(FORTUNE Magazine) – IT WAS really beautiful. Hourlies and supervisors, pencil pushers and clock punchers, all gathered around the corporate foundry to forge a new relationship based on the idea that workers could play an active part in management. Some termed it participative management, others, working smarter. Born of the often desperate struggle in the late Seventies to hold the fort against foreign competitors, the new way entailed asking employees how their work might be improved and then letting them improve it, often in work teams or so-called quality circles. The initial results were ROI-opening: A study of 101 industrial companies found that the participatively managed among them outscored the others on 13 of 14 financial measures. The concept seemed unstoppable. Ironically, though, its very success has caused some people in corporations to view it as a threat. ''The problem with participative management,'' says Raymond E. Miles, dean of the University of California's business school at Berkeley, ''is that it works.'' At many, if not most, companies that have tried it, participative management remains a gewgaw bolted on to the management machinery by social engineers. It fails often, a victim of backsliding, backbiting, backhanded treatment, and back to business as usual. ''A lot of it was something that was not going to last, couldn't last,'' says Michael Maccoby, director of Harvard's Program on Technology, Public Policy, and Human Development. The consensus among academics, consultants, and managers is that most efforts to introduce participation never make it. William Cooke, a professor at the University of Michigan who is researching the subject, concludes: ''About 75% of all programs in the early 1980s failed.'' The reason? Consensus here too: not the workers but management, upper, middle, and lower. The concept was banished to the shop floor and, even if it flourished there, was never permitted to creep higher. Jump on the quality circle bandwagon? Sure, takers were everywhere. But change the behavior of managers or the organizational structure? Not this decade, thanks. The price of failure to establish a boiler-room-to-boardroom network of committed participative managers: shattered circles, confusion among the survivors, and the same old miscommunication between the ranks. For as long as participative management has been around -- there were experiments as far back as the 1920s -- middle managers and foremen have been reluctant to sign on. Of late their recalcitrance seems to have been compounded by the newfound need at many companies to reduce the work force. Kicking tail and taking names is a lot easier when jobs are at a premium. Give a guy the mandate to downsize and watch him lay waste. Notes Jon R. Wendenhof, director of industrial relations for Eaton Corp., the Cleveland axle and electronics outfit: ''It is tempting for some of our managers to say, 'It's our turn; we've got the club.' '' Quality circles, those Hula-Hoops of 1980s management, are wobbling. The number of circles clocked by the International Association of Quality Circles (IAQC) now exceeds 6,000, but growth proceeds by fits and starts, with plenty of failures along the way. ''I spend about half my time doing repair jobs,'' says Jefferson F. Beardsley, one of 2,200 managers and consultants who recently crowded the Baltimore Convention Center at an IAQC meeting. The circles' proponents complain caustically that too many companies buy off-the- shelf programs merely because everybody else has them, and then blame the consultants who help install them when the programs fail. Without commitment from the top, goes the argument, even the best packages are doomed. General Electric's experience over 20 years demonstrates how difficult it is to get management to consistently support participative programs. GE began experimenting in the late 1960s and by 1975 had work teams in 12 plants. The experiment survived in only one plant. Everywhere else the programs fell victim to layoffs, management rotation, and what has been the company's benign autocracy -- do it your way, but. ''This is hard stuff, changing all those headsets,'' notes Gary Kissler, a human resources manager in the company's lighting group. He blames GE's slow progress on what he calls ''the lack-of- pain issue.'' Managers who think that their businesses are producing acceptable results aren't particularly interested in changing their ways. BUT THE lighting group, which has shut down ten plants in the past three years, is feeling enough pain to get very interested. The managers don't have to look far for an example to emulate. The group's Newark, Ohio, plant -- the lone survivor of GE's early effort -- was designed and built for a participative approach back in 1973. There are only four job categories, compared with 21 at other GE lighting plants. Work teams perform many tasks once handled by supervisors. Anything they can see in their area is their responsibility, known as line-of-sight management. When the plant, which makes quartz tubes used in producing semiconductors, was racked by the slowdown in the computer industry, the workers decided first to slow production and eventually to lay themselves off. The group's Ravenna, Ohio, plant around 100 miles away is in its third year of a participation program that plant manager David Hanson says has increased productivity about 25%. The plant claims to be the world's most efficient producer of highdischarge lamps -- the kind used in streetlights -- measured by the ratio of raw material to finished product. ''We're not mounting this effort because it's a nice thing to do,'' says Hanson. ''Competitors all have money, technology, and competence. The key then becomes how well you can motivate the people.'' The participative process doesn't always fit easily with traditional management methods and measurements -- and ''We do what we're measured by'' is an old maxim at GE. Even with measurable improvements at the Ravenna plant, Hanson has battled to keep the idea, and not the numbers, in the forefront of everyone's attention. ''We've had vice presidents ask for tangible measurements,'' says Hanson. ''We've refused to do that. We refused to count dollar savings at any given point. We feel this is a long-term commitment.''

