Industrial Design: Working with
the union movement, rather than against it, is one of
the best ways to improve a company's performance, says
international industrial relations guru Dr Tom Schneider..
HR Monthly, September
By Helen Vines
Tom Schneider has
made a career of advising companies in some of the world's
most highly unionised industries. He achieves results,
such as improved productivity and better employee relations,
by embracing union involvement in business.
Schneider is president and CEO of the US-based organisational
and employment consultants, Restructuring Associates
Inc. In 1997, Restructuring Associates formed a joint
venture with Australian legal firm, Corrs Chambers Westgarth.
The new business, Corrs Schneider, specialises in restructuring
organisations to improve operating performance.
According to Schneider,
it is the direct relationship an organisation develops
with its employees-and the unions-that really matters
when it come to developing a competitive business strategy.
"Companies should sustain themselves whichever
way the winds blow in terms of government IR policies,"
he says. "You should not be trying to base your
competitiveness and bottom line performance on government
policy. And you shouldn't be trying to play that issue
strategically. You really need to look at it from a
Major cases like the
Patricks dispute and the current Royal Commission into
the building industry, he says, while having the potential
to alter the course of an industry, should not be viewed
opportunistically by employers. "If there's a concerted
effort to try to change things, there's no question
that industry policy can have an effect. But if I'm
the CEO or chairman of a company relying on government
policy to make me competitive or save the day for me,
that's not something that's going to be particularly
attractive to the capital markets or shareholders.
"My basic proposition
is if you look at the top performers anywhere in the
world, the high-performing companies are successful
over decades because of their practices, regardless
of changes in government.
Companies that operate
within the traditional adversarial model are invariably
more dependent on government policy bailing them out,
says Schneider. "But from a shareholder point of
view and investing in the capital market, that's a lot
less attractive than a company that's really a master
of its own fate and doesn't rely on the government to
save it or make it."
Schneider points to
SouthWest Airlines in the US as a company that has concentrated
on the development of a good corporate culture in order
to produce long term change. Worldwide, the airline
industry is heavily unionised. "Because of the
nature of the industry, it can be shut down very easily,
and this happens routinely," says Schneider. SouthWest
is the most heavily unionised airline in the US, yet
it is the only airline in the entire world that has
been profitable every year since 1974, according to
Schneider. Despite being the fifth largest airline in
the US, SouthWest has a market capitalisation larger
than the first four major airlines.
The secret, says Schneider, is a strong corporate culture
that actively supports the development of its employees,
and has done so right from its very beginnings. When
the company was founded in the seventies, it recognised
the central importance of people in the success of the
business, he says, with the result that "they have
designed an entire culture around putting the employees
first". The company is very highly unionised and
wages are very high, but it is the lowest cost airline.
"They've literally built an organisation that has
the management system, the flight system and the people
system that are all in synchronisation with each other
and they produce extraordinary results."
The management of the firm has a very long-term strategic
focus, says Schneider. "And that's a challenge.
If the organisation doesn't want to make that investment
they have to turn to the government to make the reforms
that are going to allow them to be successful. But that's
only going to last till the next change in government,
or until they screw things up."
Schneider says the
issue of unionisation is largely irrelevant to optimal
organisational performance, although in the US, it is
illegal for management to talk directly to workers about
wages and benefits, and terms and conditions of work
if there is a union involved. "My experience in
the 27 years I've been consulting is that the performance
of an organisation is not dependant on whether you're
unionised or not.
"The issue is
how you manage your business. And if you manage your
business in a way which recognises the importance of
people and makes them a central part of your business
operation, then the fact that you're unionised in no
way detracts from your performance. In fact, there's
a lot of things unions can bring to the table that will
make it a lot easier to manage a very large organisation."
When you are dealing
with thousands of employees, then being able to strike
an agreement with a union, knowing the cultural and
management systems are in place to make it happen, actually
simplifies business, he says.
That said, Schneider
notes that unions have not always been "the democratic
models they hold themselves up to be. They do not always
focus primarily on the maximisation of the overall benefits
of their members. And they engage in some counter-productive
behaviour. All of that takes place and needs to be recognised
at the front end.
"At the same
time, managers are disingenuous on this. They say, on
the one hand, 'we have to be focused on maximising our
own personal income and the shareholder value', but
they begrudge the employees for trying to maximise their
own personal benefits. What's good for the goose is
good for the gander. They turn around and say the unions
are interested in consolidating their own power, but
at the same time the unions are the collective voice
of the employees.
