A Fighting Chance: New Strategies to Save Jobs and Reduce Costs

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fiGHTING CHANt( New Strategies to Save Jobs and Reduce Costs

Contributors Sally Klingel Morten Levin Ann Martin Ron Mitchell William Foote Whyte

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fiGHTING CHANCl New Strategies to Save Jobs and Reduce Costs

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Edited by Sally Klingel and Ann Martin Programs for Employment and Workplace Systems ILR Press New York State School of Industrial and Labor Relations, Cornell University

© 1988 by Cornell University All rights reserved

Cover design: Kat Dalton

Library of Congress Cataloging-in-Publication Data A Fighting chance : new strategies to save jobs and reduce costs I edited by Sally Klingel and Ann Martin; [contributors, Sally Klingel ... et al.]. p. em. Bibliography: p. ISBN 0-87546-145-X (pbk.) I. Cost control. 2. Work groups. I. Klingel, Sally, 1959II. Martin, Ann, 1941HD47.3F556 1988 658.1 '552--dcl9

88-28'588 CIP

Copies may be ordered from ILR Press New York State School of Industrial and Labor Relations Cornell University Ithaca, New York 14851-0952 Printed in the United States of America on paper that meets the minimum requirements of American National Standard for Information Sciences-Permanence of Paper for Printed Librarv Materials. 5 4 3 2 1

Contents

Introduction I 1

Part One l. The Xerox Corporation and the ACTWU I 13 2. Harrison Radiator and the UAW I 33 3. Trico Products Corporation and the UAW I 51 4. The Cases Compared I 71 5. Taking the Risk I 87

Part Two 6. Starting a Cost Study Team I 99

Resource Guide I 115

Acknowledgments I 129

Foreword

R

esearch for this book was funded in part by a grant from the Commission on Trade and Competitiveness, a bipartisan panel appointed by New York Governor Mario M. Cuomo. The commission, which is part of the New York State Industrial Cooperation Council, was mandated to analyze the nation's trade and competitiveness problems and to develop recommendations for a national economic strategy. A book on new strategies to save jobs and reduce costs meets the need to increase awareness of the potential of labor-management cooperation to enhance competiveness. This volume on cost study teams will be a valuable tool for firms and unions striving to reach that goal. A Fighting Chance> prepared by Programs for Employment and Workplace Systems (PEWS), emphasizes the value of greater participation in the workplace. PEWS has been highly successful in innovative efforts to integrate shop-floor insights with management goals. Their achievements have clearly demonstrated the value of cooperation in economic development.

This documenation of their work is consistent with earlier published recommendations of the Cuomo Commission on Trade and Competitiveness. The commission is pleased to join with ILR Press, the New York State School oflndustrial and Labor Relations, and Cornell University in the publication of this book. Lee Smith, Director Industrial Cooperation Council New York

Introduction

I

n the last two decades America's industrial superiority has been challenged by foreign companies that manufacrure products of higher quality at lower cost. To survive, American industry must meet this challenge. The question is whether the United States can compete without massive job loss and economic deterioration. Under growing pressure to lower costs and boost competitiveness, American companies have responded in two basic ways: by fleeing or fighting. Those who flee give up the uncompetitive parts of their businesses and buy production components or services cheaper elsewhere. Those who fight try to correct the inefficiencies that are making the company uncompetitive. This book examines an example of the fight response, a form of labor-management participation called cost srudy teams (CSTs). In cost srudy teams, union members work together with management to find ways to restrucrure production to achieve cost savings so as to restore the competitive strength of the threatened operation. Unlike other labor-management efforts such as quality circles or problem-

2

Introductwn

solving teams, CSTs are focused specifically on finding alternatives to layoffs and plant closings. The CST strategy is, by necessity, a distinctly American approach to saving jobs in manufacturing, for, unlike their counterparts in Japan and some European countries, workers in the United States have no traditional or legislated job security. Further, most labor contracts do not provide job security, leaving workers vulnerable to job loss whenever production slows or is shifted to another location. Under the circumstances, conventional collective bargaining responses are likely to be ineffective when management discovers that a company could save substantial money by shutting down an operation and outsourcing, or contracting out, the product or component that is produced. Cost study teams offer unions an alternative to accepting job loss or negotiating concessions. In fact, the suggestion to form a cost study team often comes from union leaders. CSTs go beyond the short-term focus of conventional employee involvement programs that concentrate on shopfloor problems to a study of all aspects of production. A cost study team can be focused on a single department, several departments, an entire operation, or even an entire plant. Team members can work full time or part time on the study. The work of the team can take weeks or months to complete, depending on the scope of the study and the amount of time team members devote to the effort. Teams can be composed of any combination of managers and shopfloor workers, hourly and salaried employees, and technical and administrative experts. Cost study teams can also be formed to head off competitive problems before they occur. Teams can monitor the cost performance of in-house operations against outside competition, making it possible to take corrective action before the threat is great. CSTs can even be used to identify and analyze potential products or to bid on new lines of work.

Introduction

3

In many companies, especially those in financial trouble, management views the employees as part of the reason the business cannot compete-they either cost too much or there are too many of them-and institutes labor cutbacks as the first step toward improving efficiency. In companies with cost study teams, the approach is the opposite. Management recognizes that the work force is a resource to help correct the problem and that it may in fact be the company's most valuable resource for remaining competitive. A cost study team gets its strength from what employees, given the opportunity, can contribute toward improving the efficiency of an operation in trouble.

The Challenge Facing American Manufacturing Although the United States had dominance in manufacturing and international trade during the post-World War II era, it was caught offguard by the explosion of international competition that began in the early 1970s. Finding it difficult to compete with foreign companies that manufacture products of superior quality at lower cost, American firms have been forced to surrender major chunks of market share in industries in which they were once dominant-automobiles, steel, office equipment, farm implements, home entertainment products, bicycles, machine tools, and many more. Even our much-vaunted leadership in high technology has not been immune. The task of rebuilding the manufacturing base in America has become a nationwide challenge, and the nation's staggering trade deficit is a dramatic scorecard of the extent of the problem. Confronting the power of international competition has revealed some basic weaknesses in the evolution of industrial management in the United States. Under the widely ac-

4

Introduaion

cepted approach of scientific management propounded in the early twentieth century by Frederick W. Taylor, production was divided into a series of specialized tasks and the primary emphasis was on production rather than quality. Workers were viewed as extensions of the machines, and control of production was given to engineers and other specialists who did the thinking and planning. The ideal worker was one who performed a single perfected task. In response to this approach, unions pressed for detailed job classifications and strict work rules to protect jobs and retain some worker control. Such protections solidified an already rigid system of work organization. Under this system, labor is viewed as a highly variable cost of production and is often targeted when a company needs to reduce production costs. This focus on direct labor as a variable cost and on materials and technology as fixed costs ignores the fact that direct labor is typically less than 20 percent of total manufacturing costs, a percentage that has declined little in the last thirty years (Gunn 1987, 3). Reducing labor costs thus does little to address the problems of cost competitiveness facing American companies. By contrast, Japanese manufacturers have built a system aimed at keeping costs low by focusing on quality and flexibility. To do this, they have treated the worker as the most important part of the production system, although not all workers in Japan enjoy the same job security and benefits as those in large corporations. In large assembly operations in Japan, workers are assumed to be lifetime employees and are trained to perform several functions. Employees are encouraged to think about the manufacturing process and to recommend improvements. Quality is the responsibility of each worker and is monitored continually, often through statistical methods. Decisions are made at lower levels than is customary in American firms. The expense of maintaining inventory in the plant is avoided and flexibility is enhanced

Introduction

5

through just-in-time delivery of materials and finished product. While American industry has been trying to keep pace with Japanese technological advances to make plants more flexible and efficient, many American managers have continued to treat their workers as if they were extensions of the technology, rather than the brains behind its effective use. New technologies and processes designed to reduce production costs and increase efficiency and quality-justin-time inventory control, the use of computers in the product design process, statistical process control, advanced robotics, and stand-alone machining centers-can yield substantial benefits, but they are costly to install and are not automatic solutions to cost problems.

The Flight Response Given the expense of modernizing aging plants and equipment and the difficulty of altering long-standing management practices, many managers see outsourcing as the immediate solution to the problems of cost competitiveness. They believe that by shutting down an uncompetitive operation and shipping the work out to the lowest bidder, whether a foreign or domestic supplier, their problems will be quickly erased. They think they will no longer have to deal with restrictive work rules or the hardened attitudes that have built up over the years in many old-line manufacturing industries. In their eagerness to chop costs, many managers fail to consider the impact outsourcing will have on their remaining employees-both hourly and salaried-and on labor relations. What may be left is an embittered and demoralized work force resentful that the decision to outsource was taken without more advance notice or without first giving em-

6

Introduction

ployees the opportunity to help save th~ir jobs. Relations with the union may be damaged, and m the future, employees may be reluctant to work cooperatively with management to strengthen the competitiveness of remaining operations. Another flight strategy is to close production in high-cost plants and build new plants in countries where wages are low or purchase parts and components from foreign affiliates. Since the 1960s, American manufacturers, at an accelerating pace, have moved production to countries where wages are as low as 25 percent of American rates. In some cases, American companies have conceded defeat by taking themselves out of the manufacturing business altogether. All production is contracted out overseas for shipment back home. Products are then marketed and distributed in the United States by the American "manufacturers" under their own labels. Some newly formed firms in the toy and apparel industries have no production capacity at all; they contract out for all products they sell. Meanwhile, factories in the United States are being shut down and work forces scaled back, often with devastating effects. Since 1979, more than 1.5 million manufacturing jobs have been eliminated by American companies. Much of the work entailed in these jobs has ended up overseas. Another variation of the flight strategy is the maquiladora, or twin-plant, approach. Under this arrangement, a company relocates operations along the United States-Mexico border; one plant is in Mexico and another just a few miles away in America. The two plants work closely together manufacturing and assembling parts and components. The appeal, of course, is that labor costs in Mexico are a fraction of union scale wages in the United States, a differential made even greater by the devalued peso. Plants in the northern part of the United States are often closed and relocated to the Sun Belt for the same reasons-lower wages, a nonunion work force, and lower taxes.

Introduction

7

Limitations of the Flight Approach As with domestic outsourcing, fleeing offshore appears at first glance to have several advantages for companies hardpressed by foreign competition. Experience is demonstrating, however, that producing offshore entails complications and costs that are not immediately apparent to managers enticed by simple labor cost advantages. Lionel Trains, for example, moved its production back from Tijuana, Mexico, to its original Michigan plant after encountering unforeseen problems with foreign manufacturing (Mitchell1986). Other companies, such as the Tandy Corporation and the Atari Corporation, have also brought production back to the United States (Watt 1987 and Keller 1988). The following costs were among those these manufacturers encountered: Longer turnaround times to make modifications in engineering and product designs Reduced quality that did not meet expectations Increased travel costs for managers and technical personnel Transportation delays and disruptions More opportunities for communication breakdowns Warehousing costs for storing product in between shipments Customs duties and fees Unpredictable fluctuations in foreign currencies Language and other cultural barriers A study by the National Tooling and Machining Association estimates that outsourcing overseas often increases costs by 30 to 50 percent. Typically, additional inventory adds 10 percent, shipping 5 to 15 percent, and unanticipated design changes up to 35 percent (Bluestone 1988).

8

Introduction

There is another serious, more long-term cost associated with the flight strategy. As noted in a special issue of Business Week on the "hollowing" process, the term coined to describe what happens when a company outsources production, the continued deindustrialization of America could "spell disaster for the U.S. economy as a whole" (Jonas 1986, 56). Jonas notes that by investing hundreds of millions of dollars to develop the capability and technical know-how to manufacture products in other countries, the United States may be in danger of losing its manufacturing and design expertise altogether. Raleigh Cycle Company, for example, decided to produce a new bicycle design in Washington State rather than give the technology to its usual Asian suppliers, fearing that the Asian suppliers would "use the technology to manufacture for everybody else, too" (Mitchell1986, 1). Other writers have detailed the many economic consequences of such deindustrialization, including the erosion of the consumer economy (see, for example, Bluestone and Harrison 1982). For many companies, the flight strategy is a substitute for modernizing inefficient plants and outdated management practices at home. Scaling down operations in the United States and moving production offshore can provide a temporary respite in the competitive battle, but it will not lead to the long-term internal changes that are needed to restore American industry to a stable position in the world market. And, in the meantime, communities are being devastated. The statistics for New York State illustrate the regional effects of the flight strategy. According to a study by the Economic Research Bureau of the State University of New York, Stony Brook, between 1969 and 1984 New York State lost 550,000 manufacturing jobs (Carey and Buchsbaum 1985). More than 175,000 of these jobs were lost because plants shut down and moved out of the state. The toll of these closings on families and communities has been

Introduction

9

painful. Especially vulnerable are smaller communities that have grown dependent on one or two local plants as a major source of employment. In a town that Jacks a diversified economic base, plant shutdowns can lead to chronic unemployment, the loss of other businesses, declines in property values, and reductions in government services. With little hope of finding jobs locally, skilled workers flee the area. Attracting new firms or businesses to such communities is nearly impossible. Those workers who are fortunate to find jobs locally are often forced to take considerably lower wages-and thus reduce the standard of living for their families.

CSTs: A Local Strategy Large corporations with plants in several locations are not the only companies faced with the choice of fighting or fleeing. World competition is now a fact of life for manufacturers of all sizes. This book does not pretend to prescribe a formula to guarantee survival. It does, however, demonstrate a successful way, starting on the local level and without great expense or upheaval, to address some of the specific problems that make plants uncompetitive. The employee involvement movement has opened the eyes of many managers and union leaders to the advantages of giving decision-making and problem-solving power to shop-floor workers. By joining together, companies and unions have discovered that they can build a more efficient, productive workplace and thus increase the chances oflongterm viability and job security. Properly implemented and supported, employee participation groups and similar problem-solving procesess can achieve impressive gains. Unfortunately, many such activities limit the involvement of employees to problem solving in their immediate work areas. They have also been used as a way to get concessions from

10

Introduction

workers, without giving back anything in the way of either compensation or security. In contrast, cost study teams examine shop-floor problems in the broad context of the economics, technology, and organizational structure of the firm. Teams are encouraged to make reconunendations on any aspect of the manufacturing process, with the exception of wages and benefits, giving the union and management the opportunity to plan together for the long-term future of the company. Cost study teams focus on productivity and quality problems through an intensive analysis of costs. All costs attributable to the plant or production unit are studied, not just the direct labor costs for producing and assembling the product or maintaining the machines. In examining overhead charges, the utilization of space, energy costs, and the efficiency of machines in operation or that might be purchased, CSTs study areas of the operation that are traditionally part of management's domain. In proposing changes in the way work is organized and carried out, CSTs deal with matters often covered in the labor contract. Starting a CST does not ensure that management will keep a department or operation open and work in-house. There may be no feasible way to save an operation. Both sides may conclude that the organization's resources would be better spent developing new products. Starting a CST does mean, however, that workers and union leaders will be given the chance to save jobs by exploring ways of improving the threatened operation before a final decision to outsource is made. The ultimate decision of whether or not to accept a CST's reconunendations rests with top management and the union. Before any proposed changes may be accepted, leaders of these two parties must consider the specific reconunendations as well as the broader implications for the company and the union and negotiate over any changes that would affect the collective bargaining agreement.

Introduction

11

Starting a CST is not risk-free. Everyone involved must be prepared to make unexpected choices and to face dilemmas. The CST strategy can be implemented successfully only if the company's leaders are willing to consider changing the current patterns of managerial leadership and union relations. Managers and union leaders must be willing to accept that past practices, although they served their purpose, are not necessarily right for the future. Strengthening the competitiveness of industry in New York State, and in our nation, will require a combination of changes and innovations, including investments in technology, new manufacturing systems and practices, more cooperative union-management relations, better training, more appropriate assistance from state and local governments, and increased opportunities for employee participation on the job. CSTs alone cannot solve all of a firm's problems. They are, however, a flexible, quickly implemented technique companies with limited resources can use to find ways to survive in an ever-more demanding and changing marketplace. The cases discussed in this book will point out the limitations as well as the strengths of the CST process. Limitations may exist in the best of circumstances or in spite of the best intentions. Nevertheless, CSTs can have great positive impact not only on a company's competitiveness but on its managerial leadership and relations with unions. Even in firms where a CST may fail to save a threatened operation, labor and management stand to benefit from the knowledge gained from conducting an intensive analysis of operations and from the sense of dignity and commitment that results from engaging in such efforts.

Scope of This Book This book presents the experiences of three New York State manufacturing companies and union locals that used cost

12

Introduction

study teams to improve operations and save jobs: Xerox Corporation and the Amalgamated Clothing and Textile Workers Union, in Webster; Harrison Radiator Company, a major subsidiary of General Motors, and the United Auto Workers, in Lockport; and Trico Products Corporation and the United Auto Workers, in Buffalo. These cases demonstrate that, although CSTs are not a panacea, they are an effective way to involve the people who know a business best in developing solutions to a firm's problems of competitiveness. The cases provide a "blueprint'' for using CSTs in a variety of ways to benefit workers, managers, the community, and their mutual investment-their company. The three cases vary widely in how the union-management teams were organized and the success of their efforts. Their experiences illustrate the flexibility of the CST process and the risks and opportunities company and union groups encounter when they work together on an intensive basis. This book can be read straight through or used as a reference. The three case studies, which follow this introduction, may each be considered alone or read together for the purpose of comparison. Chapter 4 compares and contrasts the three cases to provide information on what works best in a cost study team. Chapter 5 discusses the policy implications of the strategy for managers, unions, and governments. Step-by-step guidelines for starting and operating a CST are included in chapter 6. The material for the case studies was collected by researchers at Cornell University's Programs for Employment and Workplace Systems (PEWS) in interviews with the key participants from both labor and management at each site. At Trico and Xerox, PEWS staff assisted by establishing and coaching the CSTs. At all three sites, PEWS staff collected information, drafted reports, and then conducted discussions with both union leaders and managers for the purpose of analyzing the strengths and limitations of the process.

PART ONE

l The Xerox Corporation and theACTWU

B

y the late 1970s, the Xerox Corporation no longer dominated the plain copier and duplicator business as it had since it pioneered the production of Xerography machines in the 1960s. Companies such as Ricoh, Sharp, Canon, and Kodak had cut Xerox's share of the market from a high of 93 percent in the early 1970s to 42 percent in 1981. That year, the management at a Xerox plant in Webster, New York, completed a twelve-month study of operations. Based on its findings, management decided that millions of dollars could be saved by subcontracting to outside vendors several commodities and subassemblies being produced in the plant's wire harness department. In so doing, however, all the jobs in the department would be lost.

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Xerox and the ACTWU

The Amalgamated Clothing and Textile Workers Union (AGnVU), Local14A, which represents the hourly workers at Xerox, reacted to management's announcement with a counterproposal: it asked that a joint union-management commodity study team* be set up to find ways to restructure the department and reduce costs. The team succeeded in meeting its goal of $3.2 million, and the jobs stayed (Lazes and Constanza 1984). Since then, five other commodity study teams have been formed in the plant, including a second wire harness team. These efforts are part of an ongoing cooperative relationship between the ACTWU and Xerox that is squarely placed within the collective bargaining process. The union is now substantially involved in operational decisions, and management has increased flexibility in the production process. Their relationship over the last five years has produced unforeseen benefits and new dilemmas for both parties.

Background The Webster, New York, Xerox plant houses component manufacturing operations (CMO), which is part of thereprographics manufacturing group of the Xerox Corporation. The CMO plant produces a variety of piece parts and subassemblies that are used in the assembly of Xerox reprographic machines. As of 1987, it employed approximately 150 salaried and 700 hourly people. Employee involvement activities began in the Webster plant in 1980 when problem-solving teams were set up. Union-management relations had always been relatively amicable at this site, and the union and management jointly agreed to sponsor the cooperative activities. In the problem*At Xerox, cost srudy teams are called commodity srudy teams; other companies use other terms.

