VIEWPOINT : U.S. Firms Wasting Prime Asset: People : An End to Adversarial Relationship Could Boost America’s Position in Global Market

Louis B. Mayer, the head of MGM Studios during Hollywood’s golden era, was known for his tyrannical habits, yet he made MGM into a pivotal cultural force, shaping the movies that shaped America. He knew what today’s corporate titans either never knew or can’t accept: The only capital that really counts is human capital.

Mayer once said: “The inventory goes home at night,” conceding, however inelegantly, that without his corps of talented directors, writers and actors, MGM would be nothing. In the same way, whatever a modern corporation sells--from cars to meals to life insurance--its primary resource is its people.

This is a basic economic fact, and it is American business’ refusal to accept and act on it that accounts, to a large degree, for America’s poor performance in the international marketplace.

American business has traditionally seen its workers as adversaries, as mere cogs in the corporate machine: necessary, perhaps, but anonymous, replaceable and greedy. In the first decades of the Industrial Revolution, workers were treated as indentured servants. Finally, of course, the workers rebelled, and by the middle of this century, a kind of uneasy peace was established, with unions and businesses in approximate if rancorous balance. But today, there is far more rancor than balance.

The country’s top chief executive, Ronald Reagan, expressed the basic animosity that too many CEOs feel toward both unions and workers when he fired the air traffic controllers. Nobody plays a more crucial role in the airlines’ operations than air controllers. Our lives are literally in their hands, but the President nonetheless saw them as expendable and got rid of them, because they dared to ask for salaries that were commensurate with their responsibilities.

As the President went, so went corporate America. We have entered into a period of union bashing that is unprecedented in modern times. In the 1980s, workers are not only undervalued, they are scapegoats. As American business lost its comfortable edge in the international market, American businessmen blamed allegedly lazy and careless workers. In fact, the problems resided, for the most part, in the executive suites. American executives had themselves become lazy and careless.

The bottom line wasn’t everything; it was the only thing. Profits mattered more than products. Making money was more important than making quality goods.

It wasn’t until profits began to decline that American businessmen even noticed that something had gone awry. Then, in time-honored fashion, they began laying off workers and shutting down plants. They didn’t have enough vision to see that they were losing to their overseas competition because their products, not their workers, were inferior. And their products were inferior because they devoted far more energy to making short-term profits than to developing innovative, functional and useful products.

Now they’re nearly out of the game. America still leads in research and development, thanks to its natural store of talented, imaginative workers. But it trails in manufacturing and marketing, thanks to its lack of talent and imagination in the executive suites. Furthermore, the most impressive research and development goes on in small, new companies, which have replaced the traditional adversarial posture with a freewheeling, cooperative spirit.

These successful new companies are run not like feudal estates, in which workers are expected to be seen and never heard, but like round tables, in which workers are not only expected to speak up but are assured of a receptive audience.

In this way, all the talents of all the workers are tapped and used to the benefit of everyone, including company customers. What’s more, these businesses are profitable and adding workers, even as Fortune 500 companies are losing money and laying off workers. Like Mayer, the heads of these young companies know that their primary resource is people.

They know that while power and profit used to reside in property, they now reside in people. Today, productivity--a key measure of both companies and nations--is attributable less to the quantity of resources than to the quality of people.

Everyone seems to understand this fundamental fact of business life except our business leaders. In a pastoral letter released last November, “Economic Justice for All: Catholic Social Teaching and the U.S. Economy,” the National Conference of Catholic Bishops showed more business savvy than many CEOs.

Noting that “the promise of the American dream--freedom for all persons to develop their God-given talents to the full--remains unfulfilled for millions in the United States today,” and concerned about the “social fragmentation, a decline in seeing how one’s work serves the whole community,” the bishops called for “new forms of cooperation and partnership among those whose daily work is the source of prosperity and justice of the nation . . . for new structures of economic partnership and participation within firms.”

But, the bishops warned, “partnerships between labor and management are possible only when both groups possess real freedom and power to influence decisions.”

Unfortunately, such partnerships, however sensible, seem unlikely. Even in the young, successful companies, we can already see signs of the traditional hierarchical habits cropping up. As these small companies grow, they look more and more like the big old companies, and the same old schisms develop between bosses and workers. One can only conclude that the American executive is uniquely susceptible to hubris. It seems to come with the territory.

If these arrogant American chieftains do not begin to see the world as it is, if they do not finally acknowledge that their employees are their primary asset, not their primary liability, then all their jealously held power, prerogatives and perks will, sooner or later, count for nothing, because their companies will be acquired, merged or sunk.