Factory Team Building

Apparel factories commonly have vertical or hierarchical management structures. The first step in our work with Impactt is to help factories develop the concept of management as a team. We bring together the GM, HR, production manager, compliance officer, welfare officer, industrial engineer and a selection of supervisors to engage in training together. For many factories, this will be the first time that the entire set of management personnel will have been brought together to function as a team and develop a common set of practices and beliefs about factory management.

For the training to be successful, managers must buy in to the theory of the program. The training must also help factory managers develop factory social norms concerning management.

The business case will be part of the lure that attracts the interest of managers. However, as the training proceeds, manager perceptions of appropriate business practices will be affected by the rehumanization of workers in the minds of managers and supervisors.

Workers are also part of the team. The outcome for the factory depends on the workers and firms working toward the same goals. Social psychologists call this outcome dependence. Economists call this aligning incentives.

In order to align the interests of the workers and the firm or promote outcome dependence, managers and supervisors need a richer perception of workers as human beings. Worker perceptions of their own wellbeing depend on income, feeling respected at work and having the ability to realize aspirations for their family. That is, the training seeks to rehumanize workers in the minds of managers and supervisors.

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Can we improve manager processing of information relating humane treatment of workers to business performance?

We now know that managers who see workers in dehumanized terms do not accurately process the negative relationship between abuse and worker productivity. The next question is whether we can improve information processing by rehumanizing workers in the minds of managers.

In one of our experiments we conducted in Bangladesh, we employed the strategy of perspective-taking to rehumanize workers in the minds of managers. Harris and Fiske (2006), using fMRI, demonstrated that rehumanization can occur when study participants were simply asked to imagine the preferences of another person.  Dehumanized people are processed in the brain as objects rather than people.  Simply asking the participant to consider whether a dehumanized individual likes broccoli can lead the participant to process the dehumanized individual in the social parts of the brain.

Bangladesh factory managers in our experiment were first shown a graphic indicating that 53 percent of workers in their factories report verbal abuse by their supervisor.  Factory managers were then surveyed on their perceptions of verbal abuse and its prevalence in their factory.  Remarkably, in spite of having just been shown data clearly indicating significant verbal abuse, when managers were asked how common verbal abuse was, 42.9 percent responded “not at all common.”  Only 21.8 percent responded that verbal abuse was either “somewhat common” or “very common.”

In the experimental manipulation, half the factory managers in our study were engaged in a perspective-taking exercise. Managers in the treatment group were first asked to respond to a set of questions about details of their workers’ lives, both mundane and profound—from what they might have had for breakfast to aspirations they might have for themselves and their children.  The control group was asked the same set of questions but pertaining to themselves rather than their subordinates.

Perspective-taking did appear to affect information processing.  The treatment effect emerged when the sample was divided into two groups.  The first group consisted of managers who think that verbal abuse is appropriate and, thus, likely see workers in dehumanized terms.  The second group consisted of managers who think that verbal abuse is inappropriate and, thus, likely see workers in humanized terms.

Among managers who see workers in dehumanized terms, perspective-taking increased their willingness to acknowledge the prevalence of verbal abuse. Among managers who see workers in humanized terms, perspective-taking increased interest in the data and willingness to make changes based on the data.  Heightened interest and willingness to make changes among the humanized group suggests that these managers may have processed the information about the prevalence of verbal abuse, even if they were not comfortable explicitly acknowledging it.

One of the objectives of our research with Impactt is to see if a deeper intervention that addresses the resistance that arises when managers are asked to take the perspective of workers might be more effective in promoting accurate information processing.

Harris, Lasana S. and Susan T. Fiske (2006), ‘Dehumanizing the lowest of the low: Neuroimaging responses to extreme out-groups’, Psychological Science 17, 847–53. doi:10.1111/j.1467-9280.2006.01793.x

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Why don’t factory managers believe the business case for humane conditions of work?

In our analysis of Cambodian apparel and footwear factories, we found that workers and capital benefit from participation in Better Factories Cambodia. That is, we did find a business case for social compliance. But we also found that factory managers do not believe that participation in Better Factories Cambodia made their factories more profitable. Our question is why not.

It is possible that manager perceptions are part of a risk calculation. The cost of social compliance is certain. The gain in productivity is ex ante uncertain.

It is also possible that factory managers are aware that labor’s cost share rises with social compliance. A rising unit labor cost associated with humane conditions of work implies an ambiguous effect on the return to capital.

However, there is evidence that managers who see workers in dehumanized terms are less likely to process a negative relationship between abuse and productivity.