Xerox and the ACTWU

15

solving teams, hourly employees spent a few hours each week solving problems they defined within their immediate work areas. Discussion was limited, however, to issues outside the collective bargaining agreement and traditional management prerogatives. At the peak of these activities, twenty-six teams involving 19 percent of the work force were successfully solving day-to-day problems. Although some union officials were initially skeptical of the cooperative process, the union became an active partner in employee involvement.

The First CST At the time employee involvement activities were introduced in Webster, management, as part of a continuing effort to cut costs, was conducting a study of CMO commodities to assess their competitiveness with outside vendors. The results showed that Xerox could save $3.2 million by subcontracting some of its wire harness manufacturing. Building wire harnesses is a labor-intensive operation, making it vulnerable to outsourcing to low-wage suppliers. Outsourcing, however, would mean the elimination of the entire wire harness department, totaling 180 jobs. With the help of Peter Lazes, an outside consultant who later became a PEWS staff member, the union formulated a proposal to combat the loss of the wire harness department. It then approached management with a plan to form a joint union-management team to study the costs to produce wire harnesses, with the aim of identifying savings equal to the $3.2 million cost differential. Acceptance of the proposal was risky for both the union and management. It meant that the two groups would take a significant step beyond employee involvement activities and collaborate on a high-stakes project with important consequences for both sides.

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Xerox and the ACTWU

The wire harness conunodity study team became a highprofile experiment in the plant. With the help of the outside consultant, union and management negotiated the ground rules for the team's operation and set up the structures and processes to provide the team with the support it would need to meet its goal. The team was given the authority to examine all costs of production except wages, benefits, and the grievance procedure, leaving it free to investigate new production methods and processes, changes in equipment and material handling, and any other aspects of production that affected costs. A joint union-management steering committee was formed to assist the team in getting information and to advise it on the feasibility of its ideas. A higher-level executive unionmanagement policy conunittee, composed of top union and management representatives, to which the team would ultimately present its cost-saving proposals, was also formed. The next step was a call for volunteers. Of the 180 workers in the wire harness department, 160 submitted their names, and from this pool, team members were selected jointly by union officials and plant management. The plant manager and his staff identified one manager and one industrial engineer; union officials selected six hourly employees, one from each work area of the department. The aim was to construct a group whose members were open-minded, who could work independently or as team players, and who were representative of the department's skills and expertise. Selection was particularly important because the team's ability to reduce costs to a target level would determine the fate of the wire harness department. Under the guidelines set for the CST, the members knew that if they failed to come up with a sufficient plan to reduce costs during the sixmonth period the team would be active, the wire harnesses would be subcontracted out to suppliers and the area's 180 jobs would be lost. Workers from the area would have the chance to be reassigned to other parts of the plant, based

Xerox and the ACTWU

17

on seniority provisions, but there was no job security agreement in place. The eight members selected to form the CST in wire harness were taken off their regular jobs to concentrate on the production problem full time for six months. They began their work with two weeks of training and information sessions designed by the outside consultant and plant employee involvement staff. During this time, members of the team were introduced to basic business functions, given detailed financial information concerning their department, and assisted in developing the problem-solving skills they would need to carry out their tasks. Key resource people in the finance, engineering, and purchasing departments conducted briefings that provided essential information to the team and established contacts that members could draw on later. The department's budgetary process and cost-accounting procedures were explained in depth. The team was also told its cost-saving target or "benchmark." This figure represented the difference between the costs to produce wire harnesses internally and to subcontract them to the company with the lowest bid. Information was even provided on competitors' costs. Further training concentrated on interpersonal and group process skills, provided by Xerox trainers and the outside consultant through team exercises and case studies. Particular attention was paid to problem-solving methods, how to organize thoughts on paper, techniques for making effective presentations, and constructive conflict resolution. The aim of all of these sessions was for the members to create a common set of objectives while strengthening their skills in working together as a team. The team then began the work of identifYing and investigating potential cost-saving areas. Two advisers-a middle-level operations manager and a financial analyst-were assigned to work closely with the team. In addition, a Xerox facilitator and a PEWS consultant helped the team strucUlre its work and obtain needed assistance.

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Xerox and the ACTWU

After a month, the team had targeted twelve areas of concentration: Direct material Space utilization Production standards and methods Quality system Machine depreciation Stabilization of staff Organizational structure Tooling Maintenance Training Indirect labor Allocations The team members divided into smaller groups and began gathering information on each of these areas. They held meetings with employees in their department to get ideas and to keep co-workers up-to-date on team activities. They visited their suppliers' and competitors' operations and several other companies to learn about different production methods. As its work progressed, the team turned to the advisers for help in assessing the feasibility of each idea and its financial, operational, and technical merits. The two advisers, whose experience encompassed quality and production control, finance, accounting, operations, engineering, and related areas, provided a business perspective crucial to the team's success. They met with the team several times a week to work through the more technical aspects of cost-saving ideas, assisting members in determining costs, measuring spending, and preparing financial reports. Internal facilitators worked daily with the team in planning and prioritizing tasks and in communicating its needs to managers and union leaders.

Xerox and the ACTWU

19

Each week, the team reviewed its progress with the steering committee. The steering committee "ran interference" for the team, getting it access to managers and engineers, and provided suggestions and advice on how best to pursue team ideas. At the end of the six months, the wire harness CST had identified twelve ways to save $3.7 million-half a million more than its target. The team's recommendations included purchasing new equipment, redesigning the inventory control system and production flow, and eliminating overhead expenses. The latter proposal was striking in its ramifications for cost accounting in general, for the team proposed eliminating overhead charges not only for training and assistance that the department never received but for services it did receive that the team thought were not worth the cost or that could be provided better from within the department. The team also crossed over into traditional union issues, in that four of the twelve proposals involved changing items in the collective bargaining agreement, such as limitations on bumping and work rules. The union and management representatives who made up the executive policy committee then had to negotiate over which proposals to implement. Unlike the problem-solving teams, whose suggestions usually did not affect either management's or the union's traditional prerogatives, both sides had to examine carefully their usual bargaining positions and decide whether there were areas for cooperation. The policy committee agreed to implement suggestions that did not affect the collective bargaining agreement-the consolidation of jobs, stabilization of staff, tightening of performance standards, and the introduction of operatorperformed repair-and to hold off on the others until contract negotiations in 1983. Ultimately, the team was credited with proposals for savings totaling less than the $3.7 million, but the wire harness department was saved and the 180 jobs remained in-house.

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Xerox and the ACTWU

Another significant achievement was that the study team concept was incorporated into the 1983 contract. Language that limited the company's ability to subcontract was replaced, from 1983 to 1986 and again in the 1986 contract, with a new section on study teams. As the contract states in the section on subcontracting, "When the company determines through such [ongoing cost] analyses that work of satisfactory quality cannot be produced cost-competitively by the Bargaining Unit, the company ... shall establish, in conjunction with the union, appropriate Employee Involvement Study Teams" (agreement between Xerox Corporation and the Xerographic Division of the Amalgamated Clothing and Textile Workers Union, Local 14A, 198689). The section goes on to describe the appropriate actions of the team, including its primary focus of "investigating alternate production methods, processes, equipment, materials, and any other factors which affect internal production costs." As in the case of the wire harness team, the company has the freedom to outsource production if the team is unable to make recommendations that would render production of the commodity under study cost competitive with that of outside vendors. A job security clause was also included as part of the 1983 contract package. For the three-year life of each contract, employees on the payroll as of the beginning of the contract were guaranteed that they would not be laid off, even if a CST failed to meet its target. Instead, employees would be transferred to other departments, based on seniority and job status, where they would maintain their wage rate.

Expansion of the Concept Soon after the 1983 contract was signed, three more areas of CMO-turnings, extrusions, and castings in the fabrication department-were declared uncompetitive and new

21

Xerox and the ACTWV

TABLE 1.1

Comparison of CSTs Identified Savings

Team

Wire Harness Extrusions Turnings Castings

25%

29%

43 44 44

40 39 24

Source: Lazes et al., "Xerox and the ACTWU Use Labor-Management Teams to Remain Competitive," Columbia Journal of World Business (forthcoming). •Percentage reduction in operating costs

teams set up. The new teams operated within the guidelines of the contract agreement on CSTs and followed the same pattern of work as the wire harness team had, but each had its own target and projects to pursue, and the outcomes were mixed. The areas for change on which they focused were somewhat consistent, however; each of the teams made suggestions for changes in standards and methods, materials, overhead allocations, and tooling, for example. As shown in table 1.1, the turnings and extrusions teams came close to meeting their goals; however, the castings team fell significantly short of its benchmark. This was partly because the castings team spent a long time challenging this figure. The cost-saving targets for the three fabrication teams were significantly higher percentages of their departments' operating costs than the target for the wire harness team. The determination of benchmarks created a controversy for the three fabrication teams because both the union and management had criticized the process of assigning dollar values to Xerox manufacturing and suppliers' costs. The most serious problem in constructing the target for a comparison was in getting accurate quotes from other companies that produced the same or similar products. In addition to the initial difficulty of identifying the correct parts and appropriate suppliers, it was hard to know whether volume

22

Xerox and the ACTWU

considerations or "lowballing" by vendors hopeful of future work falsely skewed the bids. For these reasons, and with a healthy skepticism of management's calculations, the CSTs spent some time challenging the target. Castings, which spent a long time disputing these figures, lost valuable time from its pursuit of cost savings. Teams did discover costs to be missing or incorrect in some of the benchmarks, which only confirmed doubts about the accuracy of the targets. A second problem with the benchmarks occurred because they were based in part on foreign exchange rates, which were fluctuating daily. The first wire harness team had been benchmarked only against a United States supplier, but subsequent teams were competing with foreign companies. After several methods were explored, a currency rate based on a five-year average was established for benchmarking purposes.

Implementation of the Changes The wire harness team presented its final report on July l, 1982, but it had to wait until March of the following year for the union and management to negotiate over the proposals that affected the contract. It was the end of 1984, two and a half years after submitting its report, before the last changes were implemented. This delay in implementation was partially the result of management turnover, but the lack of a planned mechanism to ensure that approved suggestions would be put into operation contributed to the problem. The experience with the wire harness team prompted the union and management to alter the way in which CST recommendations would be implemented. Two procedural changes were made: first, a sixty-day response period was established to encourage the executive policy committee to make a timely decision on the team's proposals, and, second,

Xerox and the ACTWU

23

two team representatives, one hourly, one salaried, were selected to oversee the changes that would take place. Although the second step was highly symbolic of the union's and management's commitment to CSTs, these two members represented only two of the three fabrication teams, turnings and extrusions. One outcome was that the proposals made by the castings team were left to be interpreted by the managers, engineers, and two representatives on the policy committee, who had much less understanding of the proposals than the castings team members themselves. None of the three fabrication teams was able to implement all of the cost savings it identified, partly because of high turnover among the managers responsible for implementation.

The Second Wtre Harness Team From 1981, when the first CST was established, to 1986, Xerox increased its emphasis corporatewide on quality and employee involvement. The CMO plant built on its experience with CSTs and made substantial changes in the operation of the plant. Along with a plantwide just-in-time inventory system, some departments installed new manufacturing processes and technology, making CMO one of the most productive operations in Webster. Today, several forms of employee involvement are in use. Some areas still have problem-solving teams, a few areas have self-managing work groups, and all departments are organized into business area work groups (BAWGS), which provide employees with business and operational information for purposes of coordination and problem solving. As an early example of employee involvement, cost study teams helped to lay the groundwork for these activities by demonstrating that a more intensive form of union-management effort could produce beneficial results. The 1986 contract reflected this commitment; included were an extension of the job security

24

Xerox and the ACTWU

clause for another three years and an agreement to explore and develop new experiments in employee involvement. Also during the 1980s, a general downsizing of the Xerox work force, both salaried and hourly, occurred, largely through attrition. The work force of CMO shrank by nearly one-third from 1978 to 1985. Xerox continued corporatewide cost-cutting efforts and began diversifying its operations. Outsourcing of product components became one of the major strategies for reducing costs, and Xerox began to compare its own in-plant costs with those of low-cost vendors abroad. Such "competitive benchmarking," as it is called, was both a way to monitor the competitiveness of production costs at Xerox plants and to find new producers for outsourcing. Although CSTs were an effective means of identifying and implementing cost savings at a given point in time (i.e., when a lower-cost vendor had been found), no process had ever been established at the departmental level to make ongoing cost comparisons. When management announced in 1986 that the wire harness department was again no longer competitive, the reaction among the employees was one of shock and disappointment. The original wire harness CST had been benchmarked against United States competitors and had succeeded in beating their costs. This time, management had found a Mexican vendor that was 43 percent cheaper than Xerox. The contractual agreement calling for the formation of a CST in such a situation was activated, and the work force was told that a study team was necessary. The work force was not told the enormity of the task, however. When volunteers for a second study team were solicited, the response of the work force was twofold. People felt alternately that management was using the threat of outsourcing and the CST process just to lower costs, or that the decision to outsource had already been made and that

Xerox and the ACTWU

25

management was activating the CST only as a formality, because of the contractual agreement. Many workers also felt that they had already made work rule concessions to save money in the department and that management had mismanaged by allowing its costs to get so out of line with those of competitors. All felt the task was next to impossible. The first team had already cut overhead costs and given operators more tasks to do to eliminate unnecessary positions. The production system had been altered to produce maximum quality at maximum efficiency. People were working harder than ever before and producing higher-quality work. There were few cost-saving ideas that had not been considered. Furthermore, because of the job security provision in the contract, some workers felt they had little motivation to search for cheaper ways to work. They knew that they would be moved to other areas of the plant even if the decision was to outsource production. Nonetheless, workers volunteered for the team. As before, they were interviewed by the union and management. An effort was made this time to recruit people from the first team to take advantage of their experience Management selected two salaried workers who had been on the first team, and the union selected four hourlies from the first team and two other new members. The final eight-member team had two new and six old members. Two technical advisers were assigned to assist the team, one from finance and one an operations manager. The facilitator for the team, a plant employee involvement coordinator, had worked with several other CSTs. The team was given four months to complete its task, with the option of a one-month extension. The team had a rocky start; not only were the members dismayed by the enormity of the task before them, but they received little support from their co-workers. For the reasons described above, the team felt they were not well accepted, making it difficult to get ideas from the floor. Some of the

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Xerox and the ACTWU

workers in the department felt that "if we're so uncompetitive, why are we taking six people off the floor to work on the team?" Members of the team spent their first week in training, reviewing the problem-solving and group process skills that all employees had learned as part of Xerox's quality improvement process. They also received information from finance and operations about their department and about the outside Mexican vendor's bid. They were presented with their benchmark and some ideas about which areas of the operation could produce the largest cost savings. Because CSTs had been used several times before, systems were in place that aided the team's work. A standard costaccounting procedure had been formulated for CSTs, an avarage currency exchange rate had been established, the steering committee was available to guide the team, and formats and guidelines for presentations had been worked out. During the first phase of the team's research, members studied their benchmark and negotiated some changes in it. Next, they sent a letter to Xerox management worldwide explaining their task and asking for suggestions. This effort, as well as attempts to solicit feedback from their co-workers, produced very few ideas. The team then delineated its areas of concentration. Several members visited equipment vendors in Europe and the United States and competitors in the United States and Mexico. As a result of their visit to the Mexican vendor and an examination of its bid for wire harness work, they began to question the criteria on which their benchmark had been formulated. Knowing that it was impossible for the wire harness department to compete with a Mexican vendor simply on the basis of cost, they compared themselves on the basis of quality. They found that Xerox's quality was far superior to that of the outside vendor-Xerox had thirtysix times fewer defects per million parts-although the outside vendor was still within Xerox quality standards. The

Xerox and the ACTWU

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vendor's bid appeared to be artificially low, however, and to lack the costs associated with bringing its product up to CMO quality; thus one of the team's major projects became computing the cost of quality. Likewise, the vendor could not provide just-in-time delivery to assembly plants in Webster; hence, the team set out to identify the costs incurred in warehousing and distributing parts from Mexico. Like the previous teams, the second wire harness team worked closely with its two internal advisers and with the steering committee. Compared with the first wire harness CST, however, team members felt somewhat hampered in their efforts to get information, especially technical resources, and to gain access to managers. The team atttibuted these problems partly to the fact that the CST was no longer a new and untried concept and less attention was therefore being paid to the teams. Top management had also changed since the first team had been formed, and the idea of establishing new bonds with the union through mechanisms such as a CST was not receiving as much emphasis. Some workers sensed that a decision to outsource had already been made or that the cost gap between the wire harness department and the Mexican vendor was so wide that it could not be bridged. After five months of pursuing cost-saving ideas, the team had a list of proposals to present to the executive policy committee. The proposals were in the following areas: Job classifications New equipment Layout changes Purchasing of raw materials Reduced management Gainsharing New location Cost of quality Supervisory role changes

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Xerox and the ACTWU

The gainsharing proposal did not have a specific cost attached to it but was included as a strong request to investigate the possibility of gainsharing. The proposal to move to a new location was an attempt to show that the wire harness department was burdened with overhead costs that were preventing it from competing with outside vendors. The team felt that if management wanted wire harness to compete with an outside vendor, then the department had to be treated like one. The team selected a building close to the CMO plant and computed the cost savings of moving to the building and operating wire harness as a vendor to Xerox. Their final cost-saving package came in l percent below the benchmark. The executive policy committee disallowed l l percent of the team's cost savings by throwing out three of the proposals and scaling down the savings on others. The proposal to move to a new location and operate like a vendor was turned down as unfeasible, as was a proposal to combine supervisory and engineering duties into a new position, thus reducing the number of supervisors. The cost-of-quality issue raised a debate that resulted in negotiations between the union and management representatives on the committee that went beyond the proposals suggested by the team. Although the Mexican vendor was within Xerox quality specifications, the members of the executive committee and of the CST agreed that the quality was higher in CMO than in the vendor plant in Mexico. Nonetheless, some management representatives who were familiar with the Mexican vendor argued that its quality could be raised to CMO levels at little cost. The union argued that just-in-time delivery requirements could not be met or quality requirements maintained without a substantial change in costs. At one point in the negotiations, management gave the union two options: take a 50 percent wage cut to make CMO workers

Xerox and the ACTWU

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competitive with Mexican workers or take the risk of bidding on new products to keep jobs in the plant. The final decision was to keep all current work in-house but to make any new work part of a competitive bidding process. A union representative is now part of a team that is given the opportunity to be the final bidder on any new work; if the wire harness department can come within 5 percent of the lowest bid, it wins the work. So far, the department has won 50 percent of the volume on a new program but has been unable to compete with bids on some other projects. The CST will stay in place for the indefinite future, working a few hours a week implementing its recommendations and developing new proposals for cost savings. Ultimately, these duties will be taken over by a business area work group, as has already occurred in the turnings area, where the BAWG does ongoing studies to prevent turnings from becoming uncompetitive. One of the most important outcomes of the 1986 CST experience is that Xerox management has set up a process to track both internal costs and those of outside vendors to see whether the cost savings of sending work out are as attractive long term as they appear to be. The aim is to avoid another situation like the one that occurred in the wire harness department, where the costs were allowed to get substantially out of line with those of the competition. As one union member put it, "How many times can you go back to the well?"

