There have been laudable attempts in recent times to involve labour more directly in the operations of business. But sadly one cannot deny that the matchmaking attempts are probably not much more than management response to the ongoing worker struggle.

These attempts are doomed to fail because the company model itself has not really changed. Its underlying “values” of being profit driven and enhancing shareholder wealth are, if anything, more strongly entrenched.

Never before has the position of labour been so fragile. The power of international financial markets has removed from governments (and labour’s influence on governments) much of their control on their economic destiny. Some may argue that in South Africa, organised labour is weaker today than it was before 1994, despite being much closer to government. Job losses have reduced membership, and rampant unemployment undoubtedly weakens organised labour. Mechanisation and technology worldwide are reducing the role of the blue-collar worker in those countries that can remotely afford a strong labour movement. The real challenge to labour is to act and be seen as being a major contributor to the destiny of companies and to be involved as a partner. It, and indeed society, can no longer sustain a commodity/cost expression of what it brings to economic activity.

What the figures say

Accounting for labour as a “cost” permeates all accounting practices, and indeed is even implied in the standard measurement of productivity. By defining labour as an “input” (automatically labelling it as a “cost”), and excluding profits as an input (cost of capital or shareholder funds), capital becomes paramount and labour an expendable, undesirable “burden” to productivity.

Even the value-added statement has fallen prey to the politics. This statement reflects the overall wealth generated by the company. In this accounting format labour is expressed as one of the interests sharing in the wealth created by the company. It was born in Britain at the behest of organised labour. But because it shows that on average labour is the biggest beneficiary of value-added or wealth created it has been used mostly in the heat of wage negotiations to show workers that they are already eating the biggest slice of the cake. This manipulation has weakened the only accounting tool that should strengthen, rather than reduce, labour’s involvement in company affairs.

The real twist is that the slice of wealth does not only measure benefit. It also measures contribution. The implication is that labour is also the biggest contributor! Conversely, capital is the smallest beneficiary of wealth created, but also, by implication, the smallest contributor.

In following this argument in seminars with senior company executives and labour representatives, I often ask the simple question: “Who should govern companies: the biggest contributor or the smallest?”

Stunned silence!

The argument is that while labour has earned the right to govern, it forfeits this right by behaving not as a contributor, but as a beneficiary and as a taker. That clearly places the ball of involvement in the destiny of the business in labour’s court. Until one very experienced shaft steward at one of the country’s biggest mines responded: “We behave like takers because we are treated like takers!”

What is clear is that until labour is authentically seen to be, is treated as, behaves as if, and is accounted for, as a contributor it cannot be involved in governorship of companies. Small wonder that shareholders would probably baulk at labour behaving like a contributor! Until it does become involved, labour will always be an expendable commodity whose fortunes are dictated by the whims of supply, demand and price and other “flavours of the day” such as containment, re-engineering, rationalisation, restructuring, reconstruction, deconstruction, and other trite terms of “consultant-speak”

The principle involved is far deeper than company performance. It is axiomatic that life favours the contributor. Our true value lies in our capacity to make a contribution to others. Give and you will receive! Paradoxically, the ultimate crime against a worker is not to reduce his or her capacity to demand higher wages. It is to reduce his or her capacity to make a contribution!

The rub is to understand that the role of the contributor is not an easy one. Authentic contribution is based on the true intention being that. This authenticity is therefore directly proportional to the degree to which it is unconditional.

Taking the first steps

To enhance employee involvement in companies, organised labour first has to insist on a company communications policy that is based on sharing of company performance information. Communication has to be developmental and enabling and not manipulative or a propaganda exercise. It should be focused on common, shared goals and be simple and understandable.

Accounting practices have to be adapted to avoid the commodity-cost definition of labour. This does not mean ignoring the standard statutory accounts. But these accounts are questionable as an internal communications tool. The value-added statement, as we shall see, is by far the most appropriate tool to enhance employee involvement and empowerment.

Unions should pursue the establishment of negotiation processes that focus on enhancing employee involvement and contribution. After all, if it is acceptable to have high profile annual wage negotiations, it should be equally, if not more important to have at least one annual negotiation around what each can contribute.

The real governors of companies

It is trite to argue that shareholders govern companies. The day to day running of companies is dependent upon professional managers who are mostly employees. It is argued that they “govern on behalf of shareholders”. This is also not true. The true governors of companies are customers. Preoccupation with shareholder concerns will destroy the company in the longer term. A combined focus by management and employees on customer governorship already gives one a common cause that can appeal to all.

Ownership is no longer the holy cow it was post industrial revolution. The “rights” of the owner may still be vastly superior to that of labour (the “doers”). But in recent years they have been watered down by labour, environmental and social lobbies.

The "risk takers"

Shareholders naturally argue that they are the biggest contributors because they are “take the risk”. This is far too glib a statement to let it pass. One has to apply the principle of “relative risk”. In the absence of reasonably secure employment; employees right up to senior executives are at enormous risk. Losing a job is a devastating material and emotional experience. Few shareholders, unless they are the sole or a small group of business owners, suffer the same trauma at company losses or even closures. First of all, the risk is spread over a vast body of shareholders, and secondly, ironically a large number of shareholders are employees through their contributions to pension and provident funds, life policies etc.

The value-added statement: a powerful employee accounting tool

It must be clear to all by now, that job creation will hardly dent our unemployment numbers. We have to create job stability and job retention in our existing companies and employing institutions. To scoff at this concept is to ignore the realities of unemployment, crime and social unrest.

Stability and job retention cannot occur unless a partnership and common focus can be forged between employer and employee, and pay becomes flexible on a common fate basis. In turn this will need a redefinition of company goals away from the narrow profit focus and preparedness to be more open and transparent around company performance.

The value-added statement is the only valid accounting tool to use. The value-added measurement is the accounting synonym for wealth creation. In simple mathematical terms this means that wealth creation is equal to the contribution we make, or value that we add to others. Value-added is the only measurement in accounting that measures the contribution of a company to its market.

And because it is a segment of GDP it clearly has significant implications for national prosperity were it to become a focus both behaviorally and measurably in companies.

Value-added then clearly has an ethical, externally focused and benevolent intention: to do something useful for another human being. Surely this must be a strong rallying cry to all involved – from shareholder to sweeper? We as human beings all have a deep desire to add value to others. That is what missions, visions and statements of purpose of companies are about. All we have to do is to make them authentic and account for them in a recognised format.

Taken one step further, there is a direct correlation between contribution and reward because value-added or wealth created goes into the pockets of those who made the contribution in the first place (in the case of companies - labour, capital and government).

It means simply that the bigger the wealth cake, the more all have to share. But of course this is dependent upon the combined contribution of their efforts being of higher value in the market place. This makes the value-added measurement ideal for a common-fate fortune-share trigger. It has all the benefits of an incentive without locking the company into unaffordable bonus payments and creating unrealistic expectations. Herein lies the answer to flexible pay that will stop the obscene trade-off between rising pay and rising unemployment.