ORC Sightlines

March 2007

Summit Proposes New, Mutually Beneficial Model for Labor/Management Relations

Organized labor may represent only a small fraction of the workforce, but relations with its unions can nevertheless have a huge impact on a company’s profitability, not to mention the amount of grey hair on its managers. New forces in the economy are challenging the old ways of managing labor relations, and it’s time, agreed labor and management representatives at a recent summit conference held at ORC’s headquarters offices, to reassess the rules of the game.

The summit, Exploring Ways to Improve Labor-Management Relations and Collective Bargaining, was sponsored by Industrial Relations Counselors, a non-profit research organization. Facilitated by ORC labor experts, the summit brought together current and former union leaders, AFL-CIO officials, labor relations executives, and academics. Significantly, their varied experiences and perspectives brought them all to similar conclusions concerning the future of industrial relations: prosperity of both workers and employers depends on scrapping the old adversarial bargaining model for a more cooperative relationship between management and organized labor.

One of the tools being applied successfully in some companies is interest-based bargaining (IBB), which focuses the parties on fundamental goals rather than positions or grievances. IBB techniques are being incorporated in a range of new approaches to bargaining. The parties are increasingly engaging in joint training; joint data collection prior to bargaining; pre-agreements on ground rules and a bargaining plan; use of facilitators and brainstorming during bargaining; use of content experts and sub-committees during bargaining; new uses of electronic technology such as projecting text and taking joint minutes; and innovative ways to engage and calibrate constituents.

A few cutting-edge companies have dared to go beyond a cooperative bargaining style to build true working partnerships with their unions. Harley-Davidson is one that has decided it is better to work together than potentially to destroy one another. Stephen Weidman, Director of Corporate Labor Relations and HR for Harley-Davidson, pointed out that, essentially, unions are suppliers, and it makes sense to seek the same type of cooperative relationship with them that the company nurtures with other suppliers.

When union leaders are involved in both business issues and operations, the company benefits from their knowledge, skills, and leadership. At Harley, all union presidents and general managers share information and participate in setting policy. Not all decisions are made jointly; some are reserved for management and some are made by management with union input, but overall the thrust is on collaborative problem solving. It requires a high level of mutual respect and trust and a culture that values consensus over command and control.

At Kaiser Permanente, union leaders and senior executives developed a Partnership Agreement that gave the unions the right to give input (but not to veto decisions) at the Board level. Management and labor worked together to achieve agreed-upon business goals such as service quality improvements and expanded membership, with union members learning to be proactive, demonstrating their vested interest in the success of their organization.

In 2000, the spirit of cooperation at Kaiser Permanente extended to the bargaining table, where the two sides determined to institute a facilitated, single, national “interest based negotiation” process in which various task groups engaged in joint study, problem-solving, and negotiations on subjects ranging from quality and service to work life innovations to wages and benefits. Their recommendations were submitted to a centralized Common Issues Committee, and ultimately to the membership, which ratified the national agreement and derivative local contracts by substantial margins – 92 percent overall.

Cultivating cooperation like this between unions and management is not an easy task. Both sides are often reluctant to go past their traditional roles and accept the new and broader responsibilities that go along with partnership. And each side has different constituencies. Management tends to have a quarterly mindset, when they must answer to shareholders, while union leaders are responsible to the members who largely expect them to act as adversaries of management. Moving to cooperative processes also requires a substantial investment of time and money, something management often underestimates. Finally, the most difficult issues—for example, healthcare and retiree benefit costs, the issues that led to Harley’s first strike in 15 years—are structural economic and political problems beyond the power of the parties to solve.

Nevertheless, participants in the Summit agreed that the cooperative model is essential to the ability of both business and labor to compete in the brave new world of globalization, knowledge work, and outsourcing, and they identified several principles that the parties should recognize in order to move forward along this path:

Industrial Relations Counselors (IRC) is a not-for-profit research and educational organization specializing in human relations in management. Its mission is to advance the knowledge and practice of human relationships in industry, commerce, education, and government. IRC is the parent of ORC Worldwide, which was spun out in 1953 as a for-profit consulting firm. Since then, IRC has continued to sponsor research on human resources practices and educational activities such as this summit conference. IRC’s magazine, IRConcepts, makes learnings from IRC projects available to the public. A fuller report of the proceedings of the conference will be available in the next issue.

Local Labor Markets Challenge Global Rewards Programs

When members of ORC’s Global Rewards Meeting Group (GRMG) met in London earlier this month, the focus was very much on local challenges. Although many companies are striving for consistency in grading systems and compensation philosophy across the corporation, it is evident that local economic conditions, customs, and culture must have an impact on how these play out in any given market.

India and China, on the one hand, and Eastern Europe on the other are cases in point. As the two Asian economies continue to develop energetically, staff retention is the number one challenge for HR professionals in the region. High turnover has put HR and compensation professionals under the gun to find creative ways to retain employees. Aggressive salary increases, far outstripping inflation in both markets (see tables below), exacerbate the problem.