Effects on the Company and Union Four of the five CSTs described above either met or came close to meeting their targets. Although not all of the teams' suggestions were fully implemented, millions of dollars of

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Xerox and the ACTWU

cost savings were docwnented. Furthermore, even when teams did not meet their targets, the costs associated with shutting down part of the CMO plant and shifting work to outside vendors were such that it made economic sense to accept the recommendations of the CSTs and keep the departments operating. Management and the union both recognize, however, that changes in technology will eventually phase out some commodities. Wire harnesses, for example, will at some point be replaced by fiberoptics. Xerox has changed its production strategies over the years, in response to competition. Like many other large manufacturers, Xerox is now looking for suppliers, internally or externally, that can keep costs low. Although Xerox has been successful in regaining some of its market share, cost pressures have not abated. The competition has only gotten tougher. Xerox must be able to compete on a cost basis or it will lose its market share again. Through the use of CSTs, Xerox management has gained access to an infinite pool of expertise and creativity within its work force. It has gained several million dollars worth of cost-saving ideas that no management or consulting team was able to find. And, in building a stronger relationship with the union, management has been able to bargain successfully for flexibility in benefit packages, policies on absenteeism, and other issues. Management has also gained an appreciation of the skills and aptitudes of the hourly work force. As a result, workers have been involved in the design of a new plant in Webster and in new product development. The CST process has been championed by the union at Xerox, which bargained to have it included in the collective bargaining agreement and has supported the concept since it was introduced. Its very existence, however, is problematic for the union, which has had to pit its members against outside shops, some nonunion, with lower wages, risking the jobs of its members if the CST fails. As one union member commented, "For management, the CST is a win-

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win proposition, but for the union, it is a win-lose situation." While the ACTWU has been largely successful in keeping higher seniority jobs at CMO through the use of CSTs, plant employment has fallen because of attrition. In each crisis, the union has had to react by mobilizing a CST to prevent further long-term job loss. It was not until the 1986 agreement on bidding for new work that the union could be proactive in securing new employment at the plant. Through CSTs, the union has gained more influence over management's operational decisions, specifically by negotiating over the cost-saving proposals of the team. More involvement by hourlies in monitoring internal costs and the costs of vendors has given the union more input into the decision to outsource. Instead of having to react to the news that management has found a lower-priced vendor, the union and management will now evaluate outside and inside costs continually, including quality and delivery considerations, based on data collected over time. The union is attentive to the risks associated with CSTs. Given a new opportunity to question the company's operation, team members have begun to challenge generic work rules and practices. The final recommendations made by the first wire harness team included, for example, proposals to consolidate jobs, create separate lines of promotion within the department, and increase the use of temporary employees during heavy work periods. The second wire harness team not only presented gainsharing as an issue, one that neither the union nor management generally favors, but it suggested that the department move out of Xerox facilities altogether. Rather than attacking these recommendations, which were inconsistent with traditional union practices, the union instead considered them viable alternatives worthy of discussion at the bargaining table. The union has thus responded to the desire of union members for more input into operational decisions by negotiating for increased control over outsourcing decisions.

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Xerox and the ACTWU

The union's greatest concern may well be how to sustain this cooperative union-management relationship for the long term in the face of management turnover and corporate changes in direction. High turnover in management at CMO, especially at the top, means that the union has to provide most of the continuity for joint union-management efforts. Xerox as a corporation is now looking worldwide for its parts, so the threat of outsourcing will not abate. The CSTs have shown that Xerox departments can manufacture similar, if not better, products internally, with higher quality and more efficient delivery. Despite the risks, CSTs, and other forms of employee involvement at Xerox, have resulted in substantial gains for workers. Bargaining unit employment has been rising since 1985, increasing by approximately 23 percent as of July 1988. For the CSTs to be successful, however, there must be a solid ongoing commitment from management and trust between the two parties. Otherwise, CSTs will be only a stop-gap measure, delaying the inevitable.

2 Harrison Radiator

and the UAW rom 1978 to 1986, General Motors' share of automobile F sales in the United States-including foreign cars sold here-plummeted from 48 to 41 percent. Profits had dropped way off by 1981, and although they were climbing again by 1984, they were, for the first time, not keeping pace with GM's major United States competitor, Ford Motor Company. By 1984, GM management had begun a major campaign to reduce costs in all areas of operation. At Harrison Radiator, a division of General Motors in Lockport, New York, managers were instructed to examine all means to trim operations. In the distribution center alone, the number of salaried personnel was reduced by 39 percent, from twentysix to sixteen. As part of the effort to cut costs, management in the materials area at Harrison sought an outside bid for warehousing operations. The contractor, Autocon, offered to build a facility next to the Harrison plant and to warehouse

34

Harrison Radiator and the UA W

materials for $1.2 million less each year than Harrison was spending. The annual savings represented approximately 13 percent of the operating budget for the Harrison distribution center. Furthermore, outsourcing would make room for other needs at Harrison: light assembly, office space, and room for the engineering staff, who would be homeless once an older Harrison facility in downtown Lockport was closed, according to plan. On the one hand, the managers at Harrison recognized that outsourcing would shed an operation that provided little added value to their product, save $1.2 million in the first year, and create needed space for consolidation. On the other hand, although they did not say so at the time, the managers said later that their preference was to make the in-house operation more efficient and keep the work. They recognized the value of maintaining established internal customer relations, the risks to the operation while Autocon would be building, and the importance of two hundred jobs to the Lockport community. None of this, however, prevented management from presenting the bid as an ultimatum to the officers of Local 686 of the United Auto Workers. Initially, the shop committee was shocked by management's announcement of the bid. Other responses followed traditional adversarial labor relations lines. When management countered with a proposal to the shop committee to save the $1.2 million by cutting thirty-five jobs in the distribution center, one committee member said that the bid was just "another management blackmail tactic" to cut jobs. It was business as usual as far as the union was concerned: the union had not been consulted about how to improve the efficiency of the distribution center before the bid from Autocon was received. Harrison management believed, however, that by notifying the union and not invoking the contractual sixty-day countdown before actually outsourc-

Hamson Radiator and the VA W

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ing the work,* the union had indeed been asked to play a role in the decision to outsource. It took weeks of vigorous discussion before Local 686 and Harrison management agreed to a process by which union members would investigate savings in an effort to match or better Autocon's bid. The process they agreed to was a variation of the cost study team strategy. Although there was some precedent at Harrison for joint efforts to save jobs, this was the first time that a team was created for the sole purpose of identifying cost savings. The story of the development of the cost study team at Harrison demonstrates that CSTs can be effective even when there is little initial understanding between labor and management and when past experience makes it difficult for these parties to reach agreement outside formal negotiations. What the numbers and records do not reveal is that development of the team was possible because of the tireless efforts of individuals on both sides of the table who were determined to avoid the seemingly inevitable consequences of economic downturn.

Background The Harrison Radiator Division of General Motors employs more than six thousand hourly workers and close to one thousand salaried employees. Harrison is the world's largest *Under the 1984 agreement between General Motors and the United Auto Workers, the company was required to give notice to the union sixty days before work would be outsourced. Once the notice was given, the union had thirty days to "make proposals, which could include any changes in work practices, improvements in local operations or local deviation from the National Agreement that will make it feasible for Management to continue to produce without being economically disadvantaged." Harrison management has never invoked this clause.

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Harrison Radiator and the VA W

manufacturer of air-conditioning components and heattransfer devices, which it produces for automotive companies, primarily General Motors. In addition to the Lockport facility, Harrison has plants and affiliates in other locations in the United States and in France and Latin America. Local managers say that if Harrison were compared as an independent entity with the Fortune 500, the company would be in the top one-third. When all General Motors parts operations were evaluated in 1986 for business viability, Harrison was rated "green"-profitable and efficient. Harrison has an eighty-year history in Lockport, making it a significant force in the community. Until about fifteen years ago, the managers were local people, many of whom had worked their ways up through the ranks. Graduates of Lockport high schools knew they could get jobs at the plant. This is no longer true. In spite of Harrison's success, the company has had to respond to the more general difficulties of the parent company and is no longer hiring. Labor relations at Harrison followed traditional patterns until 1980. In that year, following up on the 1973 United Auto Workers-GM national agreement to explore means to improve the quality of work life (QWL), union leaders and management spent two days off-site developing a joint statement of commitment. QWL training began in earnest in 1981; since then, more than two thousand people have been trained in areas ranging from basic education to problem-solving techniques. Most of these people have spent at least forty hours in training. Today, union members refer to some of their peers as "traditional," leaving no doubt that QWL has had an impact at Harrison.

Employee Involvement Even before the Autocon bid, structures had existed at Harrison for employees to provide ideas of ways to improve

Harrison Radiator and the UA W

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operations. In addition to a traditional suggestion system, employee involvement teams had been in place at the plant since the early days of QWL. These teams met once a week to solve problems they identified. Under Harrison's suggestion system, rewards of 20 percent of the net savings for one year, up to $20,000, are available for suggestions made by hourly and salaried employees. Suggestions are reviewed and accepted or rejected at the supervisory level. If a suggestion is rejected, an employee has the option of taking it higher, but apparently this is seldom done. Work teams, called operating teams at Harrison, were introduced in 1984 as a way to give workers greater authority and responsibility for their work. The teams are consistent with a new managerial approach that calls for team management throughout the Harrison operation, from the top ranks to the shop floor. Operating teams are established on a voluntary basis. A department is provided with team training, but whether teams will be formed is up to the members of the department. In most settings outside of Harrison, the designation of work teams implies crosstraining and a reduction in the number of job classifications. At Harrison, members of operating teams have traditional classifications except in a few departments where new classifications have been bargained to get new work or keep work. All members of the operating teams, including supervisors, are trained in the areas of cost, quality, and problem solving. Although supervisors in operating teams are in charge of matters such as housekeeping and discipline, they trade the role of "boss" for that of resource person to the team. Some operating teams work without supervisors altogether. At the time the Autocon bid was announced, the distribution center had three operating teams, involving almost one-third of the work force. One of these teams, rack repair, had restructured its work for greater efficiency, initiated

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Harrison Radiator and the VA W

several changes that saved substantial amounts of money, and bid successfully on work previously done outside the plant.

Prior Joint Efforts to Improve Operations Although operating teams at Harrison perform the routine functions of production, in three instances before the Autocon bid, they had been enlisted to develop cost efficiencies so that a portion of the business could be kept in-house. Although these teams had not been formed solely to identify cost savings, their experiences contributed to the union leadership's reluctance to agree to form a union-management team in response to the Autocon bid. Harrison's first experience with operating teams was in an unusual department, 465, a low-volume job shop that made aluminum air coolers for the defense department. The volume was low for any given model of air cooler, the process was complex, and both cost and quality were serious problems. Even when workers took the utmost care, it was possible to lose a unit at the last step of the process because of the porosity of the aluminum used. Overhead costs were particularly high, and reductions in the work force to tighten up the operation had increased the percentage of overhead costs even more. The team approach was introduced in department 465 in 1981 as a last-ditch effort to see whether costs could be reduced. Some union leaders now believe that management had already decided to close the department when the teams were introduced. Some workers saw the formation of the teams as a management move to ensure that a bank of products would be available before closing. The teams in 465 were told they had six months to tum the department

Harrison Radiator and the VA W

39

around, but it was closed after two months, because it was too costly to operate. This experience fostered widespread bitterness and skepticism about management. The union members who were involved in the teams were, in their words, devastated when the department was closed. They remain proud to have participated in the effort to save it, however, and, in spite of the outcome, several people have said that they would work in teams again to try to save their jobs. A second effort to save a product through the use of employee involvement met a fate similar to that of 465. In the early 1980s, labor and management made a concerted effort to reduce the cost of the thermostat being produced to make it price competitive. They succeeded in reducing the cost of the thermostat, but the department was unable to reach the level of profitability Harrison required to keep it open. Managers focus on the spirit of the team in the thermostat department. Union leaders use it as an example to explain their uncertainty about whether operations can be saved even if costs can be reduced. A third team effort that is often mentioned in the context of insourcing-outsourcing discussions calls itself Win-One. Win-One is composed of almost half the people in a department that makes medium-duty radiators. They became an employee involvement team in 1981, early in the history of employee participation at Harrison and long before their product was threatened with outsourcing. In 1984, the department took the opportunity provided by a lull in work to undergo the week-long training to become an operating team. By this time the team had a facilitator and a product coordinator, the latter, a supervisor in a new role, the former, a UAW officer chosen by his fellow team members to lead the team. In 1986, GM's Truck and Bus Division issued a sixtyday notice on its product that used the medium-duty radiator. The team went into high gear and even brought all

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Harrison Radiator and the UA W

the nonteam members in the department in on their efforts. They collected $200,000 worth of cost-saving ideas, identified $100,000 in overhead costs that they successfully argued did not belong on their books, and succeeded in winning the contract from the Truck and Bus Division for one year. Win-One continues to make copper and brass radiators while there are orders, but the team is also involved in developing an aluminum radiator that the department hopes will be the radiator of the future. The leaders of the team are realistic about the future; they hope to survive by servicing the radiators they once made until they get new business. The position is not one the people in the department would have chosen, but they are fully engaged in the business of keeping Harrison competitive.

Hog's Helpers Although there are more than twenty-eight operating teams in Harrison's Lockport plant, less than a handful were functioning in the distribution center when the proposal to outsource the operation was made. There was thus no institutional structure in place for the union and management to deal jointly with the threat. The suggestion to form a CST was first made by the manager of the distribution center. Given the failure of the rescue operation in department 465, the union leadership was extremely wary of management requests for help from the work force when jobs were at stake. The initial response of the union leadership was to ignore the suggestion altogether. When the threat of a sixty-day notice was made, however, the shop committee felt it had no choice but to see what the people in the distribution center wanted to do. The shop committee got permission from the workers in the center to set up a team. Their distrust of management was so great at this point, however, that they insisted that

Harrison Radiator and the VA W

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the group be made up of hourly employees only. Management's role would be to provide support in the form of cost and engineering information. In an effort to deal with the political problems inherent in the situation, the union leadership insisted that the team be established democratically. First, the union sought permission from the work force in the distribution center to create the team; second, the union sought volunteer team members. A flier was posted throughout the center with the aim of recruiting two people from each of the nine departments. The selection method was left up to each department and, in the end, some members of "Hog's Helpers" were elected and some appointed. In industrial terms, a hogger is a huge machine that "eats," shreds, and compacts corrugated material. There is a hogger in the distribution center that has functioned over the years to get rid of used packing materials. In Harrison, where nicknaming is part of the culture, the manager of the distribution center is known to everyone as "Boss Hog." Given the distrust and animosity that surrounded the establishment of the CST in the distribution center, the name "Hog's Helpers" is somewhat ironic. Once formed, the cost study team agreed on a process that was, in effect, a screening system for ideas: all employees in the center were asked for suggestions; at the same time, representatives solicited ideas from workers in their own areas. Although the team members had no specific training for their task, all but two of the members had participated in the forty-hour QWL training that included problem solving and exercises in working in teams. When management agreed to the formation of Hog's Helpers as an union-only team, it made a commitment to provide management resources. Managers in engineering, finance, planning, and plant engineering instructed staff to give Hog's Helpers what it needed. The UAW QWL coordinator took on the role of internal consultant, mediating

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Harrison Radiator and the UA W

between management and the union for consensus on process and expectations. In the view of the union members involved, he also pushed the departments that had needed information to provide it. Although a facilitator was not appointed, an experienced union leader acted as one. The agreement to form a team did not include explicit guidelines about its performance, and supervisors, all of whom had been excluded from the team, were ambivalent about the time the team required to complete its tasks. Hog's Helpers planned to meet for one hour daily and in fact did so for a week or so until supervisors expressed disapproval. After the first week, the team met every Monday to set goals for the week and on Friday to assess its progress. Of eighteen members, twelve attended regularly. Some supervisors were pleased that those workers who did not attend meetings "put their jobs first." At the same time, management provided information and the informal assistance of the general supervisor, a universally trusted figure in the distribution center. At the end of three weeks the team had a list of twentyfive ways to save costs. Workers have noted that some of these ideas had been submitted and rejected as formal suggestions in the past. Managers confirm that one of the significant ideas had been in the suggestion system but point out that new circumstances or technology often make a suggestion acceptable that was previously rejected. With the $1.206 million Autocon proposed to save Harrison in the first year as its benchmark, the team organized the list of suggestions in order of amount to be saved and agreed to submit to management only the top three, which added up to a savings of $1.225 million. The team held onto the other suggestions "until we saw how faithful management would be." The first of the three cost-saving ideas, worth $650,510, was to reduce the department by nineteen people. Management had already planned this cutback, and

Harrison Radiator and the UA W

43

although it represented a good portion of the savings, the union disclaims responsibility for it. It appears as if the union knew these jobs were slated to go and, in the face of the Autocon bid, tacitly agreed not to grieve. The second idea was to salvage dunnage, the corrugated packing materials that are used to protect products, at a projected savings of $495,000. Materials costs, in fact, were a good target in that they were 46 percent of the distribution center's total budget. In contrast, labor costs were 18 percent. The third proposal was to redesign a shipping container to hold more product, at a savings of $80,000. The savings from these three items alone projected over five years were $2.5 million per year by the third year if an additional suggestion for a three-person salvage operation for dunnage materials was accepted. The latter was in fact rejected, so the operational figure remained $1.2 million.

Results The short-term positive results of the work of Hog's Helpers were evident almost immediately. The potential savings were presented to management in mid-October 1986. On October 30, management called a meeting in the distribution center cafeteria and, with no prior hint, announced its decision to keep the distribution center in-house. This meeting was both an unexpected and extraordinary emotional experience for the members of the team. Finally, hourly employees had been heard. Whereas implementation of CST recommendations is sometimes a problem, in this case management's decision to keep the distribution center in-house carried with it the authority to implement the team's proposals immediately. Implementation was the responsibility of the team. The internal consultant and the facilitator played a legitimating

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Harrison Radiator and the UA W

role in this process; no commitments were to be forgotten. In the first eight weeks after the CST presented its findings to management, $320,571.99 were saved. By July 20, 1987, nine months after the suggestions had been accepted, the target had been surpassed; $1,207,290.53 had been saved. In spite of continued uncertainties about the future, union leaders spoke of their tremendous sense of accomplishment at having saved so much money. Managers estimate that it would have taken eighteen months to two years to realize any savings from outsourcing to Autocon. Thus the team actually saved management considerably more than Autocon would have. Harrison budget analysts estimate that $890,000 have been cut from overhead alone. This includes savings resulting from energy conservation, as well as projected savings in employees' salaries and benefits. Because of the experience in department 465, the union, before agreeing to form the study team, had asked management to guarantee in a contract that if the CST met its target, the distribution center would be kept in-house for five years. If management was willing to give Autocon a five-year contract, the union argued, then it should be willing to give one to the union. The subject was raised again in a meeting after management decided to keep the distribution center in-house. Management's response was that if Autocon failed to perform the work for the money promised, it would have to absorb the difference. The union could have a contract that took on the same burden. The union leadership read this response as meaning it had no contract. In a second request, focusing on the long term, the union asked to have some of the money that was saved put back into the distribution center. This request has been honored; an automated service packaging machine, costing $600,000, has been installed. Although this move demonstrates commitment to an in-house distribution center, it means that ultimately a few more jobs will be lost.

Harrison Radiator and the UA W

45

Long-Tenn Prospects for the Center Some people at Harrison have raised serious questions about the long-term accomplishments of Hog's Helpers. It is common knowledge that in five years Harrison products will be shipped in plastic packs. The steel racks that stack four or five high in acrewide spaces inside and outside the distribution center will be obsolete. They will not be packed with dunnage, and they will not require repair. There will be no dunnage. Fifteen years ago, Harrison, and many other companies, built large and efficient warehouses to store and ship their products. At Harrison, the distribution center that resulted is impressive: rail cars, as many as forty, run through the center and are loaded and unloaded daily. Conveyorized carts bearing racks are directed by remote control on tracks to various locations within the center. Recently, however, the trend has shifted to minimal handling of product. Just-in-time delivery suggests that products should be shipped from a point very close to production, as, ironically, Harrison products once were. The distribution center may have been saved, but its function will have to change. It is in the nature of cost study tean1s that they are set up to deal with an imminent threat to an operation. Unless external trends change dramatically, the threat does not usually disappear, and it may even get more serious. Are cost study teams, then, only exercises in futility, or do they buy critical time that enables an operation to regroup? Clearly, Hog's Helpers must struggle with this issue. Team members recognize, as do most people in the distribution center, that it is not enough to have reached this year's target. They see themselves as an ongoing force in redefining the future of the distribution center. Hence, they have chosen to establish targets for future years and to look for a product to build that needs space.

