1972. Further proof that leading institutions have very little collective memory... In short, there was a gap to be filled, a forgotten text that existed and which, updated, would fill this gap. To revive and rejuvenate it was at the same time to satisfy a latent social demand and to atone for the out-and-out affront, the passing of time, and its Orwellian-like "atomization" (perpetrated in 1984...!). The plan was becoming clearer and clearer, the resolve and reasons for making it happen more and more apparent; it remained to find the means - the time and money - to see it through. The initiative here would not come from the outside, it was up to me to muster up the forces needed to make it materialize. "Where there's a will there's a way" as childhood teachers always used to say. In 1986-87, I applied for and obtained a grant from the Fondation IndustrieUniversité in Brussels, having stated that it was my intention to prepare the publication of this book, drawing on data collected by the I.L.O. and in East

Two Old Stories

5

European countries, so as to allow for a preliminary comparison on the use of systems of payment by results in market economy and centrally planned economy countries. Via the international contacts established at this time, I was invited to attend an international conference on wage payment systems and their socio-economic environment organized in 1986, in Siofok (Hungary) by the Vienna Centre (European Centre for Research and Documentation in Social Science) and the Institute of Labour Research in Budapest9, and was later assigned by the I.L.O. to make a brief study on the development of wage payment systems in relation to that of organizational methods and technologies, a study enhanced thanks to the contributions of several members of our research team10. The wealth of information forthcoming from this research grant, this conference and this investigation, as well as from trips to the Soviet Union, Poland, Hungary, Czechoslovakia, Bulgaria and Yugoslavia, prompted me to broaden my focus and to put together a book dealing with the philosophical, economic, social and cultural issues associated with the general problem of the financial participation of workers in the fruits of economic activity. To see this new idea through, it was clear that additional resources - time and money - would be needed. The aid sought from the F.N.R.S. (Fonds National de la Recherche Scientifique) in this case proved most valuable. For the 1987-1988 academic year, the F.N.R.S. offered me a fellowship "for scientific research work", the equivalent of the "sabbatical leave" that our North American colleagues can avail themselves of every seven years. This fellowship was to enable me to devote myself full-time to pulling together all the various threads that were to make up this book. Which was indeed what I intended to do. Thanks to this help, which fitted in beautifully with that provided by the Fondation Industrie-Université, I can today bring to the reader, in a revised, enriched and updated form, the sum of several decades of research on the functional and cultural logic of systems of payment linked to performance. In the midst of all this, of the inevitable doubts and misgivings as to the validity of the undertaking, friendly pressure from my colleague and friend Renaud Sainsaulieu proved to be the clinching factor. The place was Porto, the time May 1987. We were attending a conference of the A.I.S.L.F. (Association Internationale de Sociologues de Langue Française) on "Sociology and the New Challenges of Modernization". Here, I presented a paper entitled "De la modernisation de la société à la modernisation de la sociologie: développement technique, dialectique des modes de rémunération et travail sociologique". Having heard it, Renaud Sainsaulieu keenly advised me to write a book developing my personal views and findings on the linking of pay to performance: knowing nothing of my personal plans, he had served only to

6

Foreword

endorse them. The encouraging words of a friend had struck a compelling chord, bidding me not to flee from the difficulty, from an obligation to heed the call of the sociologist, a duty to respond to the need for information on a subject of growing importance in today's society. This book, then, is the fruit of a long story. But it is also - as can be guessed reading through the lines - the fruit of the combined efforts of many whom I should like to acknowledge for their help and cooperation. My thanks firstly to the various institutions (E.C.S.C., O.B.A.P., I.L.O., the Dublin Foundation, the Vienna Centre, Fondation Industrie-Université, F.N.R.S.), all of which, at one time or another, have financed the research I am today attempting to summarize in this book. Special thanks go to those in key positions within their decision-making bodies who lent me their kind support: Charles Savouillan and Sabine Erbès (E.C.S.C.), Marcel Pierre (O.B.A.P.), Paul Cassan (originator of the 1972 study), Elimane Kane, Jacques Monat, Gerald Starr, Hiromasa Suzuki and Zafar Shaheed (I.L.O.), Dirk Symoens (F.I.U.), Paul Levaux (F.N.R.S.), Jorn Pedersen, Vittorio di Martino and Eric Verborgh (Dublin), Peter Grootings (Vienna). To Messrs. Lôning and Orenca, I am endebted for kindly affording me access to the maze of the E.E.C. statistical archives in Luxembourg. The Université Libre de Bruxelles granted me the leave needed to take up my fellowship and, more importantly, provided the temporary replacements needed to fulfill my teaching obligations during this time. I would like to express my gratitude to the University and to all those who, with talent, competence and dedication gave up many hours of their time to take up my heavy teaching responsibilities in my place and stead: Matéo Alaluf, Alain Eraly, Henri Miller, Madeleine Moulin, Nadine Lemaître, Didier Van den Hove. Scientifically-speaking, numerous were the researchers who contributed one way or another to my research on pay schemes. I cannot cite them all by name, for the list would be too long. The names of the leading contributors are moreover listed in the bibliography at the end of this book. I shall confine myself here to acknowledging the importance of the recondite efforts of Jean-Claude Dupont, who during his civilian service as a conscentious objector, did an admirable job in updating the 1972 study. I would also like to express my appreciation for their invaluable help to the intelligent, attentive and critical readers of my manuscript, Renaud Sainsaulieu and Marcelle Stroobants, whose pertinent and kindly imparted remarks helped me to fill in gaps, to nuance interpretations and to clear up certain ambiguities. I was unfortunately not able to take account of all their suggestions and - in the classic phraseology - I of course accept sole responsibility for the views expressed in this book. Logistically, the successful completion of such a long and exacting task was made possible thanks only to the personal and professional qualities of assistants able to decipher hasty scribbles now and then obliterated by second thoughts,

Two Old Stories

7

and able also to pick up on the author's unconscious needs or to unearth documents thought to have been lost without trace. May Annie Van Houtvin, Tanya Bekounine, Jocelyne Lallemand, Joelle Brouwers, Anne-France Mêlant and Mia da Cruz find in these lines the expression of my gratitude and thanks for the fond memories of shared ordeals. And especially Anne-France who was responsible for most of the final editing. On a more personal note, Françoise knows what I owe to her (and what this book owes to her: three decades of co-gestation is quite something...), knows that I know it and that I do not forget it. I myself know that she by far prefers intimate recognition to any public tribute. Let us then defer to such modesty, commendable though inordinate as it may be.

Marcel Bolle De Bal Prèmi an* Easter 1989

* It is a strange coincidence, an amazing omen, mysteriously symbolic, call it what you will, that this book should for the most part have been conceived and written at our Languedoc retreat in a village that goes by the fated name of Premian - a deformation of the Latin "praemium", meaning premium or reward... A vestige of the time when culture bestowed upon leaders in the vanguard of battle, in consideration of their performances, lands and other such gratuities in kind...

Introduction From An Old Story To New Adventures: Double Games And Third Way

This book, the fruit of the two old stories told in the foreword, like Janus, has two faces - one turned to the past, the other looking to the future. But this is just the first of the four main axes around which are woven the views and findings that make up its fabric. This first axis, then, is the temporal axis with, at one end, the past, the historical dimension, the lessons of the old story of the pay-performance link. At the other end, the future, the prospective dimension, the state of things to come for this link studied simultaneously in the twofold perspective of sociological analysis and development management. And, between the two, the present-day state of the problem, the new adventures of participation, of pay, performance and culture in contemporary society, adventures both practical and theoretical. Which takes us on to the second axis - the epistemological axis - with, at one end, the concrete problems raised by human resources management in the corporate and social context, the questions being put to the sociologist by workers and management and the problems of applied, or at all events, "oriented" research. At the other end, the plan to evolve, on the basis of the knowledge accumulated over the years, a sociology of remuneration, a theoretical and methodological contribution to the sociology of work in general. And between the two, the desire to make the link between the concrete and the abstract, between action and research, between practice and theory, the resolve to prove the viability and feasibility of a sociology that is not afraid to get its hands dirty, to "have a go" at answering the pragmatic questions put to it by the practitioners of economic, social and political life, a sociology that is applicable if not applied, a sociology that is useful, if not used or difficult to use, a sociology that nonetheless means to preserve intact its axiomatic neutrality, its methodological precision and its analytic objectivity. The third axis - a spatial axis - is at the same time a geographical, economic and political line of reference. At one end, the countries of the West with a market economy, diverse versions of the capitalist system marked by liberal, neo-liberal or social-democratic theories and practices. At the other end, the countries of the East, with a centrally planned economy, multifaceted expressions of socialist structures inspired by Marxist-Leninist thought and analysis. And between the two, an attempt at an East/West comparison, to

10

Introduction

identify the convergences and divergences between the two models of society on the basis of their concrete experience of systems of participation and motivation. And finally, the fourth axis - a cultural axis - and hence also an axis of synthesis, piecing and bringing together the temporal, geographical, economic, political and epistemological dimensions. At one end, the countries of the North, with a developed economy, products and producers, countries industrialized through intensive use of the principles of scientific organization of work, of a culture of science, rationalization, performance and development. At the other end, the countries of the South, industrializing countries with an economy in pursuit of development, torn between their desires to partake of the great feast of economic progress and the fear of losing their cultural identity: between the two, not a North-South comparison (owing to the sparsity of relevant data), but an attempt, as the upshot of our reflections, to waymark the particular problems of participation as a development tool, as a means of cultural action which, at the cost of numerous precautions, could be tailored to the so-called Third World countries. A contribution, as it were, to the exploration of the "third way" hypothesis that some of these countries are calling for, between that of East and West, between the socialist and the capitalist. On the road that leads from an old story to new adventures, at the crossroads of these four axes, of present-day policies and bygone practices, of theoretical preoccupations and concrete issues, this book sets out, through the unveiling of a series of ongoing double games, to provide new input for the design of systems of payment and of participation, and to relativize their bearing within the framework of the culture of performance. As a first step, this implies clearly defining the meaning and scope of these terms. "Performance" and "culture": two words that are today part and parcel of modernistic management parlance. Symbols of modern times, they embellish bygone methods of management "revamped" to keep pace with sociological changes. "Performance" is the economic watchword, evocative of the success of Japanese enterprises which fascinates socialist leaders and corporatist employers alike. "Culture" is the social watchword, the essence of the most sophisticated approach to human resources management. So far as the words "pay" and "participation" are concerned, their history dates back to the earliest of ancient times. In 400 B.C., the Chaldeans were already, it seems, relating remuneration to the fruits of labour to stimulate the economic activity of their fellow citizens. Karl Marx himself, one of the leading opponents of the modern wages system, noted that the piecework wage was a feature of French and English laws way back in the 14th century". This principle lives on today, cloaked in modern style (or at any rate tailored to today's fashion, seeing as how participation is very much in vogue), the key to

Introduction

11

personnel management in most industrial concerns and businesses in developed societies, irrespective of the political regime or socio-economic structures. By bringing these four general concepts together in our title, we have sought, firstly, to show the perenniality and topicality of the subject matter and, secondly, to emphasize how it has been developed in relation to the earlier studies published by the I.L.O. and our team of researchers. "Pay by performance" and "pay for performance" can take very different forms, which encompass not only payment by output12, not only productivity pay13, not only payment by results14 and not only payment systems linked to corporate profits15. The pay-performance approach is moreover an instrument of cultural action, part of the movement aimed at fostering the corporate culture, but extending beyond it, for it is inherent in a much vaster logic of socialization of the work environment to the economic world. The fifth component of our title, the "double games" of participation, stresses the dialectic, strategic and paradoxical dimension of pay techniques, that is to say, their political significance. It attests also to our resolve to look beyond the technical and economic descriptions that abound on the market, to attempt to outline the beginnings of a sociology of remuneration corresponding to the ever changing needs and conditions of developing societies. How these various concepts tie up should become clear as the pages unfold. However, it may at this juncture be helpful to dwell a moment on each of them so as to better encompass our theme. "Performance" is an English term, frequently used in American economic literature and "taken on board" as such into the writings of French language management experts. This fact is somewhat symbolic; it reveals the American origin of the concept, and hence of the culture of which it is a cornerstone. The noun itself is derived from the English verb "to perform" which, according to the dictionary definition, means "to carry out, to complete, to enact a play, to display one's artistic or theatrical skill, especially as a public entertainment". According to the "Petit Robert" French dictionary, this English word was introduced into the French language around 1839, with the same meaning. Neither the English nor the French dictionary make any mention of its present-day meaning in economic jargon, derived from sporting contests and triumphs. The modern-day success of the idea of economic performance is not surprising (today, an individual, a group, a company has "to perform"). Needless to say, in French, the qualifying adjective "performant" is nowhere to be found in the best of dictionaries!). It is associated with the spectacular "performances" of Japanese enterprises and of the Japanese economy on the world economic scene, at the very time when, in western societies, there is talk only of the crisis of the welfare state and the growing influence of neo-liberal theories and practices under the banner of "Reaganism" or "Thatcherism". Today, perfor-