But plant managers can't evade responsibility to ''make the numbers'' on the bottom line -- the ones top management has always insisted on. And they feel other pressures. Tom Fussner, the young plant manager in Newark, says that in addition to the usual expectations from above, the workers expect more from him. Under the new regime they are routinely provided information on how the plant is doing, and they too hold the boss responsible for its performance. To add to the cultural problems, plant managers with this new kind of experience are sometimes seen by higher-ups as tainted, GE insiders say, and may have a tougher time getting promoted because they don't manage the old- fashioned way. Kissler believes the tables will turn, and soon. ''People with this kind of experience,'' he says, ''can't be bought.'' For every triumph like those at Ravenna and Newark, GE has had a disaster like the Lynn, Massachusetts, defense plant. There the company tried to set up a quality circle program without union backing. The union quickly crushed the idea. A second effort, with union cooperation, ended about a year ago. Rick Casilli, a circle leader, says it became apparent that the company was clothing authoritative management in participative dress: ''The group felt that management had the plans and was only bringing them to the worker improvement group to get them approved.'' A bigger problem involved grievances. The company insisted that incidents on the shop floor, such as reprimands and suspensions, were not subjects for the circles to discuss. ''People are not faucets; they can't be turned off emotionally,'' says Kevin Mahar, president of the union local. ''Somebody on $ the shop floor gets disciplined and it creates emotion, and when that happens, the company expected the people to go into quality circle meetings and forget what happened.'' This year the union struck the plant for a month over grievance issues. At many corporations the initial glow of participation brightened the productivity landscape with a sort of a giant Hawthorne effect: Turn up the lights, productivity increases; turn down the lights, productivity increases -- anything that suggests management cares. But the movement has done little to alter managerial behavior at most companies. ''There's nothing wrong with a Hawthorne effect, but it has to be distinguished from culture change,'' says Maccoby. ''It was first generation: The second generation is really forcing companies to change in terms of the way they look at management's function.'' And there's the hitch. The higher up the corporate ladder, the tougher seems the shift to the participative mode. Says the chief executive of an aerospace company, ''It's no fun if you can't make the right decisions.'' Eastern Air Line's desperate sale to Texas Air reflected not only a failure to reach agreement on wage concessions, but also a failure of union boss Charles Bryan and Eastern Chief Executive Frank Borman to bury the hatchet other than in each other. ''There's no question, neither Bryan nor Borman could make the shift to a fully participatory style,'' says John Simmons, president of Participation Associates, a consulting firm that studied the company. THIS despite successful efforts to introduce participative management elsewhere in the company. Even as Bryan and Borman fought, self-supervised ramp crews were unloading bags, restocking planes, and managing far more efficiently than before. Machinists came up with $50 million of productivity increases in the first six months after participation was introduced. But Borman and the union leadership failed to get to the real problem, says Sim- mons: The day-to-day working relationship at the top between management and union. At meetings where cooperation should have been paramount, bickering, finger-pointing, and other carry-overs from the past clipped Eastern's wings. The failure or refusal by many organizations to make the necessary cultural conversion is hung up on the old issues of authority. ''We know how to do it on the factory floor,'' says David Dotlich, a vice president of human resources at Honeywell, where workers leaped at the opportunity to become more involved. ''Management still assumes its role is to tell -- and not tell.'' Information is power, and access to it remains a clear badge of rank to managers. Even though many companies are forcing managers to put out information on the number of units produced, costs, and other sensitive issues, the idea still doesn't sit right. Fearing a loss of power, many middle managers torpedoed early participative programs, and the experience has tended to confirm them in their opposition. The case of Boeing Aerospace's manufacturing division, with 300 managers spread through four organizational levels, has been fairly typical. The division's initial thrust at participation in 1980 was to put together trouble-shooting teams of workers, engineers, and managers to smooth bumps in production. Other middle managers often perceived the teams as intruders, and the idea flopped. ''The only thing that remained was a negative attitude about employee involvement,'' notes Carl Hicks, head of quality improvement in the division. ''We're still trying to undo that damage.'' Employees who remembered the first try were less than enthusiastic about the second, initiated in 1984. Middle managers failed to support the effort, designed to establish quality circles, because they were left out of it. ''They perceived the program as a parallel structure, and some thought they were supposed to butt out,'' says Hicks. Only when the middle managers were invited into the program did it begin to take off, resulting in 40 circles and, according to Hicks, a 400% return on the money invested in setting it up. The skills required for the would-be participative manager -- communicating, motivating, championing ideas -- are sandy intrusions in the