Employment

Union-Management Cooperation Many labor relations practices are adversarial—organizing, bargaining over wages, disputing contract interpretations, and the like. But many argue that both unions and managements can achieve improved outcomes through cooperation. The catalyst for cooperation is often the financial exigency of the employer and the specter of potentially large job losses.

This chapter explores variations in union-management cooperation and their effects, including interest-based bargaining, community-based labor- management committees, employee involvement programs, gainsharing, and work and organization redesign. In reading this chapter, consider the following questions:

1. How are cooperative problem-solving methods different from tradi- tional bargaining?

2. Can a cooperation program violate labor laws? 3. What are some results of cooperative programs? Are they equally likely

to lead to successes for both unions and managements? 4. What types of cooperation programs are in current use by employers

and unions? 5. Are union-management cooperation programs sustainable in the long

run?

LABOR AND MANAGEMENT ROLES AND THE CHANGING ENVIRONMENT

A succession of economic cycles has influenced outcomes for labor and management. Labor supply and union power have been altered by sev- eral waves of immigration. The Railway Labor Act, Norris-LaGuardia Act, and Wagner Act strengthened labor’s ability to organize. The Taft- Hartley Act and Landrum-Griffin Act increased employer power. At various points, new production technologies substantially reduced the

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need for lower-skilled union members. Today global competition affects the survival of some employers and the jobs of a diverse set of workers. During the past 40 years, industries that virtually monopolized domestic markets, such as steel, motor vehicles, consumer electric and electronic products, textiles, shoes, and software, now either need to be globally competitive or may no longer exist in the United States. Foreign competi- tors benefited from investment, technology transfer, and, particularly, lower wages for unskilled workers that boosted their productivity or lowered costs at a faster rate than was the case for domestic producers. Some of this was due to unions’ abilities to increase wages and some to employers’ failures to invest in technology. Both groups were respon- sible for not attending to the way work and production were organized as foreign producers implemented new and improved methods. 1 Some companies failed and local unions were decimated, while others sur- vived and prospered. In most cases, companies and unions in basic industries that have survived have changed their approaches to each other considerably.

Organizing and the Evolving Bargaining Relationship U.S. employers have traditionally fought unionization. Even some employers in heavily unionized industries have implemented active union avoidance programs by fighting new organizing, shifting produc- tion from unionized plants to new greenfield operations , and reducing investment in unionized plants. 2

Adversarial relationships carry over from organizing to bargaining and implementing contracts. The union needs bargaining successes for its officers to be reelected and for the union to avoid decertification. The legal specification of mandatory bargaining issues increases the union’s emphasis on immediate economic issues and turns emphasis away from employer and union survival issues. As noted earlier, managers have generally been judged on their ability to avoid unionization or to limit its impact. In dealing with the union, managers tend to view a cooperative relationship as one in which the union has an insignificant role in deci- sion making. 3 Thus, neither party’s leaders are initially motivated to seek cooperation.

Evidence also suggests that unions win initial certification because employees are interested in exercising their voices in the employment rela- tionship. But to management, coordinating with unions to create opportu- nities for this to occur may seem like a legitimization of union efforts.

1 J. Hoerr, And the Wolf Finally Came (Pittsburgh: University of Pittsburgh Press, 1989). 2 T. A. Kochan, H. C. Katz, and R. B. McKersie, The Transformation of American Industrial Relations (New York: Free Press, 1986). 3 M. M. Perline and E. A. Sexton, “Managerial Perceptions of Labor-Management Cooperation,” Industrial Relations, 33 (1994), pp. 377–385.

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Preferences of Management and Labor Management seeks the highest profit level it can achieve through investing its capital. It makes investment decisions that shift resources from product lines with lower returns to those with higher profits. To do this, it needs to be able to adapt. From an unconstrained standpoint, it would prefer to open, close, and retool plants as needed; hire labor on a flexible basis; and adjust wage rates to meet changing product market conditions and to respond to shifts in the labor market.

Employees are generally assumed to be risk-averse, while employers are assumed to be risk-neutral. This means employers are looking for the highest rate of return, consistent with the risks they expect to encounter, while employees are assumed to accept lower pay if they can simultane- ously reduce unemployment and other risks. Employees are risk-averse not because they have an inherent dislike of risk but rather because their skills are often occupationally specific, and perhaps specifically tailored to their present employer’s requirements. Thus, their human capital is not diversifiable. They depend on continued employment, often with their present employers and in their present occupations, to be able to earn a sat- isfactory return. Employees are also interested in improving their economic outcomes, particularly when the employer is able to help them do so.

Levels of Cooperation and Control Given the way mandatory bargaining issues are defined in the labor acts and employers’ antipathy toward organized labor, managers have sought to retain as much control of the workplace as possible. Labor has generally been reluctant to seek shared responsibility for decision making given its adversarial role and the economic concessions it might have to make to gain a greater say in decision making. Both employers and unions began to consider cooperation during the 1980s in situations where companies or facilities were in extremis.

In some situations, in return for economic concessions, unions have won greater claims on the rights to control processes and share in profits. Provisions have been negotiated to increase the proportion of employees’ pay that is at risk, usually to help ensure employer survival and increase employment security. The effect of participation in gaining rights can flow along two dimensions: control and return rights. Control rights involve the degree to which labor participates in organizational decision making. Unionization, in itself, introduces a degree of control rights because the employer can no longer unilaterally decide wages, hours, and terms and conditions of employment. At the extreme, control rights would include works council arrangements (as in Germany—covered in Chapter 17) and representation on corporate boards of directors. Return rights begin with wage payments and progress through incentive plans, profit-sharing and gainsharing programs, and ultimately to employee stock ownership of the

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enterprise. 4 Conflicts over control rights and unions’ general disinterest in broader return rights, the historical antipathy of employers, and adver- sarial relationships in bargaining have made the creation of joint problem solving difficult.

This chapter explores initiatives in union-management cooperation to jointly accomplish their separate goals. Part of this is done through inte- grative bargaining during contract negotiations and part through devel- oping ongoing cooperative relationships. Many cooperation experiments are initiated through side letters in the contract or through agreements to suspend contract provisions to experiment with new methods.