Reference: FOSSUM.. Labor Relations, 10th Edition. McGraw-Hill Learning Solutions, 2008. VitalBook file. Page 429Chapter Thirteen Union-Management Cooperation Many labor relations practices are adversarialorganizing, bargaining over wages, disputing contract interpretations, and the like. But many argue that both unions and managements can achieve improved outcomes through cooperation. The catalyst for cooperation is often the financial exigency of the employer and the specter of potentially large job losses. This chapter explores variations in union-management cooperation and their effects, including interest-based bargaining, community-based labor-management committees, employee involvement programs, gainsharing, and work and organization redesign. In reading this chapter, consider the following questions: How are cooperative problem-solving methods different from traditional bargaining? Can a cooperation program violate labor laws? What are some results of cooperative programs? Are they equally likely to lead to successes for both unions and managements? What types of cooperation programs are in current use by employers and unions? Are union-management cooperation programs sustainable in the long run? LABOR AND MANAGEMENT ROLES AND THE CHANGING ENVIRONMENT A succession of economic cycles has influenced outcomes for labor and management. Labor supply and union power have been altered by several waves of immigration. The Railway Labor Act, Norris-LaGuardia Act, and Wagner Act strengthened labor's ability to organize. The TaftHartley Act and Landrum-Griffin Act increased employer power. At various points, new production technologies substantially reduced the Page 430need for lower-skilled union members. Today global competition affects the survival of some employers and the jobs of a diverse set of workers. During the past 40 years, industries that virtually monopolized domestic markets, such as steel, motor vehicles, consumer electric and electronic products, textiles, shoes, and software, now either need to be globally competitive or may no longer exist in the United States. Foreign competitors benefited from investment, technology transfer, and, particularly, lower wages for unskilled workers that boosted their productivity or lowered costs at a faster rate than was the case for domestic producers. Some of this was due to unions' abilities to increase wages and some to employers' failures to invest in technology. Both groups were responsible for not attending to the way work and production were organized as foreign producers implemented new and improved methods.1 Some companies failed and local unions were decimated, while others survived and prospered. In most cases, companies and unions in basic industries that have survived have changed their approaches to each other considerably. Organizing and the Evolving Bargaining Relationship U.S. employers have traditionally fought unionization. Even some employers in heavily unionized industries have implemented active union avoidance programs by fighting new organizing, shifting production from unionized plants to new greenfield operations, and reducing investment in unionized plants.2 Adversarial relationships carry over from organizing to bargaining and implementing contracts. The union needs bargaining successes for its officers to be reelected and for the union to avoid decertification. The legal specification of mandatory bargaining issues increases the union's emphasis on immediate economic issues and turns emphasis away from employer and union survival issues. As noted earlier, managers have generally been judged on their ability to avoid unionization or to limit its impact. In dealing with the union, managers tend to view a cooperative relationship as one in which the union has an insignificant role in decision making.3 Thus, neither party's leaders are initially motivated to seek cooperation. Evidence also suggests that unions win initial certification because employees are interested in exercising their voices in the employment relationship. But to management, coordinating with unions to create opportunities for this to occur may seem like a legitimization of union efforts. Page 431Preferences of Management and Labor Management seeks the highest profit level it can achieve through investing its capital. It makes investment decisions that shift resources from product lines with lower returns to those with higher profits. To do this, it needs to be able to adapt. From an unconstrained standpoint, it would prefer to open, close, and retool plants as needed; hire labor on a flexible basis; and adjust wage rates to meet changing product market conditions and to respond to shifts in the labor market. Employees are generally assumed to be risk-averse, while employers are assumed to be riskneutral. This means employers are looking for the highest rate of return, consistent with the risks they expect to encounter, while employees are assumed to accept lower pay if they can simultaneously reduce unemployment and other risks. Employees are risk-averse not because they have an inherent dislike of risk but rather because their skills are often occupationally specific, and perhaps specifically tailored to their present employer's requirements. Thus, their human capital is not diversifiable. They depend on continued employment, often with their present employers and in their present occupations, to be able to earn a satisfactory return. Employees are also interested in improving their economic outcomes, particularly when the employer is able to help them do so. Levels of Cooperation and Control Given the way mandatory bargaining issues are defined in the labor acts and employers' antipathy toward organized labor, managers have sought to retain as much control of the workplace as possible. Labor has generally been reluctant to seek shared responsibility for decision making given its adversarial role and the economic concessions it might have to make to gain a greater say in decision making. Both employers and unions began to consider cooperation during the 1980s in situations where companies or facilities were in extremis. In some situations, in return for economic concessions, unions have won greater claims on the rights to control processes and share in profits. Provisions have been negotiated to increase the proportion of employees' pay that is at risk, usually to help ensure employer survival and increase employment security. The effect of participation in gaining rights can flow along two dimensions: control and return rights. Control rights involve the degree to which labor participates in organizational decision making. Unionization, in itself, introduces a degree of control rights because the employer can no longer unilaterally decide wages, hours, and terms and conditions of employment. At the extreme, control rights would include works council arrangements (as in Germanycovered in Chapter 17) and representation on corporate boards of directors. Return rights begin with wage payments and progress through incentive plans, profitsharing and gainsharing programs, and ultimately to employee stock ownership of the Page 432enterprise.4 Conflicts over control rights and unions' general disinterest in broader return rights, the historical antipathy of employers, and adversarial relationships in bargaining have made the creation of joint problem solving difficult. This chapter explores initiatives in union-management cooperation to jointly accomplish their separate goals. Part of this is done through integrative bargaining during contract negotiations and part through developing ongoing cooperative relationships. Many cooperation experiments are initiated through side letters in the contract or through agreements to suspend contract provisions to experiment with new methods. INTEGRATIVE BARGAINING Integrative bargaining is a set of activities leading to the simultaneous accomplishment of nonconflicting objectives that solves a common problem for both parties.5 Conflict occurs when parties have different goals and either the need to share resources or task interdependencies block one party's