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Future of Hog's Helpers Hog's Helpers has taken steps to affect the long-term future of Harrison, as well as the short. Soon after management decided to keep the work in-house, the team made two strategic moves that may have served to institutionalize it as a standing committee: it added a management representative to the team, and it agreed to begin implementing the remaining twenty-three cost-saving suggestions. The manager who was added is an even-handed general supervisor, a local person who has spent a long time in the plant and has earned the trust of both labor and management. Implementation of the remaining suggestions contributed to the team's early achievement of its target figure. It has also given the team a reason to continue. The team now has several goals, which it developed after spending a day off-site: To preserve the work environment To seek a long-term commitment from management to the distribution center To look for a product to build that needs more space To investigate cost-saving projects-regardless of how the space will be used To establish a financial target for 1988 To conserve energy To review projects of operating teams for their usefulness to the CST Hog's Helpers was an ad hoc remedy to an immediate crisis, but its subsequent long-term planning suggests a different kind of effort. If Harrison follows GM's lead and moves toward instituting a team structure throughout the organization, then responsibility for cost efficiency and productivity gains will rest with department operating teams, as it does for Win-One. The role of CSTs in such an en-

Harrison Radiator and the UA W

47

vironment is not clear. If costs are reviewed and analyzed regularly, it is possible that single-issue CSTs will not be necessary. The goals Hog's Helpers set may have direct bearing on the future of the distribution center. The team may develop a niche as a labor-management group charged with planning for the distribution center, a group whose emphasis is long range (detached from the current business in the building) and that can work on the details of business planning. If this happens, it may be possible for Hog's Helpers to be institutionalized as an ongoing cost study team and for the team to work continually to save jobs.

Indirect Results The formation of cost study teams sometimes results in indirect changes in the labor relations environment of an organization. If the level of trust between the union and management changes at Harrison as a result of Hog's Helpers' work, the team could have a long-term effect on other cooperative efforts. Managers at Harrison above supervisory level have reported a change in the environment of the distribution center. They note that labor and management have gone "from jointness to mutuality'' and that the work force is more willing to talk about issues. The development of operating teams suggests to some managers that the union-management relationship has improved. Concern has also been expressed, however, that the union and management throughout Harrison need to work jointly on a continual basis, not just during crises. Some union members are not convinced that these positive changes have occurred. At a meeting to announce that the center had surpassed its target in only nine months, union leaders stated that unless other changes were made

48

Hamson Radiator and the UAW

in the distribution center, there would be no lasting positive effects. In the union leaders' view, supervisors, who were not involved in the CST process at all, were still distrustful of hourly employees. In spite of the acceptance by upper-level managers of employees' ideas for saving money, some workers feel that decision making by employees is neither encouraged nor recognized. They feel that lower-level managers do not support efforts at participative management with the same enthusiasm as do upper-level managers and cite as evidence the attitude of lower-level managers that members of Hog's Helpers were not really working when they were involved in team-related activities. Supervisors in the distribution center openly admit to feeling squeezed. On the one hand, they need to keep to production schedules; on the other, their workers expect to participate in QWL efforts. Initially, management had asked to include supervisors in the study team, but union leaders dearly did not want supervisors involved. After the CST was formed, upper-level management continued to feel that it was a mistake not to include supervisors. Supervisors feel positively about the results of Hog's Helpers, but without a doubt the supervisors were the forgotten group in this effort. Had they been brought in early on, they might have provided more support for the CST process. In spite of skepticism by the union, the members of Hog's Helpers speak of the tremendous emotional impact they experienced when management decided to implement the savings the team identified and to keep the distribution center in-house. This experience may lead to changes in the perceptions and behaviors of individual workers and contribute to organizational change. Two significant developments have accompanied the success of Hog's Helpers. First, the business operating team has been expanded in the distribution center to include shop-

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floor employees. Originally, the team included the senior administrator of the distribution center, his next in command, and a labor relations, traffic, financial, engineering, and packaging manager. Early in 1987, three hourly representatives and a supervisor were added. This was an important change both structurally and symbolically. To the extent that the business team actually makes business decisions, this move has opened the way for ongoing joint decision making. Second, the department 745 operating team has bid successfully on work not only for customers within the Harrison complex but outside the distribution center and has convinced management of its potential to act as an internal job shop. There is, of course, no way to know whether the development of this team and management's respect for its efforts are related to the successful completion by Hog's Helpers of its initial tasks. Neither of these changes was a direct result of the success of Hog's Helpers. Nonetheless, it is worth speculating that they were fostered by the increased confidence of the union people in the strength of their abilities and in the likelihood that they would be heard and by the increased recognition by management of the potential of Harrison's employees. Despite the uncertainty about the future of the distribution center, Hog's Helpers has added legitimacy to joint labor-management efforts at Harrison and has given both these groups a positive experience on which to build. It will be harder in the future for management to make decisions about the distribution center behind closed doors and, because of their shared knowledge, harder for the union to claim that management's numbers are wrong. For now, there is the foundation-tentative though it may be-for joint planning regarding the work to be done and how it will be allocated. Whether there will be an opportunity to build on that foundation is a different but important question. Members

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of the shop committee and Harrison workers on the shop floor have the strong sense that control of critical business decisions resides with GM and is out of the hands of Harrison's managers. They ask whether, under these circumstances, it is ethical for Harrison to recruit employees for cost study teams. Harrison managers insist emphatically that insourcing and outsourcing decisions are made at Harrison. If this is the case, then there will be significant opportunities for joint labor-management efforts to shape the future of the Harrison plant.

3 Trico Products Corporation and

theUAW

1979, Trico Products Corporation began to experience I na serious economic downturn. a supplier of windshield As

wipers to the automotive industry, Trico was directly affected by the drop in car sales caused by competition from foreign imports and the oil crisis. After considering a variety of strategies for survival, Trico announced in November 1985 that a large part of the Buffalo operations would be closed. In a letter to all Trico employees, the president of the company stated that "while we found it impossible to develop a plan to assure all current employees continued employment in our Buffalo operation, we believe the alternative we are recommending represents the very best op-

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portunity to preserve the greatest number of jobs and to assure this company's future." The plan was to move the bulk of Buffalo's production to Brownsville, Texas, and Matamoros, Mexico, in a maquiladora arrangement in which most of the unskilled work, including assembly, would be done in Mexico and the more skilled work would be done in Texas. The move would mean the loss of 1,300 jobs in Buffalo. Of the remaining 1,100 jobs, approximately 500 would be held by salaried employees, outside the bargaining unit. In a city already hard-hit by economic depression, this announcement foretold another in a long line of job losses in manufacturing. The community, however, did not accept the Trico move as inevitable. A concerted effort by union and community leaders and New York State officials led to a long and intense process aimed at avoiding the shutdown. Through negotiations between Local 2100 of the United Auto Workers, the management at Trico, and the state, two union-management cost study teams were established to find ways to cut costs and save the jobs. A third study team was established by the union and outside experts, who together researched the feasibility of building a new, integrated manufacturing facility in Buffalo. The effort to save jobs took almost nine months from the time negotiations to establish joint labor-management cost study teams were initiated until the groups presented their final reports in the fall of 1986. The most tangible outcome of the effort was the effect it had on subsequent contract negotiations: three hundred of the jobs that were to be moved to Texas and Mexico remained in Buffalo, and a strong severance package for laid-off workers was agreed to. The teams also affected the future relationship of labor and management at Trico, producing new understandings and plans, including a reactivation of a labor-management committee.

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Background Trico Products Corporation is the largest manufacturer of windshield wiper systems for cars and trucks in the world. It has production facilities in Great Britain, Australia, and Buffalo. Sales to auto and truck original equipment manufacturers (OEMs) have historically accounted for about two-thirds of Trico's sales; thus the well-being of Trico is directly affected by the number of cars sold by the "big three" and by Trico's ability to obtain contracts with these firms. Trico has been in Buffalo since 1917, when it was founded by the inventor of the windshield wiper, and the inventor's family is still the largest stockholder in the publicly owned company. Many of the other stockholders are Buffalo residents, and the board of directors reflects this local ownership. Trico's Buffalo operations are housed throughout the city in three multistory factories built in the 1920s and 1930s, the newest portions of which are twenty years old. In 1986, Trico employed 2,600 people, 2,100 of whom were hourly workers. The remaining 500 employees were engineers, managers, and clerical employees. The UAW replaced an independent union in a representation election in 1977, and in 1979 it signed its first contract with Trico. After many years of operating profitably, Trico began suffering losses in 1979, and over the next four years it lost nearly $28 million. Management called in a consulting firm in the early 1980s to study operations and advise the company on strategies for the future. The report proposed that Trico reduce its exclusive dependence on windshield wipers and become a general manufacturer of auto parts. Trico was strong in engineering and design capability, but to expand its product line would require the use of CAD/CAM (computer-aided design/computer-aided manufacturing) in pro-

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duction. Under this system, the toolroom, where machine tools and dies for operations are made and repaired, would be an important link between CAD and CAM. Management visited toolrooms in other companies and developed plans for strengthening this part of its operation. During this period, the auto companies were mounting intense pressure on their suppliers, including Trico, to lower prices and increase quality. Auto assembly plants began to employ just-in-time inventory control and higher quality standards and strongly encouraged their suppliers to change design processes and the organization of production to provide high-quality products on time. Trico responded by initiating a statistical process control program and employee participation groups (EPGs) in which shop-floor employees solved production and quality problems. In Aprill985, the auto companies demanded a 30 percent cut in the price ofTrico products. This led management to call in the consultants again. Management now recognized that it would be impossible to meet the price and quality demands of the auto makers in the existing plants. The assignment for the consulting firm was to compare the costs of building a new plant in Canada, Indiana, or South Carolina with staying in Buffalo and upgrading existing facilities or building new ones. The study indicated that construction costs in South Carolina would be substantially below those projected for Buffalo but that even this option offered no promise of keeping Trico's manufacturing operations alive for more than five years. Soon after these studies were completed, the president of Trico decided to consider an option the consultants had not investigated: building twin plants on the Texas-Mexico border. Management began to explore the risks and benefits of maquiladora operations, and by the fall of 1985 it had decided to move Trico's high-volume production to Texas and Mexico.

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Initiation of the CST Concept In November 1985, three days after the decision to move was announced publicly, leaders ofUAW Local 2100 and its regional representative met with management to urge the company to reconsider its decision. The union argued for a study of the feasibility of building a new plant in Buffalo. Management responded by saying it had investigated all possible options and the move was the only way to ensure a viable future for the company. Management indicated that the union was ignoring critical economic conditions, although it had examined the books at the last negotiations. The union countered by saying that management had not fully considered ways to make the Buffalo operation more competitive and was unconvinced that a maquilacrora operation was the only option available. At the same time, the proposed move became a major community and political issue in Buffalo and Albany. Newspapers criticized management for planning the move, and groups formed by churches and community activists joined with the union to put pressure on Trico to keep the jobs in Buffalo. Trico's president met with representatives of the state, county, and city governments and reviewed the information that had been considered in deciding to restructure Trico's manufacturing operations. After reviewing Trico's situation, most of the representatives were convinced that a move to Texas and Mexico was necessary and inevitable. The lower cost of labor in the South made it impossible for Trico to continue operations in Buffalo. Even offers of loans and tax abatements from state and local economic development agencies did not help. Trico had already considered such subsidies in its comparisons of costs and had found that they would not provide the reduction in production costs necessary to remain profitable.

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Also during this period, two PEWS staff members met with members ofUAW Local2100 and talked about cost study teams as a method to save jobs. They were told about the Xerox plant in Webster, for example, where a cost study team had succeeded in suspending an outsourcing plan by reducing department operating costs by 30 percent.* As part of its mandate to save jobs in New York State, PEWS contacted the management at Trico and state government representatives and suggested that a cost study team be established at the plant to investigate the feasibility of continuing to operate in Buffalo. Recognizing the risks, the union embraced the idea. Next, regional and local union leadership worked on strategies to involve management in the job-saving effort. Trico management had already rejected a similar idea to study the feasibility of saving the jobs, so the union was aware that the odds were against its being accepted. Community and political pressure mounted; comm.unity and church activists held a demonstration in the streets behind Trico's plant # 1 and a press conference to publicize the results of an independent study by the Midwest Center for Labor Research of the economic and human costs of the projected layoffs to the Buffalo area. On February 17, 1986, after initiatives from both the regional UAW officer and the state's director of economic development, the president ofTrico agreed to meet in New York City with U AW officials, representatives of state economic development agencies, and members of PEWS. In the course of the meeting, PEWS proposed that three cost study teams be established: one to concentrate on the tootroom; a second to focus on the linkage assembly area (where the mechanical system connecting the wipers is manufac-

*This case is discussed in detail on pages 13-32.

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tured); and a third to explore the possibility of constructing a new and more efficient single plant in Buffalo. Trico had already decided to keep the toolroom in Buffalo and to restructure and upgrade its operations, so the president welcomed the opportunity to involve toolroom employees in these plans. The company had no interest in conducting a study of whether to build a new plant, however, because it had already commissioned its own study previously. Management also initially resisted the idea of studying the linkage area because it too had been studied in the past. The union leaders then made it clear that they would not cooperate in a study of the toolroom unless management agreed to a study of the linkage area and adjoining units. The outcome was that management agreed to form a CST in the linkage area but refused to endorse the new plant study. Trico had already made commitments in Texas and Mexico, and although the president agreed that it would be possible to back out of these commitments, doing so could cost upward of $5 million. This cost could be absorbed if the results of the study teams showed significant savings. The loss in revenues of 1,100 jobs in the Buffalo area had been estimated to be more than $140 million. Faced with a loss of this magnitude, the union and the state decided to go ahead and perform the new plant study without support from Trico, in hopes of convincing management that it would be profitable to stay in Buffalo. The union was acutely aware of the risks, however, for Trico had not even agreed to suspend its plans to move if the teams could identify significant cost-saving measures. Trico management agreed to pay all of the costs for the toolroom study, half the costs for the linkage area study, and nothing at all for the new plant study, reflecting its complete lack of involvement in the third study and its grudging acceptance of the second study. The costs to PEWS

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Trico Products and the UA W

of the linkage area study would be covered in part by PEWS and in part by a grant from the state's Industrial Cooperation Council (ICC). Financial support for the new plant study would be provided entirely by the state through the ICC. The plan was for the toolroom and linkage area teams to be made up of union members and management representatives, who would work full time for several months. The new plant team was to be composed of union members, who would work with outside consultants. Researchers from PEWS were engaged as resource people to work with all three teams. Additional external consultants with financial and technical expertise would be called in when necessary. The February meeting produced an agreement in principle, but it was vaguely worded. It took ten weeks for the parties to agree on what it meant and to proceed to make firm plans. One of the issues involved the time to be allotted to the studies, initially set at twelve weeks and then increased to eighteen weeks.

Forming the Teams The toolroom team and the linkage area team were each composed of two shop-floor workers, chosen by the bargaining committee, and two managers. The new plant study team was made up of an engineer from Rensselaer Polytechnic Institute, an architect from a firm in the Boston area, and leaders from UAW Local 2100. The parties set up a joint union-management steering committee, composed of members of middle management and union representatives, to whom the teams would report every few weeks. The steering committee was expected to provide overall guidance to the teams, to link their various studies, and to facilitate the flow of information and technical assistance. Later, members of the study teams reported that the steering committee was more of a hindrance than

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a help. Especially to shop-floor CST members, it seemed like just another bureaucratic entity that demanded their time in preparing reports without providing promised assistance. Because the management members of the steering committee were not delegated responsibility to make decisions about the study teams' requests, the teams ended up going directly to top management with problems. After two meetings with the steering committee, the teams stopped requesting its assistance, and hence the committee never became the coordinating group and resource it was intended to be. The relationship between the study teams and employee participation groups at Trico was also a problem. The union and PEWS staff had assumed at the outset that the EPGsvoluntary labor-management problem-solving groups that had been meeting for an hour a week-would be a rich source of information and ideas for the CSTs. This potential resource was never fully exploited. The EPGs had not been very active, and some of their members felt that the CSTs were in competition for EPG turf. This conflict was never fully resolved, and the EPGs were less integrated into the project thart they might have been.

Team Training and Goal Setting The CSTs started their activities with four days of training and orientation organized by PEWS. Exercises in effective problem solving and an orientation to the CST process were included, as were extensive presentations by management on department costs and planned changes. Team members were also given training in cost-accounting procedures and told how to obtain technical and financial information from Trico staff. A special session was conducted by former members of a CST at Xerox, who described their experience and provided pointers.

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Some members of the teams have indicated that this training was not sufficient for their tasks and that the training was provided in too concentrated a period. Hourly team members have reported that they suffered from information overload as a result of receiving extensive briefings by management people without sufficient time to absorb the information. In retrospect, they feel that more training in costaccounting procedures would have helped the teams make more detailed recommendations in their final reports. Before beginning their investigations into specific costsaving ideas, the teams set goals for themselves. The three teams differed markedly in this regard. The toolroom team had no specific dollar target, but because management was not planning to shut down the toolroom, a specific target may not have been necessary. Management had already indicated that it would welcome any improvements the team suggested. The team decided that its goal was to design a new and efficient toolroom with the capability to build new dies. The linkage area team also lacked a specific goal. During negotiations over the structure of the CSTs, the PEWS consultants and the union had urged management to establish a dollar figure for savings in the linkage area which, if reached, would prevent job loss. Management supplied the team with as much information as was available, but it was not sufficient to determine the difference in the cost to operate on the Texas-Mexico border and in Buffalo. The team decided on a target of 30 percent of operating costs, or $8 million, which was approximately the cost reductions the auto companies were requiring. The president of Trico never agreed on this or any target figure for the work of the linkage area team, which meant that it never had a formal goal. In contrast, the goal for the new plant team was clear: to develop a plan for the construction, equipment, and layout of a new building at a cost equal to what would be

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required to build such a structure in Texas. The team also planned to demonstrate that, using the cost-saving innovations generated by the linkage area and toolroom teams, production costs in such a plant could be as low as those projected for the maquiladora operation. Traveling to other companies that had achieved important advances through union-management cost-saving projects was an important component of the teams' training. The linkage area team visited Packard Electric, a major supplier of auto parts for General Motors, in Ohio. One of the PEWS researchers and the chairman of the bargaining committee went to Harley Davidson. None of the members of top management participated in any of these trips, but members of the CSTs reported that they were extremely useful in that they provided team members with opportunities to examine production alternatives firsthand and to talk to union leaders and managers who had experience with cooperative costsaving efforts.

Experience of the Teams Toolroom Team The toolroom team began its work by sending a survey to all 125 toolroom employees. Following a review of the responses, the team interviewed 95 percent of these personnel. On the basis of the responses, the team composed a "consensus report" on the key areas for improvement in the toolroom, and from that, members focused their attention on specific projects. Although the team had the full cooperation of management, hourly team members, who devoted full time to the project, were more thoroughly involved in the tasks than the managers, who had direct and overall responsibility for toolroom operations and were of-

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ten called away to take care of their regular job responsibilities. Nonetheless, the managers were very useful in providing and obtaining information. The toolroom team developed an extensive report detailing reconunendations for improvement.

