248-409-1900 dburke@mi-worklaw.com

Every Business In America Constantly Adapts To Changing Conditions –Except Unions

By:  Bill Pilchak – 6/26/14

          No one can lead a successful business or business unit in the 21st century without two qualities: knowledge and the ability to respond to change.

          As to knowledge: In the new century, with business developments passing like fence posts on the freeway, virtually every person responsible for running a business is in a constant state of learning. The Peter Principal, Demming, Total Quality Management, Six Sigma, Kaizen, e-business, information technology, ISO 9000, deemed export regulations, environmental impact, social media. The list goes on and on. Every year something new looms which may force change. We are, after all, in the information age, which Wikipedia describes as where “the digital industry creates a knowledge-based society surrounded by a high-tech global economy that…influence[s] how the manufacturing… and…service sector operate in an efficient and convenient way.”

          Handling information – i.e., leveraging knowledge- is what we now do in America. Manufacturing has declined from 24.3% of GDP in 1970 to 12.8% in 2010. (U.S. Chamber of Commerce Study conducted by University of Michigan) For decades, Microsoft, Cisco, HP, Intel, etc. have grown while manufacturing industries making electronics, clothes, appliances, toys, shoes and many other goods have virtually disappeared from the U.S.

          As Wikipedia suggests, the information age now dominates what remains of the manufacturing sector.  Machine operators no longer read blue prints, turn on the lathe, cut the metal and measure with a micrometer. Now, a designer prepares a CAD rendering and a technician enters that data into a CNC machine which cuts the tool and electronically measures the finished product. CAD and CNC skills are taught at the community college level.

         Reflective of greater demands for knowledge, by year 2000 college degrees became as common as high school diplomas were in the 1940’s (just under 25% of the general population). (Census bureau data) Today, the percentage of college degrees among the workforce has grown to approximately 35%, with another 30% having “some college.” (Georgetown University study) Only 35% in the workforce have only a high school diploma or less. (Id) Drill press operators have been replaced by robots who do not do not demand unrealistic wage increases, fake workers’ comp injuries, bring grievances, file employment litigation or call in sick on Mondays and Fridays. The job that exists instead, Robotics Field Service Technician, generally requires a bachelor’s degree in engineering (electric or mechanical) according to the items found on Careerbuilder.com today.

          As to change: I am constantly amazed how companies employ technology and insight to upgrade service or operations to improve their competitiveness or to eke out another fraction of a percentage point in profit. A different distribution model, lowering claims experiences and insurance costs, even stiff-arming plaintiffs in litigation can all be strategies to reduce costs and prices and improve competitiveness. Every segment of the operation is expected to contribute. One client substituted a free customer service requiring an expensive full-time position with a web-based service where all customers obtained the same service by connecting to a website (and was sued for it).  In 2014, increasing efficiency and changing one’s business in response to conditions is expected. For successful companies, change is constant.

          Except in unions. In 2014, unions still operate on the same business model they employed in the 1950’s – indeed, since the 1930’s. That model made sense when America emerged from WWII unscathed and competed against industrial nations that had been decimated by war. The only issue then was how to split up a virtually untouchable pie.

          However, once satellite transmission of data, improved air travel and container shipping resulted in global competition, the unions’ 1950 business model became obsolete. No one leading the labor movement, it seems, realizes that American employers are dancing to a different, global tune.   As the State Bar President said recently about the changing environment, when the band starts playing a tango, one doesn’t merely waltz a little faster. Asian manufacturers abroad cultivate a team mentality where employees aim at the competitors. (See, e.g., a fascinating Wall Street Journal item by a 1978 consultant to Nissan: “Nissan had assumed that [U.S.]unions…were much like those in Japan, where the …bargaining unit collaborates with management to strengthen competitive position and prestige” at http://online.wsj.com/news/articles/SB10001424052702304675504579391163334785396) Conversely, U.S. unions still portray the employer as a villain, both at the local union-election level and by fueling the left’s nationwide class warfare political agenda. They gain their foothold among those employees at risk of termination because of poor performance, attendance or respect for supervision. After promising protection for those employees hurting the company’s mission, they next sell the idea that they can increase wages by threatening to shut down the company – i.e., by striking, when anyone with any knowledge knows that even the hint of a strike scares off business customers and drives them to competitors so that inevitably there will be less revenue to fund raises. Even if a strike is averted, paying wages or accepting work rules that do not make business sense to avert a strike drives up costs and impairs the company’s competitive posture. Looking at the issue in a “macro” sense, any company saddled with a union is handicapped. In a thousand ways, via work rules, contract provisions that lock companies into outmoded methods, strikes and cultivating general disdain for the company, a union saps life from a company so that more flexible competitors pass it by.   Customers, too. Just as an army of aphids can kill a thriving garden plant, a disloyal workforce sucking out resources can cripple industrial plants. Even GM can go bankrupt, ironically while Japanese brands not only thrive but dominate certain markets, including California, where they have 48.4% of the market share while domestic brands have only 24.8%. (2013 R.L. Polk & Co data prepared for the California New Car Dealer’s Assn.)