goal attainment if the other party pursues a certain course.6 For example, shared resources may be available hours of work, and different goals may be overtime premium earnings for the union and high profits for management. One party's accomplishment will interfere with the other party's goals. Integrative bargaining occurs when one party's goal will not block the other party's goal. Parties may not immediately know integrative issues that might emerge from a failure of distributive bargaining to achieve the goals the parties desired. Two major types of integrative solutions may alleviate this conflict. The first is a situation in which both parties experience an absolute gain over their previous positions. For example, in the 1980s, auto workers at Ford achieved permanent job security in return for new work rules to reduce costs. Second, integrative bargaining may involve both parties' sacrificing simultaneously (in distributive bargaining, one's gain is the other's loss).7 Steel industry wage concessions in the early 1980s reduced labor costs enough in several situations to induce employers to invest in new technology, thus lengthening the likely employment of many steelworkers. Change processes in union employment situations require that certain conditions exist. Increasing internal or external pressures felt by both parties should lead to the consideration of new joint ventures. Multiple Page 433constituencies within the union and/or management would stimulate efforts to arrive at innovative procedures for dealing with joint problems. Where the normal collective bargaining process and its attention to crisis situations is used exclusively, innovation is less likely. Joint commitments are more likely when a program is seen as accomplishing important ends for both and when both are willing to compromise on goals they desire. Programs should enable early measurable progress toward goals for both parties to maintain support from their constituents. Many of each group's members must experience benefits, and these benefits should not detract from accomplishing other important goals. Programs should be insulated from the formal bargaining process, and usual methods for distributive bargaining should continue.8 While management may propose integrative bargaining when the effects of economic change need to be addressed, distributive reasons often underlie the overture. If a change can't be negotiated, management may signal its intent to close a facility. Capital is far more mobile than labor. A plant can be sold and resources redeployed, but the financial burdens workers face, especially if the firm is the dominant employer in the area, are often very onerous.9 Several conditions are necessary for facilitating problem solving. First, parties must be jointly motivated to reach a solution. Second, communications between parties must reveal as much information about the problem as possible. Third, parties must create a climate of trust to deliberate over the issues without taking advantage of disclosed information.10 Integrative bargaining is appropriate for both immediate and long-term problems. For example, an integrative solution may be appropriate when a contract issue causes grievances during the agreement. Rather than waiting until the next negotiation, addressing the problem immediately may lead to positive outcomes for both parties. On the other hand, anticipated consequences of technology changes may be long-term and may require an open-ended relationship extending beyond the contract period. Mutual-Gains Bargaining A contract is based on the assumption that current conditions will continue during the length of the agreement. By the time a situation reaches the point that both parties will suffer if the contract is not changed, each may have lost a substantial amount (e.g., employer profits and union members' job security). Page 434A climate in which both the employer and the union would be continually concerned with problem solving and mutual improvement in their situations would call for a living agreement.11 This would require that the parties determine, a priori, what types of events would trigger problem solving. Where contracts typically include the possibility of reopeners based on the passage of time, this would require that certain employer and employee outcomes would trigger joint problem solving to deal with them. In Canada, Saskatoon Chemicals and the Communications, Energy & Paperworkers Union have agreed to continuous bargaining, particularly with relation to interest-based issues and work redesign.12 In bargaining, withholding information or threatening opponents breaks down trust. It's difficult to define and address problems straight-forwardly unless each party trusts the information the other provides. Principled negotiations require that bargaining be on the merits of the issue, providing information that would enable both to arrive at a mutually agree-able solution.13 Trust does not occur spontaneously, however. It follows from attitudes toward trust itself, and the experience the parties have had with the perceived trustworthiness of their opponents.14 Where a trust relationship doesn't exist, the parties will need training and an opportunity to build trust in simulated relationships before beginning to bargain in situations where they are at risk. Even trained bargainers may encounter problems because their constituents are primarily interested in tangible outcomes, not necessarily the effort that it takes to build an infrastructure of trust. FMCS Innovations The Federal Mediation and Conciliation Service (FMCS) has worked for over 25 years to develop tools that help parties improve their bargaining relationships. These tools include relations by objectives, bucket bargaining, and technology-assisted group solutions. While each of these will be examined separately, aspects of the three innovations may be combined in a particular bargaining situation. Relations by Objectives Creating and sustaining a trusting relationship can be difficult because bargaining often involves both distributive and integrative issues simultaneously. Relations by objectives programs train negotiators to take a problem-solving approach in negotiations and contract administration. Page 435The technique brings union and management members together outside a negotiating setting to mutually plan actions to reduce future conflict. The program is designed to increase the skills of union and management negotiators in communicating, mutual goal setting, and goal attainment. It assumes that improving problem-solving skills and obtaining increased information will enable each side to better appreciate the other's positions and to specify bargaining issues. Evidence about the effectiveness of these programs is mixed, with some positive effects on the time necessary to negotiate agreements. But adverse economic conditions erase the effects, especially if the negotiator for either side changes.15 Bucket Bargaining The bucket bargaining model is based on the idea that there are five types of issues in bargaining: minor issues, past-problem issues, change issues, discussion issues, and economic issues. The bargaining issues that emerge are screened into five \"buckets\"update, repair, redesign, discussion, and economic. Figure 13.1 shows the bucket bargaining process. Bargaining begins with the update bucket and moves toward the right. The figure shows tools that are used to assist bargaining within each of the buckets. Studying how other parties have solved similar problems may reveal \"best practices\" that the negotiators might want to examine or adopt. Another method is to create a team with members from both parties to come up with a \"straw design\" that they present to the bargaining team. They don't defend the design, but they note comments and criticisms and then modify the proposal by incorporating feedback from both sides in subsequent versions. These are labeled \"wood,\" \"tin,\" and \"iron,\" in turn. The iron version is not debated but is either accepted or rejected.16 The economic portion of bucket bargaining uses established guidelines