12

Introduction

manee is far more than a goal for sports champions and corporate managements. It is a "culture" in the sociological and anthropological sense - that to which we will be referring throughout this book - a framework of reference for the day-to-day conduct of individuals, groups, organizations and social institutions, a system of meanings, perceptions and values that help them to interpret and deal with the situations they experience. The "culture of performance" is based upon specific values which constitute what could be termed the "capitalist model". Three of them - competition, individualism, productivity - come to us straight from the United States; three others - cooperation, group work, participation - appear to be the Japanese secret weapon. Both these versions of the model - the American and the Japanese - have had their successes, so far as economic achievements go at any rate. In the eyes of many observers, a combination of the two would, it seems, be the best way to take up the challenges of technological and social change and development. This capitalist model of the culture of performance appears to be enticing growing numbers of political leaders of socialist countries, seeing as most of the economic reforms under way in these countries are inspired by a similar perspective. The socialist system has undoubtedly been successful in the social field, especially in ensuring a security of employment for the working masses unknown in the West. Inversely, the economic "performances" have not lived up to expectations. Poor economic results are becoming bottlenecks to future economic and social developments. In a context such as this, the Gorbachev message - partly inspired by the Hungarian and Polish experiences - is entirely comprehensible, aimed as it is at improving the economic performances of individuals, groups and of society as a whole. Self-financing, self-management, individual effort, social responsibility, socialist emulation, such are the new watchwords directly inspired by the "culture of performance". The latter expression - "socialist emulation", a close cousin of "capitalist stimulation" - opens the way to a revival of wage incentive schemes, and especially various extended and updated systems of payment by results (or pay systems linked to individual and corporate performance). Such payment systems have never really disappeared from market economies in spite of the pessimistic predictions of experts who considered that their effectiveness was declining. Current trends towards flexibility and deregulation have sparked a renewed interest in them and in strategies which afford a high priority to the autonomy of workers and management. But a variety of tactics is being deployed, with employers exploring novel ways to boost the performance of their workers: basic wage, non-taxable wage supplements and retraining offer new possibilities that are only just beginning to come into more widespread use. Structural differences notwithstanding, a similar trend is evident even in centrally planned economies. In his many speeches, and in his address to the USSR's XXVII Communist Party Congress, Mikhail Gorbachev repeatedly stressed the need to establish a closer link between the worker's wage and the enterprise's profitabi-

Introduction

13

lity. Similar statements have been made by political leaders and economists in all Eastern countries, including even China and Albania. The reforms under way in these countries, though varied in form and degree, are all aimed at decentralizing the decision-making process, increasing wage differentials, making pay more flexible and giving managements a greater financial stake in the enterprise. In point of fact, pay schemes are much more than just management tools or motivation techniques. Bernard Mottez showed convincingly16 that they are also, and perhaps above all, instruments of cultural action. Their aim is to arouse an economic consciousness in the working class, to instill in the minds of workers the values of productivity, profitability, competitiveness, effort, responsibility, cooperation (sometimes), entrepreneurship... In other words, to "socialize" workers to the culture of performance in the hope that a payment system of this kind and this culture both "perform well"... The triangular game of pay, performance and culture fosters the double games of participation. Just what does this mean? And just what do we understand by the all-purpose word "participation"? Participation can in fact be technical, institutional, economic, social, psychological, cultural and financial. It can permeate various levels: the production system, the administration system or the management system; work, management, power or money17. In this book, which deals essentially with the problematic issues of pay systems as a whole, we have deliberately confined ourselves to a very precise meaning of participation; unless otherwise stated, it is given to mean the financial participation of workers to the fruits of the production activity to which they contribute. But in this limited sense, there are many facets to participation: participation in capital, in profits, productivity, prosperity, results. Through the use of this term, we are looking to stress what is one of the basic principles of the pay-performance link, namely that it is because the worker "participates" (i.e. takes part) in achieving economic performances that he has the right to "partake" of them (i.e. share the fruits of). "Participation" is at the same time contribution and reward. This is true for all forms of payment systems that relate to performance, from the simplest (piecework) to the most sophisticated (e.g. proportional wage). The general concept of participation, as taken up in our title, is therefore at the same time stricter and broader than the many and varied senses it is commonly taken to have. It is stricter inasmuch as it is reduced to financial participation only18, and broader inasmuch as it encompasses all aspects of the latter and is not limited solely to profit-sharing. The other dimensions of participation are not, however, to be overlooked: financial participation is the reward for technical participation (to the production system), a reward that - as we will be seeing brings into play various forms of social participation (to the system of relations) and institutional participation (to the system of power). So that there are two facets to this participation - contribution and reward and it is characterized by a series of "double games1'. This expression is of

14

Introduction

course used in the title somewhat provocatively. But it also touches on an essential aspect of the analysis we will be presenting. To play a double game means "to act in two ways so as to deceive". One of the premises of our recent considerations was the fact that participation "acted in two (contradictory) ways" and that this could in all good faith "deceive" unsuspecting social actors. The most striking example of such a "double game" - pay linked to performance, within the context of a neo-liberal deregulation policy - may well serve the purpose of regulating behaviour and production. Yet another example is the pursuit of equity, which tends to exacerbate inequalities. As our research work progressed, we were able to identify a series of "double games", which could deceive employers and/or workers, without necessarily meaning to. In reality, these "double games" are nothing more than the expression of the contradictory, dialectic and often paradoxical nature of social realities. The use of the plural is justified, for it is a matter not of a perverse double game, but of a series of double games that are inherent in the logic of the system... though this does not exclude the possibility that some knowingly resort to one or more of these double games for what they may see as - or hope to be - their own advantage. From what has already been said, the attentive reader will by now have guessed what we firmly believe is the original theoretical and practical contribution our research has to make. What we are in fact proposing is a sociological and psychosociological analysis in a field that abounds with technical and economic treatises. In so doing, we are also looking to bring into new focus a field of research that has been given little if any consideration by sociologists: the remuneration of labour, a subject that does not rate highly amid the noble values of sociology, and yet is at the crux of the crucial problematic issues at stake for the future of the social system. The stakes here are high, for individuals, groups and institutions: justice and equity (political stakes), motivation, reward and pay (psychological stakes), individualization, autonomy and performance (cultural stakes). Our study is sociological, too, in the ongoing comparison that is made, at various stages of our analysis, of the situations encountered in two main kinds of industrialized societies: market economy countries and centrally planned economy countries. It is a comparison which, through the pages, and beyond the undeniable divergences between these systems, looks to bring to light certain convergences that are rich in teachings. Alongside these two original aspects of the study - the sociological perspective and the East/West comparison - also addressed are new developments not dealt with in the 1972 study. The analysis central to this study, which has been revised, updated and supplemented, features in Part Two of this book: the game of participation or payment by results in theory, in practice and in perspective. In view of the new trends that have emerged, of the data collected and of our more ambitious approach, we felt it would be helpful to precede this analysis

Introduction

15

with a description of the context and of how it has developed, for it holds the explanation for many of the new aspects of the problems of payment systems. Little by little, this description, initially intended to be set down in just a few pages, grew to make up the first part of the book - the stakes of participation : equity, productivity, flexibility, solidarity, freedom and society. As for Part Three, the theatre of participation, it broadens the debate by exploring new avenues for theoretical and practical consideration. It sets the stage, so to speak, for the theoretical foundation of a sociology of remuneration and the practical implementation of participation strategies. At the end of it, performance-linked pay, payment by results, may be seen for what it is in its sociological reality: a management tool certainly, but also a bargaining tool and, above all, a means of social and cultural action - in short, a development tool. The way will then be clear for a look at the specific problems raised by the introduction and application of performance-linked pay schemes in industrializing societies. Given the information available and our concern not to overburden an analysis that is complex enough in itself, we have deliberately confined our study - barring one or two exceptions - to industrialized countries. We have been able to analyze the findings of scientific or supposedly scientific investigations originating for a number of them: Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, Norway, Sweden, the United States for the market economy countries; Albania, Bulgaria, China, Czechoslovakia, Hungary, Poland, the Soviet Union, Yugoslavia, for the planned economy countries. Some of our conclusions may have little relevancy to industrializing countries, others none at all, owing to the deep-rooted differences in economic, social and cultural background. Only a specific study, based on the assumptions put forward in this one, would make it possible to determine the specific conditions in which performance-linked pay systems could be applied in developing economies. It would at this point no doubt be helpful to place payment by results in the overall context of the worker's pay, which is in fact made up of three main parts: - the work wage : that is to say, the pay directly linked to the employee's participation in the production process, the pay that reflects and rewards his productive contribution within the enterprise, his pay for doing the job; this portion of the pay therefore relates essentially to the worker's status as a producer, i.e. as a member of an economic institution producing goods or services, of a work community; - the social wage (family allowance, paid holidays, unemployment benefits, retirement pension, etc...), that is to say, the pay indirectly linked to the employees' participation in the economic activity, deferred pay resulting from a process of re-distribution of earnings and which must enable the worker to

16

Introduction

live and support his family: this portion of the pay relates to the worker outside his enterprise, as a "consumer" in the sociological sense (consumer of material goods, services and culture); - the community wage (benefits that are collective in their source and use, e.g. refectories, holiday homes): these pay components, which are not quantifiable by the employee and not chargeable to the contracting enterprise, have to be taken into consideration by the sociologist, the employer and trade unionist looking to measure the factors likely to influence workers' attitudes towards the enterprise. Payment by results is of course part of the work wage, which is made up of three types of components: - the basic wage, proportionate to work time and closely related to the worker's skill or the requirements of the job; - wage complements and supplements not linked to results, but on the other hand linked to personal qualities or qualifications such as seniority or length of service, or to working conditions or to any other factor independent of the result of production; - wage complements and supplements linked to results, i.e. production measured quantitatively, be it directly in the form of a relation to the quantity of pieces produced, indirectly in the form of a relation to output or productivity, or derivatively in the form of a relation to prosperity, turnover or profits. In theory, it is only this third category which should fall within the scope of our study. This would mean leaving aside such problems as those concerning basic pay, job requirements, work analysis and merit-rating. In practice, as we will be seeing, performance can be an element used to calculate virtually every one of the components of pay. This will be pointed out as and when appropriate, so that we will not be looking specifically at how the basic wage is determined, though passing reference will be made as to just how performance is taken into account in this determination. Performance-linked payment is common practice not only in industry, but also in distribution. Most of the findings regarding industrial sectors also apply to commercial sectors, as some recent studies have shown. To avoid any unnecessary repetition and to make for easier reading, this study has been designed and presented in keeping with industrial realities, for which by far the largest number of in-depth studies is available. Readers interested in transposing the analysis to the commercial field should have no difficulty in doing so. To help them, attention will be drawn to suggestive points of comparison as and when applicable. In addition to the restrictions already mentioned and to avoid any misunderstanding, a few other limitations are to be noted. In the pages that follow, readers should not expect to find either practical tips or information on a series of

Introduction

17

subjects o f interest which cannot at present be included in our range of considerations for lack o f space and time. Such subjects include pay levels and mechanisms for determining pay levels, techniques for setting output standards, the social w a g e and the community wage, the specific problems of payment by results in small enterprises, payment o f white-collar e m p l o y e e s , executives and managers, e t c . . . These will of course be discussed in the course o f any specific analysis or in the conclusions, as and w h e n this helps to shed light on our main theme.

Notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Marcel Bolle De Bal, 1967a, 1967b; Marcel Bolle De Bal and Christian Dejean, 1959, 1960a, 1961, 1963, 1966; Christian Dejean, 1962. All of which are listed under a special heading (Section H) in the bibliography at the end of this book. I.L.O., 1951. Marcel Bolle De Bal, 1972. Patricia Bolle, 1980, Marie-Noël Beauchesne, 1980, 1981. The detailed list of reports published in this field is set out in sections D2, D3 and F.4.1 of the bibliography at the end of this book. I.L.O., 1985. I.L.O., 1985, P. VI. The papers presented at this conference are listed in sections C.6 and F.3.6 of the bibliography at the end of this book. Marcel Bolle De Bal et al., 1987. Karl Marx, Das Kapital, section 6, ch. XXI, in Karl Marx, 1965, p. 1055. I.L.O., 1951. Marcel Bolle De Bal and Christian Dejean, 1966. Marcel Bolle De Bal, 1972. I.L.O., 1985. Bernard Mottez, 1966. Marcel Bolle De Bal, 1967, pp. 21 -26. In France, there is a tendency today to use the term "participation" to cover a profusion of experimental social projects launched in the wake of the "Auroux laws" on the "right of expression of employees"; among the many works dealing with this subject, see Renaud Sainsaulieu, 1987; Daniel Mothe-Gautrat, 1986; Jacques Gautrat, and Dominique Martin, 1984.

Part One The Stakes of Participation

Before looking at the actual operation of pay schemes linking pay to performances, that is to say, the game of participation, we would first like to outline their context, i.e. the stakes of this participation. This context - which is important for it sheds light on, influences and lays down the rules of the game - can be considered from seven points of view that bring into focus six crucial issues and the six double games of participation associated with them. The seven points of view, from which the problems of pay and the linking of pay to performances can be considered, correspond to various branches of human science and raise specific issues: - from a philosophical point of view, the issue of a "fair wage"; - from a technical point of view (material systems and systems of organization), the issue of innovation, its inducements and its rewards, and also the question of autonomy and interdependence; - from an economic point of view, the issue of flexibility and deregulation; - from a psychological point of view, the issue of motivation, mobilization, stimulation and involvement; - from a sociological point of view, the issue of anomie, alienation and unbinding; - from a political, legal and institutional point of view: the issue of freedom, democracy and participation in general; - from a cultural point of view: the issue of the model of the emerging society. The psychological point of view is at the same time central to our theme and runs crossways through it in relation to the other six. These more or less correspond to six crucial issues associated with the implementation of formulas for linking pay to performance: equity, productivity flexibility, solidarity, freedom and society. Woven around these six issues are six double games that typify the often paradoxical dialectic of payment systems. Indeed their ambivalence is revealed in the pursuit of seemingly contradictory objectives: equity and equality, quantity and quality, deregulation and regulation, binding and unbinding, independence and interdependence, production and reproduction.

Chapter I Pay and equity One of the oldest issues at stake when it comes to pay and to the variety of its forms of payment is respect for equity. Even back in the Middle Ages, the tenet of the "Just Wage" inspired many treatises, the most widely read of which were those of the scholastic doctrinarians.

