Unions Follow Suit

By Robert J. Grossman Apr 1, 2005

HR Magazine, May 2005 Labor takes a page from management as it looks to reorganize, perhaps signaling a new, less contentious era of labor elations.

This year, as the AFL-CIO celebrates its 50th anniversary, there should be a loud celebration. Instead, there’s a crescendo of discontent drowning out the party music—and it’s centered on a raging debate over how labor will position itself for the next half-century.

A key figure in the debate is embattled AFL-CIO president John Sweeney. When Sweeney was first elected to the post in 1995, many thought he would lead the stumbling labor movement back to its glory days, when it represented nearly 35 percent of all U.S. workers. Instead, union membership has plummeted. Currently it’s at 12.5 percent for workers overall, and only 7.8 percent for private-sector workers.

As a result, Sweeney’s leadership is under fire and the very role of the AFL-CIO—a federation of 58 different unions representing 13 million workers—is being debated. Powerful unions within the federation, like SEIU, the Teamsters and UNITE HERE, are clamoring for major reforms to help organized labor become more effective and efficient. Prodded by new Ivy-league-educated leaders with advanced business degrees from places like Yale and Wharton, they’re looking to jump-start the movement and take a more businesslike approach to managing unions.

The way this drama plays out could have one of two dramatically different consequences for any business that currently interacts with unions—or might do so in the future. On the one hand, unless labor gets its act together quickly, experts predict the debilitating backslide will continue. If that happens, for HR professionals embroiled in parrying union thrusts, nothing much will change.

On the other hand, it will be a watershed moment if labor embraces 21st century business strategies that employers are using so effectively against it, and redefines itself around the premise that if employers are to flourish, unions must too. As some HR professionals have already learned, that might not be so bad.

Time for Change

One thing is certain: Organized labor must change—and soon. Year after year, union membership rolls are being reduced due to corporate downsizing, restructuring and offshoring, as well as retirements of union employees. And there’s little new blood coming in. In fact, last year’s organizing results were the worst ever. “The machinists union [International Association of Machinists and Aerospace Workers, or IAMAW] lost 100,000 members [last year]. Just to keep even, they need to recruit 100,000 new members,” points out Marrick Masters, professor and director of the Center on Conflict Resolution and Negotiation at the University of Pittsburgh. “They’re swimming against the tide.”

Union leaders themselves recognize they are facing dire straits.

“Radical changes must be made, and we need to have a dialogue about how to do it,” says Steven Sleigh, director of strategic resources of IAMAW in Upper Marlboro, Md. IAMAW, which supports Sweeney, currently has 400,000 active members in aerospace and air transportation and 330,000 retirees.

“Unions are realizing they need to be as strategic and focused on their objectives as employers are,” says Sleigh. “We’ve been too complacent. If you see your market share decline every year for 30 years, you have a fundamental problem.” The question is: How can labor effect that change? Sweeney and his detractors have some fundamental differences of opinion on that subject.

Rumbling and Grumbling

In March, Sweeney invited union leaders to attend the AFL-CIO’s executive council in Las Vegas. Reorganization, finances and redefining labor’s vision topped the agenda.

Sweeney offered reforms that would direct an additional $45 million of AFL-CIO resources into political action and legislative activities aimed at electing a worker-friendly president and Congress. He supported a $15 million reduction in contributions from the unions to the federation, freeing up money the unions could use for organizing efforts. He also offered measures aimed at encouraging unions to merge so they won’t undermine each other in organizing and negotiating.

Dissidents, led by Andrew Stern of SEIU (service workers), James Hoffa of the Teamsters and John Wilhelm of UNITE HERE (which has 440,000 active members representing the needle trades, textiles, industrial, hotel and restaurant industries), pushed for a $35 million reduction in union contributions—$20 million more than the amount Sweeney proposed—that unions could spend on organizing instead.

They agreed with Sweeney that unions must merge, but, unlike Sweeney, they see it as such a pressing priority that they believe unions reluctant to band together must be forced to do so. This represents a striking and fundamental difference of opinion for unions, which tend to be focused on a democratic process, not the command-and-control model of hierarchical businesses.

Throughout the three-day meeting, the debate was intense; majority and minority factions emerged. The majority, representing about 60 percent of all union members, supported Sweeney. The minority, representing about 40 percent of organized labor, went with the Stern-led coalition.

Tempers flared as Stern refused to deny the inference that unless the AFL-CIO moves more aggressively, SEIU, with 1.7 million workers and growing, may secede and create a new workers’ movement. Leaders in the majority coalition, though they find Stern’s ideas about restructuring, going global and large-scale organizing provocative, were angered by his threats, calling him impulsive and divisive.

