The recent rejection of a contract by the Public Employees Federation is instructive. Much of organized labor is in a desperate struggle to justify its existence in the face of unrelenting financial and global competition.
Historically, unions have provided a critical service to our industrial base.
They continue to fight for fair wages, safer working conditions, do exceptionally fine work in many trades, and act to promote employee interests in the conduct of the business.
Conversely, over the past several decades, labor unions have been weakened almost to the point of irrelevancy by events both within and beyond their control. Private sector unions in the U.S. have seen a frightening and unstoppable fall in membership — from 35 percent of the work force in 1950 to less than 8 percent today.
Membership in public-service unions is increasing, but they are running into significant roadblocks from states teetering on the brink of insolvency. Their negotiating power is compromised by fiscal reality and voter apprehension. The battle between New York’s Gov. Cuomo and PEF shows just how complex and difficult it is to come to agreement on what is best for all parties.
Responsible to members
What has happened to cause such a drastic and unsustainable decrease in union effectiveness? There are many reasons, but principally this: Union leadership is responsive to its members alone. Business leaders, however, are responsible to multiple constituencies, each of which can have a powerful positive or negative impact on the conduct and success of the business.
In addition to the employees, they must address the needs of the customers, the shareholders or owners, and other elements within the satisfaction chain. They cannot subordinate one element to the others without significant risk or penalty. Indeed, the PEF mission statement is to “Provide the leadership necessary for PEF members to achieve employment security, higher wages, better working conditions, and improved retirement benefits.” Nowhere in its charter does it address the needs of the customers of state services or the investors (voters) who want dependable services and an effective utilization of their tax dollars.
Labor seems to have ignored the changing nature of work and business and America’s participation in the global economy. The industrial age, where unions have had their biggest successes, has morphed into the information age; technology has replaced a lot of human manufacturing skills; political borders are collapsing and changing around the world, and global labor markets are opening up and offering stronger competition, often on uneven playing fields.
In today’s hyper-competitive and worldwide marketplace, employees are now interdependent with other disciplines and are in direct partnership with investors/owners, customers, regulators and other stakeholders who have a vested interest in the success of the organization.
Current union business plans do not appear to address this interdependency. Labor costs are but one factor in producing a product or service at competitive rates. Labor unions are in a service business. They provide qualified labor as needed by an organization. Specifically, unions must now go beyond their employee focus and help the company sustain its operations profitably and grow the business. They must directly help the company maintain competitive advantage in an unfair and inequitable playing field.
In short, unions can no longer play a self-focused and adversarial role.
They must be a contributing party to the profitability, productivity and success of the organization. Appropriately, owners and leadership must also share the rewards of such success equitably.
What can labor unions do?
— Establish a value metric for the services provided by union members that translates into financial and competitive advantage for the company, job security for the members and satisfaction of the needs of the customers who buy your products or services. Value is something that is perceived by the customer and justifies the price paid for the product or service.
— Help the company increase revenue and decrease costs. They must remain solvent and profitable. If they are successful, the company stays in business, union members retain their jobs, and union dues continue to be collected.
— Get over the adversarial mind-set of your ancestors. Smart negotiators on both sides argue their interests, not their positions.
Unfair and dictatorial owners that the unions prevailed against in previous generations are now taken care of by marketplace factors, laws, and regulatory activities such as OSHA.
— Develop a much more pro-active public relations campaign and promote the knowledge, skills and abilities of your members as tangible and measureable assets as seen by those who buy your products or utilize your services. When members of the International Longshore and Warehouse Union recently staged a wildcat strike and damaged property and equipment at the ports of Seattle and Tacoma, they wiped out a lot of good, honest and decent work of other longshoremen around the country.
If your union can help me stay in and grow my business against unrelenting competitive, financial and government pressures, I would gladly sit down with you and welcome your advice and participation. Unless you can directly help to improve the condition of my company, you will provide little value to the employees, the customers and the owners. I fear that you will become generally irrelevant. Nobody wants that.
Ken Moore teaches strategic management at the University at Albany and lives in Schenectady. He is a regular contributor to the Sunday Opinion section.
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