I. Just Wage and scholastic thought According to Michael Fogarty1, this scholastic doctrine of the "Just Wage" had four fundamental rules: Rule n° 1 - Equal pay for equal working capacity Pay should be equal to the working capacity of the worker, which value is measured by reference to the market value of each grade of labour. The equitable nature of pay must at the same time be guaranteed by agreement (commutative justice) and by the legal framework in which it is placed (social justice). Rule n° 2 - To each according to his status Every worker must be able to maintain, for himself and for his family, the standard of living warranted by his ability, as well as by his status as a producer and consumer. Rule n° 3 - Respect for the common good Pay should be consistent with the overall resources of the community. Rule n° 4 - Avoidance of compensation between pay and other conditions of work, barring exceptional cases Through all four rules runs a common theme: pay is not simply a balancing factor in an economic equation or a tool for the sound management of the economy. It is in an important sense one of the ends of the economy insofar as it concerns the well-being of workers. This doctrine reached a high level of sophistication in the Middle Ages, and went on developing into the 17th century. By the 18th century and the first three-quarters of the 19th century, in the full tide of liberal economics, it had been reduced to little more than a museum piece. In Great Britain, the most advanced industrial country of the mid-19th century, the idea of a just wage survived, in a fragmentary and often distorted form, in the belief of the labour movement and in the practice of industrial relations. It was at the end of the golden era of extreme liberalism that renewed interest was shown in the idea of the just wage: money was not everything, nor were competition and profit, capitalism had to be social (to avoid society becoming a socialist society) and

Chapter I: Pay and equity

21

account had to be taken of the needs of workers, pay had to be consistent with not only economic considerations, but also standards of equity.

II. Just wage and just performance This debate on the equity of pay was particularly rife in Great Britain, where it carried on through to the mid-20th century. It had its heyday in the fifties, which saw a spate of scientific publications on the subject2 by researchers from various branches of the social sciences (economics, psychology, sociology) who brought into the analysis of this concept with its strong moral and ethical connotations and of the determination of its purport, the techniques and viewpoints of their own particular fields. At the time of their study of systems of payment by results, the industrial psychologists Sylvia Shimmin3 and Hilde Behrend4 noted the existence of standards and more or less equitable rates, and set about trying to understand their origin. From this stemmed the idea that, in the case of payment by output, the just wage can but be the result of another concept, that of just work, what Hilde Behrend calls "fair day's work", that is to say the amount of work that has to be provided in a day according to certain ethical standards5. This is a subjective and hence non-measurable notion, but it is to be said that the just, fair, honest nature of it rests not on a work analysis of any kind, but really on the opinion and feelings of the parties to the work contract6. W. Baldamus - a sociologist - pursued his colleague's line of thought and went on to develop the concept of "wage effort parity", which is the standard that is set after negotiation of the effort to be provided and becomes stable because it is deemed fair and consequently acceptable to the two parties. The term chosen by W. Baldamus to express production-wage conditions in which the standards are deemed equitable (i.e. requiring neither too much nor too little effort in order to be achieved) includes neither the term "equity" nor the term "fairness", as these notions inevitably imply comparisons between total gains. It expresses the situations in which management is no longer looking to reduce the rate and the worker to increasing it for a given effort. The just wage corresponds to the just effort and vice versa, the objective being to define an equitable balance between the two. Just work, just effort - both these notions can legitimately be summed up by "just performance", which covers them both.

III. Fair pay and responsibility The works of S. Shimmin, H. Behrend and W. Baldamus concern the blue-collar worker. Surprising though it may seem, it should be possible to apply their findings, mutatis mutandis, to the remuneration of white-collar workers. This is

22

Part One: The Stakes of Participation

at any rate what emerges from the striking parallelism to be noted between the analysis of the sociologist W. Baldamus and that of Elliott Jaques, consultant psychiatrist at the Glacier Metal Cy 8 . Parallelism not only in the theoretical preoccupations (research into the scientific laws or subjective criteria underlying the determination of the just wage) and in the graphic representation of this process of determination (a balancing curve between pay and one other factor - effort for W. Baldamus and responsibility for E. Jaques), but also in the description of the process of adjustment of wages and salaries to this curve. The main difference between the two consequently lies in the reference criterion for determination of the just wage. W. Baldamus, with his expertise and experience of manual work and production bonuses, made a thorough investigation of the problems raised by the remuneration and stimulation of workers' effort. E. Jaques, on the other hand, evolves his theory around "responsibility". In his view, the principle whereby the range of wages and salaries must be commensurate with the degree of responsibility of the work seems beyond doubt. So that this problem amounts to being able to measure this degree. E. Jaques' originality lies precisely in his having discovered a yardstick for measuring responsibility, a standard which he called the "time span of discretion"9. He defines this as the longest span of time that an employee can and should exercise his own initiative at work, without intervention from his superior. According to Elliott Jaques, the benefit of this notion lies in the fact that he has found there to be a close connection in the minds of individuals between their margin of initiative and the level of pay they feel is fair for the work they do. If their pay is higher than this level, they feel they are getting more than their fair share; if it is lower, they get the opposite impression. Clearly, then, these feelings have a bearing on their attitude to work: tensions arise as much from under-pay as under-employment (when the individual is getting fair pay for the work he does, but has qualifications and skills that would enable him to do a higher grade job) or over-employment (when the responsibilities placed on an individual exceed his personal capacities). The feeling of fairness or unfairness can be a key factor of job satisfaction and productive efficiency.

IV. Fair pay and technical progress The definition of fair pay can be refined, and some of the finer points differentiated, by more closely comparing the works of W. Baldamus and E. Jaques. Each one of these researchers lays claim to his theory having a much broader validity than that of the works personally conducted by them; W. Baldamus implies that his interpretation does not limit him to output-rated work, but that it

Chapter I: Pay and equity

23

is probably also valid for time-rated work 10 ; at the expense of a few variations, E. Jaques integrates into his theory the case of some time-rated" manual workers, and goes so far as to say that some of his findings show his model can even be applied to production-rated workers 12 . Such claims - which we are not looking here to either prove or disprove - do however, we feel, by the sheer fact that both exist - call for some nuances and restrictions to be made: simplistic and monistic in their interpretation of reality, we feel that they take insufficient account of a factor that should relativize the implication, namely the technical factor and the type of work. When production is mechanized, automated and computerized, when manual work and the job of operator give way to supervisory work, can one still talk of a relation between effort and work? On the other hand, is it realistic to want to assess physical manual work in terms of responsibility? Investigations carried out by the ECSC have shown that technological progress brings a change in workers' influence over production: preventive influence replaces creative influence 13 , responsibility takes precedence over effort 14 ; that changing trends in the methods of payment reflect or should reflect this change (the basic wage portion - remuneration of the effort); that workers are aware of this changing trend and take it into account in assessing their basic wage 15 . Does this not lead one to think that Baldamus' and Jaques' hypotheses are more complementary than opposite, that the solution to the just wage problem lies in their synthesis and their interpretation with regard to the technological variable?

V. Fair pay and equitable pay structure Another aspect of Elliott Jaques' arguments is worth mentioning. After having extended his investigations to several companies, he alludes to the "de facto" existence, in Great Britain, of a national wages and salaries structure, and regards the conformity of wages and salaries to the scales of this structure as the origin of the feeling that equity of pay exists; inversely, intuitively perceived deviations from this structure are, it seems, the cause of conflicts over the range of pay in industry. Needless to say, this assertion is not unanimously adhered to by experts on the question, particularly economists. Among these, Hugh Clegg, counters E. Jaques' assumption, denying the existence of a national "fair wage" standard 16 for, as he points out, certain sociological variables enter into the determination of standards at local level, be it the regional variable, the technical variable (the degree of technical modernization) or the economic variable (state of the market in one or other branch of industry). Certainly this economist's training makes him instinctively wary of a concept as subjective and as normative as that of the "fair wage" 17 : economic wage theories, whether the market theory or the collective bargaining theory, describe what is, not what should be. Hugh Clegg

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maintains that the arguments of justice and equity serve only to camouflage the real - economic or institutional- forces at play for which they are a tactical ploy. But the British Civil Service, which has called this economist in several times for consultation, has had to adopt a somewhat different point of view, seeing as how various committees formed within the civil service have been set the task of defining an equitable basis for comparison of civil servants' wages and salaries. The definitions they used to specify this notion of equity prompt Hugh Clegg to acknowledge that the "fair wage" is a concept determined as much by a number of social norms as by free play of the market or collective bargaining. However, the fact that there is tacit agreement on the idea and the level of the "fair wage" does not make the determination of a national wages and salaries structure based on equity considerations any the more feasible; studies carried out show that such a structure would rapidly come into conflict either with market forces or with the resultant of the ratio of social forces, or with both. Differences from region to region, and from firm to firm, are inevitable.

VI. Fair wage, fair income and right price

This British debate - the most advanced on the subject - highlights the ambivalence of the expression "fair wage". This ambivalence is clearly illustrated by the two meanings which characterize the adjective "just". Ethically, "just" is that which is "fair", equitable, in keeping with prevalent moral and social standards. Technically, "just" ("just so") is that which is "right", exact, in keeping with scientific norms. In the first sense, the fair wage is that which is consistent with the feeling of equity, the satisfaction of the human needs of the worker and of his family - in short, the income that allows every one to have a decent living, a socially just wage. In the second sense, the "right" wage is the wage which is consistent with a balanced supply and demand on the labour market, that is to say, the wage that is economically right, the right price for the job. Justice in the first case, justness in the second; the two can meet, and indeed coincide, but this is not always so. The right price for the job is not always enough to give the worker the fair income he should be getting according to standards of equity. This debate is not of course confined to Britain. Examples of such controversies and similar questions are to be found in most capitalist and socialist, developed and developing, economic systems. Did Taylor himself not base his system of scientific organization of work on "motivation through fair pay"18. Two issues appear to be at the heart of these comparisons: when it comes to wages and salaries, how does one make the link between equity and rationality on the one hand, and between equity and equality on the other hand?

Chapter I: Pay and equity

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VII. Equity and rationality Should not those responsible for devising wages and incomes policies be concerned - as Barbara Wootton at any rate would have it19 - with making a "rational", that is to say, "reasonable" determination of the wage amount? Everybody agrees to wanting equitable and "reasonable" wages and salaries bargaining, and experts are mobilized to work out the most "rational" procedures for achieving this, i.e., equity. And yet, while nobody is able to define with commonly accepted precision the tenor of the word "justice", equity appears to be being sought in the application of reason to the realm of values... A positivist myth of triumphant rationalism or a technocratic illusion of scientific solutions? It is interesting to note how never-ending philosophical contentions keep cropping up in a field as pragmatic as that of forms of wage payment. Yet modern-day managements bother little with such personal feelings on the matter. Mediaeval doctrines stand no chance of cooling their productivist ardour; scholastic theory can flourish under the lee of academic precincts, provided it never ventures out inopportunely. For determining the level of wages - and any increase thereof, their allegiance lies with a new criterion of rationality: the level of - or raising of - productivity20. This criterion has the peculiarity of being purely economic, with the increase in productivity allowing for the increase in wages, but also setting the limit that is not to be exceeded in this respect. Disregard for this rule would undermine economic rationality, and hence in the medium term, wage and social equity. Economics clearly have priority: productivity is at the same time a limit and an opportunity - the criterion of the harmonious development of society. All things social are defined merely as an economic pre-requisite - equity is the instrument of efficiency. This development of the "fair wage" concept can be summed up in three stages21. The first is that of the scholastic theory: the "just wage", defined by moral criteria, is at the same time the minimum (to avoid the adverse effects of worker laziness) to be paid to workers whose needs are therefore regarded as limited. The second is that of the classical theory: the "fair wage", this time not in moral but in economic terms, is determined by the effect of competition, like the market price of labour. The third is manifest in developed industrial societies: the "fair wage" is no longer only a universal economic problem, of a sector or of the economic system, beyond the law of supply and demand. It has to do with the conditions of economic growth as a whole. Equity ceases to be a defensive criterion (respect for men and/or respect for the market), to become one element of an offensive strategy (participation in the development of the system). Throughout these three stages, equity and efficiency have always been attendant but, in the hierarchy of values, the one has gradually superseded the other. Here, as elsewhere, rationality is tending to tighten its hold over the system, including in the field of human management.

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VIII. Equity and equality When it comes to equity, does rationality imply equality? At first glance, this may appear to be so. And there are those who firmly uphold this view, while others maintain quite the opposite. The fact that equality is a value widely adhered to is confirmed by the cherished feminist claim "Equal pay for equal work". And the principle itself implies that if the work is not equal, then the pay should not be either. A fair wage is not necessarily an equal wage, but is dependent on the context and its many dimensions. For the worker, the wage must be fair by comparison with that of others, and fair with regard to his effort - equality and equity. Equality of rights, equality of opportunities, equality of conditions and equality of wages and incomes - such are the principles that have guided the action of the labour movement for decades, and that have inspired social reforms in capitalist countries and the socialist revolution in professed communist countries. On both sides, reality has imposed its restrictive and sometimes paradoxical logic. In the West, egalitarian reforms have exacerbated certain inequalities. In the East, the equality of incomes is being seen less and less as a source and sign of social justice. In the West, the "egalitarian machine" 22 is grinding to a halt. For the last fifty years or so, all manner of procedures, mechanisms and institutions have been set up in numerous developed countries in order to taper inegalities. On all fronts, one thing is becoming clear - not only is the Welfare State in crisis, not only is it coming up against the traditional inequalities but, above all, it is introducing new inequalities that are making matters worse and which it is all but able to control. As Alain Mine puts it: "equality now functions like a machine with its step-down gears engaged" 23 . New pockets of inequality are appearing. The Fourth World bears witness to the insiduous inequality that is creeping into a relatively opulent economy. Egalitarian action - on the left and right - has had its success, through the raising of the minimum wage, the gradual build-up of fiscal pressure and the logic of collective bargaining, in bringing about a consolidation of wages and salaries and narrowing the wages and incomes gap. Social and political reaction was not long in coming, and the individualization of wages and salaries, and of pay increases, the linking of wages to results and productivity, the détaxation of profits, of movable assets and of capital gains, are now top of the bill considerations. The hierarchy of the priviledged is being overturned. It is bondholders first, followed by shareholders, then holders of immovable assets and finally, way behind, employees, however highly-paid they may be. Pay may be more equal - and that would still remain to be shown but the same cannot be said for incomes. Where, in all this, are justice and equity? In the East, things are following a similar course. Long gone is the time when Marx urged workers to rid their banners of the slogan "a fair wage for a fair

Chapter I: Pay and equity

27

day's work" - which he denounced as conservative - and to put up in its place the revolutionary watchword "down with wage-earners!"24. With Perestro'ika and Glasnost as the watchwords of today, echoing the assertions of Trotsky for whom the "socialist forms of ownership" accord well with... "the capitalist principle of the remuneration of labour"25, the same questions are being asked on all fronts as to just where egalitarian policy comes into revolutionary plans. So far as Perestro'ika (restructuring) is concerned, in centrally planned economy countries, the need for fundamental economic reform is generally recognized. With Glasnost (transparency), wage egalitarianism is ceasing to be a taboo subject, so that tongues are being loosened and the contradiction brought out into the open: the solution of economic problems implies greater material inequality, whereas solving social problems calls for greater equality. Others are quick to say that this is a misperception of "justice" (in the economic sense) in a socialist regime26, that the levelling out of wages is the antithesis of justice, that it is aimed at ensuring equality of consumption by disregarding production needs, differences in output, the equitable remuneration of the effort provided. Levelling ensures social inequality at the expense of social justice27. Social justice - one of Mikhail Gorbachev's ongoing concerns - cannot be reduced to an artificial equalization, for one of the cardinal principles of socialism is the relation between wages and the effort provided28. In the face of such acknowledged contradictions between social equality and social justice, no one in the Soviet camp sees the moment of reconciliation between the two concepts as being far off given the analogue situations facing the various social groups. While awaiting this future dialectic synthesis on the communist path, the leaders' main task must be the achievement of "socialist justice", namely the fair remuneration of the effort provided29. This distinction between "social justice" and "socialist justice" is instrumental in maintaining an ideological cohesion threatened by the disturbing issue of equality. Soviet authors are not alone in throwing open such a debate in East European countries: in Hungary, in Bulgaria and elsewhere, the same question is being asked30. While most decision-makers and observers seem to be resigning themselves to the inevitable inequality, seen as the price of efficiency and a paradoxical instrument of a form of equity, some well-meaning idealists persist in arguing the case for radical solutions, for another cultural model, in this case called the "egalitarian scenario"31. Have they got in wrong? Or should such suppositions be given a chance of being put to the test? It is a question that has no easy answer. But it is worth asking all the same.