          I daresay one could not find a labor lawyer who has not dealt with a union who dug in and threatened labor unrest rather than permit change that would save existing work, bring in new work or enhance competitiveness generally. Unions often say “we’d rather shut the company down/ lose the work” than change a provision that has been in the contract for thirty years. Management’s excitement over devising a solution to a daunting outside challenge can evaporate upon realization that the union must agree to the change.   Bringing the union into the process can be like when a special-needs cousin joins a fast-paced board game. When no one on the union team understands what competitors are doing or the latest business trends that demand change, the union’s veto-power can doom the only solution. That occurs often enough that the management team often rejoices when a degreed auditor or attorney joins the union team and can educate the bargaining unit and legitimize management’s needs.

          Occasionally, we encounter colleagues who have served internships at Solidarity House. Two, in different ways, wondered why the UAW didn’t spend some of its estimated $260 Million in annual revenue to hire MBAs to provide them with a game plan for the future. If the “help” management often gets from union auditors and attorneys is any indicator, one has to believe that the nation’s manufacturing competitiveness would improve by infusing an educated viewpoint into the unions, even if the MBAs were paid by the UAW and shared their pro-worker agenda.

          So, it is worth noting that Bob King, the son of a Ford Director of Labor Relations, who -with a bachelors and a law degree- has more education than any UAW President in history, is leaving office. Unless King and his father had a legendarily poor relationship, King should have gained some insight on the need to respond to outside business pressures from dinner table conversation. So, it is regrettable that as he hands over the presidency to Dennis Williams, who has no college at all and who led a venomous five year (unsuccessful) strike against Caterpillar, the UAW’s business model remains the same.  As King leaves, the UAW’s only meaningful new strategy is an unsuccessful (though unopposed) attempt to also handicap overseas transplants by saddling them with the UAW’s obsolete business model.

          So, what kind of ideas and changes might an educated, innovative mind suggest to unions in the information age? How about these off the top of our head:

  • How about not fighting for (and achieving) reinstatement of 13 pot-smoking Chrysler workers caught on film, to avoid nationwide news items that give consumers yet another reason to avoid American brands? Doesn’t anyone at Solidarity House realize that telling America that Chryslers are built by workers high on pot hurts their membership by losing far than 13 jobs due to lost market share? Doesn’t anyone at Solidarity House realize that workers in Tennessee, Alabama, and other southern auto manufacturing states might vote against a union that fights to place stoned colleagues into an environment where loaded hilos speed down aisles and safety concerns abound?
  • How about aligning the union workforce with strategies to increase market share and thus revenue, in exchange for an agreed method of measuring the economic benefits and an agreed split between workers and the shareholders of the increased profits?       The kind of strategies we have in mind would be based on the fundamental principal that each employee, whether management or hourly, should do an honest and vigorous eight hours of work per day. That means the union would work with the company to:
    • Stop rampant time theft where employees leave the plant after punching in;
    • Eliminate no-work jobs;
    • Break down job classifications that result in workers sitting idle for hours on end;
    • Where idle time is inevitable, such as maintenance repair positions, fill the time with constructive duties;
    • Stop the Monday and Friday call offs.
  • How about permitting the company to reward hustle, good attendance and excellent work product by paying bonuses or higher wages to the best employees, instead of stamping out excellence by paying go-getters the same as the worst slacker? Why wouldn’t the union want their members to get more cash?   Is there something wrong with promoting a better work ethic?

          Anyone who has been involved in business for 30 years knows that America is declining on many fronts. It’s hard not to believe that Asia is winning the global competition in the auto industry because their unions “collaborate with management to strengthen competitive position and prestige.” When will American unions abandon their class warfare ideologies and begin to think outside of their outdated box?