"I've done some
interesting exercises with senior managers, where we
put them in a group setting and treat one or two individuals
arbitrarily - basically unfairly. The automatic human
instinct when someone is being treated unfairly is to
collectivise. To form a group so that united we have
a stronger voice than we do as individuals. These are
the same people that decry unions, but then turn around
and try to form collective action. They join political
parties. What is a political party? It's the common
voice, with more power than the individual voice. All
unions are trying to do the same thing.
"There is a certain
amount of self-interest. What happens is that unions
make it more difficult for managers to be arbitrary,
to do whatever they want."
There is a lot of
talk about companies recognising the importance of people,
but how widespread is it really? Schneider is of the
view that it is on the rise, and points to specific
examples of companies in Great Britain and the US which,
he says, are increasingly recognising the value of a
people-centred corporate culture. These include Scottish
Power and General Mills in the US, which is one of the
larger food processors. "They were number two in
the market behind Kelloggs; they've now taken over from
Kelloggs. And a big part of what they've done is focusing
on building a culture around the people side of it,"
The new areas of the
economy, like technology, he says, do generally place
a premium on people, "and they're very different
cultures, and get results". The top companies listed
in Fortune magazine, he says, are organisations that
are viewed as being "extraordinarily great places
to work. If you view them over sustained periods of
time, they tend to be the best performers in the marketplace,
in their industry and the stock market." It is
a correlation he describes as "fascinating".
starting to see is more and more senior executives who
have been going through these structural changes - redeployment
of assets, stripping things out, and outsourcing - and
they're finding that they're still under competitive
pressures. This is going to continue because of globalisation
and technological improvement, but it is reaching a
point where they find that there are fewer options available.
So companies are now starting to say 'maybe we should
be thinking about something else', and they are coming
back to the people they employ. And that's going to
be what makes them competitive over the long term."
From Schneider's perspective,
one of the biggest changes in the industrial relations
landscape in Australia has come from a shift from the
national agreement to the enterprise agreement, to the
individual agreement. "From a corporate point of
view," says Schneider, the enterprise agreement
was "the critical move. Because essentially what
it did was allow companies to come up with agreements
for their employees which were appropriate for their
own competitive situation. Moving to these individual
agreements really started to become bureaucratic and
add very little value.
be pressured to do so by the government and they may
be jumping through the hoops, but it really doesn't
make a big difference for most of them in terms of their
"What they really
need to do is make certain that their employees are
covered by agreements under terms and conditions that
are appropriate for their setting, their industry and
their competitive position.
"From a pure
management point of view, if you go back to the beginning
of the century, when job classifications developed they
weren't introduced by unions but management.
it was a tool by management to organise work. The idea
of saying you have to treat every one of your 5,000
employees as unique individuals with unique agreements
[is unrealistic]. You're going to need an HR department
of thousands of people in order to manage employees.
It's easier if you can go in and find one or two agreements
that cover all employees. They're all going to have
the same terms and conditions. They are drafted to achieve
flexibility and an agreement is created that fits the
competitive challenges faced by the company.
"When I've looked
at enterprises, they may have these individual agreements,
but in many cases they're basically going through the
motions. What they'll all say is that 'we got everything
we needed with our enterprise agreement, this stuff
is now dealing with politics'. Now if I'm a shareholder,
I don't care about that. I don't care about ideology,
I'm concerned about what my return on investment is."
So what's the first
step towards improving industrial relations? "Our
approach is to take the key leaders within management
and the unions, then sit down and identify the challenges
faced as a group, and the environment in which the company
operates. Realistically, if you aren't successful in
that context, then whether you're labour or management,
you're going to end up failing.
"So the starting point is a common agreement about
what the business, market and environmental challenges
are. And at that point, we're going to sit down and
ask what the common interests are within this environment.
I have to say that, almost without exception, people
will come up with a core set of shared interests that
allow you to then start to build and restructure a firm
and how it's operating.
"You only focus
on succeeding in that business, because by succeeding
there, that is what is going to be the source of greater
job security, greater training and development, higher
wages and benefits, and higher returns to the shareholder.
So there is a common interest in success."
-- HELEN VINES is
a contributing editor to HRMonthly.