IX. The fair wage: a few sayings In this debate, the argument revolves around a few mottoes and sayings that everybody can and tends to interpret to fit his own theory:

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Part One: The Stakes of Participation

- "To each according to his needs" - "From each according to his means, to each according to his labours" - "To each according to his worth". Such sayings are being defined as fundamental socialist principles... while a good many capitalists could argue that they are the mainspring of their own wages policies. But the best known slogan in market economy countries is that of the feminist movement: - "Equal pay for equal work" And so, the two camps go on sending back to each other the balls of equity, equality and efficiency...

X. The double game: equity and inequality The idea of a "fair wage" - seemingly simple to start with - appears apt to encompass the most divergent of hypotheses on the financial participation of workers, including that of pay linked to results. Indeed, back in the 19th century, Euverte, the manager of a French undertaking, wrote that the basic principle of a good wages policy should be "to pay what it takes to get the most and the best possible"32. Which prompts Bernard Mottez to stress that from this point of view "the incentive value is the criterion of the just wage"33. The current debate on this between socialist leaders and experts echoes the debate that has since the last century in capitalist systems been opposing the economic priorities of employers and the social arguments of workers on all fronts. This is the first double game of participation. Systems linking pay to performance seek to simultaneously satisfy - to varying degrees and with different priorities depending on the context - two often contradictory imperatives: equality and efficiency34. Through more or less successful compromises, they are therefore at the same time conducive to equity and to inequality. In short, to a necessary and fragile synthesis: a higher degree of equity which, depending on one's tastes, may be qualified as socio-economic or "socialist"35.

Notes 1 2 3 4 5 6

Michael Fogarty, 1961, pp. 257-300. Marcel Bolle De Bai, 1962. Sylvia Shimmin, 1959. Hilde Behrend, 1959. Hilde Behrend, 1961, p. 102. Hilde Behrend, 1961, p. 118.

Chapter I: Pay and equity 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

29

W. Baldamus, 1957, 1960, 1961. Elliott Jaques, 1951, 1956, 1961. Elliott Jaques, 1956, pp. 32-42. W. Baldamus, 1957, p. 198. Elliott Jaques, 1956, pp. 61-72. Elliott Jaques, 1961, pp. 235-236. Burkhart Lutz and Alfred Willener, 1960, p. 86. Marcel Bolle De Bal et al., 1958, II, p. 148. Marcel Bolle De Bal et al., 1958, II, pp. 147-148. Hugh Clegg, 1961, p. 212. Hugh Clegg, 1961. Maurice de Montmollin, 1981, p. 124. Barbara Wootton, 1955, p. 162. Bernard Mottez, 1966, pp. 207-208. Bernard Mottez, 1966, p. 208. Alain Mine, 1987. Alain Mine, 1987, p. 13. Karl Marx, Wages, prices and surplus value (18 bis), in Karl Marx, 1965, p. 533. Léon Trotsky, 1936, p. 39, cited by Maximilien Rubel, 1965, p. 1685. N. Rimashevskaya, 1986, pp. 6-7. V.Z. Rogovin, 1986, p. 7. T. Serebrennikova 1988, p. 8. T. Zaslavskaya 1986, p. 66. For Hungary, see for example: Lajos Hethy, 1986 a, p. 5; for Bulgaria: Krastyo Petkov and Yordan Boshilov, 1986, p. 9. Robert Leroy, 1983. Euverte, 1870. Bernard Mottez, 1966, p. 74. Paul Trescott (for China), 1985; Catherine Antoine, p. 195. See Lajos Hethy, 1987 a, p. 14.

Chapter 2 Pay and productivity The debates on equity of pay, as summarized in the preceding chapter, demonstrate the central importance, in the choice of payment systems, of productivity and such related issues as technical progress, new forms of work organization, motivation and mobilization of labour, fear of unemployment, the development of skills and the operation and evolution of wage schemes.

I. Productivity and technical progress The concept of "productivity" had its heyday in the years following World War II. At this time, the imperatives of economic reconstruction and international competition led European social actors to look closely, partly thanks to funds provided under the Marshall Plan, at the determinant factors of America's high level of productivity. They saw it as being associated with two main factors: the technological advance and the management of human resources. So that from a vague theoretical notion, "productivity" suddenly became an instrument for measuring technical process. More particularly, it came to be a measure of the "productivity of labour", that is to say, the ratio between the quantity of goods produced and the number of hours needed to produce them; technological progress - be it mechanization, automation or computerization - essentially has the effect of increasing the number of goods produced by unit of time, and of reducing the time needed to produce a given quantity of goods. Logically, then, every technological development implies a concomitant increase in the productivity of labour and an improvement in economic results. Hence, in order to make workers party to the benefits of technological progress, the idea of giving workers a financial stake in the fruits of increased productivity and of replacing systems of payment based on output with schemes that gave workers a stake in productivity.

II. Productivity and output In point of fact, without going into any lengthy semantic debates on the theoretical definitions of the terms "output" and "productivity"1, we can, for our present purposes, concur in acknowledging an essential distinction between the two. Productivity, as we have just seen, has to do with a ratio between "inputs" and "outputs" when these are expressed in different units (quantity of products/-

Chapter 2: Pay and productivity

31

hours of work), whereas output refers to a similar ratio, but where "inputs" and "outputs" are expressed in the same unit. Generally speaking, this definition may seem arbitrary. In the case of human output, and hence wage payment systems - it is altogether justified. Within much broader economic and social policies, output and productivity bonuses in fact have separate objectives. Policies on output - and hence output incentive schemes - focus on the individual's effort, on his work, on his output, and are aimed at pushing him to work more and faster. The "output" criterion serves this purpose. Technically, output is measured in percentage ("inputs" and "outputs" are expressed in the same unit) "all other conditions (production methods in particular) being equal". On the other hand, policies on productivity - and hence productivity bonuses - focus on the economy of production factors, on a long term vision, and are aimed at making the worker work better, in more favourable conditions. "Productivity", being not a technical but an economic and social concept, is consistent with this aim. It is assessed in terms of the evolution of different factors, including the work factor, which enter into the determination of the result.

III. Productivity and motivation Reward for personal efforts on the one hand, sharing of the fruits of technological progress on the other hand. Stimulation on one side, participation on the other. The aims of these bonuses - output and productivity bonuses - are clearly different, albeit designed to do the same thing, i.e. to motivate workers and to mobilize the labour force. Changes and developments in technology (where any acceleration quickly renders output measurements obsolete), in the economy (requirements arising from corporate concentrations), in the social arena (worker opposition), and cultural arena (evolution of needs), is prompting employers to gradually replace their systems of payment by output, which have become dysfunctional, not with time-rates, but with productivity bonuses and incentive schemes, which are judged to be more modern, better suited to the demands of production and the aspirations of producers. The workers, it is assumed, want their share of the increases in productivity made possible by their contribution. The employers, on the other hand, are concerned with overcoming workers' resistance to the introduction of new production techniques and dispelling the fears these give rise to regarding unemployment, the stress associated with higher production rates and having to acquire new skills. Motivating anxious workers, mobilizing the forces available to win the ongoing battle against technological progress, such are the issues underlying employers' policies to give workers a financial stake in productivity.

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IV. Productivity and work organization In this perspective, technological progress can be viewed more broadly to include progress in work organization techniques (up to and including - why not? - that of psychosociological human resources management techniques...). The "new forms of work organization" (N.F.W.O.) - job enrichment, autonomous groups, quality circles, flexible workshops, brigades, etc... - are also a response to the concern to improve productivity, not short term output, but productivity in the medium and long term, by taking into consideration workers' needs for expression, achievement and autonomy, through the setting up of structures making better use of their creative potential, a potential scorned by traditional practices of scientific work organization. In addition to the introduction of new forms of work organization, new methods of wage payment can be applied, be it in the way the basic wage is calculated, through merit- rating or various bonuses and incentives. One way or another, these formulas will aim to raise workers' awareness of the problems and benefits of productivity. The twofold objective pursued is to remunerate the newly-acquired skills necessary and to share the savings made possible as a result of new organization techniques. Work organization does not determine the system of remuneration. What it does is define a series of constraints and opportunities which should or could be taken into account by management and workers.

V. Productivity and innovation More fundamentally, and in the longer term, one concern is taking shape, that of fostering the system's creativity by convincing workers of the benefits to be gained from accepting the innovations that come from outside or which they themselves bring about. This is telling of the employers' desire to "socialize" the working class by sowing in a worker milieu that is wary by nature and culture, the seeds of another culture, that of change, technological progress and innovation. This is done on two fronts, firstly, with the aim of overcoming prejudices concerning the machine in order to facilitate the introduction of new technologies and, secondly, more pragmatically, with the aim of inciting workers to prevent breakdowns, incidents and other work stoppages, a vital pre-requisite for improving the profitability of modern plant and equipment.

VI. Productivity and socialism This focussing on productivity and innovation has in recent years become particularly marked in centrally planned economy countries. It underlies the

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33

wave of economic reforms that for a quarter of a century now has been sweeping through these countries and gaining momentum year after year. The central issue of these reforms is the transition from a policy of extensive growth, based on the use of a plentiful supply of manpower, to a policy of intensive growth made necessary by the growing scarcity of this self same labour force 2 . So that, in these countries now too, but with some delay, the focus is on work productivity, the profitability of production units, innovation, inducing workers' concern for technological progress and productivity, that is to say, for the quantity as well as the quality of production.

VII. The double game: quantity and quality There can be little doubt that productivity is a major focus of wage payment systems. This is true in at least two reciprocal and complementary senses: the influence of productivity on wages, and the influence of wages on productivity. This interrelation highlights the second double game, that of quantity versus quality. As long as pay remained linked to output, the emphasis was on quantity (maximizing production). But as soon as pay became linked to productivity, the emphasis shifted to quality (optimizing production). Quality, however, manifests itself in a number of areas; quality of conditions of production, quality of products, quality of services, quality of life at work and outside work. Quality in each of these areas can help to boost productivity by promoting a better attitude among workers towards their work. The objective of maximizing production gives way to that of optimizing production, with the latter implying often difficult, but ever necessary trade-offs between quantity and quality.

Notes 1 2

For such an analysis, see Marcel Bolle De Bal and Christian Dejean, 1966, pp. 174 and following. J. Wilczynski, 1973, p. 17.

Chapter 3 Pay and flexibility Flexibility is the order of the day. It has become the watchword of neo-liberalist ideology. It is lauded with all the economic, social and political virtues, including debureaucratization, stimulation of employment, the autonomy of individuals and groups, freedom. In many ways, it can be enticing to alienated workers in large and depersonalized economic and social organizations. The quest for flexibility also stimulates efforts to institute a stronger link between pay and performance. The flexibility of wages - and hence costs - is thought to reflect and/or promote personal and structural flexibility, as well as the flexibility of the labour market and of management methods. Flexibility is therefore a burning central issue in determining the future of payment systems1.

