U.S. Economy: Unilever, Union
Boost Productivity With Workers
By Craig Torres
Baltimore, June 21
(Bloomberg) - Economists point to computers as an explanation
for why U.S. productivity surged in the last half of
the 1990s. At Unilever's soap plant in Baltimore, assembly
line operator Leon Hinton points to his ears.
"I can just listen
and tell you what's going on," Hinton shouts over
the noise of Unilever's largest soap factory, where
his income will be tied next year to how efficiently
his machines turn out Caress soap. He listens for wrong
notes in the clatter that may signal production is flagging.
Hinton, who once rotated
from line to line, is now considered an expert in his
machinery under a labor agreement that Unilever says
helped cut production costs while tripling output. Other
companies, such as General Motors Corp. and Kaiser Permanente,
say they are increasing efficiency by giving workers
more authority over how to make their products. The
trend may help the U.S. economy by allowing companies
to achieve productivity gains without investing in new
"With the change in technology, we had to change
the way we worked and looked at things," says Talmadge
Ellerbe, an electrician and president of Local 217-C
of the International Chemical Workers Union. "It
isn't about union and management anymore; it is about
Productivity measures the amount of goods produced for
every hour worked, and gains allow the economy to grow
without increases in business costs, keeping inflation
in check. U.S. labor productivity accelerated to a 2.67
percent average annual growth rate between 1995 and
2000, compared with a 1.35 percent pace between 1973
and 1995, according to the Federal Reserve.
As much as three-fourths
of the U.S. economy's productivity gains in the late
1990s came from investment in computer-related devices
that speed up processes and help workers generate more
value in the same number of hours, Harvard University
economist Dale Jorgenson says. U.S. companies spent
$373 billion on hardware, software and telecommunications
equipment in 1999 alone, according to the Federal Reserve.
By putting sophisticated
systems on the shop floor, companies have also shifted
much of the authority over how a plant operates out
of the hands of managers and into the hands of workers.
The trouble is that many labor-management relationships
haven't caught up with this change.
lends itself to management and labor jointly working
together," says Thomas J. Schneider, chief executive
officer of Restructuring Associates Inc., a Washington,
D.C., consulting firm that has advised more than 20
companies, including Unilever, on improving performance.
The idea is to get management to be more transparent
about decisions and goals, and to get labor to take
more responsibility for processes they already control,
In automated factories
like Unilever's Baltimore plant, which fills and packages
bottles of Wisk and All laundry detergent with almost
no human contact, costs rise when machinery breaks down
or doesn't work well. So Unilever and the union agreed
on an incentive bonus tied to the budget. If the plant
runs below projected costs in 2003, workers will get
a share of the surplus.
The company also
set aside manuals full of engineering schematics and
asked line operators to make hand-sketched drawings
of their equipment. Plant bulletin boards now resemble
a fourth-grade art class, and the drawings have refined
operators' understanding of their machinery, the company
breaks, I can usually tell the mechanic what he has
to fix," says Hinton, the Caress bar soap line
Workers are encouraged to refine their packaging or
filling lines at the Baltimore plant, which employs
500. One team bought $25,000 in used machines over the
Internet and adapted it to improve a packaging line;
a new piece of equipment would have cost $500,000, Unilever
With the new work
rules in place from 1994 to 2001, Unilever cut the cost
of making a case of liquid laundry soap by 45 percent
even as output increased 241 percent as the company
closed other plants and shifted production to this facility,
Other companies have
been working for the past decade to team up with labor
unions. At the Spring Hill, Tennessee, Saturn plant,
General Motors and the United Auto Workers have cooperated
on everything from the choice of suppliers to the ergonomics
of the assembly line for the past 12 years.
The threat of plant
closure has sometimes prompted change. When Kaiser Permanente,
America's largest not-for-profit health maintenance
organization, discussed closing an optical lab in 1998,
union and management committed to a series of talks
about how they could improve performance.
As a result, management shared financial information,
giving the union an insight into just how much slow
customer service was hurting profitability.
said, 'If I break a lens, that is going to eat into
my paycheck,'" says Preston Lasley, an optician
and president of a local of the Service Employees International
Union, which represents about 300 workers in Kaiser's
optical labs. The optical lab's productivity rose 5.8
percent in 2000 and 6 percent in 1999. Instead of closing
the lab, Kaiser has opened a new, expanded plant this
often takes time. Unilever hasn't been able to get the
International Chemical Workers Union to endorse an agreement
that would allow a full, plant-wide change in work rules
in Baltimore. Instead, management and the union have
converted to new work methods line by line over the
past seven years, and the job still isn't complete.
Much of the work of persuading union members falls to
Gary Sysak, the plant manager, and Ellerbe, the union
leader. Sysak says all numbers describing the plant's
performance are posted on a bulletin board. When performance
needs to improve, "I basically throw the numbers
on the table and ask them how we are going to get there,"
Rather than view each
other as the opposition, the union and management are
focused on outperforming other Unilever plants and keeping
away outsourcing companies that always argue they can
do a job cheaper.
In a recent round
of negotiations, teams of union and management were
on one side of the table arguing with a team of union
and management on the other side over the best way achieve
the production goals, Sysak said.
"It was different,"
Ellerbe says, with a laugh.
--Craig Torres in
Washington (202) 654-1220 or at firstname.lastname@example.org.
Editors: Hendel, Cranford.