Unions, Companies and the Government achieve a common goal: More jobs in the UAW contract

I was pleased to see that the UAW has agreed to a new contract with GM. It’s been a painful decade for unions as enrollment has dropped to a low of 11.9% of the wage and salaried workers in the U.S.

One of the reasons that participation has dropped is that there are just plain fewer workers that can join a union. This has occurred because companies in search of higher productivity to survive global competition have four options:

Offshore production to lower wage countries

Automate production jobs and eliminate the labor

Reduce wages

Increase throughput using the same labor through changes in process

Three of these strategies have a negative effect on employees, innovation and jobs. Only the last option can improve competitiveness and maintain and grow jobs. Unfortunately the first three are easy and quick…and don’t require participation or agreement from employees to execute.

This lack of job security can make it difficult to motivate employees to find small improvement in their work…the type of success seen in many continuous improvement projects.

I’m hoping that this new contract heralds an era of renewed collaboration between management and unions. When unions and management are both focused on the same goals and have similar expectations, continuous programs like Lean stand a chance.  And so do jobs in America

The headline agreements of this UAW contract indicate shared goals and common understanding. I would guess that economic conditions were a large driver at the negotiating table in this case.

But when the economy gets better, how can companies and unions continue to stay aligned to ensure that the real objective, continued global competitiveness, doesn’t get lost in the battle over labor security, wages and benefits and productivity gains.

In Lean thinking, meeting system objectives must outweigh the benefits that local efficiencies deliver. This approach to thinking would serve both unions and management well in ensuring that when negotiating individual terms, that the overall outcome meets both sides’ expectations.

This can be difficult, because it is challenging to negotiate line items when the interdependencies between pay, labor and production aren’t completely understood by everyone at the table.

There are proven techniques to resolve this challenge. One of the most interesting techniques I have heard of involves using a timekeeping system to model the effects in changes in work rules. What this particular company did was to enter in the proposed work rules into their timekeeping system. They re-ran the previous year’s payroll with the new change incorporated. With this information they had a very accurate understanding of how the changes would affect their cost of labor. Now a hard dollar value can be placed on each proposed change. This is much more effective than estimating the impact during negotiation and then overrunning a labor budget 9 months into the year.

Modeling proposed changes in workforce management systems can include more than just work rules. Benefit changes, skill and certification planning, impact of absenteeism, safety incidences by job and tenure, turnover due to retirement, mix of tenure on a line, temporary employees and fatigue are all negotiating points that can be easily modeled and valued using the previous year’s time, labor and production data.

By understanding how the changes will impact costs and output before the change is agreed to, the actual benefit and cost of a proposal can be understood by both groups. Better alignment and fewer surprises occur.

At the end of the contract a scorecard measuring the effectiveness of those changes can also be developed linking the changes in rules with a factual audit of changes in behaviors, costs and productivity. This can highlight unintended consequences in behaviors, costs and output in unbiased terms that both groups can see.

Inventory and contract management with suppliers has long benefited from these types of measurements and data used in negotiations. Isn’t it about time we started applying supply chain science to union negotiations as well?

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