I. Flexibility and security: the Japanese model The Japanese model seems in this case to serve as a reference, especially for European Economic Community (E.E.C.) officials: "Adjusting wage differences means adjusting changes to (collective) agreements; in some cases, changes need to be made to provisions of law. One option would be to make a portion of the total wage a flexible component varying according to corporate results and profits. This component represents 30% of the total pay-packet in Japanese enterprises, and this element of real labour cost flexibility has contributed in Japan to maintaining stable and positive growth in employment"2. This value - of flexibility advanced as a neo-liberal standard - does however come up against other values that have more of a social ring to them, such as security, equality, equity and justice. The reference to the Japanese model - this shining example of capitalist success - is not an unbiased one, for it betrays the managerial inspiration drawn from the emphasis being placed on the "flexibility" value... But the example merits much deeper consideration than it is usually given, for the "Japanese model" is also well known for the twofold security it tends to confer to members of the system (economically: life employment and pay linked to length of service; psychologically: management by consensus and de facto participation at all levels). In the West, business leaders are in this respect somewhat more prone to selective deafness, and tend to disregard the social dimension of the model and pick up only on the aspects that are more directly economic. Flexibility without security. Hence the opposition of trade unions which fear social regression, the loss of vested social interests and benefits, a return to the law of the jungle, the victory of

Chapter 3: Pay and flexibility

35

exacerbated individualism to the detriment of collective solidarities. In other words, and so far as wage payment systems are concerned, the trade unions consider that wage flexibility in performance-linked payment schemes may well undermine income security, equality of treatment and occupational equity. Income security, inasmuch as incomes depend on fluctuations in production; equality of treatment, inasmuch as such schemes accentuate individual and collective disparities; occupational equity, since, in the final analysis, incomes would depend on factors over which workers have no control (e.g. the relative strength of the enterprise or branch of industry). Flexibility is at the heart of the bitter debate which, in western economies, revolves around so-called "flexibility" policies. But it also underlies the more muffled discussions in socialist countries concerning various plans for economic reforms, as evidenced by the following extracts: For the U.S.S.R.: "It is thought that the solution of economic problems inevitably leads to economic inequality, while the solution of social problems calls for equality of this kind. This affirmation is undeniably the result of delusions and a misconception of justice (in the economic sense) under socialism"3. For China: "The government of the province of Anhwei, in the Federal Republic of China, has introduced in State enterprises a new system of bonuses, with no ceiling limit, to reward the best executive employees and managers. Although contested by some theorists, this reform is beneficial for the national economy because it promotes efficiency and does away with egalitarism"4. Hungary, for its part, was the first socialist country back in 1980 to open a public debate on the principle of linking wages to performance, and on the pros and cons of a relation of this kind5. Most of those involved in this debate voiced keen opposition to any wages differentiation, while a by no means negligible minority spoke out in favour of such a policy.

II. Flexibility and the labour market There is another dimension of security that trade unions feel is threatened by an employer's flexibility policy, certain aspects of which (particularly wagerelated) could lure workers eager for freedom, autonomy and gratification (material and/or psychological), and that is security of employment. The spectre of unemployment is a haunting one, and any move towards deregulation for the sake of flexibility is seen as a subtle tactic aimed at "trimming" enterprises. On the employer's side, this policy will be "sold" under the guise of a policy on "redeployment of human resources", a term deemed to provide a more optimistic and more positive vision of the same phenomenon. Over and beyond these semantic controversies, the economic and social problem is real, and the issue one of obvious importance.

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To forestall the social uncertainties of excess external flexibility, some companies devise an internal flexibility policy. By means of training, retraining and promotion schemes, they develop an internal labour market6 to cushion certain foreseeable disturbances. In this way they manage for a time to reconcile the contradictory demands of flexibility and security, management flexibility and relative security of employment.

III. Flexibility and planning: the wage drift As a value afforded a high priority for its economic virtues, flexibility can find itself in contradiction with other objectives of an economic nature also, such as planning and the battle against inflation. To link wages to results is to side with the market versus planning, with decentralization versus centralization, to offer enterprises a way to escape from the constraints of State regulations, and it is also to run the risk of a wage drift, a potential source of inflation. It is well known that this wage drift is due to the difference existing between the basic wage, which is subject to negotiation and collective bargaining, and real earnings. The cause of these differences themselves is to be found, partially at least, in the enterprise's pay structure, in methods of linking pay to performance - which are rarely covered by collective bargaining, and consequently escape various attempts at social programming and centralized economic policy (State planning and/or incomes policies). It is also well known that any action of this kind (centralization of wage-related decision-making) has an immediate adverse effect: the proliferation of all manner of bonuses, allowances and benefits paid by enterprises to employees, executives and managers 7 ...

IV. Flexibility and debureaucratization The origin and success of the notion of flexibility are associated with the excesses of bureaucratization characteristic of enterprises, administrations and trade unions, both in market economy countries and centrally planned economy countries. In the face of excessive regulation, the response is deregulation planning. In the face of regulation constraints, the response - in both East and West - is a desire for deregulation. The economic, social and cultural stakes are high. Linking pay to performance - for all producers, manual and non-manual workers, executives and especially corporate managers - is a logical step in this move towards deregulation, decontrol and debureaucratization. Where pay is concerned, the phenomenon of bureaucratization in fact finds fertile ground for its development when centralized wage-fixing practices are put in place, i.e. incomes policies in the West and State planning in the East. It is, as it were, a desire for administrative, legislative and statutory wage

Chapter 3: Pay and flexibility

37

regulation laudably aimed at avoiding undesirable disparities as well as wage drifting, and at ensuring controlled achievement of the principles of equity, solidarity and socio-economic stability. But such policies inevitably entail a number of administrative constraints which are perceived by the producers employers and employees - as restrictions on production needs and pay increases. Such constraints quickly generate reactions which some qualify as "adverse effects", unexpected and yet foreseeable consequences, i.e. the proliferation of all manner of individual and/or collective, regular and/or exceptional bonus schemes linked to productivity, prosperity and/or length of service. These incentives - the symbolic revenge of flexibility over rigidity, and of the market over bureaucracy - are aimed at ensuring the enterprise's autonomy vis-à-vis the higher authorities, as well as that of workers in relation to these same constraints. This can heighten employer and worker motivation with a view to improving economic results. At the other end of the scale, at the macro-economic level, this process leads to the institution of a parallel economic system, one of the many other terms used to describe the underground economy. Famous in its Italian version, this phenomenon is virtually universal. Its existence is publicly acknowledged by economists in collective economy countries, especially Poland and Hungary. The Hungarian experience is in this respect revealing of the issues raised by the struggle for flexibility and against bureaucratization. Socialist social sciences experts have long since described the existence of what they termed a "natural" or "secondary" economy. Nowhere have the political decision-makers in these countries applied this concept, except in Hungary. Here the political vocabulary was enriched in the early eighties with a new expression, the "supplementary economy" or "auxiliary economy". Is it synonymous with "natural" or "secondary" economy? Yes and no. Yes, inasmuch as it presents an ideologically different perception of it. To say that this economy is "supplementary" or "auxiliary" is to define it as being dependent upon the fundamental economy. To qualify it as "natural" or "secondary" is to suggest possibilities of a divorce and indeed conflicts between the two economies. For example, in Hungary, the "secondary" economy is characterized by higher hourly wage rates and higher competitiveness compared with what the "primary" economy has to offer8. Under these conditions, the semantic subtleties dreamt up by the bureaucrats in power are proof of the difficulties encountered on the path of flexibility, at the same time illustrating the changes taking place and the defensive reflexes of the social actors taking advantage of the benefits of status within the scope of bureaucratization... In the face of such resistances, Hungarian economists and sociologists, heedful of the fact that Hungary is in many respects regarded as an experimental social laboratory for the East European countries, continue to call for greater flexibility of wage-fixing systems. Some9 go further down this road than others. For them, it is not enough to improve the pay-performance link of a wage

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Part One: The Stakes of Participation

system whose methods of determination would moreover not be open to question. They see the priority and fundamental change has having to do with the determination of basic wages. These should no longer be determined by more or less secret administrative decisions, but by economic realities, i.e. the market, and structured through an official system of collective bargaining. Thus expressed, this point of view clearly shows that flexibility, as a stake of participation, extends beyond it and, in its struggle against bureaucratization, raises the problem of the decentralization of basic decision-making, as well as of the limits of this decentralization.

V. Flexibility and decentralization Ultimately, it could be said that the proposed model renders superfluous the very existence of a centralized wage-fixing policy regarded as harmful, for it carries the seeds of a series of adverse effects, of negative repercussions, the real nature of which is less and less contested. Effects such as corporate resistance, restriction of performances, refusal to measure performances, manipulation of production standards, corporate and individual demotivation. This raises the fundamental problem: if some regulation of wage-fixing is considered essential, what will be the regulation model opted for and applied by the decision-makers? Here, the choice is often presented as having to be made between two extreme models: - that of centralized regulation (hetero-regulation) or administrative regulation, a model where all fundamental decisions for determining wages are taken by central institutions looking to exercise control over the system as a whole, with a view to balanced development planning; - that of a decentralized regulation (self-regulation) or economic regulation, a model in which overall balances are the result of free play of market supply and demand, where fundamental decisions are left to decentralized economic units, i.e. the producing enterprises and individuals and/or consumers. In reality, because of the need for flexibility and solidarity, the socio-economic systems of the East and West seem to converge, with notable differences, towards a model of mixed regulation, combining centralization and decentralization, structuring and innovation, collective bargaining and market forces, solidarity and flexibility. The trend in this direction in collective economy countries is meeting with objections from some socialist economists 10 who fear that the decentralization of wage-fixing at branch or company level will make for greater wage dispersal. One recent study on the subject" suggests that this fear is unfounded: there is less wage dispersal in some market economy countries, i.e. with decentralized regulation, such as West Germany 12 .

Chapter 3: Pay and

flexibility

39

VI. Flexibility and power By the implication of political and macro-economic debates on the principle of flexibility, flexibility attempts to provide an immediate response to contemporary micro-sociological issues at corporate level: the assertion of authority, the authority of the head of the enterprise. His power in fact tends to diminish in an economy moving towards rationalization and bureaucratization. Wage formulas such as participation in prosperity and productivity are aimed at giving managers greater freedom of action on the grounds that - or so the external authorities are given to understand - this is what the groups and individuals within the enterprise want13. Some here come up with a tell-tale formula: "decapitalize the enterprise without decapitating it"14. For the employer, the financial participation of workers - an instrument of flexibility - should serve to strengthen his authority rather than to challenge it. To his mind, it in no way implies having a say in decision-making. Hence, for example the allocation of shares... with no right of vote attached.

VII. The double game: deregulation and regulation Flexibility, however, is taken by many economic decision-makers to mean deregulation. In the minds of most employers, these two concepts go hand in hand. The flexibility employers seek implies extensive deregulation, a condition and factor of flexibility regained in corporate management and a return to free enterprise and unhindered management. This, at any rate, is the current vogue, but behind the ideological smokescreen and media hype there lurks a much more complex reality, a third double game of participation. It is all good and well to talk of deregulation, but what exactly is meant by deregulation? At the heart of the issue is an administrative deregulation through the lifting of legal constraints ("decontrol"), decentralization and debureaucratization. In line with this idea is the term as first used by the Americans, and neo-liberal ideologies have not failed to build on it. But liberals and technocrats often confuse deregulation and "disregulation" or "decontrol"15. The misgivings arise when it is realized that administrative regulations do not stop at regulations or labour laws, but also include sociological, political, psychological and economic regulations, which may well have a greater role to play owing to the breakdown of administrative regulations. In natural science, the term "regulation" denotes the action of corrective mechanisms that maintain these physical systems in existence. The social sciences have borrowed the term to describe processes of a similar kind that ensure the perpetuity of social systems. In this sense, administrative deregulation (i.e. decontrol) is often accompanied by a tightening of other regulations, such as those imposed by the

40

Part One: The Stakes of Participation

market, by cultural factors, by professional practices and by the influence of the underground (or "natural") economy. A whole new school of thought among economists, notably in France, has recently come into being, with the so-called "theory of regulation". One area of study of certain of its members concerns the process of regulation through standardization, which provides an explanation as to why differences and rivalries, far from causing chaos, actually serve to strengthen social cohesion. Socially, wage differentials, which are less erratic than they may at first appear to be, are governed by subtle regulations related to organizational structures. Viewed from this angle, the linking of pay to performance has two apparently contradictory dimensions, but which are in fact complementary: it is part of an economic deregulation at the macro level, but it also gives rise to a regulation of society at the micro level in the sense that it helps to maintain the stability of a social hierarchy in an increasingly complex productivity structure17. Deregulation notwithstanding, when it comes to pay and methods of wage payment, de facto regulations are many and complex. By linking wages to profits, the employer agrees to regulation by the market. By accepting to negotiate the application of such wage formulas, the trade unions are banking on the beneficial effects of regulation through collective bargaining. These, then, are the outlines of yet another double game of the financial participation of workers. On the one hand, bonuses and incentives are a way of escaping from the constraints of administrative regulation and therefore appear as an element of deregulation. On the other hand, they lend force to regulation by the market and/or through collective bargaining. Deregulation promotes the growth of new regulations, which not only justify it but make it wholly meaningful. Inversely, some of these regulations are devised in such a way as to foster administrative deregulation and regulation of behaviour (as employers and the logic of the economic system would have it). With regard to the latter, one has to go a little further, because bonuses and incentives linked to collective output fulfill a particular regulatory function, mid-way between traditional stimulation and sixties-style participation. They are aimed at ensuring regularity of production and regularity of earnings, and in this way meet the demands of highly mechanized production and the needs of workers relying on regular money coming in to keep up with their hire purchase repayments. From this point of view, some formulas linking pay to performance aim to "control" the system of contributions and rewards, to "order" worker behaviour, to "regularize" production rates and to "regulate" the socio- technical system of production. So that there are four - often confused - meanings of the idea of socio-economic regulation: the first concerns compliance with rules and regulation, the second standardization of work behaviour, the third achievement of uniform and "smooth" production, and the fourth proper running, and hence survival of the system.

Chapter 3: Pay and flexibility

41

In the face of this multiplicity of meaning of the concept of "regulation", the double game of participation, flexibility and deregulation shows up in all its complexity. Deregulation is only possible and desired because it brings with it and fosters new regulations. If deregulation were to be total, if administrative deregulation plans were to be accompanied by actions of social deregulation, then this would make for a completely different society, the advent of which would be marked by uncontrolled upheavals and a priori undesirable trials and tribulations. Here, once again, the paradox is that the proponents of (administrative) deregulation who, on the political chessboard are if anything in the conservative camp, are the most dogged opponents of (social) deregulation. Their apparently deregulatory resolve to link pay to performance is fundamentally regulatory. And the regulation they seek is pursued at all levels of economic activity, as evidenced by the proportional wage model advocated by the French "self-made man" E. Schueller, who greatly influenced young employers in France between 1936 and 1944. The formula he proposes18 is designed, in the line drawn by Ford, as an instrument of threefold regulation: macro-economic regulation, through the standardization of production and consumption, and the improvement in the overall functioning of economic life, meso-economic regulation through the greater authority afforded to employers within the enterprise, and micro-economic regulation thanks to a revival of worker mobilization.