Among the more famous experiments in social psychology is the Milgram (1963) electric shock experiment.  The experiment explores the relationship between dehumanization and the willingness to inflict pain on another.  Milgram was testing to see whether supervisors would follow instructions to administer an electric shock to a subordinate.

In a replication of the original Milgram experiment, Bandura et al. (1975) manipulated both the apparent effectiveness of an electric shock in eliciting desired behavior and the extent to which the subordinates were seen in dehumanized terms by the participant charged with administering the shock to them.  Not surprisingly, experiment participants who saw their subordinates in dehumanized terms systematically administered more severe shocks than experiment participants who saw their subordinates in humanized or neutral terms. 

These results are consistent with our own findings. Cambodian factories with managers who see their workers in dehumanized terms are less likely to be compliant at the next assessment conducted by Better Factories Cambodia.

The interesting evidence from the Bandura experiment for our question emerges when the experimenter manipulated the perceived effectiveness of the shock in eliciting the desired behavior from the subordinate and the extent to which the participant saw the subordinate in dehumanized terms.  In the first experimental condition, the subordinates appeared to respond to the shock by improving their performance. (In reality, responses were preprogrammed and no one received a shock).  However, in the second experimental condition, the subordinates appeared to make more mistakes after supposedly receiving the shock.  That is, in the second experimental condition, the abusive treatment of a subordinate was not an effective human resource management strategy.

The question for our purposes is: Did the participant administering the shock in the second condition realize that abuse was an ineffective method of eliciting effort?  The answer depended on whether the subordinate had been previously dehumanized in the mind of the participant.  When the participant saw the subordinate in humanized terms, they correctly processed the negative relationship between abuse and effort.  In contrast, when the participant saw the subordinate in dehumanized terms, they failed to draw the obvious lesson and even intensified the abuse. 

Bandura, Albert, Bill Underwood, and Michael E. Fromson (1975), ‘Disinhibition of aggression through diffusion of responsibility and dehumanization of victims’, Journal of Research in Personality, 9, 253–69.  https://doi.org/10.1016/0092-6566(75)90001-X

Milgram, Stanley (1963), ‘Behavioral study of obedience’, Journal of Abnormal and Social Psychology, 67, 371-8.

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The business case for humane conditions of work

In a recent survey we conducted of Cambodian factory managers, we found that managers generally think that humane conditions of work improve productivity. When asked the question, ” Do you believe that there is a relationship between productivity and working conditions in this factory?” 75% of managers replied, ” Yes, more comfortable working conditions are linked to higher productivity.”

But when we asked the same managers whether humane conditions of work increased profits, they said no. When we asked the question, ” Do you believe that there is a relationship in this factory between profits and paying workers as promised?” 72% responded, ” No, there’s no relationship.”

These beliefs are not necessarily inconsistent. Profits can go down as productivity goes up if social compliance is costly.

These manager beliefs are generally consistent with the literature. Osterman (2018) reviewed 25 years of literature on the business implications of the “high road” and found that the high road is more productive but less profitable.

However, we recently completed two pieces of analysis that find evidence for the business case for social compliance. We first looked at whether Cambodian firms that improved social compliance between the first and second assessments by Better Factories Cambodia predicted a subsequent reduced probability of failure. The answer is, yes. Factories that improved compliance related to communication, compensation, information about pay calculations and more humane practices related to termination, discipline, overtime and weekly rest were less likely to close than static factories.

Now, just because social compliance predicts survival, that does not mean that social compliance caused survival. To strengthen our identification, we conducted a field experiment with Cambodian firms between 2015 and 2018.

Over the course of the study, factories participating in Better Factories Cambodia increased hourly pay by 41.1% and reduced work hours by 8.8%. Hourly productivity increased by between 25.6% and 32.7%, less than the percent change in hourly pay.

So far, it looks like manager beliefs are correct. Productivity went up with social compliance but unit labor costs also went up. As a consequence of the presence of Better Factories Cambodia, factories shared productivity gains with workers and, if there was exploitation before participation with Better Factories Cambodia, that exploitation was reduced.

However, we still find that the return to capital also rises as long as labor’s cost share is less than 0.78. The reason is that capital also became more productive. The daily output per machine went up.

So, there is a business case for social compliance, but it is masked by the fact that labor’s share of the surplus earned by the firm is rising.

Osterman, Paul. 2018. In Search of the High Road: Meaning and Evidence. Volume: 71 issue: 1, page(s): 3-34 Article first published online: October 23, 2017; Issue published: January 1, 2018. doi/10.1177/0019793917738757

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