to frame the issues in the economic package, rank or prioritize them, identify and define costs, identify interests of the parties, and agree on the tools for analysis. Then a straw design is developed, and the parties use their problem-solving techniques to develop standards and arrive at a solution that fits the standards. Figure 13.2 details the economic bucket process. The aim is to avoid a strictly sequential approach to bargaining and to deal first with issues that can readily be resolved and then to handle in a final reconciliation those that can't be settled within their bucket. Technology-Based Group Solutions Technology-based group solutions (TAGS) provides bargainers with a network of laptop computers. Participants enter comments and suggestions at their keyboards that are displayed and categorized before the group. Language for proposals can be changed to reflect suggestions agreed to by the entire group. The time necessary for negotiation, a permanent record of the comments, and the ability to vote secretly all enhance the amount of information that can be transmitted quickly and enhance the ability to reach a consensus.17 Page 436FIGURE 13.1 Bucket Bargaining Process Source: K. Saunders, \"Bucket Bargaining: Best Process in Interest Based Bargaining,\" Labor Law Journal, 50 (1999), p. 87. The Use and Effects of Interest-Based Bargaining The FMCS compared the results of interest-based bargaining (IBB) to negotiations where traditional methods were used.18 The study found that unions were more likely to use IBB if they had a less experienced negotiator, were in a service industry, and were dealing with a management bargaining team having internal disagreements. Union negotiators' preference for using IBB was associated with having less negotiating experience, being male, dealing with a management team having internal conflict, and not being located in the middle Atlantic states. Page 437FIGURE 13.2 Bargaining Economics Source: K. Saunders, \"Bucket Bargaining: Best Process in Interest Based Bargaining,\" Labor Law Journal, 50 (1999), p. 52. For management bargainers, use of IBB was associated with pressure around new technology and with not being in construction, manufacturing, or service industries. Preference for using IBB was associated with less negotiating experience, a perception that the bargaining relationship is cooperative following negotiations, pressure around new technology, and not being in manufacturing, construction, or service industries. Contracts negotiated using IBB were more likely to have increased work rule flexibility, new pay arrangements, joint committees, and team-based work systems. Most economic issues were not influenced by IBB. The greatest effect seemed to be on the ability to negotiate complex issues. There are differences in goal emphasis between union and management Page 438negotiators who prefer to use IBB. Management negotiators are more likely to be interested in new pay arrangements and teams, while union negotiators are less likely to be interested in those issues. Work rule flexibility and willingness to reduce benefits were higher for union bargainers preferring IBB but lower for management negotiators preferring IBB. These findings raise some caution flags regarding long-term sustainability of IBB in a particular bargaining situation. CREATING AND SUSTAINING COOPERATION Since the early 1980s, cooperative initiatives outside contracts and integrative bargains within contracts have increased, enhancing firm performance and improving job security. An analysis of contracts involving 1,000 or more employees and expiring between 1997 and 2007 found that 47 percent included cooperative provisions.19 Figure 13.3 shows the cooperation continuum, while Table 13.1 shows the incidence of cooperative clauses by levels of cooperation. Given management's long-standing antipathy toward unions, it's reasonable to expect collaboration only where improved performance is expected. Cooperation has been successful where communication between the parties is open, management accepts the representational role of the union, and the union is concerned about the success of the enterprise.20 Figure 13.4 models the proposed impact of collaboration on performance. It suggests that the intensity of cooperation is influenced by a cooperative structure and the relative power of the union and the company as modified by organizational constraints. Over time, the labormanagement relations climate also influences intensity. Changing labor-management relations, the relative power of the company, and organizational constraints lead to changes in company performance. The availability of union and company power implies they will use it to influence cooperation. Applying relatively equal power should enhance cooperation efforts where both parties prefer it as a mode for achieving important ends for each.21 A cooperative climate is promoted by the union's willingness to adopt an integrative bargaining approach, management's willingness to share information freely, and perceptions of procedural justice. This study found that cooperation contributed to higher productivity and improved customer service.22 Page 439FIGURE 13.3 The Cooperation Continuum Source: G. R. Gray, D. W. Myers, and P. S. Myers, \"Cooperative Provisions in Labor Agreements: A New Paradigm?\" Monthly Labor Review, 122, no. 1 (1999), p. 31. TABLE 13.1 Incidence of Cooperative Clauses in Private Sector Collective Bargaining Agreements Expiring between September 1, 1997, and September 30, 2007 Source: G. R. Gray, D. W. Myers, and P. S. Myers, \"Cooperative Provisions in Labor Agreements: A New Paradigm?\" Monthly Labor Review, 122, no. 1 (1999), p. 33. Page 440FIGURE 13.4 Model of the Effect of Cooperation on Performance and Labor Relations Outcomes Source: W. N. Cooke, Labor-Management Cooperation (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 1990), p. 94. Reprinted with permission. METHODS OF COOPERATION This section examines cooperation methods, covering assumptions about types of cooperation, mechanisms used to achieve it, union and management personnel involved, and results of cooperative efforts. It examines several generic approaches to labor-management cooperation, including areawide labor-management committees, productivity improvement and employee involvement plans, gainsharing, and employee stock ownership plans. Within firms, several of these may be combined to enhance joint outcomes. The section also covers the changing roles of managers and union officials, political changes, and the processes involved in the diffusion and institutionalization of innovation in workplace design. Areawide Labor-Management Committees Areawide labor-management committees (AWLMCs) are jointly sponsored by unions and employers in a local area. They don't engage in collective bargaining or form multiemployer or multiunion bargaining units. Instead, they advise their members on how to deal with jointly experienced employment issues. AWLMCs are most often a response to significant regional employment problems. They have been developed most frequently in the Northeast and Midwest following economic declines. There is often a history of plant closings, with parent companies expanding elsewhere. High wages and/or adversarial labor relations are likely to be part of the problem. The primary assumption behind the creation of AWLMCs is that labor and management representatives may pressure each other to identify sources of problems and use cooperative methods to reduce or avoid Page 441conflict. They provide information to members about cooperation successes and legitimize the use of nonadversarial methods. The identification of joint issues, such as reduced profits and declining job security, may lead to joint efforts to resolve them. An AWLMC is usually managed by an executive director hired by a coalition of business and union leaders. AWLMCs engage in four major types of activities: (1) sponsoring events to improve labor-management communications, (2) establishing committees in local plants, (3) assisting in negotiations, and (4) fostering economic development.23 