Notes 1

2 3 4 5

6 7

That this is indeed so is borne out by the fact that the sixth international conference organized in Amsterdam in 1985 by the European Committee of Work and Pay devoted an entire session to the problems of flexibility and deregulation associated with wage payment systems. See J.K. Bout, 1985; Peter Knevels, 1985; E.A. Poelmann, 1985; Zdravko Kaltnekar, 1985; Olive Robinson, 1985. EEC, 1985, p. 50. N. Rimashevskaya, 1986, pp. 6-7. Yvan Zhen, 1985, pp. 78-86. See in particular, in the journal Heti Vilaggazdasag, the articles by Miklos Polgar (09.08.1980), Istvan Csillag (16.08.1980), Sandar Balazsy (23.08.1980), Zolvan Hechter (30.08.1980), Gyorgy Neuman (30.08.1980), Istvan Kiss (06.09.1980), Sandor Pataki (06.09.1980), Zsolt Szalay (13.09.1980), Csaba Kemeny (13.09.1980). Marie-Noël Beauchesne, 1980, p. 93. The psychosociological approach deliberately adopted in our study leads us to touching only briefly on this problem of wage drift, an economic phenomenon closely related to the effects of formulas linking pay to performance. At the height

42

8 9 10 11 12 13 14 15 16 17 18

Part One: The Stakes of Participation of the intense period of economic growth, this problem was the subject of numerous specialist studies, particularly in Great Britain and the Scandinavian countries. Interested readers should consult: National Board for Prices and Incomes, 1968, pp. 15-27; Lars Aarvig, 1970. Lajos Hethy, 1986a, p. 19; Lajos Hethy, 1988 b, pp. 2 and 59; Katalin Falus-Szikra, 1988. In particular Lajos Hethy and Dezso Vass, 1986, pp. 7-8. H. Flakierski, 1979, pp. 31-32. Dominique Redor, 1985. Dominique Redor, 1986, p. 7. See Bernard Mottez, 1966, p. 190. A. Dubois, 1948, p. 30. Michel Crozier, 1987, p. 121. See in particular Michel Aglietta and Anton Brender, 1984, p. 9. Michel Aglietta and Anton Brender, 1984, p. 89. E. Schueller, 1941.

Chapter 4 Pay and solidarity As alluring as it may be, the issue of flexibility does give rise to various misgivings that are more or less warranted. In particular, it is challenged by the countering claims of those who advocate virtually absolute flexibility and those in favour of relative flexibility. While the former extol the virtues of individualism and liberalism, the latter call to mind the virtues of and need for solidarity. With solidarity being portrayed as a moral imperative and a social objective, albeit grudgingly, the question is, at what level will this solidarity manifest itself, particularly in terms of pay.

I. Lonely crowd and group solidarity An "anthill of lonely men" said Camus, and others besides him have described the developed industrial society, of the West and the East, as that of collective solitude (Buber), of the atomized mass (Sliviski), in short, of the "lonely crowd" (Riesman). A crumbling, desintegrated, shattered, atomized, "serialized" society (Sartre). A society characterized by the désintégration of basic communities (family, village, parish, workshop), by the splitting of these primary social groups that once saw to the "socialization" of individuals and to their more or less harmonious integration into the social system. A society that is "undone", one in which interpersonal bonds - that are as invisible and vital for our survival as the air we breathe - are strained, frayed, broken. The introduction of new technologies dramatically heightens this process, tending as they do to break the bonds between man and his endeavours, between the worker and the product of his work, between the workers themselves. Employment is threatened, work is rationalized, teams are disbanded and solidarities dislocated. Disunited, dissociated, prisoners of their own actions, people look to piece back together the puzzle of their lives, aspire to forming and renewing bonds and to rediscovering the warmth of lost solidarities. The corporate anonymity of the Gesellschaft inspires a nostalgia for the greater intimacy of the Gemeinschaft. The lonely crowd creates the need for group solidarity. And so, when it comes to pay, solidarity finds dual expression at the micro-economic level, where it is keeping with the dynamics of entrepreneurship, and at the macro-sociological level, where it reflects the dialectic of the workers' movement.

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Part One: The Stakes of Participation

II. Pay and micro-economic solidarity: collective bonuses The logic of modern production, which is ever more geared to the collective, calls for solidarity on the part of producers: individual effort cannot prevail over collective efficiency. Methods of wage payment follow and reflect this trend, so that individual incentives tend gradually to be replaced by collective bonuses in order to heighten workers' awareness of the need for teamwork. Pay schemes have in this respect evolved along the same lines as personnel policies, marked by growing awareness of the paramount role played by the group of producers'. Drawing on the lessons learnt from the experiments conducted by Elton Mayo and his team at Western Electric, corporate managements have implemented so-called "human relations" policies2. These are designed to fulfill a series of functions previously performed by the wages system (mobilizing work force energies), by placing the emphasis on three priority objectives in this area: worker satisfaction, integration and participation. Policies of this kind, where the focus is on problems of communication, information and the exercise of authority, are supplemented by a variety of formulas linking pay to performance by giving workers a share in productivity or prosperity for example3. The common feature here is that they are all in fact collective bonuses, linked to the results of the team, department, company, and indeed sometimes even the branch of industry. Their aim is to foster a spirit of solidarity and an awareness of the need to integrate individual contributions within the scope of collective endeavour. Or, put another way, to shift the focus onto the quality rather than the quantity of production. In the West, corporate bonus schemes have proliferated since the late 1950s4. For some years now, there has been a similar movement in the East, as evidenced by the spread of team bonuses in various collective economy countries. Closely associated with this trend is the appearance of new forms of collective organizations, like the "brigades" in the Soviet Union and the "economic work communities within the enterprise" in Hungary5. In these countries too, the movement is inspired by the combined effects of three factors: technological rationality (production ever more geared to the collective), economic rationality (the need for suitably tailored methods of managerial control), and social rationality (humanization of working conditions and the need for participation). Judicious wages flexibility can therefore contribute to the strengthening of certain forms of microeconomic solidarity.

III. Pay and macro-sociological solidarity: trade union strategies But solidarity cannot be limited to the micro-economic sphere. There are other solidarities of a macro-sociological order which can to varying degrees be put at risk by linking pay to performance. Trade unions, the keen custodians of these

Chapter 4: Pay and solidarity

45

solidarities, have a significant role to play in the practical determination of just how pay is linked to performance. Trade unionism, the bridge between the economic and the social, therefore unites what the universal commodities expansion tends constantly to cast asunder6. With its overriding concern for the level of wages, it cannot neglect the means by which this level is established, i.e. pay schemes. This places trade unions in a delicate position, as their social commitment calls for a dogmatic stand, urging them to oppose any form of remuneration that is related to profit, and to advocate instead time-rated wage payment. Economic considerations, however, lead them towards a less intransigent position and away from the deadlock of a flat ideological refusal. Such considerations prompt them to accept to negotiate the terms and conditions of the practical application of pay schemes linked to performance which, in certain respects, can be very effective in helping trade unions to achieve their economic, social and political objectives. More especially, and paradoxically, these may be effective in promoting solidarity, for example, by securing wage increases that would be impossible to obtain otherwise, or again by bargaining for the right to participate in the overseeing of pay scheme administration. This in turn allows them to counteract recent trends towards the atomization and individualization of these schemes, as well as the autonomization of bargaining levels7.

IV. The double game: binding and unbinding In the area of economic and social solidarity, the participation game is also played as a double game. On the one hand it binds, and on the other it unbinds. On the one hand it brings workers together, and on the other it separates them. It strengthens solidarity on the one hand, and threatens it on the other. It binds, brings workers together, and strengthens solidarity when bonuses are collective, when pay is linked to the performance of a more or less large group of direct and/or indirect producers. Here, financial participation serves as a medium of economic, social and cultural bonding, for it is aimed at promoting an awareness of common interests and specific solidarities. But it also unbinds, separates and undermines solidarity, even in the case of collective bonuses, because it separates the group which benefits from the collective bonus from other groups or from the system as a whole. One exception to this is where provision is made - and this is rarely the case - for wage schemes which can forestall such an objection. So, even while it binds, participation inevitably unbinds. The pitfall and temptation of corporatism is ever present, the extreme expression of successful micro-economic binding within the context of macro-sociological unbinding. The double game of binding and unbinding reflects the problems raised by the constant confrontation of

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Part One: The Stakes of Participation

participation with the logics of interdependence and independence, of heteronomy and autonomy, of solidarity and freedom.

Notes 1 2 3 4 5 6 7

Bernard Mottez, 1966, p. 178. Marcel Bolle De Bal, 1958. André Boyer and Jacques Dubois, 1958. Marcel Bolle De Bal, 1967 See Lajos Hethy, 1986b. Michel Aglietta and Anton Brender, 1984, p. 78. Jacques Vilrokx and Mark Leys, 1986, pp. 14-15.

Chapter 5 Pay and freedom

Freedom - not surprisingly - is a central, and in many respects crucial issue participation. The four issues at stake outlined earlier can be graphically illustrated running along two main axes: an economic axis - representing the concepts productivity and flexibility - and a social axis - representing the concepts equity and solidarity. We can therefore depict these four forces as follows: Equity

Productivity

Flexibility

Solidarity

of as of of

As an issue with economic, social and political dimensions, we can then legitimately place freedom at the crossroads of the economic and social axes:

Equity

Flexibility

X ^

Productivity

Freedom

v

Solidarity

Indeed, when it comes to pay, the principle of freedom underlies all actions taken with a view to achieving the objectives of equity, productivity, flexibility and, to some extent, even solidarity. However, the concept of freedom as it is used here must be carefully defined in terms of its dimensions and its actors. When it comes to work organization and the determination of methods of wage payment, the constraints are many. So that rather than talking in terms of freedom and independence (its presupposed ideal), it is perhaps preferable to talk of autonomy in interdependence, real freedom in terms of restrictive rules, but not total freedom in terms of technological, economic, social and cultural realities.

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So whose freedom (or autonomy) are we talking about? That of at least four "actors": individuals, groups, the enterprise and the sector. All four in quest of autonomy, whose interests may or may not come together in a common focus, and the convergence of which is in fact a crucial issue in financial participation policies.

I. Freedom and individual autonomy Originally, the linking of pay to performance, in its earliest form of piece rates, gave the worker a certain degree of often very welcome freedom. In the 19th century, it was repeatedly claimed that piecework meant freedom. And piecework did in fact offer the skilled worker a degree of freedom in his job, just as for management it helped to relieve the pressure of work organization problems2. Piecework - and hence piece-rates - promoted freedom in the organization of time and work, while guaranteeing pay equity and justice3. In the early days, this freedom was understood to be freedom from time-rate constraints, which meant the worker was free to organize his work, to choose his hours and to work at his own pace according to his personal needs and to immediate production requirements. Later, a similar principle came into play when wages were linked to output. These new pay formulas, associated with the Taylor-style concept of scientific work organization, offered workers a potential freedom, not so much in relation to organizational constraints, but freedom from the employer's authority and the constant presence of supervisors. By regulating work force behaviour, wages linked to output partially did away with the need for hierarchical control of lower echelon supervisors.

II. Freedom and collective autonomy In a society characterized by unbinding, individualization and atomization, one witnesses an autonomization of possibilities for social interaction5. This greater autonomy of limited groups manifests itself in two ways, that is to say, by the creation of autonomous groups and the decentralization of collective bargaining. Back in the inter-war years, Hyacinthe Dubreuil6 advanced the idea of dividing the enterprise into autonomous sub-groups. His concept provides that each group, department or division so defined and "autonomized" buys its working materials from the one preceding it in the production chain and resells them at an agreed rate to those following. Any profit that is made thanks to efficient self-organization of work forms the basis of "true worker participation in corporate life"7.

Chapter 5: Pay and freedom

49

Today, we are seeing something of a resurgence of this idea of more or less autonomous teams, with variations depending on the socio-economic context: semi-autonomous groups in the West, brigades in the East. "Freedom" is posted everywhere as the objective. Freedom from the constraints of centralized management of major industrial complexes in the West, and freedom from nationwide wage control policies in socialist countries. Though not as explicit, freedom is no less real in terms of trade union control in both systems8. A second expression of this same trend comes in the area of collective bargaining, hitherto afforded high priority at national level and in a somewhat authoritarian manner. Today it is being "phased out" in favour of in-company bargaining or negotiations at sectorial level9. This at any rate is the case in Belgium, where the phenomenon has been described as an "autonomization of the collective bargaining process"10. Clearly, it is a process which tips the odds in favour of a revival of pay schemes linking pay to performance.

III. Freedom and corporate autonomy This shift is reflected in the policies of most enterprises in the West and now too in the many convergent plans for economic reforms in East European countries. The same concern is common throughout, namely to give back to enterprises and their managements the freedom - and responsibility - to define the wage policies that are best suited to the needs of production, profitability, specific market requirements and the needs of workers. This situation inevitably favours recourse to one form or another of formulas linking pay to performance, not only for the workers, but often and above all, for corporate managements. It is a subject being keenly debated today. Overlaying this greater autonomy of enterprises and their managements, then, is the autonomization of collective bargaining at these lower levels of socioeconomic reality.

IV. Freedom and sectorial autonomy What has just been said concerning the enterprise applies, mutatis mutandis, to the sector or branch of industry. Economic and social leaders, on both sides, in growth sectors such as oil and electricity, are driven by the constant desire to secure a freedom of negotiation vis-a-vis the higher authorities. Such freedom would enable them to share in the benefits of their situation through a pay-performance linked arrangement, albeit to the detriment of the consumer. This clearly borders on corporatism. This kind of freedom regained is uneasy with the idea of solidarity, which is perceived as an unwelcome constraint. The

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Part One: The Stakes of Participation

double games - especially on the trade union side - are commonplace owing to the implacable logic of the system and its contradictions.