Linkage Area Team The linkage area team began by setting up a suggestion box in the linkage area and feeder operations. By early June 1986, the team had cost-saving ideas related to raw materials, work group formation, and the positioning of equipment. Suggestions were made of ways to reduce the number of inspectors and increase quality control by workers and to reduce setup time and down time. In all, the suggestion process generated more than sixty specific cost-saving proposals, forty-two of which focused on ways to make production more efficient. The number of projects proposed in the linkage area indicated the fruitfulness of the suggestion process. At the same time, the team was overwhelmed by the volume and variety of ideas. Members felt that they were already having a hard time gaining the cooperation of crucial management people, whose help they had been told they could expect. The large number of ideas further increased the team's demands for information from management. The union members of the team had the impression that the two managers on the team were not influential members of management and thus were not likely to be effective in gaining management's assistance. Furthermore, the team needed inunediate answers to its requests for information, much quicker than management was able to provide it. There was ready cooperation from cost-accounting employees, however, whose information was vital to the project and who spent many hours calculating figures on a departmental basis.

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The lack ofcommitment by top management had an effect on the team itself. The management members of the team had little faith in the study and were unclear of their role in the project. The management members always left the team an hour before the union people, who worked long hours and even put in time after the end of the workday. This might have been because the union members had a nine-hour workday (including an hour of overtime) and the managers had an eight-hour schedule. Nonetheless, the symbolic effect was strong and supported the perception among union members that management was only minimally committed to the study. Team members later reported that as the date for the final report approached, they were under enormous pressure that affected both their relationships at work and at home. From its inception, the linkage area team had suffered because management and the union could not agree on a target for the team. This uncertainty about expectations led to frustration and difficulty in preparing the final report. In the end, the report itself was problematic for everyone involved: management, union leadership, and the people who prepared it. The union members of the team, and especially the PEWS consultants, felt that, in effect, the management members had left the writing of the final report to PEWS staff and the union members.

New Plant Team The goal of the new plant team was to produce plans for a new cost-efficient plant in Buffalo based on the findings of the toolroom and linkage area CSTs. To reach this goal, the team had to consult technical experts, engineers, and architects. PEWS staff coordinated the efforts of these people. The team also consulted with an industrial construction company and with leaders of the building trades unions in

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Buffalo, hoping to devise ways to compensate for the lower labor rates in the South. The leaders of the construction unions were not prepared to lower their basic hourly labor rates, but they did agree to make an important concession: travel time to and from the job and waiting time, normally included in the costs charged to a company, would be excluded. This concession would reduce the construction costs substantially. In addition, the local utility company agreed to charge reduced rates and the state made low-cost construction loans available.

Response to the Team Reports After seventeen weeks of study and report preparation, the members of the linkage area and toolroom teams met in Buffalo with top management and the shop committee, officials from the state, the UAW regional representative and local union officers, and PEWS staff. The purpose of the meeting was to present the teams' reports to management and to begin discussion of opportunities to implement the recommendations. The toolroom report recommended an investment in new machines and the introduction of a new production layout, a skills-development program, improved organization of work, gainsharing, and flexible time scheduling for workers. The report also recommended a pay increase for skilled workers, who, the report noted, were being paid below average for the area. The report noted that of thirty-eight workers in the toolroom who had quit during the previous eighteen months, the majority had left after the move to the Texas-Mexico border had been announced, even though management had pledged to keep the toolroom in Buffalo. The report was well received by Trico, and management's subsequent investment decision was the most concrete evidence of its support. The report called for the company to

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invest approximately $500,000 in numerically controlled machinery. Management committed $1.5 million. The union's response to the report was mixed. The union generally supported all of the recommendations except the pay increase for skilled workers. At a time when hundreds of production and assembly workers were threatened with layoffs, it was difficult for the union to support a pay increase for the most highly paid workers, whose jobs were not threatened. The union decided to defer a decision on this point until formal contract negotiations. The report from the linkage area team was presented largely by its union members. Its recommendations extended to matters beyond the linkage area into the production of component parts as well. During the preliminary planning period, the union members had tried to persuade management to extend the scope of the work areas covered by the team to include feeder operations where component parts were manufactured, but management had refused to authorize this request. As the team members conducted their study, they realized that unless the team broadened its scope, it could not possibly achieve its goal of finding ways to make the linkage area more efficient. The report projected $9 million in savings-well beyond the $8 million target the team had established. The study called for a radical redesign of large portions of the production areas, an investment in high-speed presses and quick-change dies to reduce setup time and improve servicing, the implementation of a just-in-time inventory control system, the elimination of piece rate, and the introduction of plantwide gainsharing. The report also projected opportunities for cost savings through increased worker involvement in quality control and continual cost improvement. The president ofTrico did not respond to the presentation at the meeting itself. He made it clear in subsequent discussions, however, after he had examined the proposals in

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detail, that he saw no possibility of implementing any but a small number of the team's recommendations. He stated that many of the ideas had already been considered and rejected by management and that the estimated savings for some of the ideas were unrealistic, as costed out by Trico accountants. In a subsequent letter to the union, the president detailed his criticisms. He ended up crediting the linkage area team with only $1.5 million of potential savings. The savings discounted to create this discrepancy were related to feeder operations, considered by the president to be outside the team's jurisdiction, and to projects management had considered and rejected in the past. The proposal for the new plant was presented two months later. The report detailed plans for a plant to be built in Buffalo of the same size and equal in cost to the one set to be built in Texas. The proposal was based on a novel engineering and architectural design worked out with the consultants. It took into account the cost reductions offered by the power company, the availability of government-supported loans, and the willingness of the unions in the building trades to forgo pay for travel time and waiting time on the job. Using the cost savings identified by the two inplant teams, the study projected total savings of more than $37 million if Trico built the new plant in Buffalo instead of in Texas. The president considered this proposal but refused to reverse his decision to move. By now, construction had begun on the sites in Texas and Mexico; abandoning the plans would have saddled Trico with extra costs.

Outcomes The work of the study teams came to a bittersweet ending. Management did not abandon its plans to move to the Texas-Mexico border, but it agreed, during the contract negotiations that followed, to retain three hundred more

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jobs in Buffalo than it had planned. The future of these jobs was dependent on retaining low-volume orders that required the more highly skilled workers in Buffalo and on an increased market share for Trico products. The negotiations also produced a comprehensive compensation package for those employees who would lose jobs as a result of the move. Another outcome of the study team project was that a plan was devised to increase labor-management cooperation in the future. Both the president of Trico and the officers ofUAW Local2100 agreed that the experience of working with the study teams led them to endorse this plan. The aims were to retain the jobs remaining in Buffalo after the move, to improve the production operation in the Buffalo area, and, it was hoped, to expand. A labor-management committee and in-plant teams were subsequently established.

Evaluation of the Process and Outcomes The crisis that generated the determination and energy to develop cost study teams at Trico may have been the very thing that kept the project from saving all of Trico's jobs in Buffalo. The process of developing study teams did not begin until after a decision had been made to move part of the operations; the announcement of the move created the pressure to look for other ways to reduce costs. By the time the recommendations of the linkage area and new plant teams were received, however, management was so committed to the move that it would have been difficult to accept them. Given that the cost study team project was such a high risk for the union and management, and for the state, why were the groups willing to undertake it? The motives for

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Trico Produas and the VA W

pursuing or agreeing to such a project were undoubtedly complex and are best understood by examining the risks and benefits each group faced. Because Trico was a locally owned company that had operated in Buffalo for many years, community interest was strong and pressure was exerted on Trico through the media and community groups to establish the study teams. The company faced negative consequences from these groups if it did not cooperate. At the same time, Trico management risked a loss of face if the teams' reports showed that the decision to move to the Texas-Mexico border was not economical. Trico was not moving all of its production, however, so it was not a win-lose situation. Any production improvements identified by the linkage area team would be useful to operations, whether in Buffalo or Texas and Mexico. Trico's future depended on efficient operation of the toolroom and good integration between the toolroom and production, regardless of where production was located. Thus the toolroom study was of great value to management, as was establishing future cooperation between management and the production employees remaining in Buffalo. The union faced what appeared to be a no-win situation in the short term. On the one hand, had the union not responded with a plan for action, 1,100 jobs in Buffalo would definitely have been lost. Retaining even one or two of the operations that were scheduled to move would provide the possibility for job growth in Buffalo in the future. On the other hand, working without a clear commitment from management that the jobs would stay if the teams met their targets meant that management controlled the final outcome of the studies. By responding, and performing well under pressure, the study teams laid the foundation for future involvement in operations decisions. Union members gained sophistication and knowledge about finances, production accounting systems, and manufacturing processes that have enabled them to be proactive rather than reactive

Trico Products and the UA W

69

regarding the future of the remaining manufacturing jobs in their plant. Worker involvement in the redesign of the toolroom has also benefited the union, as well as management, by strengthening toolroom operations. The involvement of state resources was a unique and important aspect of the Trico project. Initially, officials from New York State provided the forum for the union and Trico management to meet and discuss alternatives to the move. Once the cost study teams were formed, the state supported the work of PEWS and funded the new plant study. Although it was done too late to prevent the move, the study showed that a new plant could be built as cheaply in-state as in Texas and that, despite the wage differentials, gains in productivity could be achieved equal to those achieved by moving. Thus the union, management, and the state demonstrated that by working together, they could improve the options for New York manufacturers. Based on the experience of the Trico CSTs, the state has improved its ability to help companies and unions become competitive and remain in New York State. & a result, the state's Industrial Effectiveness Program (IEP) provides companies with organizational and technical assistance so that they can improve and upgrade operations. Rather than providing a typical loan and subsidy package to New York State companies, the IEP tries to help companies deal with production issues, by making technical assistance and funds available. Local community and political involvement in Trico had both positive and negative aspects. On the one hand, without the strong stand taken in the community, the project probably would not have been undertaken. On the other hand, by actively seeking this support, the union put management on the defensive. A special problem arose because the study was paid for partly by the state. Through the Freedom of Information Act, confidential reports were made accessible, and, unfor-

70

Trico Products and the VA W

tunately, sensitive information leaked out. Trico's understanding was that privileged information would remain confidential, and management was understandably upset by the leak, which it felt represented a breach of contract with state agencies and officials.

Conclusion It would have been easy for the union, Trico management, and the state to resign themselves to the move. Instead, each group weighed the risks and opportunities available, to it. In spite of the difficult conditions under which the studies were carried out, the teams achieved impressive results. In all, $37.5 million in cost savings were identified. The toolroam team set in motion a major reorganization and strengthening of the toolroom, which now holds the strongest hope for enabling expansion ofTrico's product line. Even the $1.5 million of potential savings credited to the linkage area team is a substantial achievement and an indication of the potential value of cooperative labor-management efforts. Perhaps most important, Trico now has a history on which the UAW and management can build as they pursue other joint efforts to improve operations in Buffalo.

4 The Cases Con1pared

S

uccess in a cost study team can be measured in a variety of ways. In fact, in each case studied, the team members viewed success differently. By comparing the three cases across a range of variables, however, one can begin to identify the reasons a cost study team succeeds or fails. This chapter examines those components of the process that seem to affect its outcome. It is based on an analysis of several variables that participants in the three cases identified as important. These variables were also used to formulate guidelines for setting up cost study teams, outlined in chapter 6. In each case, both the formulation of the purpose of the CST and its ultimate outcome may have been influenced by a set of environmental conditions. These conditions can be divided into two categories: those pertaining to the external environment in which each company and union operated

72

The Cases Compared

TABLE 4.1

Conditions in the External Environment

Triro

Harrison

Xerox

Economic pressure

OEM demand to reduce costs by 30%

GM losing market; mandate to lower costs

Xerox losing market; mandate to lower costs

Precipitating condition

Cheaper to move to Texas-Mexico border

Cheaper to subcontract

Cheaper to outsource

Number of jobs threatened

1,300

200

180+

Pressure from state and local governmentor community

Yes

No

No

NOTE: These tables record data of the Trico linkage area and toolroom teams combined, the one team in the distribution center at Harrison Radiator, and the first wire harness team at Xerox.

and those pertaining to the internal relationship between the company and union (see tables 4.1 and 4.2). Once the decision was made to start the CST, each group made a series of choices about the structure of the teams and established guidelines for their operation. These decisions about the process may also influence a team's success or failure (see tables 4.3 and 4.4). The results each team reported were both qualitative and quantitative. No one measure of results seemed to account for whether the union and management group involved viewed its CST effort as a success; it is therefore important in comparing the cases to look at the range of outcomes (see table 4.5).

The Cases Compared TABLE4.2

73

Conditions in the Internal Environment Trico

Han-ison

Xerox

Production type

Machining and assembly

Warehousing

Machining and subassembly

Previous labormanagement cooperation

Yes

Yes

Yes

Party initiating CST

Union

M~agement/

Union

Level of support for CST from top management

Low

Medium

High

Outside consultant

Yes

No

Yes

Length of time required to establish team

3 months

2+ months

l month

State agency/ government involvement

Yes

No

No

umon

Conditions in the External Environment As shown in table 4 .l, the degree of economic pressure from the external environment was similar in each case. Although Xerox manufactures in a different sector of the economy

74

The Cases Compared

TABLE4.3

Team Process

Trico CST based on Target established by OEM demand

Harrison

Xerox

Outside bid

Benchmarking study

Team composition

2 union members 1 manager 1 engineer

18 union members

6 union members 1 manager 1 engineer

Full or part time and duration of team's activities

Full time 18 weeks

Part time 3-4 weeks

Full time 30 weeks

Technical training for study

2 days

None

2+ days

Problemsolving training

2 days

Prior, at different times, totaling 5 days

3+ days

than the other two companies, and only one company, Trico, can be considered an independent supplier, the three faced similar demands from their "customers'' for lower costs and greater efficiency. The Reprographic Components Manufacturing Division, where the cost study team activities at Xerox took place, supplied a corporate organization that was being forced to lower its costs or lose out in the world market for copiers. Trico, as an independent supplier to the "big three" auto makers, was subject to regressive pricing policies set by the auto makers to deal with their loss of market to foreign manufacturers. And Harrison Radiator, although it is a division of General Motors, was subject to pressures similar to those at Trico as GM attempted to

The Cases Compared TABLE4.4

75

Resources Available to the Team

Resources

Trico

Harrison

Xerox

Labormanagement steering committee

Yes

No

Yes

Internal facilitator

Yes

Yes

Yes

External consultant

Yes

No

Yes

Clerical staff

No

No

Yes

Financial expert

Yes

No*

Yes

Engineer

Yes

No*

Yes

Operations adviser

No

No*

Yes

Access to management

Yes

Yes

Yes

Funds to support visits to other compantes

Yes

No

Yes

*Although not specified for the team, these individuals were available and were sought out for advice by the Harrison team.

reduce its operating costs. All three companies faced imminent loss of some operations or major cost cutting. In all three cases, management initially adopted some form of the flight approach. At Xerox, an internal study recommended outsourcing certain operations in the wire harness department, which would have meant the loss of

76

The Cases Compared

TABLE 4.5

Results of the CSTS

Trico

Harrison

Xerox

Percentage of target reached

100+%

100+%

100+%

Percentage accepted by management

Unknown

100+

100+

Implementation of suggestions

Partial

All

Most

Jobs saved

300

200

180

Agreements on labor-management cooperation negotiated as result of CST activities

Yes

No

Yes

180 jobs. At Harrison, a bid from a subcontractor to do warehousing threatened 200 jobs. At Trico, a management study recommended moving operations to the Texas-Mexico border to make production more efficient; this move threatened 1,300 jobs. The unions had little choice but to accept these losses or join with management in finding alternative ways to cut costs. Perhaps because ofthe magnitude of the job loss anticipated at Trico, the community of Buffalo and eventually the government of New York State put pressure on management to find alternatives to moving. This certainly heightened the crisis atmosphere in which the decision to try cost study teams was made. Although there was no direct community involvement at Xerox or at Harrison Radiator, both labor and management at Harrison have reported that they had

The Cases Compared

77

a strong sense of obligation ro keep jobs in the Lockport area.

Conditions in the Internal Environment The production process was different in each of the three cases, bur whether the process was assembly, tool and die making, or storing and shipping did nor seem ro affect the decision ro create cost study teams or their ultimate function. This is nor surprising given that cost study reams focus on neither labor nor technology alone as subjects for savings but on all the costs of an operation; any part of the operation can be scrutinized for possible savings. Some form of labor-management cooperation existed in each organization before the crisis that precipitated the development of the cost study team. Trico had employee participation groups (EPG) that met for an hour a week to solve local production problems. Harrison and Xerox had more extensive experience with labor-management cooperation. In addition to localized problem-solving activities, both companies had contractual agreements that obligated them to notify the union of plans to outsource and to give the union an opportunity to offer alternatives.* Each company had experience and training in joint labor-management problem solving and was aware of the possibilities and the problems that can arise. Not until a crisis, however, did these companies and unions experiment with more intensive, riskier forms of cooperation. In each case, the threat of outsourcing seems to have motivated the union and management to try the new form of collaboration. *This was true at Xerox when the later CSTs were formed. The contractual provision was agreed upon in negotiations after the positive experience with the first wire harness team.

78

The Cases Compared

In each case the union took an active role in initiating the CST. At Xerox and at Trico, the union had the active support of an external consultant, who pushed for the development of the cost study team. At Harrison, the proposal to set up a study team came from management, but the union took responsibility for establishing it. In fact, the union spent several weeks developing the internal consensus necessary to take what was viewed as a high-risk step. The conditions in the three cases fit those described in published models of successful employee involvement (see especially Kochan, Katz, and Mower 1984). First, intense pressure existed, which was strong enough to force both parties to overcome the political and economic risks inherent in close cooperation. As an effect of this pressure, the relationship between labor and management changed from one of passive involvement to one of active cooperation. Existing employee involvement structures were unable to address to any perceivable degree the crisis conditions that precipitated the need for the cost study teams, and when organizational upheaval and job loss became imminent, both labor and management-but particularly labor at Trico and at Xerox-relinquished their passive stance and sought to cooperate more actively. Second, both parties perceived that by working together, the goals of their respective constituencies could be met. Faced with the choice of closing operations or cutting costs, the union and management each had clear objectives: management's goal was to lower costs and increase efficiency; the union's, to prevent layoffs of its members. Although all three organizations had other forms of employee involvement, a link between those structures and the cost study teams was never clearly established. At Trico an effort was made to utilize the skills of the EPG members to expand the options for savings, but, in fact, the EPG did not participate in CST-related activities to any great extent. The QWL training that Harrison Radiator had made avail-

The Cases Compared

79

able to all employees and the proximity of a well-trained internal facilitator in problem solving may have bolstered the success of the CST, but there was no structural connection between the Harrison CST and the QWL program. Likewise, although a reasonably strong problem-solving program existed at Xerox prior to the CST effort, the two efforts were linked only indirectly. It thus appears that the existence of a separate employee involvement program does not necessarily influence the outcome of a CST. In that an employee involvement program existed in all three cases, it is possible that the program contributed a common language and experience that made the decision to form a CST a logical one. There is some basis in the theory of reinforcement to support the idea that "the experience of participation can be a condition for its own continued existence" (Bernstein 1983, 49). CSTs are fundamentally a process that enables joint problem solving to take place; early involvement efforts in each of the three companies involved such problem solving, even if only on a localized level. This experience may have provided a framework for thinking about CSTs. It is also possible that frustration with less effective forms of employee involvement prodded the unions and management to try a new approach when the stakes were higher. Almost every popular article prescribing the elements necessary for successful labor-management cooperation lists support from top management as a prime requirement. At Xerox, management was open to the CST strategy and, indeed, demonstrated support by providing time, training, and resources for the teams. At Harrison, management proposed that the team be formed, and there was apparently never any doubt that if the team could meet its target, the threatened operation would be kept in-house. Furthermore, the management at Harrison and at Xerox agreed to suspend their final decisions regarding the threatened operations pending the teams' reports. The management at Trico never

80

The Cases Compared

made such an agreement. Although there was support for the CST in the toolroom area, which was to stay in Buffalo regardless of the team's findings, long negotiations were required to convince management of the potential use of the CST in the linkage area. It is fair to suggest that management may have been reluctant to undertake the linkage area study because steps had already been taken to outsource the work. Not surprisingly, the recommendations for the linkage area, for which there was no management support, met with limited success. Top-management support and commitment to the CST process seem to have a direct effect on acceptance of the results. Finally, the influence, or lack thereof, of an external consultant in initiating the CST is important. At both Xerox and Trico, outside consultants actively encouraged the unions and management to form the teams. At Harrison, a consultant met for a few hours with union leaders a few weeks before the union finally agreed to the process. This intervention was so brief, however, that no one mentioned it during several days of interviewing at Harrison. Nonetheless, outside consultants were instrumental in introducing the idea to at least one party in each case.

