Men Who Sleep With Dogs
"Our most important resource is our people". That's a statement that we hear over and over again from corporate leaders. It is a constant theme in communications to workers, to communities and to corporate customers. We see it year after year in everything from employee handbooks to corporate mission statements and annual reports. It's more than just corporate propaganda (although it's sometimes used for that purpose) it's a philosophy of management that has been around for over a hundred years and is still the dominant philosophy in the North American business community.
Known as the "Human Relations School of Management" it's been around for a long time. In the early 1900's, it ran contrary to earlier philosophies (the ones that said that workers needed to be coerced and threatened to do an honest day's work) by proposing that working people bring value to the organization and that by meeting their needs (both intrinsic and extrinsic) a business could not only have a better chance of survival but it could also achieve a competitive advantage in the market place.
The field of "Human Resources Management" is grounded in the human relations school of management theory.
Human resource management is the process of bringing people and organizations together so that the goals of each are met. It can be viewed as the process of combining four components, in a harmonious and productive fashion. Its goal is an optimal degree of fit among these found components - the environment, the organization, the job and the individual.
(Human Resources Management, Strategy, Design and Implementation, D. Hall & J. Goodale, 1986)
The philosophy took root a long time ago and is still with us. For over a hundred years now, the business community has acknowledged that workers matter when it comes to business success. Millions of books have been written, countless studies have been conducted on the subject of competitive advantage through people. Millions of dollars are spent annually by companies on their human resources departments. Business execs have sung the praises of employee involvement, participative management, quality circles, total quality management, employee centered management, kaizen, self-directed teams, empowered employees. Human resources managers are now strategic partners in business, bringing their expertise in people relations to the table in the pursuit of greater profitability. Human Resources management is taught at colleges and universities. You can even get a degree in it. Human resources professional associations have their own designation or certification programs.
Thousands of people make their living as human resources practitioners. In any large company, you'll find them piled up high and deep: Human resources managers, coordinators, recruiters, analysts, trainers, evaluators, administrators, strategists, there's a title for everybody. Their role is to develop and execute strategies that will help the company derive competitive advantage through its people - hiring (recruitment), training (staff development), keeping them around (retention), rewarding them (compensation), motivating them and getting more work out of them. The employee relations programs they administer are their strategies and these exist because at the top of the corporate pyramid, there is an ingrained belief that people make your business profitable.
Although the motives behind these programs and the whole human resources management thing have profit rather than not people at heart, the proliferation of these programs and the extent to which the human relations philosophy of management is entrenched in the business community, are an acknowledgement that people and how they are engaged and treated impacts on the success of a business. If they didn't, corporations wouldn't be pouring millions into their human resources schemes and the legions of experts who are retained to make them happen. Business leaders just aren't that stupid when it comes to making a buck or saving a buck.
Now let's be clear: We are not making a pitch for the human relations school or the human resources management. Our point in this week's rant is that backroom dealing - of the kind that we've had in large sloppy buckets this past week - (here and here) - is not only bad for unions and workers, it's bad for business. Any business that even nominally espouses the human relations philosophy of management (and most of them do and they spend gobs of money on it), is blowing smoke up its own ass when it allows, for whatever reason, its labour relations experts to engage in sleazy dealing with union representatives.
It's time that the CEO's and senior executives of corporations to understand this and to be held accountable for the actions of their labour relations experts. The senior levels of management in many corporations that engage in these practices like to keep themselves blissfully ignorant of what their labour relations Mr. Fix-It's are doing. Decisions to partake of a little backroom action are often made by the senior labour relations staffers and the details are kept - confidential. The CEO doesn't know the details (and doesn't really want to know). He is told by the Vice President of HR or the Director of Labour Relations that "we are in the process of negotiating an understanding with the union that will give us greater operating flexibility and increase profitability". That's all the big kahuna needs to hear. Few know much about unions or about working people and many do not hold them in high regard. There is an assumption that some kind of hush-hush, wink-wink, underhanded confidential stuff must, of necessity, happen from time to time. If corporate managers have to bend a few rules, well, that's a risk involved in doing business. Just as the union leaders rationalize their backroom antics as "necessary for the good of the labour movement", the corporate guys rationalize them as "necessary for the good of the bottom line".
Ignorance will be bliss no longer. It should be pretty plain by now that the players in underhanded biz-union dealing are gong to get exposed and will get all the embarrassment, disrepute and distress that comes with that.
Both management and union players are going to find themselves subject to scrutiny, criticism, even ridicule. The source of that criticism will not be limited to union reformers and social activists. If we have anything to do with it, the criticism will come also - with a little bit of prodding - from shareholders, customers and industry associations which will come to recognize that backroom dealing is - among other things - a bad business practice. So bad that it impedes competitiveness, creates a culture of complacency among managers and stifles the ability of the company's human resources to contribute fully to the success of the organization. The backroom boogie is an attractive and addictive fix that brings short-term gain followed by long-term pain.
When dogs bed down with other dogs, they all wake up with fleas.
That's the problem. Bad union guys and bad company guys are a bad combination. They get involved in activities that run contrary to the objectives of both of their organizations. For unions the conflict is more obvious. Selling out members for personal gain or for the benefit (read: profit) of the organization is not defensible on any grounds. It runs contrary to the union's reason for being: The betterment of the workers. Bring forward any lame excuse you like, but at the end of the day, if a decision, action or strategy doesn't directly benefit the workers, it's not a good deal.