INDIA
Merit Increases
Consumer Price Index
  2006 2007 2006 2007
Executive 12.0% 12.0% 5.6% 5.3%
Managerial 12.0% 12.0% 5.6% 5.3%
Clerical 12.0% 12.0% 5.6% 5.3%

 

CHINA
Merit Increases
Consumer Price Index
  2006 2007 2006 2007
Executive 7.9% 7.6% 1.5% 3.2%
Managerial 8.0% 7.8% 1.5% 3.2%
Clerical 8.0% 7.8% 1.5% 3.2%

Source: ORC Worldwide’s Local National Salary Increase Survey – Autumn 2006

As a result of attractive salaries and almost unbridled opportunity, there is an influx of national employees returning to their countries of origin after gaining work experience abroad. Nevertheless, the demand for skilled workers and managerial talent far outstrips the supply. GMRG companies are responding to these pressures by offering more non-monetary inducements such as education, technology, cross-training, and courses in languages such as Spanish and English.

The big issue shared by organizations entering or already established in Eastern Europe is market data, or, more correctly, the lack of it. Finding reliable and accurate data specific to the appropriate organizational sector or geographic location is extremely difficult for this region. Poland is an example where geographical data is critical, as organizations are now locating outside of the capital making regional pay differences more contentious than ever before. ORC presented data at the meeting that gave participants a useful guide to current pay levels for benchmark roles in Eastern European countries.

The developed markets present their own challenges. In the UK, concern about retaining key talent has increasingly led organizations to formalize their reward strategies and to link merit increases and variable payments to individual performance. One hallmark of many of these new strategies is open communication with employees about principles of base pay, variable pay, and also benefits, which have taken on a significant role. Many organizations have introduced or revamped childcare schemes, bicycle loans, paternity policy, annual leave, and private healthcare coverage.

In the US market, the majority of GRMG members are moving towards a “total rewards” model that includes the traditional elements of compensation plus everything else that the employee values in the employment relationship. As a result, employers are investing in training, career development, non-cash recognition awards, and work/life flexibility. At the same time, they are decreasing their investment in long-term reward vehicles such as stock plans and retirement benefits.

Clearly, the Group’s discussions demonstrate that, while the labor market may be global in the sense of mobility and availability of talent, employers cannot ignore local conditions when making decisions about remuneration and other rewards. The biggest challenge about which GRMG members share ideas is how to meld local solutions with a rational, equitable, and strategically aligned corporate-wide HR strategy.

For more information about these issues or the Global Rewards Meeting Group, contact Paul Coleman, +44 (0)20 7591 5600.

Chinese Have Leg Up on Development in Africa

Chinese enterprises are aggressively targeting sub-Saharan Africa for development, and Western businesses could be at a disadvantage if they don’t make their move, according to Dr. Alusine Jalloh, director of The Africa Program at University of Texas at Arlington. Addressing a joint gathering of ORC’s Southern US and West Coast Roundtables earlier this month, Dr. Jalloh noted that one of the barriers Western companies have faced in expanding into Africa has been instability and unreliability of government support. Those that are successful, however, have taken note of an important fact of African life: the most powerful social forces in the region are not national governments, but ethnic/tribal affiliations and local communities.

Historically, Western companies have started their African explorations at the top, by meeting with government leaders seeking mutual incentives and support. But, while government officials may gain from working with these companies, very often the economic advantages do not trickle down to the people. Sometimes, in fact, their traditional ways of making a living—fishing and agriculture, for example—are undermined by development without any concomitant benefits. Much of the turmoil and violence that employers see in Africa is a direct result of the frustration of local people who do not feel they are sharing in the economic growth of their countries.

Foreign businesses would be wise, Dr. Jalloh argued, to spend more time building relationships with local communities and finding ways to help them reach their own goals, such as improving education or training people for jobs. One challenge facing would-be employers in Africa is finding scientific and engineering talent locally. Not only aren’t there the numbers of trained scientists and engineers to provide sufficient staff in certain industries (oil and gas, for instance), but those who have the theoretical education often lack experience in private industry and need to be educated in business practices.

Africa is a huge continent, Dr. Jalloh reminded his audience, encompassing an area larger than all of China, Europe, and the US combined. Initiatives to bind African countries together into a few regional economic zones have yet to surmount the barriers of language diversity and lack of a common currency. While African nations are extremely motivated to improve their economies, therefore, the structural and cultural realities favor a more grassroots approach.

ORC’s regional roundtables in the US, Europe, and Asia bring together managers responsible for their companies’ international assignment programs to share policies and practices regarding expatriate pay, benefits, and other management issues. For more information, contact any of the following ORC offices:

Slow-Cooked Onboarding Avoids Half-Baked Results

Onboarding is best thought of as a long-term process, says Jodi Starkman, ORC’s vice president of talent management consulting, in an interview in this month’s Talent Management. “It’s about bringing employees into a company, making sure they know what’s expected of them, making sure they know how they’re going to add value, making sure they understand how they fit.”

Although there are probably some common objectives and core pieces of content that would apply to all employees in a given company, the orientation program may need to be tailored to the needs of different groups or individuals (e.g., new executives, R&D scientists and engineers). The onboarding process should extend over months, maybe even a year, according to Starkman—long enough to ground new employees in the values and vision of the organization and help them figure out how things get done in their new organization.

“‘It takes people time to learn their job, but also to…figure out what questions they have. And I think you need to have those monthly or quarterly kinds of comebacks to the person to see how it’s going and take them to the next level,’” Starkman advises.

The full article is available on the Talent Management web site at. http://www.talentmgt.com/talent.php?pt=a&aid=277. Jodi Starkman can be reached by email or by phone at 212-382-0394.

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