HRER504:

 

To fully understand modern employment relations, it is necessary to have a solid understanding of contemporary unions and employers. This includes their fundamental purposes, their objectives vis-a-vis each other, their organizational structure and governance, the strategies they employ, and the constraints under which they operate.

This lesson will examine these two parties in some depth, providing the background necessary to understand how each functions in the labor-management relationship. The third party, the government, will be examined in the next lesson.

 

 

Readings and Activities

Check the Course Schedule for specific details on what to read this week.

 

Competitive Strategy – Businesses

For businesses competitive strategy is the key to the carrying out of the mission (purpose of the business) and reaching towards the organization’s vision (where the business wants to be). Competitive strategy sets out the broad parameters of how a business will attract and retain customers or clients, it lays out what attracts customers to a business’ product or service and why they would choose that business’ product or service over those of their consumer market competitors. A critical component of the labor relations process from the business perspective it so align the labor relations strategy to the business’ competitive strategy. 

The first step in this is to understand the general competitive strategy and to identify which strategy the business has selected. There are really two broad strategies of low cost leadership and differentiation. Low cost leadership entails delivering a product or service at the lowest cost possible to  consumers. The idea is the low cost of the product will be the main concern of the consumers and if your product has the lowest cost they will naturally select your product. Differentiation entails attracting consumers to a business’ product or service by some characteristic that makes it different from the competitors. This might include serving a specific consumer markets needs or desires – often referred to as niche market differentiation. It might also entail a best quality of best “bang for the buck” differentiation – i.e. the product might cost more initially, but the quality of the product will lead to it lasting longer or having a higher value to the customer over time. 

Too often when business’ select these business strategies they assume there is a natural alignment to similar labor relations strategies. There is often for instance the assumption that achieving low cost leadership for a product or service will require adopting a labor relations strategy of having the lowest overall labor cost. This would entail keeping wages and benefits low, spending little money on training and development and of course avoiding or even busting unionization attempts that might lead to increased labor costs.

This strategy, however, is short-sighted. For instance, having low cost labor does not automatically translate into low cost products or services. Low cost labor might lead to more scrap, less discretionary effort, and fewer widgets per hour. For instance, consider the following scenario in the production of the ubiquitous “widget.” 

Company A and B both have adopted low cost leadership as their competitive strategy in the widget market. 

Company A has adopted a corresponding low cost labor strategy, while Company B has adopted a more employee centered labor strategy. 

In the production of the widgets the costs of the widget at completion is 30% from labor costs, 30% from materials and 40% overhead and other costs. 

Both Company A and B pay the same amount for their materials – about $10 per widget.   They also have the same overhead costs.  Company A pays employees $15 per hour in total labor costs and Company B pays employees $25 per hour in total labor costs.

Company A’s employees produce 10 widgets per hour/employee, with a scrap rate of 30%.

Company B’s employees produce 15 widgets per hour/employee with a scrap rate of 10%.

When we calculate the costs per widget. We see that the total labor costs for 10 widgets for Company A is $15 or $1.50  per widget. For Company be the same ten widgets cost $16.70 in labor or $1.67 per widget. Already, much of the total compensation gap has been closed. 

However, there is still more to consider. Employee A will have produced 30% of scrap in that hour. This is an additional $30 of total cost or $3 per widget. Bringing the cost of the widget to $4.50 for Company A.

Company B employees will produce $10 of waste for every ten widgets or an additional cost of $1 per widget for a total widget costs of $2.67. Company B’s total widget costs is over 40% lower than Company A’s and thus they can engage in a clear low-cost leadership model in the consumer market. 

While this is an overly simplified example of why we have to think a bit deeper about how we align labor strategy to business strategy, it points out that there are a myriad of factors to consider. We would also see such an analysis become critical in aligning to other competitive strategies. For instance, how do unions impact things like quality of productivity? How do they impact other labor costs like absenteeism, turnover, sabotage? What labor relations strategies lead to high quality production if you have adopted a high-quality differentiation strategy? If you are serving a niche market, what labor relations strategies lead to employees focusing on meeting customer needs.

 

Union strategies – Business Unionism, DEMRV

Much like businesses and other organizations, unions also can select from a number of different strategies. These strategies are often differentiated based on the scope of representation, the broad goals of the union, the level of the power or decision making within a union, and the tactics the union will broadly engage to achieve its goals.

Unions will have to decide what groups of workers they will represent. As we saw in Module 3, the earliest unionist represented skilled workers or craftspeople and even viewed unskilled laborers as an enemy or distraction. As the CIO emerged, industrial unions began to represent all employees within an industry or within an organization – skilled and unskilled alike. For unions that followed the critical industrial relations school of thought (see Chapter 2 of the Budd text) like the IWW, the thought was that one big labor movement represented ALL working people across skill levels, organizations and industries. This is still an important decision that union leaders must make today.