For business, the downside of labour management partnering is less obvious. Some proponents of the backroom boogie would argue that it's a good thing: It keeps labour costs down and allows greater flexibility. Maybe it does in the short term, but over the long haul it interferes with those elements of organizational performance from which competitive advantage and sustained profitability is derived. An example:
Paying the lowest wages does not always give a company competitive advantage. Relying on the lowest price ignores other factors that influence customer choices. If lowest price guaranteed profitability, consumers would always buy the lowest priced item on the market without regard to quality, accessibly or service. The concept of "goodwill" or customer loyalty would go flying out the window. We would all buy the cheapest car, day-old bread, last week's produce and yesterday's newspaper. Some of us do but many of us don't. The fact is that, price isn't the only factor that determines consumer's buying decisions. There's a lot more to it than that.
In the service industry, contact between customers and workers is essential and the quality of that contact can and does influence customer choices. It would seem that businesses in the service industry especially, ought to be working hard with their most valued resource. Many do. The proliferation of employee relations programs, motivational schemes, customer service programs and morale boosting activities is a testament to that. We're not saying that these are good things. Many of these programs are very manipulative in nature and serve to confuse workers about their rights and the nature of their relationship with their employer. But the fact that they exist, goes to show you that businesses in this industry are very conscious of the need to have workers feel good about the business and the customer and to interact in a positive way with them. Some of these programs also operate to keep unions out. That's a secondary consideration. Loving the company and loving the customer are the primary goals - so that the company can make money and more money and even more money.
Now here comes the backroom shmoozing problem. When a business does a backroom deal with a union, it essentially abdicates its relationship with its workers. They are no longer a valued resource - they are a commodity to be controlled and exploited - a la the days before the human relations school. The union is a convenient control mechanism. Workers rights and entitlements are set out in a crappy contract and they must do what they're told and stay quiet for fear of discipline. For those who don't quite get that quickly enough, a sort-of-judicial system - that serves only the interests of the employer and the union - awaits.
If we look at companies that do backroom deals, we will probably find a lot of common threads in terms of how they treat their workers. Among those we would probably find some or many of these:
- High turnover of staff, with resultant staffing and service problems.
- High training costs, as new workers must constantly be trained in the basics of their jobs.
- A lack of experienced and knowledgeable staff.
- An obsessive focus on managing labour costs at the expense of customer service.
- A generally poor reputation for service or quality or both.
- Little in the way of motivation for workers, few opportunities for growth or advancement.
- Ghettoization of workers based on characteristics like gender, ethnicity or social status into low paying classifications with little prospect for advancement.
- Frequently conflict between supervisors and workers and among workers themselves.
- Poor communication with workers.
- Little awareness by workers of the mission and direction of the business.
- A reputation in the community as an employer of last resort rather than an employer of choice.
- Difficulty competing or responding to new competitors or trends in the industry.
- Obsessive reliance on decreasing labour costs as a means of meeting the challenges of staying in business.
The bottom line is that backroom dealing is as strong indicator of a fundamental lack of respect by the organization for its workers. When you lie, cheat or deprive people of their rights, you're treating them with disrespect and you'll get as good as you give.
A business that treats the people who can make it or break it (if we believe the wisdom of millions of business experts) is dysfunctional. If it's dysfunctional, it can't maintain competitiveness indefinitely. If it's making itself uncompetitive, that's contrary to the primary objective of maintaining long-term profitability.
Think about concessionary bargaining in the retail food industry: The race for the bottom that began in the 1980's has made the major players in the Canadian retail food biz large heaping piles of money. In the process, however, they've rolled out the red carpet for their most feared competition: Wal-Mart and the other American big box retailers. There's nothing like a low-wage, no-benefit, non-union (or biz-union) marketplace to draw the competition. There's no question that the Canadian retailers through their backroom romances have created just that. The willingness of the unions to roll over and take whatever scraps are thrown their way has created Canada's answer to the US "right to work" states. An environment where strong labour unions need not be a concern to your business.
Although there is a lot of controversy over the reality of the Wal-Mart threat, if the big anti-union retailer ever does show up in the Canadian marketplace, the likes of Loblaws, Sobey's and the handful of other players have reason to be concerned. Their management culture (probably badly atrophied by reliance on driving down labour costs) may not be up to the challenge. Is their organizational culture one that puts a premium on creativity, innovation and respect for the skills and abilities of working people or is it one that relies on manipulation, control and coercion? Which is more likely to respond effectively to the challenges of the marketplace?
Case in point: Earlier this week, we brought you the story of a company that really went to town in the backroom. Consumers Distributing, at one time a successful Canadian retailer relied on its relationship with a Teamsters local to keep labour costs down. Over a period of several years it paid for "labour peace" and when the shit hit the fan, it paid the price. Consumers went under in the 1990's. There are a lot of factors that contributed to its downfall but its dirty dealing with its union surely played a part. The resignation, in disgrace, of its President (after pay-offs of $250,000 to a union official were revealed) and the years of labour unrest and bad publicity that followed in the wake of the scandal, must have had some impact. We'll never know exactly because for all the resources devoted to human resources management, no real measures exist to gauge the effect of bad labour relations strategies or on organizations' business strategies. Maybe it's time they did.
Corporate leaders need to beware. Sleazy dealings with union partners pave the way to your mutual demise. Not all the sleazebags will end up in jail or publicly disgraced but more of you will. The impact on your organizations may not be immediate but in the long run, it will be profound and, in some cases, irreparable.
So business folk, CEO's, line managers and Human Resources professionals alike, don't end up on MFD.