These activities aim to create a problem-solving environment and an appearance of labor-management cooperation. Generally, evidence suggests that AWLMCs need the backing of major employers in the community and a competent executive director who is willing and able to stay in the post for an extended period to be able to accomplish the goals.24 Joint Labor-Management Committees The retail food industry joint labor-management committee (JLMC) involves top union and management leaders and helps managers to understand the national-local union relationship in a decentralized industry. JLMCs have been successful with research on occupational safety and health issues, introduction of new technology, health care cost containment, and issues relating to competitiveness.25 JLMCs are most often implemented in industries with many employers and a dominant union with locals in many employers and locations. Joint labor-management committees have most often been used to deal with specific problems rather than to address the entire scope of the bargaining relationship. Some joint efforts have led to continuing and expanded cooperation efforts. Notable among these are the cooperation between Xerox and UNITE-HERE, which began as a result of rapidly growing competitive pressure faced by Xerox in the early 1980s and the effects this was having on job security,26 and the employee involvement (EI) program developed by Ford and the United Auto Workers to respond to higher levels of quality and value in imported vehicles and decreasing profits and job security in an industry under siege. Another example is the introduction of joint building trades- union contractor committees in the construction industry. Here one study Page 442found improvements in safety, training, and absenteeism; a reduction in jurisdictional disputes between unions; and a decline in jobs going to nonunion contractors.27 A health care labor-management council in Minneapolis-St. Paul created extensive cooperation that improved hospital staffing flexibility, resulting in an increase in hospital income per patient of about $80 per day.28 Among these examples, Xerox and the Twin Cities hospitals are currently facing very difficult financial situations. Some Twin Cities hospitals have merged and nurses have struck as health care purchasers have put pressure on insurers and hospitals to cut costs and compete. The labormanagement council is no longer in operation.29 Thus, joint labor-management cooperation does not, in itself, ensure corporate survival and employee job security. Workplace Interventions Workplace interventions are projects usually initiated at a single location within an employer and involve a single union, or they may be part of a larger joint union-management program in a single firm. Typically, changes are sought by employers to improve product quality, productivity, and profitability. Unions seek enhanced employment security, an opportunity for economic gains, and continued operation of local facilities. Workplace interventions change the design of organizations by increasing the use of lean production, cell manufacturing, self-directed work teams, and the like. Jobs are made broader and classifications are reduced, increasing the employer's flexibility in assigning work as demands change and reducing the likelihood that layoffs might follow a reduction in demand for jobs with narrow skills. Pay programs are often changed so that employees share in productivity or profitability gains while reducing employers' risks during periods of economic difficulty. Base pay levels are more frequently tied to skill level than to current job duties or seniority level. A variety of workplace interventions has been implemented. Table 13.2 divides them into gainsharing and nongainsharing plans and describes their characteristics. Gainsharing plans (covered in Chapter 9) tie periodic bonuses to labor productivity improvements. Nongain-sharing approaches may include a changed reward structure (primarily nonmonetary) in the intervention without a directed relationship between productivity and pay. The table summarizes the guiding philosophy of each method, primary change goal, degree of worker participation, role of supervisors and managers, any bonus formulas, the union's role, and other characteristics. Page 443TABLE 13.2 Comparative Analysis of Workplace Interventions Source: Adapted from M. Schuster, Union Management Cooperation: Structure, Process, and Impact (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 1984), p. 73. Gainsharing plans generally benefit both employers and employees. As noted in Chapter 9, their adoption is often followed by increased profits, productivity-related bonuses for employees, and/or a greater ability for a firm to survive and employees to retain jobs during secular decline in Page 444an industry. In addition to generally positive economic benefits, a study found that after the introduction of a Scanlon-type plan, grievance and absentee rates permanently decreased over time.30 A long-term study of a suggestion system found that productivity improved and grievances and disciplinary problems declined but implementation costs more than offset the gains the suggestions generated.31 The survival of gainsharing plans is related to employees' vote to approve, new employee training, labor intensity, major capital investments, bonus performance, and use of consultants.32 Gainsharing plans are often implemented in mature organizations in competitive product markets where there is continuous pressure on all types of costs. Unless barriers to entry exist against new firms, flexible compensation programs inevitably lead to ratchet effects, with the performance base on which bonuses are paid increasing following higher productivity.33 Employee Involvement and Quality-of-Work-Life Programs Employee involvement (EI) and quality-of-work-life (QWL) programs have three components: (1) improving climate, (2) generating commitment, and (3) implementing change. Union participation in EI programs is related to the progressiveness of the company and increased foreign competition. The implementation of involvement programs in traditional unionized workplaces is related to deregulation, demographic change, and support (but not pressure) from a parent national union. Cooperation in strategic decision making is positively related to foreign competition and negatively related to domestic competitionprobably because the national union often bargains with other companies in the industry.34 A study of GM-UAW plants found that performance, quality, productivity, grievances, discipline, absenteeism, number of local contract demands, and negotiating time were significantly related. Grievances and absenteeism rose when production pressures increased. Product quality and productivity measures decreased as labor problems increased. Managerial attitudes were positively related to both labor relations and productivity-efficiency measures. EI programs were associated with higher product quality and reduced grievances. Absenteeism and quality Page 445were related, possibly because less careful workers were gone more.35 A study of both unionized and nonunion firms in Canada found that in unionized firms grievance rates generally decreased following implementation of EI programs but in nonunion workplaces EI was associated with the development and implementation of grievance procedures but not lower rates.36 EI programs are associated with reductions in absences, accidents, grievances, and quits.37 Desire for union involvement in EI programs is related to dissatisfaction, organizational commitment, and attitudes toward EI.38 Participation in programs leads to greater loyalty to the union rather than reduced commitment. However, perceived effectiveness of the grievance procedure is a stronger predictor of attitudes toward the union than of participation in EI programs.39 EI program participation was associated with improved job satisfaction and enhanced communication skills. Union empowerment is a possible outcome.40 EI programs increased organizational citizenship behavior of participants, both