V. The double game: independence and interdependence In this vast area of the search for freedom and autonomy by individuals, groups, enterprises and economic sectors, the financial participation of workers in the fruits of their labours, at any point in time and in whatever form, a subtle double game is being played. The greater the freedom conferred in this area, the more it contributes to developing a sense of responsibility, to imbuing the "freed" social actors with the prevalent concepts of the system. And this, with the paradoxical result that freedom ultimately leads to the end of freedom, independence to an awareness of interdependence. This is true, for example, of workers in the autonomous teams mentioned earlier, whose pay is linked to collective production - and who are consequently led to take measures to exclude less productive workers from their own ranks... so that autonomy in this case turns into selfpolicing". The specific features of this double game depend on the nature of the socio-economic system. In societies just starting out on the road to industrialization, participation in the form of piece rates does offer the worker some freedom to organize his hours and methods of work. However, it at the same time aims to "socialize" the worker (often from a rural background) to the standards of the industrial world, to "tune" him into the workings of economic life and to initiate him to the constraints of efficiency, productivity, profitability, and interdependence. It is a way to elevate the worker's action from the particular to the general. In industrialized societies, on the other hand, through the medium of pay schemes linked to output or productivity, participation becomes a tool of liberation from the pressures of interdependence, a means for individuals, groups, enterprises and sectors to derive personal benefit from favourable strategic market positioning12. So just where does the fair and productive balance lie in this double game of independence and interdependence to prevent the scales tipping too far one way or the other? Well, employers and workers are led to devising locally tailored solutions; one example is that of an enterprise employing autonomous teams, where it has been decided to share part of the overall profits jointly between the teams. Employer and trade union organizations in the Nordic countries for instance, set a nationwide limit on the amounts which can come under negotiation at local level. Whether it be a tool of liberation or standardization, of independence and interdependence, financial participation little by little, through one of its essential sociological functions, looks like being instrumental in shaping the technological society in the making.

Chapter 5: Pay and freedom Notes 1 2 3 4 5 6 7 8 9 10 11 12

Alain Touraine, 1955. Bernard Mottez, 1966, p. 12. Bernard Mottez, 1966, pp. 54-56. Bernard Mottez, 1966, pp. 57-59. Jacques Vilrokx and Mark Leys, 1986, pp. 14-16. Hyacinthe Dubreuil, 1948. Hyacinthe Dubreuil, 1959. See in particular Lajos Hethy, 1986 b, p. 662. See in particular Gerald Starr, 1988, pp. 15 and following Jacques Vilrockx and Mark Leys, 1986, p. 16. Jacques Attali, 1978. Bernard Mottez, 1966, p. 213.

Chapter 6 Pay and society More than freedom itself, in all its implications past, present and to come, what is "at stake" in the choice of one or another approach to linking pay to performance is a whole model of society. Taking up from our earlier diagram, we can illustrate this as follows:

L

^

•

Soc

where E - Equity P = Productivity F1 = Flexibility Sol = Solidarity Fr - Freedom Soc = Society Is not our society founded on the interaction of the five basic principles of equity, productivity, flexibility, solidarity and freedom? Does not the dialectic between freedom and solidarity underlie the ideological debate between liberalism and socialism and all its political ramifications?

I. Liberalism and socialism Liberalism - the old and the new - enjoys being portrayed as embodying the values of freedom, flexibility, productivity, profitability, efficiency, effort and responsibility. It is for their sake that it advocates the institution, extension and re-introduction of pay schemes linked to performance. But the obstacles encountered over the years in implementing such plans have led their proponents to revise their concepts, to challenge the functionality of the systems in

Chapter 6: Pay and society

53

place and to "socialize" them by "playing down" the more individualizing and stimulating dimensions thereof. Many capitalist entrepreneurs, who have had to acknowledge the crisis in their wage systems linked to output1, are forgoing them or at any rate changing the form or manner in which they are being applied. Socialist countries are at the same time moving in the opposite direction. Structured so as to achieve a gamut of "social" values (justice, equity, solidarity, conviviality, democracy... but also "freedom", real freedoms beyond formal freedoms), they are inspired by an ideology which would if anything oppose the linking of pay to performance: "to each according to his needs" rather than "to each according to his efforts"... In practice, it is another matter altogether. From the beginning, wages linked to output have held pride of place in new socialist societies alledgedly in a transitional phase. Over the years, this form of remuneration has remained and been improved. Today, there is no talk of abandoning it, and the search for more effective formulas is well and truly on. Socialist leaders have been forced to acknowledge not so much the crisis in their system of wage payment by output, but that of output itself. In spite of obvious divergences, there are signs of a gradual convergence between the two socio-economic systems. In the West, economic freedom calls for a renewal of social responsibility, and in the East, social responsibility calls for a renewal of economic freedom. Freedom and responsibility are closely interlinked. This assertion, which is true at the political and macro-sociological level, is proving equally true at the individual level, as evidenced by the impact of these pay schemes on individual behaviour.

II. Freedom and responsibility By affording "freedom" to workers through systems of payment by results, employers in the past hoped to instill in their workers a greater sense of responsibility. Today, their successors - in the West and the East - pursue a similar objective when they advocate corporate profit-sharing or enterprise bonus schemes. It is their hope too that workers conditioned in this way will come to understand the mechanics and constraints of economic life and consequently show restraint by not making unreasonable demands. In short, that they become small-scale entrepreneurs, for who better to uphold the established economic system, and what better way to ensure that their social "indoctrination" is quick and painless.

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Part One: The Stakes of Participation

III. Culture and counter-culture

The prevalent culture of developed industrialized societies, over and beyond differences in socio-economic systems, can, as we have seen in the preceding pages, be characterized by a few prominent features; unbinding, anomie, domination (of the financial system or political system), quantitativeness, inequalities, heteromanagement, bureaucracy and technocracy. Here, there and everywhere, "counter-cultural" aspirations are welling up in reaction to the shortcomings of such a cultural system. Expressed and fuelled by the student protests of 1968, they are gradually being taken up by the economic, social and cultural establishment. And the same is happening in corporate management, with calls from all sides for new methods of human resources management. Pay schemes themselves are seen as contributing to the emergence of another culture within the enterprise, and indeed of a new "corporate culture". Binding, solidarity, democracy, quality, equality, self-management and creativity rank highest in the scale of managerial values. Present and future forms of linking pay to performance take account - and will have to continue taking account - of this old and yet new cultural dimension of the implicit or explicit plan for a "new" society in the double game in which it is but one spearheading factor.

IV. The double game: production and reproduction

Participation plays a role in the production of a new society and in the reproduction of the present society. This, in essence, is the double game that synthesizes and summarizes all the others. It "socializes" workers to the norms of industrial society while lending force to it and making it truly dynamic. It is, as we have seen, a management technique that is used to realize the contradictory values of developed industrial societies: in America's case the cherished values of competition, individualism, productivity and, in socialist countries, the values of cooperation, solidarity and participation, which they uphold and which are practiced by the Japanese who fascinate the world at large. But beyond these values pertaining to the industrial ethic, it plays a multifaceted cultural role: binding and unbinding, regulatory and deregulatory, quantitative and qualitative, equitable and non-egalitarian, a matrix for independence and interdependence. It reproduces the model of an alienating logic while at the same time creating the conditions for overcoming it. It produces and reproduces reproductive and productive individuals. The polymorphous stakes of participation determine as well as variegate the game of participation.

Chapter 6: Pay and society Notes 1 2

Burkhart Lutz and Alfred Willener, 1960. Marcel Bolle De Bal, 1964.

Part Two The Game of Participation

The financial "participation" of workers in sharing the fruits of their performance - that is to say in the results of the economic activity to which they have contributed - can take many forms. The theory of "payment by results" (chapter 1) describes the structures and functions of various pay schemes. The practice of these (chapter 2) reveals a number of distortions between the theoretical and real functioning of these systems. From a perspective standpoint (chapter 3), it can be seen that, while fronting as management tools, they are in fact bargaining tools.

Chapter 1 Payment by results in theory Pay can be linked to results in many varied ways, so that it is difficult to arrive at a universal judgment about their functioning and effectiveness. Any appreciation must be nuanced in terms of the individual type of payment system considered. To put forward a valid appreciation - which is the object of this study - a first essential step therefore is to survey and itemize the various types of systems of payment by results, and to then propose a rational, realistic and functional classification for them. Most of the works dealing with the analysis of these payment systems propose "structural" classifications, defined in terms of "forms and features" (wage structure, reference factor, type of linkage, result measurement, method of profit-sharing, etc...). Although usefully descriptive of the systems, they are less helpful for measuring their effectiveness. The effectiveness of a method or system of wage payment can in fact only be assessed in relation to its purpose or objectives. A system of payment by result cannot be said to be effective unless it fulfills functions as intended and achieves the aims and hoped-for results - without the economic and social cost being too high. Aims do vary from one system to another, but can nevertheless be grouped into a few major categories. Sociological studies carried out in the last few decades have provided deeper analytic insight using such a "functional" classification, defined in terms of ultimate objectives (stimulation, participation, regulation etc.), as a starting point. The practical problem, then, is to establish a connection between the structural and functional classifications, between the underlying forms and ultimate objectives. Such is the object of this first chapter, to survey and synthesize these two major types of classifications.

Section 1 Structural classification: systems of payment by results viewed in terms of their theoretical forms and features Every system of payment by results has numerous design features built into it. At least four of these have been taken by various authors as a basic criterion for classifying these systems:

Chapter 1: Payment by results in theory 1) the 2) the 3) the 4) the

59

wage structure definition of the result relation between wages and results method of sharing.

I. Classifications based on wage structure Wage payment methods can be related to two key factors, either the unit of work time or the work result. Three main types of wage can be defined from the combination of these two factors: - the fixed wage (hourly rate, time rate), calculated on the basis of the time taken, irrespective of the result actually achieved; - the piecework wage (piece rate, commission) calculated on the basis of the results obtained, irrespective of the time taken to complete the task; - the bonus wage, a portion of which is related to the time taken, the other to the result of the work. In principle, only the latter two categories come under the scope of this study.

II. Classifications based on the definition of the result These classifications take into account one or other of the following three factors used to define the result: - the method of measurement, - the main variable, - the range of application. A first classification is based on the method used to measure the reference result: - if these methods are empirical, the wage is said to be a piecework wage ("piece rate" or "piecework bonus", depending on whether or not a portion is calculated as a unit of work time); - if these methods are scientific, the wage is qualified as payment by output. A second classification is based on the main variable taken into account for calculating the result. Bonus wages can therefore be distinguished into production bonuses and time- saving bonuses. All systems of payment by output in fact combine two variables: the result (measured in pieces, points, turnover, etc...) and time. Depending on the system, the reference factor will be the result obtained in a given time or the time taken to obtain a given result. This real

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Part Two: The Game of Participation

distinction therefore appears to be a minor one as far as functional principles are concerned. A third classification is based on the range of application of the system, i.e. on the individual or collective nature of the result. It therefore distinguishes: -

wages linked to wages linked to of small groups of large groups

individual results (pieces, production, output); collective results : (pieces, production, output); (productivity, prosperity).

Most wage formulas related to individual results (piece rates, piecework bonuses or output bonuses) can be applied to collective results, particularly when work is collective. By nature, some formulas are almost always collective, especially participation or incentive bonuses related to productivity or prosperity. The difference between output and productivity, as reference factors for wage calculation, is in fact difficult to map out. Wage schemes linked to such results are all characterized, in principle at least: - by the definition of "standards" of production, output or productivity on the basis of which the results obtained are measured; these standards can be a unit of production time, a quantity of production, a quantity of raw materials used; - by a more empirical rather than in fact scientific determination of these standards; - b y the periodic adjustment of these standards, according to technical and economic trends and developments; - by a combination of the "time" variable and the "result" variable, as stated earlier. Finally, the only concrete difference between the two types of bonuses lies in their range of application: - output bonuses are generally linked to the results of individuals or small groups; - productivity bonuses are generally linked to the results of large groups. Within this third classification based on the range of the results taken into account, one can moreover distinguish: - systems related to technical results (output and productivity bonuses, calculated independently of the market price of the products); - systems related to economic results (systems linking participation to prosperity, which take account of external factors such as economic or monetary fluctuations).

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III. Classifications based on the relation between wages and results This was the type of classification adopted by the International Labour Office in its first report "Payment by results". This report distinguishes four main categories of payment systems according to how gains are related to output, i.e. the slope or shape of the bonus curve3. 1) systems where gains vary in the same proportion as output (standard piece rate systems, standard-hour system); 2) systems where employee gains vary proportionally less than output (Halsey system, Rowan system, Barth system, Bedaux system); 3) systems where employee gains vary proportionally more than output (high piece rate system and standard-hour system); 4) systems where employee gains vary in a different proportion at different levels of output (Taylor system, Merrick system, Gantt system, Emerson system, "accelerating" premium systems). According to Marriott14, this classification has several advantages: 1) it indicates the most important effects of wage incentive systems on employees' earnings and, by implication, on production costs as output increases; 2) it incorporates the notion of gains or losses in the calculation of unit-costs; 3) it is based on a single criterion so that there is an obvious connection between all the categories. A further advantage can be added. On the basis of the slope and shape of the bonus curve, it introduces an essential factor related to the function of various types of payment by results systems. The sharper the slope, the greater the motivational effect of the system. From this structural classification, based on certain design features and their application, emerges another category of classifications - functional classifications based on objectives inherent to each system.

IV. Classifications based on the method of sharing Variations in output, productivity or prosperity can be expressed in financial results (gains or losses) which, depending on the system, will be shared in one way or other between the employer and the worker. This has led some authors to classify wage incentive systems on the basis of this criterion. One example is the classification proposed by Lytle, which distinguishes five categories of systems1: 1) systems where the employer takes all the gains or losses (time rates);

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Part Two: The Game of Participation

2) systems where the employee takes all the gains or losses (piece rates, Taylor system, Merrick system, Gantt system); 3) systems where the employer and employee share the gains and losses (Halsey system, Bedaux system, Rowan system, Barth system); 4) system where the gains or losses are shared according to an empirical determination (Emerson system); 5) "accelerating" premium systems. According to Marriott2, this classification has two disadvantages: - firstly, its basic plan retains only the first three categories, categories 4 and 5 having no obvious connection with the first three; - secondly, it restricts the gains or losses to those connected directly to output, taking no account of gains or losses in unit costs of production so that, in some cases, while the employee can take all the gains and losses, the employer takes all the gains and losses in unit costs of production.

