The Fragility of Functional Work Systems in American Steel

The I/N case offers insight into the interrelationship between work systems, living standards and performance. It demonstrates that a high road approach and functional work systems positively impact stakeholders' lives, improve production efficiency and benefit the local and macro-level economies and societies in which they are embedded. It also shows that such work systems can be implemented in contexts with a history of adversarial labor-management relations. However, broader external forces can conspire to make it very difficult for firms to sustain functional work systems despite initial successes in specific contexts. Financial markets in particular make long term commitment to stakeholder groups other than shareholders (i.e. employees, suppliers and communities) conditional on profit maximization and share price appreciation. Yet the logic of profit maximization for the benefit of shareholders leads to short termist decisions that undermine the very commitments that were so necessary for creating a new work system: security is threatened, training is put on the back burner; trust is irreparably undermined. Indeed, because of the inherent contradiction between strategic approaches to maximizing stock market and long term product market success, these high road systems are fragile in national frameworks that subject them to low road pressures without a forum for resolving the difficulties that arise from opposing market pressures and responses.