through participation and through changing job characteristics requiring more task sharing. Other employment practices had little effect.41 Local unions involved in participation programs do not change the nature of their regular functions and activities, but unless they have support from their parent national, they may have a hard time coping with both participation and representation activities simultaneously.42 Finally, union antagonism toward EI doesn't appear to influence employee attitudes, but it does reduce participation.43 Page 446The evidence suggests that positive outcomes for both employers and employees result from implementing EI programs. However, a study using two large employer and employee data sets found that while employees generally feel that they benefited from EI programs, there is no measurable effect on company sales, even across a 10-year period.44 Team-Based Approaches The organizational restructuring that began in the 1980s has been increasingly team-oriented. A work team is responsible for the output from an area, including work assignment. Each team member is expected to be able to perform all the tasks necessary to produce the output for which the team is responsible. The more skills employees possess, the greater the variety of tasks they can perform. As such, many team-based programs are supported by skill-based pay (SBP) plans. SBP ties employees' pay levels to the number of specific skills they have acquired.45 Within a team, an employee who has acquired the entire set of applicable skills can perform any of the jobs. Broader skill sets mean the organization can readily accommodate changes in the demand for products because employees can assume new responsibilities quickly. Less equipment downtime occurs because one of the skill sets includes equipment maintenance. Multiskilling also improves an individual's job security.46 At Chrysler's Jefferson North plant, a \"modern operating agreement\" was implemented as the company's quid pro quo for rebuilding the plant in Detroit. Team leaders are elected in this operation as well, but rotation is infrequent. The team structure encourages equal effort and reduced absenteeism. This plant was staffed primarily by senior employees who would have been laid off if a new plant had not been built.47 Studies at Saturn found that quality is higher in units where the interests and goals of the management and union co-representatives, who are responsible for directing a work unit, were aligned. In addition, evidence suggests that union representatives formed more intensive lateral and vertical communication patterns within the plant, enabling quicker identification and solution of problems.48 Page 447Team members are expected to learn all skills involved in the jobs performed by the team. The team decides how work will be accomplished. Supervisors facilitate rather than direct work. In organizations where teams have been implemented, relatively small numbers of distinct jobs exist. Employee-supervisor relations improve more when there is substantial union leader participation and teams are very active. They do best where employment has not changed appreciably, where workers are experienced, and where management does not subcontract.49 While team approaches have been broadly implemented in the auto industry, they have been controversial at GM. GM's initial foray into cooperation involved QWL programs begun in the early 1970s. Since then, the introduction of teams at the company has been aimed at improving productivity, with more positive worker outcomes a potential by-product. Team approaches have been successful in New United Motors Manufacturing, Inc. (NUMMI), a Toyota-managed GM-Toyota joint venture in Fremont, California. Before the joint venture, this assembly plant had GM's worst absentee and quality record. When NUMMI began, most employees were retained and the UAW remained the bargaining agent. The team concept was agreed to before hiring and start-up, and employees were trained extensively in statistical process control and teamwork. The assembly line runs faster than it did under GM, but there is a nolayoff policy. Absence rates are very low.50 The EI program helped improve ergonomics for the production of the 1993 models.51 Joint labor-management teams are often established to deal with workplace issues such as safety and health. These are standing committees, co-led by labor and management. Stewards who are members of these committees become less likely to file grievances and more likely to settle them at earlier stages in the process. They see their roles as less advocative and more tied to enforcing the contract equally on labor and management. However, they aren't more likely to adopt managerial goals related to plant or firm performance.52 Page 448Alternative Governance Forms Union-management cooperation changes both the production process and workplace governance. Employee involvement in decision making shifts the focus of collective bargaining from structural rules to processes. Traditional collective bargaining offers less participation than other forms of governance.53 Table 13.3 shows the relationship between employee relations practice and various employee involvement areas influencing governance of the organization. Union Political Processes and the Diffusion of Change Collaboration is foreign to an adversarial relationship and requires political change by local and national unions. Firm stability and progressive management ensure the safety net union leaders need to advocate change. Unions adopt one of five reactions to innovative workplace initiatives: (1) \"Just say no,\" (2) let management lead and see what results, (3) become involved for political protection, (4) cooperate or collaborate, or (5) assert union interests.54 Local union defensiveness is not irrational because sometimes managers view cooperation as a signal of a willingness to make concessions and increase productivity while efforts to undermine the union continue.55 If unions perceive an unequal power relationship exists with management, cooperation is hard to introduce. Unions can take advantage of economic problems to further worker interests. Cooperative programs offer an opportunity to negotiate permanent participation into contracts.56 Developing cooperation programs is enhanced by international union education efforts and local willingness to risk experimenting with new forms of bargaining and work designs.57 Participation programs can benefit unions since workers who are active are more satisfied with their union and involved in union activities. Union support is not undermined by member involvement.58 Union leader involvement in participation lifts member commitment, but members who view the company and union negatively are not changed by a program's success.59 Page 449TABLE 13.3 Joint Governance and Other Governance Forms Source: A. Verma and J. Cutcher-Gershenfeld, \"Joint Governance in the Workplace: Beyond Union-Management Cooperation and Worker Participation,\" in B. E. Kaufman and M. M. Kleiner, eds., Employer Alternatives and Future Directions (Madison, WI: Industrial Relations Research Association, 1993), pp. 204-205. Page 450Management Strategy Labor-management cooperation efforts are often focused at the plant level, although some companywide strategies, such as the Ford-UAW EI program, exist. Management may frequently encounter situations in which its employees, across plants, are represented by several different international unions, each with its own approach toward union-management cooperation. Initial research on management strategies toward collective bargaining, cooperation, union avoidance, and firm performance suggests that firms improve profitability through extensive collaboration between management and labor. Performance is also improved by closing existing unionized facilities and opening or acquiring new nonunion plants. Deunionizing activity in any existing plant has a negative effect on performance.60 Evidence from steel minimills indicates they follow either a cost-reduction or productdifferentiation strategy. Cost-reduction strategies are