Process The participants in the CSTs at each site stressed the importance of obtaining initial agreement on a target. At Harrison and at Xerox, the teams had outside bids as their targets. In these cases, management agreed that if the team could identify cost savings equal to those achieved with the outsiders, then the threatened operations would stay inhouse. At Trico, management never agreed to a cost-saving target for the linkage area team, and when the team determined its own target, management questioned the assumptions on which it was based. Production in the linkage area

The Cases Compared

81

was integrated with production in many other areas, making it difficult for the team to distinguish work in this area from work in other operations and therefore to decide the boundaries of its tasks. In contrast, the toolroom was separate from the rest of the production process and the CST had little trouble defining its goals and tasks. The evidence suggests that without a target and agreement on how decisions will be made based on the teams' work, the CST process can become confused and possibly conflictual. At Xerox and Harrison, targets were set at the beginning of the process and outcomes were agreed on: if the team could reach its target, the work would stay. But even at Xerox, where there was extensive agreement on how to proceed, a simple comparison between vendor and inplant costs led to confusion about the cost of quality, currency fluctuations, and so on. Some of the study teams at Xerox therefore had to renegotiate targets. And although both Xerox and the union had agreed that the work would stay if the teams met their targets, more negotiations had to occur, mostly at the bargaining table, because the teams recommended changes in the bargaining agreement. Advance agreement on every possible problem or outcome is not necessary, but consensus at the beginning that conflicts will be negotiated along the way and that both sides will evaluate and negotiate the outcomes is vital. At Xerox this consensus was explicit, at Harrison it was only implied, and at Trico it appears not to have been reached. Of course, such consensus is possible only when both parties are strongly committed to the process. At Trico, where there was no agreement on targets and no formal process for assessing and negotiating the teams' recommendations, the outcomes were less satisfactory to both the union and management. Management questioned the work of the linkage area team, saying that many of the suggestions were not new or had already been considered by management and rejected. From the union's point of

82

The Cases Compared

view, rejection by management earlier did not make these suggestions irrelevant; rather, it meant that the suggestions had not been fully considered and should be reexamined. Indeed, with no initial agreement between the UAW and Trico management on what cost savings would "count," management rejected many of the suggestions of the linkage area team altogether. At Harrison, where the union also presented "old" ideas, management did consider them, and indeed implemented them, because it was committed from the beginning to keeping the work if the team identified cost savings. One might expect that the makeup of the team and the time dedicated to the study would be critical to its success. At Trico and Xerox, the teams consisted of union and management representatives, including a technical person and a manager, chosen by their constituent groups. The Xerox teams also had financial, engineering, and operations advisers assigned to them. At Harrison, the distribution center team was made up of union members only. Although no technical or financial managers were included, management had instructed the engineering and accounting departments to be of assistance. The teams at Trico and at Xerox worked full time for three to six months preparing their proposals. By contrast, the Harrison team met only weekly, and most of the work was done when members could fit it in. Facilitators were available to the teams at all three organizations. The teams at Xerox and at Trico also had access to outside consultants, who functioned as facilitators and as informal mediators between management and the team when misunderstandings arose or when areas of disagreement such as target amounts had to be resolved. Assistance from outside consultants was not available at Harrison. A trained QWL facilitator from the union led the team at Harrison, and another functioned as a liaison between the team and management. Unlike the facilitators at Xerox and

The Cases Compared

83

Trico, however, neither of the facilitators at Harrison was perceived as playing a neutral role in the informal negotiations that accompanied the team's work. In general, the CST process was far more integrated and developed at Xerox than at Harrison or Trico. Although the CSTs at all three firms had access to most of the information they required and to internal or external consultants, the commitment of time and assistance at Xerox was much greater. The process the teams at the three organizations followed reflected this difference. The teams at Xerox solicited suggestions from their co-workers and then followed an explicit process that included checking out costs on every aspect of the department or process being researched, from overhead to tooling to maintenance. At Harrison, the team sought ideas from union members only; the system was not technically methodical, but it was thorough and democratic. At Trico, the process combined the ones used at Xerox and at Harrison: ideas were sought from the entire work force, but only ideas ultimately recommended to management were costed out. As the three cases demonstrate, the CST process has a wide tolerance for variation in the makeup of the team, its training, the amount of time allotted for work, and the technical assistance available. The union-only team at Harrison was able to devise a way to match the outsider's bid in only three weeks, although the team had no specific training and was allowed very little time off the job. At Xerox, several CSTs followed the same thorough and time-consuming process and had similar levels of training and assistance but experienced different levels of success. Although there is no clear indication that the time allotted to a study, the resources assigned to a team, or its makeup affect success as measured by the cost-saving ideas that are implemented, these factors do seem to affect how a team reports on its progress and the level of sophistication of its

84

The Cases Compared

recommendations. Employees on the second wire harness team at Xerox stressed that reduced access to necessary information slowed the progress of the team significantly. By contrast, the team at Trico that had the greatest access to information and assistance, the toolroom team, was pleased with its progress. A comparison of the recommendations generated at Harrison and at Xerox reveals important differences in their level of sophistication. Although the Harrison team was as effective at keeping work in-house as the first wire harness team at Xerox, the recommendations of the Harrison team were far less complex. Essentially, the Harrison team made only three recommendations: to reduce personnel, reuse packing material, and redesign containers. By contrast, the first wire harness team at Xerox made fourteen recommendations that ranged from changing accounting procedures to restricting job movement to avoid unnecessary training costs. Another Xerox team, among other things, developed a sophisticated system for calculating the cost of quality. The lesson is that good facilitation, training, and access to experts, as well as sufficient time, can enhance the potential benefits of a CST.

Results Compared The changes recommended by the teams in each of the three organizations were similar in that they were all critical to production and cost issues. In no case did the teams recommend reducing wages or benefits, although recommendations were made that affected job responsibilities. At Xerox and at Harrison, the teams allowed for staffing reductions through attrition, bolstered at Xerox by a job security agreement. The CSTs at Xerox proposed contractual changes, but the union and management agreed to table the recommendations until the contract negotiations, when the

The Cases Compared

85

proposals were bargained over in the context of the entire contract. All the teams reached or came close to reaching their targets. At Xerox and at Harrison, a large proportion of the proposals were accepted and implemented, and since then no additional jobs have been lost in the areas studied. At Trico, where management had already made the decision to move production when the CSTs were formed, three hundred jobs were kept in Buffalo, largely because of the study team's efforts. Changes have been made in the collective bargaining agreements between the UAW and Trico and between the ACTWU and Xerox as a result of the study teams' activities. At both companies, work rules have been amended, and written agreements on labor-management cooperation have been put into effect. At Xerox, a job security clause is in place, as well as an agreement by management to institute CSTs before making a decision to outsource. These formal agreements are examples of how participative activities can be extended and strengthened subsequent to the use of CSTs. At Trico, for example, the union and management have reactivated a labor-management committee to help them reorganize the Buffalo plants. At Xerox's Webster plant, employees have participated with management in several joint activities over the past five years. These include the design of a new plant, the development of new products, the development of semi-autonomous work groups, and the refinement of the CST process. Of the three organizations studied, only Xerox has a negotiated agreement to use the CST process when a portion of the operation is found to be uncompetitive. In fact, the CST process is now a structural component of Xerox's approach to quality and cost effectiveness. It is difficult on the basis of three case studies to attribute this level of institutionalization to success of the CSTs, however. The time allotted and the resources allocated to the CSTs may have

86

The Cases Compared

been a result, rather than a cause, of the greater institutionalization of labor-management cooperation at Xerox. The increased commitment to employee involvement evidenced in each company after the completion of the study team activities suggests that involving workers in tackling critical organizational issues can reinforce cooperation and move an organization closer to becoming fundamentally more participative (Bernstein 1983). Caution should be taken in making such a conclusion, however, because the experience with CSTs is all quite recent. There is evidence that labor-management participation in an organization fluctuates as external economic and internal political demands change (Hammer and Stern 1986). Labor-management cooperation in a less active form existed for at least five years at each of the three organizations studied. Now that the immediate crises have passed at Xerox and at Trico, the organizations may revert to a less active form of cooperation. In contrast, at Harrison, the days of warehousing in the old manner are numbered and the crisis may intensify.

5 Taking the Risk

T

he decision to fight or flee is not always an either/or decision. Some corporations engage in both strategies at once; they relocate some plants while investing in technology and drastically changing the culture of work at others. General Motors and Xerox, for example, have taken this approach. Trico represents the plight of a number of smaller firms, especially those supplying parts to automobile manufacturers. In an attempt to respond to cost pressures from their customers, and faced with aging plants and technology and a highly paid work force, many such firms have opted to abandon their plants and start over in countries or areas of the United States where wages and taxes are lower. What drives these decisions is the need for lower costs, higher quality, increased flexibility in product mixes, and timely delivery. Outsourcing or moving production is one way to meet these needs. In each of the three cases described in this book, the company either performed or commissioned studies of its operations and solicited bids or studies of operations in other locations; in each case management found that the company could produce more cheaply some-

88

Taking the Risk

place else than in-house. But rather than proceeding with plans to outsource or move and playing out the job loss scenario so familiar in New York State, these companies instead turned to the employees working in the affected operations for their suggestions. And, instead of accepting the single solution to the problem defined by management or reacting with adversarial tactics, the unions looked for alternatives, both to the definition of the problem and to the solution. The cost study teams discussed in this book demonstrated that utilizing the expertise and creativity of workers, who know the operation best, can lead to increased efficiency and reduced costs and thus enable a company to remain competitive without employing lower-cost labor. More important, the teams demonstrated that when shop-floor workers and managers join forces, seemingly unsolvable problems can be solved. The Trico case demonstrates that state agencies also have choices available as they strive to retain industry. The state did not limit itself to offering traditional tax breaks and financing to Trico; rather, in providing vital financial assistance to the teams, the state helped the union and management look for alternatives to moving production. As a result, although Trico management had taken into account tax breaks and loans from the state when it assessed the advantages of moving versus keeping operations in Buffalo, it had not accounted for the value of such assistance in combination with suggestions from union leaders and employees.

Assessing the Risk There are, of course, risks inherent in the use of cost study teams. In any cooperative effort, both managers and unions are apt to be afraid of losing power or security. This is especially so when jobs and future work are at stake, as in

Taking the Risk

89

the cases discussed here. Union leaders at Xerox, Trico, and Harrison risked being blamed for instituting a fruitless process if the teams' recommendations were not successful in saving the business, or if management failed to live up to its side of the agreement to establish and support the CSTs. By the same token, managers who share strategic decision making with unions may feel they are putting their own careers on the line by allowing the union to "tell them how to do their jobs." Managers may also fear that allowing workers to study a problem only delays necessary and inevitable decisions and makes the already difficult prospect of cutting jobs even harder. State officials risk a poor return on their investment when they contribute to a job-saving strategy that has unknown outcomes and over which the state has little control. In committing funds to the Trico CSTs, the state risked making a "bad" investment had the teams failed. In the short term, however, these risks were outweighed at all three firms studied by the prospect of developing long-term cooperation on strategic business issues. The managers at Xerox, Trico, and Harrison took on other risks as well. In agreeing to form CSTs, they also agreed to share information that traditionally was only in management's domain. Supervisors exposed themselves to criticism of management policies by workers, while at the same time taking on extra work in agreeing to train and assist the teams. Middle managers feared that if the teams were successful and came up with new ways to save money, upper management would ask why they had not thought of the same suggestions. Top management worried that if the teams failed, the company would lose money in lost time and the cost of the team members' time off the job, with nothing to show for their efforts. A significant issue for union leaders is whether involvement in management decision making opens up union locals to the danger of having their jobs pitted against lower-wage,

90

Taking the Risk

nonunion shops. The unions at Xerox, Trico, and Harrison took the risk that management had used the threat of outsourcing to shops with lower labor costs as a ploy to get their own work forces to take wage reductions or accept layoffs. Union leaders also fear, as they do with any employee involvement process, that management may ''use" the CST process to get productivity gains without providing any quid pro quo. Union leaders who were interviewed at the three firms studied all recognized that competing with outside vendors by cutting costs internally could threaten the longterm security of their members' jobs: if their members devised efficiencies that eliminated work, some jobs would ultimately be lost, although, where there was job security, only through attrition. Nonetheless, the union leaders believed that in the current economic climate, simply "hanging tough" would result in more job loss, both in the inunediate future and in the long run. Management would find a way to cut costs, outsourcing would remain an immediate threat, and plant closings would be a possibility. The union leaders viewed the CST process as one way to help ensure their members more long-term job security, in that it kept work in-house in the short term.

Reaping the Benefits What can unions, companies, and state governments gain from labor-management collaboration on strategic business issues? Can cost study teams serve the interests of unions, management, and governments and help strengthen manufacturing in the United States? The goal of unions is to keep their members' jobs secure and ensure them decent wages; the goal of management is to produce at the lowest cost, while delivering high-quality products on time. States and local communities want to ensure that no manufacturing

Taking the Risk

91

jobs are lost. To varying degrees, the teams at Xerox, Trico, and Harrison met these interests at least for the near future. The unions in these three firms not only saved some of the threatened jobs, they also garnered a higher level of involvement in management decision making. In so doing, they gained more security for the future: instead of having to react to management decisions after they are made, leaders of these union locals now possess the knowledge of plant operations and finances to be proactive and to protect their members' interests in keeping work in-house. Study teams can thus provide unionists with training in cost analysis and with technical knowledge that would otherwise be difficult to obtain. The CST process also provides an opportunity for union leaders to think broadly about the future of a company and its product in the international marketplace. When management threatens to outsource to a foreign country where wages are a dollar an hour or less, competing on the basis of cost savings through efficiency becomes almost impossible. Local14A of the ACIWU found itself in this position at Xerox. Although the CST in the wire harness department was able to compete with a domestic competitor in 1982 and to save the jobs, it was unable to match cost savings with a foreign competitor in 1986. Rather than agree to cut wages by 50 percent, as management suggested, union leaders instead thought strategically about the future of the wire harness as a commodity in the production of copiers. Knowing that the wire harness they built would eventually be replaced by fiberoptics, a technologically intensive operation, they chose to become involved with management in bidding for new work for the wire harness department to ensure that more jobs would be retained in the long run. Likewise, at Harrison, the union has recognized that the distribution center will not continue for long in its present configuration. Based on its experience with the cost study team, the union is now actively planning for the future of

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the distribution center by studying with management the possibilities for new work. And at Trico, although the CSTs did not succeed in retaining the jobs moved to Texas and Mexico, the union and management are now working together to strengthen Trico's Buffalo operations and to bring more jobs into the plant. Cost study teams enable management to gain the advantage of labor's input and, by the same token, to recognize and credit labor's knowledge. At Harrison, the union had offered such knowledge in the past and, for one reason or another, had had its ideas rejected. The cost study team provided the forum for management to take union members' ideas seriously. At Xerox, the second CST in the wire harness department demonstrated the hidden costs of quality, which has helped management change the way it looks at outsourcmg. Working together on issues vital to the future of a company raises expectations that information and decision making will be shared in the future. When both labor and management are truly committed to implementing the results, CSTs provide a vehicle for making constant change and improvement; workers have a means of making their suggestions heard, managers learn how to accept and use them, and the union is able to ensure that its members get credit for their suggestions. This process can have far-reaching results. At Xerox, for example, teams of workers and managers have designed a new plant and are developing new products together. The CST process provides a way for companies and unions to step back from their traditional modes of action and examine their problems from a new perspective. By agreeing to suspend decision making temporarily and to consider jointly the recommendations of a CST, labor and management get an opportunity to reconsider their respective interests in light of the cost pressures they face. CSTs can think about solutions to problems without the constraints

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normally faced by a management task force or an outside consultant. The team is free to look freshly at operations and to consider all possibilities. Although the team must ultimately consider the feasibility of its recommendations, it can be as innovative and creative as it likes in the beginning stages of its work. As is evident from the teams at Xerox, Trico, and Harrison, given such freedom, teams can come up with cost-saving packages equal to or better than those of the experts. Intensive labor-management efforts such as CSTs appear to be more effective in organized companies than in unorganized firms. An alert and resourceful union is in a much stronger position than an unorganized body of workers to pose the challenge to management to improve operations. As an elected body representing the shop-floor work force, a union makes it possible, through an institutionalized vehicle for communication, for workers' suggestions to be heard. Furthermore, workers who have the security of a labor contract are more comfortable arguing with management against plans to reduce the work force and suggesting alternatives. At Xerox, the CSTs often made recommendations that were unpopular with both management and the union. They felt free to do so knowing that their recommendations would ultimately be negotiated over by both parties. The cases demonstrate that the state can play a constructive role in mediating conflict between labor and management, as it did at Trico. The state assisted in bringing the union and management together to negotiate the CST process and provided funds to make the study teams possible. Although the cost of the Trico project to the state may appear high, a cost-benefit analysis of monies spent is quite revealing, especially in that the Trico situation was a highrisk opportunity at best. The costs for consultants to establish and manage the linkage area and new plant study teams was $83,000 and resulted in the retention of three hundred

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jobs. Even if no additional jobs are created as a result of increases in volume or the development of new products, this activity has cost the state only a little more than $275 for each job that was retained. More in-depth work at each stage of the CST process probably could have kept the costs even lower. The decision of the state to finance the Trico project was a wise one not only because jobs were saved, but because it was a cost-effective use of its monies.