Sweeney appears to have enough votes in his run for re-election for another four-year term. But with the AFL-CIO’s July election months away, rumors buzz about the possibility of an opponent waiting in the wings. If it happens, it would be only the second time an incumbent president has been challenged.

Tying the Knot

The splits that surfaced in Las Vegas—and continue today—suggest the road to unity will be long and rocky, even though there is a fair amount of agreement between the two sides.

“The majority believes nothing much can be done without political and legislative change,” says Fred Feinstein, senior fellow at the School of Public Policy at the University of Maryland and former general counsel to the National Labor Relations Board from 1994–1999. “The 40 percent says, ‘While we’re working on the politics—which we must do—we can do more.’ The division is about an approach; the [minority faction is] more committed to making internal changes in structure and attitude.”

Both sides agree that what works for big business can work equally well for unions, and that mergers are needed. Large employers, many with global reach, hold a nearly insurmountable edge over isolated unions that are too small, inefficiently organized, and prone to bickering and territorial disputes. As a result, employers can pick off smaller unions one by one.

When smaller unions unite, they become a more powerful force. Suddenly, it’s Goliath vs. Goliath.

“It’s how do we get there—not whether these changes are necessary,” says Tom Juravich, director of the Labor Relations and Research Center at the University of Massachusetts. “The issue is, how heavy-handed can you be?” Feinstein says. “Andy Stern says we’ve got to create strong incentives, and, if necessary, force; Sweeney says we’ve got to encourage and urge.”

But will unions voluntarily see the synergies in consolidation? “No way,” says Masters. “Like any other institution, each union has a vested interest in survival.”

But, on the other hand, “there’s not a lot of support for forced mergers,” says Andy Levin, director of the Voice@Work Campaign of the AFL-CIO. Levin says the gears of democracy may grind slowly, but the process must trump expediency. “We’re democratic—not like corporations; every labor leader is elected, and decisions to merge should percolate up from the bottom.”

“Our process is grounded in democracy,” agrees LeeAnn Anderson, executive assistant to the president of the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE International) in Nashville, Tenn. Recently, Anderson participated on the team that negotiated the merger between PACE International and the U.S. Steelworkers, which was expected to be finalized in April.

Anderson describes the mating ritual that led the large “smokestack unions” to tie the knot: “We started ‘dating’ about two years ago—did some things together cooperatively to see if it was a good fit.”

The ultimate result is a more powerful union, she says. “Now we’re married, with 850,000 members, the largest industrial union in North America. With that diversity of membership, one sector can support the other. Before, if 150,000 paper workers went on strike, we’d have 100,000 members supporting them. Now we’ll have 700,000.”

Pick a Partner

There are different theories about the most sensible way to consolidate—by industry, job type, geography or some combination thereof.

“For SEIU, Stern proposes to carve up the pie by industry—one in health care, one in metal manufacturing, one in education and so on,” Juravich says. “By organizing all of them, when employers agree to improve working conditions, no one is disadvantaged in the competitive mix. The rising tide raises all boats, and the costs get passed along. This win/win strategy has helped SEIU organize successfully in health care and cleaning industries.”

Meanwhile, union mergers continue—some for convenience, some for strategic reasons. Others are “shotgun weddings,” Juravich says. Success rates parallel business mergers—below 50 percent.

Too often, unions are not doing their homework. “When Verizon looks to buy MCI, there are hundreds of firms they can go to for help to analyze the merger, but there’s not a single firm that does the same for unions,” Sleigh says. “We need to have critical assessments before we act, but it has not been happening.”

Without due diligence, the odds of success decline, suggesting that the rush into wholesale mergers may fall flat.

“I’m not sure labor has thought it through sufficiently,” Masters observes. “It looks like they’re going to take a bunch of dysfunctional unions too small to be effective, merge them into a bigger one and then hope they’ll be able to tackle the dynamics of the economy. Without a strategic rationale, these mergers won’t mean squat. You’re talking about stapling things together without addressing the fundamentals.”

Changing the Equation

Some say that even if unions consolidate and become leaner and more businesslike, it won’t be enough.

“The ultimate conundrum for unions is, they’re offering a product to a market that isn’t buying,” says Lawrence Lorber, a partner at the law firm of Proskauer Rose in Washington, D.C. “They could do all this good business stuff—it’s Business 101—but what’s the widget they’re selling?”

Savvy reformers, like SEIU’s Stern, recognize Lorber has a point. The widget needs to be remastered to mesh with the realities of today’s economy. That calls for fundamental reform in attitudes and practices.

Stern believes the way to achieve that is to work more closely with employers, rather than against them. He says labor understands business pressures and is sincere about working with employers when possible.

