Unions play pivotal role making companies more competitive

Businesses do better when management and labor are partners, and unions are the key. Handshake via www.shutterstock.com

When Wisconsin Governor Scott Walker put pen to paper to create America’s 25th right-to-work state last month, it became clear that the “labor question” is once again gnawing at the nation’s psyche. Do unions bring value to our economy or are they just obstacles to growth?

Walker and others who have led the charge to strangle unions’ power justify their actions by saying unions create labor market inefficiencies and fat union bosses. Yet they ignore the vital role they can play in combating inequality, lifting wages, implementing new training programs and rebuilding our economy.

Also lost in the fury in Madison, Wisconsin – and nearly everywhere else labor finds itself under assault – is the underrated but equally significant contribution unionized workplaces make to the resilience of our companies and the quality of our government services.

To weather the storm whipped up by the likes of Walker, organized labor needs to highlight its unique ability to leverage shop floor power to build partnerships with employers and governments. Together, they’ve successfully rolled out participatory workplace structures that have improved how their organizations are run. If they don’t expand these efforts, labor will continue to lose ground to right-to-work laws and other efforts to stifle unions.

Wisconsin recently became the 25th right-to-work state, despite intense labor opposition. Reuters

Successful unions

The demise of US labor would mean not only the end to resources to help rebuild our economy and reduce inequalities but also the capacity for management to draw on the deep knowledge of frontline staff. That’s a partnership that has led to prosperity for both workers and their employers.

During World War II, legendary United Auto Workers leader Walter Reuther knew the value of worker participation in management decisions. Reuther wanted the automakers to convert auto plants so they could manufacture planes and army trucks to help with the war effort. But managers at the Big Three car companies – Ford, General Motors and Chrysler – were initially reluctant to grant the UAW a seat at the table. Reuther persisted until the companies saw the wisdom of his ideas. Record profits and wages followed.

Another example involves Irv Bluestone, chief negotiator for the UAW at GM in the 1970s. He advocated tirelessly to improve “quality of work life” and helped create opportunities so that assembly line workers could help improve the cars they rolled out by working with management to find ways to produce a high-quality, affordable car.

In the 1980s, the UAW was crucial in developing the GM-Toyota California joint venture known as New United Motors Manufacturing (NUMMI), which deployed Japanese-style work teams, extensive training and collaborative labor-management partnerships to bolster productivity and quality far above established GM plants.

This culminated in the historic labor-management partnership that built and ran the Saturn plant in Tennessee, giving rise to a car that competed with the then-dominant Honda Accord. It also provided workers with a voice in decision making, from the layout of the shop floor and the selection of production equipment to the choice of dealerships and suppliers.

While NUMMI and Saturn ultimately closed, victims of the 2008 financial crisis and management intransigence, the lessons learned in autos have spread elsewhere. At heavily unionized Southwest Airlines, for example, labor routinely consults with management on high-level strategic decisions, a structure that helped workers ride out the post-September 11 downturn with zero layoffs.

Walter Reuther, pictured here next to President John F Kennedy, showed how labor-management partnerships can pay off. Reuters

Forward-thinking CEOs

Instead of fighting their employees, forward-thinking executives and public administrators have partnered with unions to drive growth, improve quality, develop new products, re-train employees and, in the case of the airline industry, made flying safer. Companies like Saturn, Xerox, and Levi Strauss, as well as medical centers such as Montifiore Medical Center and Kaiser Permanente have chosen this high-road strategy.

Employers and unions know how to work together but have often been stymied by short-sighted executives focused exclusively on the share price and rigid work rules such as seniority provisions, promotion rights and job classifications that have denied workers agency and prevented grassroots ideas from being implemented.

In the public sector, where unions remain relatively strong, leaders have long looked beyond collective bargaining and grievance handling and have helped radically reduce costs and improve community services. In education, for instance, Rutgers scholars Saul Rubinstein and John McCarthy have shown that partnerships between teachers’ unions, administrators and classroom instructors are a significant predictor of student performance, after controlling for poverty and school type.

At the ABC Unified School District southeast of Los Angeles, which comprises 21,000 students in 30 schools, the authors found that a partnership with the ABC Federation of Teachers improved student achievement. The district consistently scored above the state average on the California Academic Performance Index, despite high percentages of low-income families and English-language learners.

The involvement of rank and file teachers in areas previously the preserve of administrators and school boards taps the endless fountain of knowledge that only they possess.

Perhaps one of the best examples of a long-term worker involvement is in the non-profit healthcare sector, where the Service Employees International Union (SEIU) and Kaiser Permanente have aggressively improved the coordination and quality of patient care while tackling the bloated medical costs that were the target of President Barack Obama’s Affordable Care Act.

The labor-management partnership at Kaiser Permanente created unit-based teams to help improve patient satisfaction and strengthen processes to coordinate care and implement a comprehensive electronic medical records systems. Some notable results include reducing unnecessary hospital admissions and tests.

Other healthcare labor-management partnerships in Los Angeles, New York City, Pittsburgh and Seattle have reduced infections, patient falls, re-admissions and unnecessary costs.

Labor needs to broaden its toolkit

Yet these, and many other efforts, often fly under the radar. And partnerships can often go wrong – managers and unions that simply impose reforms without devolving power to worker-led teams are bound to fail. The short-term “gains” of Scott Walker – reduced wages and the elimination of meaningful collective bargaining – become illusory and self destructive as government and corporate leaders realize they have sidelined their most important asset: worker skills and knowledge.

In the face of relentless attacks from short-term profit seekers, labor needs to broaden its toolkit to find concrete ways of strengthening firms and improving public services. It needs to communicate to members that they are more than just an insurance agent. And managers need to stop listening to Walker and think hard about how to embrace unions as vital partners in their company’s success.

Band-Aid solutions to manufactured fiscal crises like slashing wages or eroding union security clauses are not sustainable. Instead of denying labor’s right to exist, the political class should consider what can be gained by partnering with labor to improve services in the face of cost pressures and cut-throat international competition.

There is now mounting evidence joint labor-management partnerships work can make a difference to improve our economy by enabling workers to have a voice in resolving problems to improve quality of care and services while at same time reduce waste and unneeded costs. But this can only happen if both sides remain committed to the process. The coming years will be a test, not just of the labor movement’s metal, but of the commitment of politicians and CEOs to America’s best interests.


This is the third in an ongoing series on the waning power of Organized Labor. Click here to see other articles in the series, which culminates on May 1, International Workers’ day.

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