How Can Cost Study Teams Increase U.S. Competitiveness? An important lesson from these cases is that there are many ways for United States manufacturers to cut costs, enhance quality, and improve their relations to customers. All too often, managers try to reduce their labor costs without examining other costs of production. This approach focuses on only a small portion of their costs-those for direct labor (wages and fringe benefits for production and maintenance workers), which in many companies amounts to less than 15 percent of total operating costs. Even if management achieves a spectacularly successful 30 percent reduction in direct labor costs, only a 4.5 percent improvement is seen in the bottom line. This approach takes for granted that costs for overhead-space utilization, machine and equipment purchases, and energy-are fixed costs that cannot be substantially lowered. In fact, at Xerox, Trico, and Harrison, a good portion of the savings carne from these categories. Unions are often equally narrow in their approach to combating runaway shops and outsourcing. When faced with plant closings, unions often focus their efforts on staging slowdowns or strikes as a protest against management's decisions. These actions put financial pressure on the company but do little to save jobs. When the plants finally close,

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or jobs are outsourced, union members end up in lowerpaid, nonunion jobs or unemployed. Likewise, concessionary bargaining often does not provide union members with any influence over the ultimate fate of their jobs. The unions in the cases studied did not give up wages or benefits. Instead, they demonstrated that lowering direct labor costs was not necessarily the best way to improve competitiveness. State economic development policies have also tended to be reactive, rather than proactive. Several state goverrunents have tried to attract new businesses by offering them better incentives than they offer existing businesses or by funding retraining programs for laid-off workers. While such measures help to create some new jobs, or alleviate the effects of plant closings on workers, they do little to help keep existing industry in the state. Labor, management, and government may be pursuing different strategies to try to keep manufacturing strong, but on one point there is general agreement: the crisis facing companies like Trico, Harrison, and Xerox is real, and survival is not possible unless such companies are willing to make major changes. The disagreements are over how each party affected should respond to the warning signs of the crisis. Unions often accuse management of failing to give due consideration to the company's obligations to its workers and the community in making decisions about outsourcing or moving; management responds by insisting it has done everything reasonably possible to save jobs but that labor rates and taxes are too high to be competitive; the state responds by saying it has offered everything it can in tax breaks and incentives. To put these conflicting points of view in context, there are three possible management responses to a cost crisis: l. Management can decide to shut down manufacturing operations and move to areas where labor costs are substantially lower. Planned layoffs are then viewed

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as costs of moving and the planned changes are presented to employees and to the general public as necessary responses to the market forces of the free enterprise system. 2. Management first undertakes to determine the extent to which it is possible to meet the new cost requirements in the local plant. When outsourcing appears to be the only alternative to meet costs, management calls in the union leaders and lays out the facts and figures before them. If the union and conununity respond with alternatives designed to retain local employment, management undertakes to consider those responses seriously and, while not agreeing to rescind its decision to move, undertakes to work with the union to save as many jobs as possible. 3. Management makes a preliminary assessment of the cost crisis and recognizes the need to consider outsourcing all or part of the manufacturing and assembly operations. Management then presents the union leaders with the problem and proposes to undertake a joint study to see whether cost requirements can be met while retaining some or all of the jobs in the local plant. Management and the union inform public officials and community leaders about the nature of the crisis and undertake to determine to what extent actions by public officials might help the company to meet its cost problems locally. Finally, if the joint study does not provide a realistic basis for retaining all or most of the jobs in the local plants, management reserves the right to resort to outsourcing. All of the companies in the cases described in this book followed a scenario similar to the second one above. Only Xerox, which had been using the CST process for a number of years, approached the degree of participation described in the third option. Only with such joint planning and

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accountability, however, can the greatest potential of the CST process be realized. Of course, there are situations in which keeping a manufacturing operation open is neither possible nor useful. In some cases, consolidating operations or closing the plant is the only viable alternative to going out of business. If management and labor have worked together to try to keep the firm competitive, the decision to close operations can provide an opportunity to look for new business or new product lines. Joint planning by labor and management in these situations can mean minimal job loss and economic dislocation.

Conclusion Increasingly, union leaders are beginning to think more broadly about the total cost structure of manufacturing, about the future of the industries in which they work, and about the long-term security of their members. The United Steelworkers, for example, have bargained for labor-management committees to deal with economic and productivity issues at both the corporate and plant levels, in the hope of avoiding any further losses in the industry. There are countless other examples of unions that have taken the initiative at the plant or corporate level and gotten involved in operating their companies more efficiently (see resource guide). The companies in which these efforts occurred are joined by many other firms that have decided that operating in the United States is a more stable prospect in the long run than moving offshore for short-term profits. They are discovering that the skills of their work force are a valuable asset in producing high-quality products in a quickly changing marketplace. At the same time, state governments are beginning to assist troubled firms through legislation such as New York's

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Omnibus Economic Development Act, which provides funds and expertise to companies in danger of closing and to companies trying to increase their efficiency and profitability. The emphasis of such state-funded programs is on keeping manufacturers in the state viable and helping them expand. Many managers are unaware of how effective study teams can be in the challenge to remain competitive. Others see as threatening, or impossible, the prospect of giving workers and managers the responsibility to investigate ways to solve economic problems. Likewise, many union leaders are unaware of such in-house strategies as CSTs. Others feel that working on issues of competitiveness is management's job, not the union's. For those interested in discovering the potential of labor-management collaboration, CST experiences can provide inspiration and guidance.

PART TWO

6 Starting a Cost Study Team A

s illustrated by the case studies in this book, CSTs can differ from one another in many ways, depending on the reason they are formed. A CST can focus on a single department, on several departments, on an entire operation, or on the plant as a whole. CST members can work on their project full time, relieved of their regular job duties, or only part of the work week. Depending on the scope of its mission, a CST can complete its study in a few weeks or over several months. CSTs can function in ways other than those illustrated in this book. They can also be "bid teams," for example. In this case, hourly or salaried employees, not ordinarily included in such activities, help construct the bids for new products or lines of work. CSTs can also be used to head off competitive problems or to monitor the cost performance of an operation. By alerting management and the union to unfavorable trends, the CST can help ensure that corrective

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action will be taken before problems become critical. And, as the case studies in this book illustrate, CSTs can be used as a "last resort" to try to save an ailing business. They are most effective, however, when the operation is still competitive and viable.

Elements for Success To maximize the chance of success, the following seven elements should be carefully considered when starting a CST. They are the foundation for building an effective team. l. A group of top-level managers and union officials should be formed to sanction, guide, and monitor the CST process. This group should meet regularly to provide ongoing leadership of CST activities. 2. Both union and management employees should be included on the CST. 3. Members should be given access to all of the people and information they need to conduct an effective study of the operation under question. 4. CST members should be allowed adequate time to complete their mission, including time away from the job. 5. The CST should be given a specific dollar target at the outset. 6. Before the CST begins work, a procedure should be agreed upon for evaluating the CST's recommendations. 7. The CST process should be initiated before commitments have been made to outsource work or close an operation.

Other elements such as training in problem solving and group communication skills are important but are less critical

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than the seven dements above. Integrating these dements into the CST process from the start will help managers and union leaders avoid problems later on. Small companies, or firms with few resources to devote to a CST, may find it difficult to follow all the details of the recommendations included in this chapter. But even companics with limited resources should be able to follow the suggestions above, with modifications if necessary.

The CST Process The remainder of this chapter outlines a step-by-step process for setting up a CST. This process consists of eight general steps: 1. 2. 3. 4. 5. 6. 7. 8.

Identify the problem. Form a joint labor-management committee. Develop a plan and target for the team. Form the team. Study the problem and develop solutions. Present and evaluate recommendations. Implement recommendations. Evaluate and follow up.

This eight-step process is based on experience gained from participating in and studying the CSTs discussed in this book, combined with experience from related labor-management activities. Following this process does not guarantee success, but it can help a CST reach its goals. CSTs are encouraged to modify the steps to meet the individual needs of their situation.

Step 1: I dentijj the Problem The best time to form a CST is at the first indication that a department, a division, or an entire plant is losing its ability

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to compete-the sooner the better. If an employee involvement program is already in place, it can serve as the vehicle for initiating a discussion of CSTs between labor and management. Management has primary responsibility for keeping a close watch on the cost performance of a business, but union leaders need not wait for a crisis before getting involved. If the union suspects that a department, operation, or product line is becoming uncompetitive, it can approach management with a proposal to form a CST. Likewise, management can inform the union when costs have reached a point where jobs are threatened. Once one party has approached the other about forming a CST, discussion should focus on questions such as the following. Discussion of these questions will help both parties determine whether or not to form a CST. What operation is threatened with outsourcing, and what is the precise nature of the competitive threat? How much time is there before action must be taken? What courses of action exist to deal with the problem, and what are the consequences of each? Does the CST process seem to be a viable approach in this situation? Do both parties have a good understanding of what is required for a CST to succeed? Are both parties willing to invest the time and commitment necessary to proceed with forming a CST? Does either side feel that an outside consultant would be helpful in starting and guiding the CST process? Depending on the nature of the union-management relationship and the organization's experience with employee involvement activities, it may be wise to seek the assistance

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of an outside consultant. An experienced third party can provide useful ideas and suggestions on how to handle difficult issues that may arise during the CST process. Monies to fund consultants or for other technical resources may be available from local or state government agencies.

Step 2: Form a Joint Committee The CST must have the total support of top management and the union, from the time the decision to form the team is made until its final recommendations are presented. It is important that both parties stay involved as the work of the team progresses and recommendations are developed. Forming a joint committee of top managers and union officials is essential to the success of the CST process. This committee should meet regularly to review team activities and discuss and resolve issues affecting the CST. The existence of this committee reinforces to the team, and to the rest of the organization, that the CST has the full backing of both top management and the union. Because the joint committee plays such a crucial role, it should be formed as early in the CST process as possible. The joint committee should deal with problems that arise during the course of the CST's activities, especially those that may affect the collective bargaining agreement. A CST is not a substitute for bargaining, however, although some of its recommendations may need to be dealt with at the bargaining table. It is extremely important that management and the union monitor the CST together and discuss and resolve any difficulties. Composition. To ensure that the joint committee has the authority to make key decisions, top-level managers and representatives from the union executive board need to be in this group. Additional people may be included as needed.

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Responsibilities. Much of the success of the overall CST effort is in the hands of the joint committee. In addition to resolving difficulties, this committee has several important responsibilities throughout the CST process, including the following:

It develops a plan for the CST and sets its target. Formulates the general plan of operation and support for the team Defines the guidelines and boundaries of the team's activities Identifies the team's target It assists in selecting and training team members. Establishes criteria and the process for selection of members Publicizes the team's role throughout the organization Plans and participates in team member training Arranges for a meeting time and place for the team It supports the team throughout its study. Makes sure the team obtains needed information Validates dollar savings the team claims for its recommendations Keeps the rest of the organization informed about the team's progress Eliminates roadblocks Assists the team in packaging its final recommendations It helps in the implementation of the team's recommendations. Identifies and provides resources needed to implement recommendations

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Assigns responsibility for implementation of changes Tracks the effectiveness of changes Monitors to determine need for modification of changes Establishes a permanent mechanism for ongoing benchmarking of the operation against competition

Step 3: Develop a Plan and Tat;get for

the Team As indicated above, the union-management committee is responsible for developing the overall plan for launching and supporting the CST. In putting together this plan, several issues have to be discussed and decided on: Size of the CST How members will be selected Training they will need Need for office space and materials Boundaries and guidelines fpr team activities Time frame for completion of the team study Resource people who will assist the team The mission of the CST and the urgency of its task will determine some of the issues above. Once the focus of the team is agreed on, the joint committee can decide who will be on the team, whether members will work full time or part time, and the estimated time for completion of the team's study. Another important feature of the CST's plan is its target. The target is the total dollar savings the CST must identify to meet the needs of the business. It represents the "cost gap" the team must close by identifying cost-saving and productivity-improvement ideas. Both the union and management must agree on this dollar figure. To do so, the

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members of the joint committee must have all relevant financial information made available to them. Agreement must also be reached on what will happen if the team exceeds or falls short of its target. Again, it is important to clarifY this point early. Who will be responsible for evaluating the final recommendations of the CST and for determining the fate of the operation under study must also be clarified.

Step 4: Form the Team The composition of a CST is vital to its success. Whether a formal interviewing and selection process will be used or members will be simply appointed by the union and management, the joint committee should discuss the skills or qualifications required of CST members. Many criteria can be considered in making this decision: Work records Knowledge of the area to be studied Whether they are respected by co-workers Grasp of business fundamentals Ability to work in a group Attitude Degree of self-motivation Special skills necessary to the team's work Employees need to feel that the selection process is fair and that the team represents them. Otherwise they may be reluctant to suggest cost-saving ideas, or they may not support changes that are approved and implemented. Training Team Members. All team members need information about the three areas below to understand their

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nuss10n. It is important that the joint committee provide information on these areas during training: Guidelines and boundaries of the CST process Financial background on the operation to be studied Target or benchmark and how it was determined Some CSTs receive training in the following areas as well: Conducting meetings Consensus decision making Problem solving Cause-and-effect analysis Brainstorming Basic cost accounting Cost-of-quality analysis Interpreting charts and graphs Group communication Project management Time management Conducting interviews Making presentations Using calculators Technical experts from engineering, finance, and other departments should also provide training to CST members as appropriate. Probably the most critical part of a team's training will be the presentations on the finances of the operation to be studied. It is important that the team have a thorough understanding of all the financial and business issues related to their study. Management may consider some information confidential, so an agreement with the union needs to be worked out concerning this issue.

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Step 5: Study the Problem and Develop Solutions The examination of the threatened operation is the heart of the CST process. Major cost elements are examined, inefficiencies and causes of low productivity are identified, and ideas for improvement are collected and fashioned into specific proposals. This step can be divided into three phases, discussed below.

Phase 1: Getting Organized. A newly formed team may feel overwhelmed with its task and unsure how to proceed. Careful planning and coaching from managers and union leaders can help the team work through this uncertainty and develop its plan of action. It is not unusual for a team to spend a week or more preparing and organizing its activities. Members of the joint committee and other technical experts need to be available during this period. Before identifying projects for investigation, the team should do the following: Decide on a regular meeting time and place Elect a leader Agree on how the team will function Plan regular meetings with the steering committee Decide on a strategy for canvassing ideas from the work force

Phase 2: Analysis and Study. During this phase, members spend the bulk of their time developing specific recommendations and estimated cost savings. Possible areas for investigation would include the following: Work design Floor layout

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Work proceses and procedures Tooling and fixtures Equipment and utilization Staffing Material costs Service functions Quality performance Job training Production control system Overhead costs It may be necessary to clarify that some areas, such as wages and benefits, are exempt from investigation. Throughout the analysis phase, the operations manager with responsibility for the business being studied should be closely involved in the project. Members of the joint committee should talk regularly with team members as well. One effective way to organize activities is to assign pairs of team members to each project. Estimated timetables should be established for specific projects to assist in planning and tracking progress.

Starting the Investigation. Once the areas for study and analysis have been identified, the team can organize its study process guided by the following three questions: l. What do we know about this area? 2. What information do we need? 3. Whom do we see to get this information? Employees in the area under study are a valuable resource of information on problems and ways to improve. The team needs to develop a strategy for tapping this expertise.

Meetings with the]oint Committee. Regular meetings between the team and the joint committee are recommended.

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At these meetings, team members present the status of their projects and review future plans. The committee can ask questions, offer suggestions, and provide any help the team may need. Important issues or concerns can also be discussed and resolved. A regular schedule of meetings can be arranged, or they can be called as needed. Phase 3: Finalizing Recommendations. As the team nears completion of its srudy, recommendations for improvement need to be organized into a final report. This report should contain a summary of the recommendations, the cost savings for each, and supporting material from the team's investigation. The joint committee should help the team by providing suggestions and advice on what to include.

Step 6: Present and Evaluate Recommendations During this step the CST submits its findings to a group of top managers and union leaders for their review and evaluation. This group may be the same as the joint committee or include other members. Regardless of the members, the group should have responsibility for deciding the future of the operation under srudy by determining the feasibility of the cost-saving ideas and proposals developed by the CST. The group is also responsible for validating the dollar savings attributed to each idea. The length and content of the team's final report will depend on the scope of its srudy. Some are long and involved; others are brief. In any case, the team should be given clear directions on how to present its findings. All reports should include the following: An explanation of all cost-saving or productivity-improvement ideas

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A calculation of the dollars that would be saved as a result of implementing each proposal Supporting material from the team's investigation, documenting the proposals A plan for implementation The team may choose to submit its findings in a formal presentation, in a written report, or both. A deadline needs to be agreed on by management and the union by which time a final decision can be expected on the team's proposals. Making the Final Decision. The union and management need to be prepared to deal with several situations that could make deciding whether to accept or reject the team's proposals a difficult one. For example, a CST may identify substantial cost savings yet fall short of its target by a small amount. Does this mean that the operation should be outsourced? Alternatively, a team may identify what it thinks are sufficient cost savings but have them challenged during validation. Should the team have more time to find additional cost savings? Once a decision is reached about how to proceed, meetings should be held to let employees know the decision and its implications.

Step 7: Implement Recommendations Having a carefully planned strategy to guide the implementation process is essential to a CST's success. Top managers and union leaders need to work together closely in developing a strategy that includes the following: A step-by-step action plan A timetable for implementation

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Clear assignment of responsibilities Plans for the provision of needed resources Some changes the CST recommends will be more difficult to implement than others. Those that affect the labor contract, for example, will need to be negotiated. Others may require a significant investment in time or resources before they can be put into effect. Less complicated changes can be made as soon as the action plan is developed. Overcoming Resistance. Depending on how employees view the approved changes, they may express some resistance. Carefully considering how a change will affect both employees and work routines can help in gaining employees' acceptance. Communicating the purpose and benefit of changes will help everyone understand how the changes will improve the operation. It is important to be specific about what people will be asked to do differently and why. Assigning Responsibility for Implementation. Someone needs to be responsible for overseeing the implementation process. Because they are familiar with the changes to be implemented, members of the CST can be effective in this role. This can be either a part-time or full-time responsibility for one or more members of the CST. Operations managers will have to be closely involved in putting in place changes that affect their areas, but asking them to take on this responsibility entirely may be too much for them to handle in addition to their regular job duties. CST members can assist the managers in this process. The joint committee should continue to meet regularly to guide the implementation process, provide needed resources, coordinate with those making the changes, and smooth out problems.

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Step 8: Evaluate and Follow Up The final step in the CST process is an evaluation of the effectiveness of the changes that have been implemented. Did the change lead to anticipated cost savings? Did improvements occur as planned? Were there any unintended side effects of the changes? It is often difficult to predict the exact impact a change will have before trying it out. Continual monitoring can provide the information necessary to make this evaluation. If a change is not working out as planned, corrective actions may be needed. Maintaining open lines of communication with employees can ease this process. Assigning Responsibility. As with the implementation of changes, an individual or group needs to be responsible for evaluation and follow-up. Measures need to be developed to track performance closely to let management and the union know whether the operation is regaining its competitiveness. Benchmarking. Evaluation is not a one-shot activity. To prevent an operation from losing its competitive edge is an ongoing challenge. Benchmarking the operation against outside competition needs to be a permanent responsibility of the organization. CST members or other individuals can assist management in this process.

Resource Guide

Appleborne, P. "U.S. Goods Made in Mexico Raise Concerns on Loss of American Jobs." New York Times, December 29, 1986, p. A1(L). This article reports on the national concern over the maquiladora or twin-plant strategy whereby American companies set up plants on the Texas-Mexico border. As Appleborne notes, critics assert that Mexico is being allowed to pay off its foreign debt at the expense of American workers, subsequently lowering American consumer demand. Audi, F., and McCutcheon, R. L. "Cooperation between Steel Companies as a Result of Worker Participation." Work Life Review 1 (November 1982): 10-11. As this article recounts, union officials from Copperwelt Steel warned the local of one of its suppliers, Bethlehem Steel's Johnstown plant, that unless measures were taken to correct delivery problems, Copperwelt would switch to an overseas supplier. With the support of their respective managements, union representaThe information in this guide was researched and annotated by Taylor Hollander.