Paul Salvatore, a partner with Proskauer Rose in New York who represents employers that deal with SEIU, has seen such cooperative efforts firsthand; he cites an example where SEIU agreed to a zero percent increase in wages to shore up its health fund.

“The [unions are] more pragmatic about the needs across the table,” he says. “They know the employer has to survive. It doesn’t mean they won’t strike, but it’s a last resort.”

“We’re not looking to fight to the death,” says Mark Flaherty, general counsel of the 60,000-member Physicians for Responsible Negotiations, SEIU, in Kansas City, Mo. “We’re looking for situations where we can bring value to the table. Successes have been in the nursing home industry in California where employers want tort reform. In exchange for labor’s support for extending caps on punitive damages to nursing homes, the nursing home industry was neutral in letting SEIU organize its workers. Similarly, on the East Coast, labor tells management: ‘We’ll go hand-in-hand with you to fight for higher Medicaid reimbursement rates.’ ”

Jim Gray, SPHR, a management consultant and member of the Society for Human Resource Management’s Labor Relations Panel, says this approach is promising for industries that are growing and unlikely to turn to offshoring to reduce payrolls. “Ideally, like in custodial services or health care, there will be a three-way win—benefiting the company, the workers and the customer,” he says.

That’s been the case at Tenet Health System in Chesterfield, Mo., where management works cooperatively with SEIU, the California Nurses Association and the American Federation of State, County and Municipal Employees.

“Our approach is to work in partnership, in collaboration for the benefits of our patients,” says Les Abercrombie III, SPHR, senior director of regional human resources for Tenet Health. “It takes a lot of organizational energy to collaborate, but the rewards can be seen in increased patient outcomes and employee satisfaction and performance. In the end, unions are successful to the extent the business is successful.”

Successful cooperation at Bryant University in Smithfield, R.I.—where 36 percent of workers, including faculty, are organized—also has paid dividends all around. “At Bryant, the union reps participate fully in planning and strategy, and serve on universitywide task forces,” says Linda Lulli, SPHR, associate vice president of HR. “We’ve been successful in forging relationships, and it’s likely to have positive outcomes,” she says.

Southwest Airlines also has had good experiences cooperating with unions. The company worked together with IAMAW to increase job security, productivity and efficiency. Such cooperation has helped make Southwest among the most profitable airlines.

Profitable Coexistence?

SEIU and other service unions believe that their cooperative approach is opening doors to employers—and to potential new members.

But so far, most employers are keeping their doors closed.

For example, Southwest is one of only a dozen employers with workers represented by IAMAW to warm to the prospect of a partnership. The remaining 5,000 or so companies with IAMAW workers have opted out.

Anderson at PACE International estimates that of 3,000 contracts, fewer than 20 percent feature labor/management cooperation. “So many employers have heard the message about strategic alliances, but when push comes to shove, they don’t buy in.”

While she admits there are areas where employers and unions can’t ally, “like grievance and arbitration procedures,” Anderson does believe that “there are some things labor and management can work together on, like increasing productivity and building the business.”

But Masters says it’s unrealistic to think that many employers will buy into the new partnership rhetoric being peddled by the unions. “You won’t convince the NAM [National Association of Manufacturers] or the Chamber of Commerce that unions are sympathetic to management’s economic woes. They won’t believe it.”

Don’t Be Complacent

Will the AFL-CIO, a voluntary federation with little authority to impose its will on its members, find ways to implement essential reforms, with or without Sweeney at the helm? Will powerful unions like SEIU decide to bolt the AFL-CIO and go it alone? Will unions continue to talk, talk, talk, until it’s too late? Or will more of them adopt a more cooperative, business-friendly position?

For now, the jury is out. In a corporate environment, the board makes policy, then dictates it. “With unions, it’s like herding cats,” says Juravich. “How do you get such disparate entities with different agendas to agree?”

But human resource professionals must be careful not to let down their guards. “[Unions] may be coming, and if they do, be prepared to work with them,” Lulli says. “You need to be more attuned. If you’ve lost sight of the influence of unions, you won’t be prepared for the abrupt changes in process that a union brings. Before it happens, you should understand how to work and build relationships in a union environment.”

And if your goal is to keep unions on the sidelines, remember that it’s your job to make sure employees are satisfied, engaged and focused on business success. “At the end of the day, the employees’ decision to choose a union is dependent on their satisfaction level,” Abercrombie says.

And if the union movement continues its nosedive, beware an unintended consequence. “HR has to ask: If employers don’t fear unions, will they become complacent?” Gray says. “How often is the positive climate in a company the result of the good will of management? How much can be attributed to your incentive to remain union-free?”

Robert J. Grossman, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.

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