associated with conflict and the use of formal grievance procedures, while product differentiation requires flexible manufacturing and is associated with employee commitment, collective bargaining, and the informal solution of problems. Wages in minimills following a product-differentiation strategy are higher and employees add more value to the products.61 Research on the Effects of Cooperation across Organizations A study of several hundred organizations has yielded important information on the effects of contextual and cooperative structures on productivity and quality. The more active team-based programs are, the greater their effect. Top union leader participation is important. Larger plants have more difficulty improving productivity through cooperative efforts. Technology changes improve productivity at a rate faster than any negative effects from unilateral management implementation. Higher union security predicts more positive results. Subcontracting and frequent layoffs reduce gains. Interestingly, the larger the proportion of women in the workforce, the greater the productivity gains.62 Page 451TABLE 13.4 Perceived Effectiveness of Involvement and Gainsharing Programs on Performance Measures Source: Adapted from D. -O. Kim, \"Factors Influencing Organizational Performance in Gainsharing Programs,\" Industrial Relations, 35 (1996), pp. 232-233. Product quality was higher where joint labor-management programs existed. Adversarial programs produced better results than programs run only by management, which were not better than having no program. Joint programs were as effective as participation programs in nonunion firms. If the firm coupled cooperation with significant capital investments, quality improved substantially. Factors reducing joint-program effectiveness included subcontracting, earlier concessions, downsizing, and larger unit size.63 Table 13.4 shows the effects of various unionmanagement Page 452cooperation plans, demographic characteristics, and program performance on measures of quality, productivity, cost reduction, production processes, and bonus payouts. A study of company performance across 24 units found that adversarial labor-management relations were associated with higher costs, more scrap, lower productivity, and lower returns to direct labor hours than was found in areas with increased cooperation and improved grievance handling.64 Employee involvement programs were equally likely in both union and nonunion settings, but unionized firms allowed employees less authority. EI programs were not related to return on assets.65 EI programs influence firm performance more in unionized firms, while profit-sharing and gainsharing programs are better in nonunion firms in raising value added per employee. Unionized firms had higher value added, lower labor costs, and more experienced and skilled workforces.66 Another study of outcomes across a set of employers found union officer-management relations were positively related to forming general committees but not to decisions involving profit sharing or employee stock ownership plans (ESOPs). Grievances were reduced where committees or gainsharing plans were implemented. General labor-management committees kept grievance handling more informal and resolved problems more quickly. Flexibility and reduced absenteeism and turnover were related to all types of participation, as cataloged in \"Workplace Interventions\" (above).67 Table 13.5 summarizes the results of this study. Managers perceive greater support from employees who are covered by profit-sharing and participation plans. Employee input on issues and authority to implement suggestions are related to managerial perceptions that employees support change.68 Research on the Long-Term Effects of Cooperation Little research on the long-term effects of union-management cooperation has been reported. One study of cooperation initiatives found large differences in the philosophies underlying projects. Scanlon and quality circle programs have the greatest participation, while Rucker and Impro-Share programs are mostly associated with economic incentives. The plans cannot substitute for good management, but where that does not exist, labor-management committees can be a springboard for progress. In the absence of management commitment to participation, Scanlon and other high-participation programs will fail.69 Critical factors for the ongoing success of the programs are the training and commitment of supervisors and the construction and understanding of the bonus formulas. Page 453TABLE 13.5 Managers' Mean Evaluations of the Impact of Selected Committees and Programs on Six Labor Relations Outcomes* Source: Adapted from P. B. Voos, \"The Influence of Cooperative Programs on UnionManagement Relations, Flexibility, and Other Labor Relations Outcomes,\" Journal of Labor Research, 10 (1989), p. 109. Companies and unions generally begin programs to improve labor relations, increase the level of pay available, and so on. Motives of the parties influence the type of plan chosen. Gainsharing affects productivity more than do labor-management committees or QWL programs. If a traditional bargaining relationship has enabled both the company and the union to accomplish their objectives, they do not initiate cooperation methods. Those methods are used only when the parties encounter difficulties in accomplishing their goals while using a traditional distributive bargaining approach. A study of cooperation at 23 sites found productivity improvements in 12 and no change in 10 others. In 16, subsequent experience enabled employees to earn bonuses supplementing what they would have Page 454earned solely as a result of collective bargaining. Bonus levels are directly influenced by the rate of suggestions generated by the employees.70 Employment levels are relatively unaffected by cooperative programs, and labor relations are seen as improved.71 While it is very difficult to develop and sustain labor-management cooperation, two examples of continuing success stand out. Harley-Davidson and the IAM and PACE unions have worked together for over 10 years to increase productivity, quality, and profitability. They have implemented substantial changes in work design, worker participation, and gainsharing. Intensive involvement by top management and the national and local unions has helped this program to succeed. In the meantime, Harley-Davidson has increased its market share and reputation with consumers to an almost \"cult\" level.72 The second example involves the city of Indianapolis and the American Federation of State, County, and Municipal Employees (AFSCME) locals representing employees in the transportation department. Working with the mayor and AFSCME leaders, workers improved productivity sufficiently to undercut private bidders for street maintenance and repair contracts. Several layers of middle management and supervisors were eliminated in a politically volatile environment. Communications between management and the union were substantially enhanced and racial segregation in job assignments was successfully addressed.73 One of the most widely followed innovative cooperative relationships was between the United Auto Workers and the Saturn division of General Motors Corporation. As noted above, managers and union leaders worked together cooperatively to operate to solve problems and operate the plant. However, in 1999, after 13 years in office, the UAW's local leaders were voted out and replaced by new officers who favored a traditional relationship between the union and the company. Over the next several years, the Saturn operation was fully integrated with General Motors and the Spring Hill, Tennessee plant has now been remissioned to produce a Chevrolet crossover SUV using the same types of production methods and labor relations as the rest of the company's assembly plants. Page 455HIGH-PERFORMANCE WORK ORGANIZATIONS A lot of attention has been paid to the development of so-called high-performance work organizations (HPWOs). These employers have adopted many of the EI and other work practice innovations that have been discussed