Section 2 Functional classifications: systems of payment by results viewed in terms of their theoretical objectives The theoretical objectives of systems of wage payment by results are manifold. They may be situated at various different levels: employees' attitudes (stimulation, participation), production costs (cost control, cost price reduction) work organization (improvement of methods, raising of output), etc... And yet few attempts have been made to classify payments by results according to such objectives. R. Marriott, in his very comprehensive survey, encountered only one, that proposed by Yoder5. It distinguishes four groups of wage plans: 1) "selective" plans (Taylor, Merrick, Emerson), which aim to weed out the least efficient workers; 2) "time-saving" plans (Halsey, Rowan), which aim to reduce the time needed to perform a given task; 3) "combination" plans (Gantt), which combine time-saving and selective plans; 4) "inter-departmental" plans (Bedaux, Haynes-Manit), which provide equitable treatment for inter-departmental transfers occasioned by production requirements. Marriott demonstrated the deficiencies and ambiguities of this classification6. It gives no indication as to the primary purposes (raising of productivity and earnings), and it juxtaposes categories defined on the basis of discrete criteria,

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63

that are not mutually exclusive (all wage incentive systems exert upon workers some kind or degree of selection of time-saving or wage equity). R. Marriott's book is unquestionably a work of reference in the English language. Since its publication, however, a highly original study has been published, this time in French, which provides new insight into the philosophy underlying employers' choices in terms of pay policies. It is a work by Bernard Mottez7, who proposes another classification based on the sociological functions of wage schemes, defined essentially in terms of ideology or social action. Central to his analysis is the notion of organization, and he defines three categories of enterprise: the enterprise as a business, as an organization and as an institution. As a business, the enterprise uses bargaining systems ("jobbing", the entrepreneurial worker) piece rates (the worker selling his "wares") profit-sharing (the worker as a family member). As an organization, the enterprise develops the system of payment by output (the motivated worker). The enterprise as an institution devises systems of participation in prosperity (the worker as a partner) and in productivity (the integrated worker). These distinctions, which are interesting in a historic perspective, though questionable in the context of a structural analysis (why, for example, separate profit-sharing and participation in prosperity?), confirm the fact that systems of payment by results become significant within the framework of employers strategies, and that they form a special category in the panoply of management tools available to the employer. They are tools with a specific ultimate objective, namely to foster certain attitudes, to induce a certain form of worker behaviour, which behaviour is of course deemed to be in keeping with the logic of the employer's ultimate objectives, i.e. production cost and cost price reduction. So that selective plans, time-saving plans and combination plans all aim, in different ways, to act as incentives, to stimulate workers' productive capacity, to increase their output and to increase possible profit. So-called "inter-departmental" plans in fact have the same ultimate objective, but their "inter-departmental" nature is intended to incorporate a preventive feature, that of avoiding wage grading distortions and their effects on the social climate within the work environment. Since influencing workers' attitudes is theoretically the priority focus of systems of payment by results, a functional classification of these systems can legitimately be founded on this criterion8. From this point of view, a fundamental distinction can be made to define two systems of payment by results: 1) stimulation systems, theoretically designed primarily to induce workers to increase their production and their output. Most of the systems mentioned fall into this category (piece rates, piecework, payment by output, time- saving, etc...);

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Part Two: The Game of Participation

2) participation systems, theoretically designed primarily to interest and involve workers in their enterprise or in technical progress in general. Aside from their primary objective, each of these systems embodies a series of secondary objectives, some of which can occasionally become primary objectives. It can therefore be said that: 1) stimulation systems are generally designed to serve the following purposes: - to increase output; - to reward workers for their effort; - to interest and involve employees in their work; - to give workers some measure of control over the amount of their earnings; - to allow for an increase in earnings for more efficient workers; - to improve work organization methods; - to encourage a "keeping up with the Joneses" mentality among the workers; 2) participation systems are also intended to fulfil a series of other functions: - to raise productivity; - to financially reward the sense of responsibility; - to interest and involve workers in the collective aspects of production; - to meet exceptional financial needs (holidays, end-of-year bonuses); - to "top up" earnings on a provisional and non-arbitrary basis; - to share the fruits of technical and economic progress; - to materially and psychologically "attach" workers to their enterprise. This multiplicity and diversity of theoretical objectives accounts for the dearth of functional classifications as compared with the abundance of technical classifications to be found, in classical literature at any rate. And there is a further difficulty, already encountered in the analysis of technical classifications, and that is the overlapping of possible reference criteria which it is not easy to clearly distinguish. So stimulation and participation are two closely related and complementary notions which are in fact covered by the Anglo-Saxon term "wage incentive". Every system of payment by results aims at the same time to stimulate and involve the worker, to interest him by motivating him or to motivate him by interesting him. Or, put another way, every system of payment by result aims to interest workers in these results, either in the short term ("stimulation system") or in the long term ("participation system"). These differences may appear negligible, yet they do go beyond the simple nuances of vocabulary. Fundamentally, stimulation and participation correspond to two different philosophies of personnel management: making workers work harder and more efficiently, pushing them to make an effort or developing a greater sense of responsibility, promoting individualism or encouraging team spirit, developing participation at job or corporate level.

Chapter 1 : Payment by results in theory

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The distinction between these ultimate goals is therefore unwarranted. The entrepreneur will avail himself of one or other kind of pay technique depending on whether he is looking to stimulate or to interest. Different ends call for different means. A functional classification, then, is not enough, as the employer's ultimate objectives are often implicit rather than explicit. A synthetic classification based on the natural connection between the theoretical designs and objectives is therefore necessary.

Section 3 Synthetic classifications: systems of payment by results viewed in terms of their structural-functional aspects The objectives "assigned" by employers to their system of payment by results are logically reflected in the ways in which it is applied in practice. By analyzing the objectives of a system of payment by results, one can "identify" the various ways, forms and methods in which they are put into practice. The problem, then, is to determine the objective expression given to subjective intentions, i.e., the concrete criteria which will help to determine whether a given system is a stimulation system or participation system.

I. Factors of wage "sensitivity"

The motivational force of a payment system essentially depends on its "sensitivity", i.e. its capacity to express variations in workers' contributions and in the results of their work in terms of variations in earnings. This "sensitivity" depends on a certain number of factors. Five of them are frequently cited: -

the the the the the

time of payment, range of application of the bonus, relative importance of the variable portion of the wage, slope of bonus curves, influence of lost production or stoppage time.

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Part Two: The Game of Participation

A. Time of payment The motivational force of a system is inversely proportional to the period of time that elapses between when the work is done and when the bonus is paid. If this period is too long, the reward is too long in coming and the incentive disappears.

B. Range of application The stimulative effect of a system is inversely proportional to the range of application of the bonus: if this range is too broad, i.e. if bonus calculation is based on the production of a large number of workers, the individual effort is likely to be cancelled out by factors beyond the worker's control, e.g. the effort of other workers or work organization.

C. Relative importance of the variable portion of the wage The greater the relative importance of the variable portion of the wage in the pay-packet, the more the system is likely to be stimulating. This is because variations in results can theoretically affect a higher percentage of the earnings.

D. Slope of the bonus curve The bonus curve graphically represents the evolution of the bonus (Y-axis) as a function of the increase in production, output or productivity (X-axis). The slope of this curve, measured by its angular coefficient, graphically illustrates the stimulative effect of the bonus: the sharper the slope (i.e. the higher the angular coefficient), the higher the wage increase resulting from an increase in results and, in principle, the higher the stimulative effect of the bonus, and vice versa.

E. Influence of lost production or stoppage time Lost production time (stoppage times for repairs, conversion, maintenance) may or may not be taken into account for calculating bonuses. Lost time may or may not be deducted against workers' bonus earnings. When they are attributable to the worker and when they are not deducted, the stimulative effect of the wage should increase proportionately. In point of fact, any increase in lost time will result in a decrease in hourly output, and hence in a wage reduction.

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II. The two fundamental "built-in" design features Establishing a synthetic classification combining these five criteria is impossible and pointless, for it would virtually mean creating as many categories as there are wage schemes. A selection is therefore necessary. Two criteria can be ruled out straight away: the "importance of the variable portion of the wage" criterion and the "influence of lost production or stoppage times" criterion. In point of fact, - a wage with a minimal variable portion may be stimulating if the bonus slope is high; inversely, a wage with a high variable portion may play only a minimal motivational role if the bonus slope is low; - the deduction of stoppage times may be stimulating when such stoppages are for the most part beyond the workers' control, and may undermine stimulation when they are due to action attributable to these workers. A third criterion - "the slope of bonus curves" - can also be temporarily ruled out. This is of course a key factor for assessing whether a wage scheme is more or less stimulating, and was moreover the basis of the classification analyzed earlier and adopted - legitimately it must be said - by the I.L.O. in its report on "Payment by results". However, it is especially useful within this category of payment by output in the strict sense, i.e. within the category of stimulation systems, because it is a measure of the theoretical degree of stimulation, rather than simply a factor serving to differentiate stimulation systems and participation systems. This leaves two criteria on which a technical differentiation can be based: - a time criterion: the time of payment - a space criterion: the range of application.

A. The "time" criterion: wage complements and supplements In order for a wage scheme to be stimulating, it must satisfy a first condition, a condition of time : its variable portion must be paid as soon as possible after the effort, e.g. each pay day. This condition leads to distinguishing two groups of payment by results components: 1) wage complements, i.e. bonuses, fringe benefits allowances and other non-wage benefits paid regularly each pay day (no later than one month after the effort) which affect the hourly wage structure;

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Part Two: The Game of Participation

2) wage supplements, i.e. bonuses, fringe benefits, allowances and other benefits paid either occasionally or regularly, but at intervals greater than one month (quarterly, half- yearly, or annually) and which therefore "top up" the normal wage9 A wage complement is added to the basic wage to make up basic wage deficiencies. A wage supplement on the other hand, appears as an allocation external to this minimum or normal wage. The distinction between wage complements and supplements pay therefore takes account of two criteria of an objective nature: the intervals of payment, i.e. regular or of an occasional nature, and the time period, i.e. the time that elapses between the effort and the payment.

B. The "space" criterion: payment by output and productivity pay In order for a wage scheme to be stimulating, it must satisfy a second condition, a condition of "space": the range of application of the bonus must be relatively small, and it must be calculated according to the results of an individual job or a small number of jobs. This condition serves to distinguish two categories of bonuses linked to technical results: 1) output bonuses, linked to individual results or the results of a small group of workers, 2) productivity bonuses, linked to the results of a large group of workers. It has in fact been shown that the only measurable difference between these two types of bonuses was the range of their field of application10. In addition to these bonuses linked to technical results, one therefore has to include bonuses linked to economic results, i.e. prosperity bonuses, which fall into the category of bonuses for large groups. Others prefer to refer to a more classical distinction between: 1) individual bonuses, and 2) collective bonuses. In our view, there is a disadvantage to this classification in that collective bonuses linked to the results of the effort of small groups of workers, from the point of view of their theoretical objectives and real functions, are as a rule stimulation bonuses. Technical, economic, social and cultural evolution leads to a relative development of collective systems of payment by results. Within this general category, three types of systems can be distinguished: 1) systems of payment by output of small groups (stimulation bonuses),

Chapter 1: Payment by results in theory

69

2) systems of payment by technical output of large groups (bonuses related to productivity), 3) systems of payment by economic output of large groups (profit-sharing, bonuses related to prosperity). The boundaries of these various categories will always be difficult to map out.

III. Basic types of systems of payment by results By combining the distinctions made earlier, we can now profile the functional and technical features of the two major types of systems - stimulation systems and participation systems - defined in the preceding chapter. These profiles are summarized in the following table:

Main functions

Main features

Stimulation systems

Participation systems

Work participation

Participation in the enterprise

Output incentive

Resources-saving incentive

Reward for effort Improvement of work methods

Reward for responsibility Improvement of accounting methods

Linked to production or output (small range)

Linked to productivity or prosperity (broad range)

Wage complements

Wage supplements

Relatively high bonus

Relatively low bonus

High slope

Low slope

Stoppage times not deducted

Stoppage times partially deducted

Accordingly, both these profiles correspond to two extreme types of bonuses in the general category of payment by results. And between these extreme types of "bonuses" there can of course be various intermediate types. The combination of the "time" criterion and the "space" criterion, which served as a basis for the definition of these extreme types, therefore suggests the existence of two mixed or combined types: - wage complements linked to individual results (or the results of small groups);

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Part Two: The Game of Participation

- wage supplements linked to collective results (or the results of large groups). In these combined formulas, the former can usually be encountered particularly in the tertiary sector, for example in distribution for certain sales representatives and in banking for branch managers. In industry, only the latter are encountered in practice. It can be assumed - as we will attempt to show - that technical, economic, social and cultural development trends make for a more widespread application of such formulas. Their main objective, like their forms and methods of application, lies mid-way between stimulation and participation. In many cases, the systems in question can be called regulation systems, their main aim being to regulate production and worker behaviour, to penalize and therefore forestall human deficiencies and production stoppages, and to uphold and develop the sense of collective responsibility towards collective endeavour. The combination of the "time" and "space" criteria can therefore be illustrated as follows:

Types of payment by results Space Small

Time

Large

wage complements

stimulation system

regulation system^11*

wage supplements

stimulation and participation system

participation system

The following diagram, on the other hand, summarizes the main components of the work wage, taking account of the basic wage (on a work time basis) and wage components related to factors other than results (seniority, length of service, regular attendance, etc...):

Notes 1 2 3 4 5 6 7

C. Lytle, 1942, p. 127. For a detailed description of these various systems see I.L.O., 1951, pp. 5-39. R.Marriott, 1961, p. 41. I.L.O., 1951, pp. 5-39. R. Marriott, 1961, p. 43. D. Yoder, 1942, pp. 92 and following. R. Marriott, 1961, p. 40. Bernard Mottez, 1966.

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