Edward E. Lawler, III is Distinguished Professor of Business at the University of Southern California’s Marshall School of Business and Founder and Director of the USC’s Center for Effective Organizations. In this interview he discusses the findings of his and James O’Toole’s new book, The New American Workplace, and their ramifications for small businesses.

How did you get involved in the original report, Work in America, on which The New American Workplace is based?
Work in America was written by Jim [James O’Toole, co-author –Ed]. He was asked to prepare the report by Elliot Richardson, who at the time was Richard Nixon’s secretary of health, education and welfare. Jim had recently completed his PhD at Oxford University, and wanted to focus on workplace research. Elliot tapped Jim for the project, as he was also concerned about workplaces – particularly employee stress and well-being in the workplace.

Jim got me involved; at the time I was in Michigan doing research on employee involvement and attitudes.

In working on the new book, what was the most striking change you found in how people view their work between the early 1970s and today?
The most striking thing we noticed was the change in security, or certainty, in people’s work. One of the biggest changes is how unpredictable the careers in the IBMs of the world have become. The shift in focus to corporate profits, or valuing the shareholder above other stakeholders, has made people become more self-sufficient. You could say that everyone has become a small business of one.

aIt seems as though “High-Involvement” (HI) companies stand the greatest chance of filling new niches and being innovators of change. What’s your take on these kinds of organizations versus “Low-Cost operators” and “Global Competitor corporations”? [See Sidebar]
The HI companies are my favorites because they’re more effectively able to balance the needs of employees against the need to be successful. Jim and I are frustrated that the adoption rate for HI practices is slower than what we think it should be. But at the same time, a special set of skills is required for HI companies to work. There’s no question that it’s easier to implement HI practices in small and midsize organizations, which often have more personal leadership and more readily defined values that workers can relate to.

The new book suggests that small businesses will be especially vulnerable to international competition. What can smaller organizations do to compete in this arena?
They should identify their competitive advantages and adopt a strategy that can’t be copied by a foreign competitor. They should also look at the HI model, which might provide them with an advantage. A focus toward innovation, supported by refining the means by which they engage their employees and solicit their feedback, can help small businesses compete globally.

Unfortunately, the reality is that some U.S.-based small businesses can’t compete because their labor costs are too high. They may have to consider offshoring.

What do you make of the evidence suggested by the 2005 Harris Interactive survey which found that nearly twice as many workers at small firms feel passionate about their jobs compared with their counterparts at large firms?
I’ve studied organizational size since 1962, and in all the studies I’ve seen that relate size to worker attitudes, there’s been a negative relationship between the firm size and employee satisfaction. Of course, this raises the question: Why do people like working in smaller firms more than in larger firms? We’ve found that employees in smaller firms can understand the business better – at least in terms of understanding their role in it. Also, at smaller companies employees are less of a number than they are in large organizations. In many small businesses, worker involvement is automatic unless management ruins it.

What negative trends for U.S. businesses that are outlined in the book do you hope will be proven wrong and turn positive?
Number one is the slow movement toward the HI model; I hope it will accelerate. Without HI in place, offshoring issues will become more problematic. Also, we’ve seen a slowdown in the growth in wages for the average worker. International competition is putting downward pressure on pay rates for educated individuals. In the book we also discuss the current state of health care’s impact on work. Resolution of the health care issues we have in this country would positively affect our global competitiveness.