previously. Recent research finds strong evidence that firms need to implement a coherent set of practices to enhance firm performance. A study of steel minimills found that plants that implemented a combination of problem-solving teams, flexible job assignments, training for multiple jobs, guaranteed employment security, and flexible pay plans were substantially more productive and profitable than firms that implemented smaller combinations of these or only single practices. Operating uptime and value added were strongly influenced by these types of human resource management practices.74 In another study, steelworkers in HPWOs who say they are able to use skills and knowledge, perceive positive employee relations, and balance work and family life are very satisfied. Predictors of satisfaction include perceptions of pay fairness, being a women, being a high school graduate, job autonomy, use of skills, employee relations, work/family balance, and low job stress.75 Workplace Restructuring A great deal of workplace restructuring has taken place over the past 20 years. Much of this has increased the intensity of work and reduced the number of employees in production jobs. At the same time, the number of layers of management has been reduced. One study found that workplace restructuring and employer performance outcomes were more successful when the organizational structure and operation of the local union were stronger as reflected by horizontal and vertical communication network ties and internal political vitality.76 Companies that implemented HPWOs during the early 1990s had higher layoff rates and no net compensation gain for employees during the decade. Layoffs were negatively related to sales gains, exports, skill levels, employee age, and proportion of female employees, and they were positively related to the proportion of blue-collar workers and the introduction of HPWO practices. Wage gains for core employees were associated with sales gains and were negatively related to employee age and proportion Page 456of female employees. Teams, quality circles, and total quality management (TQM) were positively associated with layoffs, while teams were negatively associated with wage gains. Clearly, HPWO practices have not increased job security or pay except in situations where the organization's revenues were growing.77 This evidence suggests that unions are unlikely to gain from cooperating in implementing HPWO practices. The study found that union status had no effect on layoff or wage gain outcomes among the employers studied. THE LEGALITY OF COOPERATION PLANS Among unionized employers, cooperation plans meet the requirements of the labor acts because they are jointly agreed to by unions and managements. Many employers in nonunion companies have established joint management-employee committees to deal with a variety of production and employment issues. However, it's possible these committees violate labor law. Section 8(a) (2) of the Taft-Hartley Act forbids employers to create and operate employer-dominated labor organizations.78 Discussions of employment issues or proposals by committees for taking action on areas related to wages, hours, and terms and conditions of employment intrude into the mandatory bargaining issues specified in the act.79 The NLRB was faced with ruling on the legality of an employer-sponsored committee in the Electromation case.80 In its deliberation the NLRB asked: \"When does an employee committee lose its protection as a communication device and become a labor organization?\" and \"What employer conduct constitutes interference or domination of such committees?\" The company had set up five volunteer committees to look at absenteeism, pay, bonuses, and the like. The company initiated the committees and drafted their goals, and management representatives facilitated discussions. The NLRB ruled this was an employer-dominated labor organization in violation of Section 8(a)(2). But in a later case, it held that employee committees that were delegated management responsibilities for production and personnel decisions that were reviewed by and sometimes reversed by management were not employee-dominated. Page 457However, these committees neither were elected nor made proposals to management.81 At this point, it would be difficult to determine what a legal employee involvement program in a nonunion environment would be since pay will undoubtedly be an issue if productivity is discussed.82 At the same time, the NLRB has accepted and pursued very few cases alleging 8(a) (2) violations where employers have established teams and committees. EMPLOYEE STOCK OWNERSHIP PLANS Employee stock ownership plans (ESOPs) were first permitted by the Employee Retirement Income Security Act (ERISA) of 1974. Employees may receive stock through profit sharing, productivity gains, or subtractions from wages. Since the early 1980s, several companies (e.g., Chrysler) have given employees stock in exchange for labor concessions. In most of these cases, particularly in the airline and steel industries, employees, in general, have experienced an erosion of their shares' value, in some cases even going through bankruptcies. ESOPs will not, in themselves, improve productivity. Employee-owned firms in Israel don't function much differently than privately owned firms. Pay, productivity, and job security are somewhat higher.83 Workers are generally productive regardless of the source of ownership.84 Ownership affects workers' attitudes by providing greater perceived influence and control and financial value.85 A study of Ohio ESOPs found that in unionized companies, there were more shop-floor participation methods in companies where employees owned a majority of the stock. Performance was judged to be somewhat higher than that in non-ESOP firms.86 However, workers may not automatically favor ESOPs either. The firm governance role involved in ESOPs may induce fear and anxiety as well Page 458as expanded commitment. Where firm performance is linked to retirement security, workers may wish to avoid ESOPs since their investments lack diversification.87 THE DIFFUSION AND INSTITUTIONALIZATION OF CHANGE An important labor-management issue is how successful changes get diffused throughout the organization and become institutionalized. Participation needs a stable environment, especially in the composition of the management team, in order to grow. The parties need to avoid or isolate collective bargaining shocks and strategic shocks. Layoffs create problems for teams because workers use competitive seniority rights to bump in and out. Changes are aided by implementing them in new facilities with new workers. Diffusion of successes can then move toward established settings. Unions can markedly assist change when they have a role in strategic decision making such as plant locations. They may also provide needed concessions and work rule changes to make retrofitting of existing facilities economically feasible. Training to introduce new technology and increase employment security is important to employees and can help to make change permanent. Gainsharing will probably follow as a logical consequence of innovative participation.88 The ability to institutionalize change depends on high levels of trust and commitment by union leaders and members, supervisors, plant managers, and corporate executives. Evidence shows that labor and management have substantially different perceptions in many situations regarding the degree of commitment, feelings of manipulation and co-optation, and delivery on promises given that the efforts undertaken have not always followed their planned course. Establishing and continuing trust are critical underlying factors in the success of cooperation programs.89 Maintaining Union-Management Cooperation in the Face of External Change Union-management cooperation is a fragile regime. At the most basic level, the parties have different interests. Creating cooperation requires a political investment by both managers and union officers who see it as a vehicle to achieve their organization's objectives more fully than pursuing a traditional