gearbox of many traditional executives. Before General Motors converted its Buick City plant to the new way, the company undertook a campaign replete with videotapes, coffee mugs, hats, and other cheerleading to tell everyone just how good participative management was going to be. ''There's nothing the company didn't do,'' says William Byham, president of Development Dimensions International, the firm hired to train the managers in participative skills. When asked before their training if they believed the type of management they were about to learn would actually be used, more than half the top managers, two-thirds of the middle managers, and four-fifths of the line supervisors said no. ''At the start of the program two-thirds of the top management % couldn't run a participative style meeting if they had to,'' says Byham. He says that the training markedly improved attitudes and participative skills. Commanded to put in place what they perceive to be management du jour, the best of the managerial lot often go off on their own tangents. ''We have unit managers who say, 'If you want me to get the stuff out in quantity and with the right quality, I'll do that, but let me do it my way,' '' says James V. Gale, director of employee participation for Deere & Co., the big farm machinery maker. Other bosses insist they already are participative managers. Now in the fourth year of a publicly proclaimed transition to a more participative style, Deere is not forcing the change, although it directs all unit managers to share more information with employees. About half its plants have a formal program to make the transformation. MORE DIRECTION may be required to ensure the transition. Eaton, a company with a foot in both traditional manufacturing and high tech, was one of the first large companies to alter its organization on the factory level. In the late 1960s the company began to open ''new philosophy'' plants that eliminated time clocks, put all employees on salary, and allowed workers to decide for themselves their hours and vacations. In the 1970s the company began adding work teams and quality circles. Two years ago the company took a reading and discovered that the relationship between management and labor had indeed improved, perhaps so much so that managers didn't feel the need to be any more participative. ''We plateaued,'' says Wendenhof, Eaton's industrial relations chief. ''The plants did not continue the evolution. It didn't go to the next level that I would have pictured: self-managed work groups, or processes that brought decision-making down to lower levels.'' Eaton ran into a curious irony of participative management: It can't be installed participatively. The program needs leadership ready to cram it down the organization. Eaton has formally made participation a corporate goal and has taken steps to hasten its progress. To signal the change, E. Mandell De Windt, Eaton's chairman until he retired in April, led one of the first meetings to introduce the policy. Wendenhof says: ''We're not leaving it up to unit managers today. We've said, 'This is the philosophy.' '' The company has put its top 150 executives through three days of training in participative techniques. If all goes according to plan, those executives, mostly unit ) managers, will sow the seeds of change among the people reporting to them. Wendenhof sees the corporation advancing ''beyond the conceptual'' by next year. Top managers at other companies refuse to learn, though, even when the evidence is right there before their faces. GE's successful Newark plant was modeled on a Gaines Foods plant. The participative system at Gaines began when the company was part of General Foods -- it is now owned by Anderson Clayton, and Quaker Oats wants to buy it. Under its different owners, the plant has been a long-running success. But the owners didn't do much with the idea. The Gaines plant, built in Topeka, Kansas, in 1969, did away with traditional supervision through the use of work teams. In addition to running machinery, work teams hired new employees and were responsible for quality control and maintenance. ''We have succeeded in spades,'' says Herman Simon, the plant manager. The plant's biggest battle was fighting off corporate attempts to impose traditional management controls. General Foods, in the meantime, built only one other plant along the same lines, in Canada. It closed last year because the market didn't meet expectations. ''We have a number of people who wanted to move the participative process throughout the organization as quickly as possible,'' says Anthony Olkewicz, an organizational development expert at General Foods. ''When that was posed as a strategy and short-term goal, a lot of people said, 'Wait a minute, why do I have to fix what is going quite well?' '' CONSULTANTS such as Ralph Barra, who spent 30 years on the human resources front for Westinghouse, believe that this if-it-ain't-broke-don't-fix- it notion may be holding back U.S. management. ''We're great at maintenance management,'' he observes, ''and in making small improvements. But why should the status quo be acceptable? Why not 40% improvement instead of 10%?'' There is, to be sure, a certain righteousness to the participatory bunch, a belief that theirs is the true religion -- the First Participation Pentecostal Church and Productivity Revival mission -- and the rest are just sinners who must repent or meet their Maker. But what if these zealots are right? ''It's Japanese managers and workers against our managers,'' says Barra. ''The companies that will survive are going to be participative.'' Plenty of managing sinners seem willing to risk the apocalypse. Confronted with this persistence in error, the participation gang has another strategy: ''We're just going to have to wait until some people leave or retire,'' says one believer. And so they wait, prophets in their own country.