Related to this scope of representation, unions can also select very different goals. For many unions, the goals will only relate to their members and will focus on what are often termed bread and butter issues – i.e. wages and benefits. This is a common approach from unions who have adopted the concept of business unionism. Often issues about control of the means of production are intentionally left to management and even negotiated through broad management rights clauses. Issues for workers outside of the immediate membership also are not considered important. Other unions might adopt a more traditional craft union approach and look to have greater control of the methods and means of production, adopting a form of job control unionism.

Unions also must make broad decisions about the internal power of the union or whether they will adopt a servicing model or a rank and file model of unionism. Will leaders make the decisions, engage in many of the tactics and members will only be involved to support such efforts, or will rank and file members be empowered and supported to engage in decision making as well as to engage in the tactics within the union.

Finally unions will have to make decisions about the tactics they will use to reach their goals. For business unions these often entail processes that are part of the formal labor relations structure under the NLRA. Organizing drives will focus on the election process rather than pressuring the employer to recognize the union. Collective bargaining will be formalistic and structured with roles for the negotiating committee and little input or role for other members. Disputes over contractual clauses will be handled through the grievance process, not other forms of concerted activity. Disputes that fall outside of the CBA will not be considered union concerns. Other unions take a more militant approach to tactics.  Organizing drives are more likely to involve external and internal pressure tactics – picketing, community involvement, work slow-downs, sick outs and even walkouts. Collective bargaining for some militant unions will occur on an on-going process rather than leading to a formal collective bargaining agreement that might limit the ability to strike or engage in other types of concerted activities. Collective bargaining that does lead to a formal CBA might entail more actions during the negotiation – picketing, involvement of members, sickouts, open negotiations, and other pressure tactics. During the day to day more militant unions might engage in concerted activity on a regular basis. As just one example, one union is known for calling for “Harry Bridges to whatever office” when a member has a dispute with management. This is a call for all members who are available to show up at that manager’s door as a pressure tactic to resolve the issue (A Trouble Maker’s Handbook). Grievances will often be used for more than just settling contract disputes and will be used as warning shots, to shine light on issues and to show members the union has power. 

There are a large number of different union strategies, including the DMRev model discussed in the article in this module. Other examples include:

 

Associational Unionism

Professionals within their field set standards for the fields. National Education Association is often cited as an example of this form of unionism.

 

Efficiency Enhancing Unionism

Focuses on improving firm performance and securing the members have a fair share of the efficiency – negotiated items might include things like, bonuses, raises, commissions, incentives plans like  gainsharing and/or profit sharing.

 

Business Unionism

Represent members; mechanism – Collective Bargaining – grievance; wages, hours, benefits

 

Employee Ownership Unionism

The goal is that the members of the bargaining unit will own the business/organization.  An example of this the UE purchase of the Chicago Glass Works from the former owners.  

 

Social Justice Unionism

Focuses on the working class as a whole. Tends to engage in militant activities like strikes, picketing, walk outs, community rallies.

 

 

Why Unions Matter

Thinking back to the four schools of thought from Chapter 2 of Budd, we see that each of the four schools takes a slightly different bend on the question of whether unions matter.  For those who follow the industrial relations school of thought (the view that is most closely aligned to the US labor laws), unions are seen as critically important and the best method to equalize power and to solve the labor problem. For those who follow the HR school of thought unions are no longer needed due to the progress of HRM and employment laws. For those who follow the critical school of industrial relations, union are important, they matter, but they are not enough. Finally, for the neoliberal school of thought followers, the belief is that labor unions interfere with the effective functioning of the free market.  

Economist Michael Yates, argues in Why Unions Matter, that unions are still important to equalize power between workers and their employers. He also presents evidence that suggests that unions help to solve the labor problem by increasing wages that otherwise stagnate and even decline when adjusted for inflation, protect workers in terms of safety and security and help to assure the human right to dignity for working people. According to a study by Western and Rosenfeld (2011), the decline in union density has led to a 20-33% of the increase in income inequality in the United States, leading to a level of inequality that has not existed in the US since the Great Depression. A 2015 study by Freeman, Han, Madland and Duke, concluded that unionization is a key to increasing upward mobility for the children on union workers as well as the children in areas where unions are strong.   Morantz (2013) found that unions play an important role in increasing the safety for mineworkers. 

Activities

 

This is the end of Lesson 05. Please check your syllabus for the time frame of the next lesson.

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