approach. There are always other managers and faction Page 459leaders within unions who believe that cooperation is antithetical to labor-management relations. When or if they move into leadership positions, the efforts are likely to flounder. Besides facing internal political pressures, managers must deal with shareholder demands. Unless a firm with a cooperative labor-management relations climate performs better than comparable firms within its industry during the current operating period, there will be inevitable pressures to try different methods. While most of the evidence cited above suggests that cooperation is generally associated with higher worker satisfaction, lower grievances, and greater organizational commitment, there is no consistent evidence to indicate it universally improves firm performance. In today's environment, merger and acquisition activity occurs at a high rate. Divisions and companies are bought and sold, with performance objectives being determined by the managers employed by new owners. Usually, an acquiring firm has paid a premium over the current market value of the acquisition, increasing pressure to improve performance after a takeover. One of the companies described above, Chrysler, was taken private by Cerberus Capital in the summer of 2007. It will be interesting to see what labor relations climate develops, whether the modern operating agreement will be sustained, or whether a radically changed regime will be implemented. Chrysler's new owners were able to negotiate a new labor agreement with the UAW in 2007 after perhaps the shortest strike on record (about six hours). It's CEO, Bob Nardelli, has no experience in the auto industry, having earlier been the CEO of Home Depot and before that a business-unit leader with General Electric. Its new co-president is James Press, who previously headed Toyota's U.S. operations. With the exception of the NUMMI facility (described earlier), U.S. Toyota plants are nonunion, so the new team has little experience in dealing with the UAW. Summary The employment environment has changed substantially during the last 15 years, spurred by global competition. Most union-management activity has been adversarial, but the needs of both parties have increasingly led to cooperative approaches in a variety of situations. Employers would like to earn as large a return as possible on their investment, while labor would like continuous economic improvements and employment security. Given the requirements for negotiations on mandatory issues and the inability of unions to demand negotiations on permissive issues, room for cooperation in traditional bargaining environments is sparse. Integrative bargaining is the set of activities leading to simultaneously accomplishing nonconflicting objectives in solving a common problem. Mutual-gains bargaining has been increasingly practiced. To implement integrative solutions, both parties must have as much information as possible on the problem they are attempting to solve. Page 460Employers and unions use a variety of methods to create and sustain cooperation. These include areawide labor-management committees that deal with regional employment problems in unionized environments, joint labor-management committees that operate at the industry or firm level, gainsharing plans (the Scanlon plan, Rucker plan, and Impro-Share), and nongainsharing interventions (labor-management committees, quality circles, quality-of-work-life programs, and team-based approaches). Increasing numbers of companies are working with unions to implement team-based action groups to improve productivity and quality. Perceived productivity seems to increase most where the union is secure, top union officials are involved in the process, and significant numbers of union members are in team-based activities. The introduction of new technology continues to lead the way in improving productivity. Unions are learning how to participate in and benefit from cooperation while retaining their distributive bargaining roles. Innovation is institutionalized through success and stability in organizations where experiments are tried. Employee stock ownership plans aim to increase employee commitment to the company through the long-term improvement of the value of ownership gained through higher productivity. Discussion Questions Why would including such programs as QWL in the collective agreement be difficult? Under what conditions would a Scanlon plan be likely to be effective over relatively long periods? What are the potential long-term problems for unions in agreeing to labor-management cooperation programs? Should unions be guaranteed a seat on an organization's board of directors? Should the Electromation decision be overturned? Key Terms Greenfield operations, 430 Principled negotiations, 434 Relations by objectives, 434 Bucket bargaining, 435 Interest-based bargaining (IBB), 436 Areawide labor-management committees (AWLMCs), 440 Joint labor-management committee (JLMC), 441 Employee involvement (EI) program, 444 Quality-of-work-life (QWL) program, 444 Modern operating agreement, 446 Team concept, 447 Employee stock ownership plans (ESOPs), 452 Page 461Case: Continuing or Abandoning the Special-Order Fabrication Business It is about three months since the effective date of the GMFC-Local 384 contract. In GMFC's executive council meeting this morning, financial officers reported on an in-depth study on the profitability of the special-order fabrication operations. They recommended GMFC take no more orders for this area and close the operation when present commitments were shipped. Their data showed that the operations lost money two out of the last three years, and they argued that the Speedy-Lift assembly lines could be expanded into that area for meeting the increasing demand for GMFC forklift trucks. Top-level managers in the special-order fabrication operations conceded that profits, when earned, were low, but they pointed out that, from a return-on-investment standpoint, their operations had been among the best in the company during the 1993 to 1998 period. Besides, they argued, many of the special orders were from some of the largest customers in the standard product lines, and GMFC could not afford to lose that business if it was dependent on occasional custom orders as well. The finance people reiterated their recommendations to terminate the operations, pointing out that labor costs had risen over the past several contracts and, due to the custom nature of the work, productivity gains had been small because new technologies could not be introduced. After both sides presented their final summations, the chief executive officer announced that the firm should prepare to terminate operations. After the announcement, the industrial relations director pointed out that GMFC would have to negotiate the termination with Local 384. The union might demand severance pay, job transfers, and so forth. The point was also raised that this decision offered the union and the company the opportunity to devise a method for reducing and controlling labor costs. The CEO designated the vice president of finance, the general manager of special-order fabrications, and the industrial relations director as the bargaining team to present the company's decision and bargain a resolution. The CEO made it clear that the company intended to abandon these operations but could reverse its position with the right kind of labor cost reductions. Although this meeting was not publicized, Local 384's leadership had been concerned about the special-order fabrications area for some time. Management had frequently grumbled about low productivity, and stewards were frequently harassed about alleged slowdowns. Union members in the shop often grieved about work rule changes. The stack of grievances, coupled with management's lack of action on them, led the leadership to request a meeting with the industrial relations director to solve the problems. DIRECTIONS Rejoin your original labor or management bargaining team. Reach an agreement for continuation or termination of the special-order fabrication operations. Compan