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tives toured each other's facilities and discovered ways to improve shipping and handling of the product. These ideas were successively implemented and have enhanced the productivity of both compantes. Baker, S. "The Magnet of Growth in Mexico's North." Business Week, June 6, 1988, pp. 48-50. This article reports on the dramatic increase in maquiladoras throughout northern Mexico since 1982. Baker discusses some of the economic and political causes of the phenomenon and predicts the formation of one unified manufacturing region on both sides of the border. Bernstein, P. Workplace Democratization. New Brunswick, N.J.: Transaction Books, 1983. This book is a theoretical study of the transformation of the workplace as it moves toward giving employees greater influence over management decisions. Bernstein discusses options ranging from soliciting employees' opinions in managerial decisions to worker management and ownership. Bluestone, B., and Harrison, B. The Deindustrialization ofAmerica: Plant Closings, Community Abantknment, and the Dismantling of Basic Industry. New York: Basic Books, 1982. Bluestone and Harrison express concern over the ''widespread disinvestment in the nation's basic productive capacity" through the reallocation of profits, plant shutdowns, and physical relocations. One of the results, they say, is long-term unemployment for at least one-third of the workers directly affected. After reviewing various reindustrialization plans, the authors endorse "a social safety net" of legislation, early warning systems, and "radical industrial policies" for economic growth. Bluestone, M. "Machine Parts: It Really May Pay to Buy American," Business Week, May 30, 1988, p. 101. This article describes a study coiP..missioned by the National Tooling and Machining Association that analyzed the hidden costs of

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outsourcing overseas. The article warns that buying parts from foreign vendors may be more costly than buying from domestic suppliers. Bywater, W. H. "How U.S. and Mexican Workers Lose Together." New York Times, January 26, 1987, p. A34(L). In this letter to the editor, Bywater, the president of the International Union of Electronic Workers, criticizes an earlier New York Times editorial on maquiladoras. He questions how the writer

could ignore the harmful effects of this strategy, which Bywater claims puts Mexico through the "export development wringer'' and takes jobs away from American workers. Carey, C., and Buchsbaum, A., coordinators. Lieutenant Governor's Task Force on Plant Closings. Final Report (unpublished manuscript, March 1985). This report provides data on job loss and plant closings in the last two decades in New York State. Cohen-Rosenthal, E. "Orienting Labor-Management Cooperation toward Revenue and Growth." National Productivity Review 4 (Autumn 1985):385-96. Cohen-Rosenthal asserts that healthy industries, as well as those that are failing, should implement quality-of-work life and employee involvement programs as a way to cut costs and improve market position, product development, and customer service. Examples are given of how labor-management cooperation has benefited both parties by enhancing revenue and growth. Dreyfach, K., and Post, 0. ''Even American Know-How Is Headed Abroad." Business Week, March 3, 1986, pp. 60-63. This article focuses on the negative effects of "globalization." Its primary position is that in an effort to become more competitive, the United States has eroded its industrial base. The authors warn that the United States is losing its expertise in product design and technological innovation as more products are being manufactured overseas.

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Foster, G. "Lucas Aerospace: The Truth." Management Today, January 1979, pp. 34-41, 106. This article provides an overview of a highly publicized effort by British workers to prevent layoffs and plant closings at the Lucas Aerospace Company. Discussion focuses on how a team of shop stewards was formed to develop and propose a range of activities and products so that jobs could be preserved. 1bis initiative sparked many similar activities around the world. Fraser, D. A. "Employee Participation for Productivity: A Labor View." In Productivity: Prospects for Growth, edited by Jerome M. Roscow. New York: Van Nostrand Reinhold, 1981. Fraser, the retired president of the UAW, maintains that job security must be the basis for cooperating to improve productivity: ''Until a full employment society becomes a reality, society cannot expect nor demand unambiguous employee participation for productivity improvement." The UAW's move to seek representation on Chrysler's board of directors is presented as an example of an attempt by the union to address all issues affecting workers' lives. Givens, A. "Fighting Shutdowns in Sunny California." Labor Research Review 5 (Sununer 1984):1-14. Givens describes the efforts of a California labor-church-community coalition to prevent plant closings and gain benefits for both workers and the community. The author reviews how the coalition learned to be proactive and develop alternatives to job losses, rather than respond to business crises "just at the factory gates." Goldstein, M. L. "Chasing the Right Stuff." Industry Week, December 14, 1987, pp. 22-27. As this article reports, while United States companies are outsourcing to foreign countries, foreign multinationals are setting up shop in the United States because of the market opportunities, strategic business alliances, political climate, and access to new technologies. Goldstein maintains that the differences in labor costs between nations are actually diminishing as more and more

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nations are attempting to raise their standards ofliving. He quotes Peter Drucker, who asserts that outsourcing as a means of obtaining wage cost advantages is unlikely to survive the twentieth century. Gray, L. "Union-Management Cooperation: A Passing Fad or Permanent Change?" Labor Studies JournalS (Winter 1984):20920. This overview of union-management cooperation emphasizes that collaborative efforts are not a new phenomenon. It considers why cooperation is a worthwhile effort and what forms it can take. The necessary conditions for success and the implications for the future are also examined. Gunn, T. G. Manufacturing for Competitive Advantage. Cambridge, Mass.: Ballinger Publishing Co., 1987. Gunn analyzes the competitive environment confronting United States manufacturers, with an emphasis on the effects of the global economy. The author recommends a comprehensive set of strategies for redesigning the manufacturing process, focusing on the use of capital investment and intact resources as the means to compete rather than relocating or outsourcing. Gutfeld, R. "Most U.S. Manufacturers Would Locate New Plant Here, Not Offshore, Poll Finds." Wall Street Journal, October 7, 1987, p. 17(E). Gutfeld reports on a survey of executives at two hundred large and medium-sized manufacturers in which the majority responded that they would be more likely to locate a new plant in the United States than overseas. The author notes that the executives have discovered that foreign production "isn't as easy a dollar as they had hoped" because of unstable currencies, foreign government regulations, and the quality of the work force. Hammer, T., and Stem, R.N. "A Yo-Yo Model of Cooperation: Union Participation in Management at the Rath Packing Com-

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pany." Industrial and Labor Relations Review 39 (April1986):33739. The authors develop a model of union-management cooperation in which union leadership fluctuates between close cooperation with management to save the firm and "adversarial behavior'' when cooperation endangers union strength and cohesiveness. They conclude that everyone must ensure that efforts at cooperation do not challenge the legitimacy of either party, for such a challenge can lead to the breakdown of the cooperative process and the termination of joint activities. Hayes, R., and Abernathy, W. "Managing Our Way to Economic Decline." Harvard Business Review 58 (July-August 1980):67-77. The authors argue that the problems of American business are not attributable solely to general economic forces. American managers are also to blame for placing too much emphasis on shortterm cost reductions rather than the long-term development of technical expertise. Consequently, while American companies reduce labor costs by producing overseas, many are still threatened by better managed foreign competition. Hickey, J. V. "UAW Initiative Saves 203 Jobs in GM Warehouse." World of Work 12 (April 1987). Hickey reports on how the threat of outsourcing galvanized members of UAW Local 686 at the Harrison Radiator warehouse division in Lockport, New York, in an effort to save their jobs. A team of union members identified cost savings of $2.5 million projected over five years. "The lAM lOO'Model': A Debate." Labor Research ReviewS (Summer 1984):81-118. In two articles introduced by Jack Metzger, Lance Campa and Paul J. Baicich and Randy Barber and Andrew R. Banks discuss whether the lAM 1OO's approach to collective bargaining with Eastern Air Lines, which resulted in concessions in the 1983 contract, was an innovative "model" for the future of the labor movement or a return to the "New Capitalism" of the 1920s. The

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authors ask whether the extensive research, initiative, insistence on reciprocal and equitable sacrifices and offers, and demands for input into the decision-making process really augmented the position of workers and the union at Eastern. "IBM Is Leading the Way." Business Week, June 16, 1986, p. 122. This editorial focuses on IBM's decision to produce parts in United States plants rather than abroad. It argues that the ability ofUnited States manufacturing to remain innovative requires that technology and skills remain at home. Jonas, J. "The Hollow Corporation." Business Week, March 3, 1986, pp. 57-59. Jonas argues that the current trend ofUnited States manufacturers to shift output to foreign countries and/or buy parts from abroad creates hollow, service-oriented corporations. He contends that the United States cannot prosper without a strong production base that spurs innovation and boosts the standard of living. Juravich, T. Chaos on the Shop Floor. Philadelphia: Temple University Press, 1985. This study of shop-floor workers in a small New England parts plant focuses on mismanagement, stemming from the chronic inability of many managers to recognize their workers' potential. Results reveal that failure by manag~ment to train properly and a fear of worker initiative have resulted in contempt for workers' knowledge, an increase in the number of workplace accidents, and poor-quality production. Keller, E. L. "Atari Says Goodbye to Pacific Rim." Manufacturing Week, February 22, 1988, pp. 1, 6. Keller discusses the decision by the Atari Corporation to return production of its consumer electronics products from the Pacific rim to the United States. The decision was motivated by a need for more product consistency, better production control, and lower costs.

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Kochan, T. A., Katz, H. C., and Mower, N. R. Worker Participation and American Unions. Kalamazoo, Mich.: W. E. Upjohn Institute for Employment Research, 1984. This study reports on the experiences of unions involved in worker participation programs. Included are case studies that illustrate the stages of worker participation projects and an analysis of survey data collected from rank-and-file union members and union activists, officers, and top labor leaders who have been involved in such projects. The conclusion is that such ventures are most successful when the union is a full partner in the process, when the changes that are implemented enhance employment security and productivity, and when union leaders can link their support of participation to their collective bargaining strategies. "Labor Tackles the Local Economy." Labor Research Review 9 (Fall 1986). The premise of this series of articles is that the labor movement needs to organize community coalitions to fight deindustrialization. The conclusion is that it is organized labor's responsibility to take more of a lead in monitoring local economic activities. Local governments should be enlisted in the fight to head off attempts to attract transient corporations and thus lower the communities' standards of living. Lazes, P., and Costanza, T. "Xerox Cuts Costs without Layoffs through Union-Management Collaboration." Labor-Management Cooperation Brief. Washington, D.C.: U.S. Department of Labor, Bureau of Labor-Management Relations and Cooperative Programs, July 1984. Lazes and Costanza describe a collaborative project between Xerox and the ACIWU that utilized a labor-management study action team to prevent subcontracting. As a result of this team's work, the department's 180 jobs were saved. Subsequent changes included the physical design of the department, expansion of employee responsibilities, upgrading of equipment, and the elimination of unnecessary overhead expenses. Included is a discussion of the lessons learned from the project.

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Lazes, P., Rumpeltes, L., Hoffner, A., Pace, L., and Costanza, A. "Xerox and the ACTWU Use Labor-Management Teams to Remain Competitive." Columbia Journal ofWorld Business (forthcoming). This article examines the use of commodity study teams at the Xerox Corporation, focusing on their effectiveness as a technique for employee involvement. Activities from 1981 to 1984 are described and analyzed. Lueck, T. J. "Saving Jobs in Buffalo: Victory and Loss." New York Times, February 17, 1987, pp. 14(N), B1(1), col. l. Lueck describes Trico's plan to scale back its manufacturing operations by moving to the Texas-Mexico border. He suggests that Trico's experience, especially the roles of the company, union, and PEWS, should serve as a model for other companies that are considering options other than closing and layoffs. Main, J. "Anatomy of an Auto-Plant Rescue." Fortune, April 4, 1983, pp. 108-13. Main reports on the events at the Detroit Trim plant after the union approached management in an attempt to prevent a shutdown. An agreement was reached that led to an intense cooperative effort to increase productivity, and, after three months, the savings target was exceeded. Layoffs still occurred but fewer than anticipated. Milliken, R. ''Textile-Fiber-Apparel Industry Opposes Caribbean Proposal." New York Times, December 9, 1986, p. A34(L). In this letter to the editor, Milliken, the president of a textile company, opposes the federal government's program of encouraging American textile and apparel companies to take advantage of the low wages in Caribbean countries. Arguing that losing jobs is not in the best interest of the United States, he asserts that moving offshore is contributing to the dismantling of the country's manufacturing base.

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"Mismanagement and What Unions Can Do about It." Labor Research Review 10 (Spring, 19 8 7).

This series of articles presents five case studies to illustrate strategies unions have used to combat mismanagement. In so doing, the articles demonstrate the weakness of the traditional argument that management alone has the prerogative to determine how plants are to be run, where they are to be located, and how profits are to be distributed. Mitchell, C. F. "Corning Home-Some Firms Resume Manufacturing in U.S. after Foreign Fiascos." Wall Street Journal, October 14, 1986, p. 1(E). Mitchell reports that companies are discovering that foreign havens with low labor costs are not as rewarding as many managers initially believed. Often the labor savings are offset by expenses for inventory, customs, and transportation. The author concludes that if companies would look more closely at their production divisions, they would find that they could operate more efficiently in the United States. Mohrman, S. A., and Mohrman, A. M. "Employee Involvement in Declining Organizations." Human Resources Management 22 (Winter 1983):445-65. The authors present the common behavior patterns that occur during employee involvement efforts in declining organizations. Characteristics of the employee involvement process are also discussed. Emphasized is the critical role of leadership in establishing and maintaining the credibility needed for such efforts to succeed. Moskal, B. S. "An Age of Realism." Industry Week, December 14, 1987, p. 19. As reported here, a poll of 5,400 employees revealed that job

security was the key issue of concern, whether they were in the most senior levels of management or on the shop floor. Respondents, including managers, criticize current management practices as conservative rather than innovative and reactive rather than proactive.

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"Packard/IDE Pact Uses Retraining to Save Jobs." Work in America 12 (September 1987):4-8. As recounted here, as a result of an informal meeting of Packard management and union representatives to explore ways to prevent work and plant relocations, a joint plan was created which recognized true job security as possible only when the company was competitive in the marketplace. Packard's subsequent 1984 collective bargaining agreement symbolized a break from a history of conflict and mistrust by advocating a commitment to cooperation. The agreement laid the groundwork for this cooperation by including a section on retraining employees to meet the requirements of new technology.

Saporito, B. "Cutting Costs without Cutting People." Fortune, May 25, 1987, pp. 26-32. Saporito asserts that it is possible to cut costs without laying off people, using methods such as employee involvement and labormanagement cooperation. Several cases in which corporations have attacked cost problems using such methods are discussed. Serrin, W. "Subcontracting: A Key Issue for Labor." New York Times, November 26, 1986, pp. ll(N), B8(L), col. l.

Serrin proposes that subcontracting has negative effects on companies as well as on workers. Because the companies are paying just for what they need, a second-class work force of temporary and part-time labor is created. The alternative, Serrin says, is to use cooperative labor-management strategies to keep costs down. "Stateside Production Gains Favor with More Manufacturers." Wall Street Journal, June 25, 1987, pp. 1(E), 1(W), col. 5. This article reports on a 1987 survey by the Boston University School of Management Manufacturing Roundtable which revealed that 32 percent of American manufacturers were expecting to increase production in the United States rather than in facilities abroad, a 19 percent increase over 1986. Explanations for quality problems and examples of the hidden costs of global outsourcing are g1ven.

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Talbot, V. G., and Oldham, L. B. "Labor-Management Committees: A New Look at an Old Idea." Workplace Democracy 52 (Spring 1986):12-13, 17. Talbot and Oldham define and examine several types of labormanagement committees, focusing on those in Illinois. The authors argue that communication and decision-making channels have to be opened up for the assumptions governing workermanagement relationships to be changed. Teresko, J. "Challenging Traditions." Industry Week, January 12, 1987, pp. 34-35, 38-40. Teresko argues that manufacturers have to escape the traditional view that "labor check[ s] its brain at the time clock," realize that "labor is part of the solution," and stop "chasing labor around the globe rather than understanding the total cost picture." CEOs, who were interviewed for this piece, comment that the typical cost reduction approach concentrates too much on labor and not enough on distribution. If American companies attacked distribution problems directly, they would not have to produce offshore to lower their costs. "Union Spearheads Improvement Effort at Gulf Canada." National Productivity Review, March 15, 1987. This article describes a Canadian union's proposal to management to establish a joint task force to improve the competitive position of its refineries. The idea was to be profit-oriented, while aiming to involve all workers. Questionnaires were distributed to the employees, soliciting their ideas on how to improve operations. A majority of the suggestions were implemented, and eventually the company was getting a five-to-one return on the dollar. Watt, M. "From South Korea, Tandy Moving PC Line Back to U.S." Manufacturing Week, November 23, 1987, pp. 1, 10. As discussed here, the Tandy Corporation predicted a 7 percent

cost savings as a result of moving manufacturing from South Korea back to the United States. Improved lead times and inventory

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controls associated with domestic production contributed to Tandy's decision. ''Workers Have Brains Too: An Interview with Irving Bluestone." Workplace De1n()cracy 9 (Summer 1982):5-7, 16-17, 20. In this interview the former vice president of the U AW discusses the growing interest among American unions and companies in labor-management cooperation, the resistance by both management and labor to this new relationship, and methods to encourage further cooperation. Zager, R., and Rostow, M.P., eds. The Innovative Ot;ganization: Productivity Programs inAction. New York: Pergamon Press, 1982. This collection of articles describes efforts by a dozen leading corporations and unions to introduce ''work innovations" or utilize the creative abilities of their employees. The focus is not on the mechanics of such innovations but on policy issues that created conflict. This book is designed to assist parties who are considering such innovations or who have already introduced them and want to learn from others.

Acknowledgments

Programs for Employment and Workplace Systems (PEWS) is an arm of the New York State School of Industrial and Labor Relations of Cornell University. PEWS works as a neutral third party with management, labor, and community leaders to develop cooperative strategies that enable organizations to remain competitive, save jobs, and improve working conditions. This book is the result of the collaborative efforts of many managers, union leaders, rank-and-file workers, consultants, and representatives of state agencies. The union leaders, workers, and managers at Xerox, Harrison Radiator, and Trico not only provided information on their cost study teams, they also reviewed and critiqued drafts of the manuscript. We have tried to present their views and perceptions as accurately as possible. We hasten to add, however, that the interpretations presented are ours alone. As the teams we describe involved collaboration by labor, management, and government groups, so too the research for and writing of this book involved collaboration by the staff of PEWS. Each chapter was researched and written by

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several people, whose contributions are described below. The cooperative nature of this process makes it impossible to credit each person with the acknowledgment he or she deserves. Mike Gaffney, a PEWS associate, came up with the idea for this book and helped Peter Lazes, co-director of PEWS, secure funding and develop the structure and scope for the research part of this project. Mike, Peter, and Don Kane, co-director of PEWS, and William Foote Whyte, research director of PEWS, provided valuable guidance and suggestions throughout the course of the project. Professor Whyte inspired and assisted in the writing and editing process from the first page to the last. This book was made possible by partial funding from the Industrial Cooperation Council (ICC). Lee Smith, executive director of the ICC, provided not only research monies but ideas and motivation. His critiques of various drafts of the manuscript helped keep the book focused and clear. Involvement by PEWS staff with cost study teams began with the work of Peter Lazes, who assisted in setting up the first CST at Xerox and worked with the union and management throughout the team's work. Ron Mitchell, a PEWS associate, provided assistance and training to subsequent CSTs as an external consultant to Xerox's manufacturing division. The material presented on Xerox was gathered through numerous interviews with Xerox study team members, managers, and union officials. Peter Lazes and Tony Costanza wrote the original analysis of this activity in 1982. In 1984 and 1985, Leslie Rumpeltes, a PEWS graduate research assistant, did further research and a report that became the foundation for the case study included here. Sally Klingel, a PEWS associate, researched the most recent study team activity and wrote the case study, drawing on an article written by Peter Lazes, Leslie Rumpeltes, Ann Hoffner, Larry Pace, and Tony Costanza. She was greatly

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aided in this process by the insights of Ron Mitchell and Peter Lazes. Very special thanks go to Nick Argona, Bob Attardo, Les Calder, Tony Costanza, Larry Pace, and Bill Roscoe for sharing their experiences and ideas with Cornell University researchers over the course of several years. Thanks also go to the Xerox study team members and advisers who described their experiences thoughtfully and candidly. Ann Martin, a PEWS associate, researched and wrote the Harrison Radiator case study, with the active collaboration of union members and officials and managers at Harrison Radiator. The first contact between PEWS and the distribution center at Harrison occurred when Mike Gaffney described cost study teams to union representatives prior to the formation of Hog's Helpers. The managers responsible for the distribution center, members of Hog's Helpers, and the Building 9 UAW-QWL facilitator were all helpful, patient, and tolerant as PEWS staff compiled information on the CSTs. Special thanks are due to the union bargaining committee and the materials and QWL managers at Harrison for their careful critiques of the manuscript. Research for the Trico case study was done by Morten Levin, a visiting professor from the Norwegian Institute of Technology in Trondheim, Norway, and Frances Viggiani, a PEWS graduate research assistant, who wrote a longer report on the case with a grant from the ICC. Levin and Viggiani interviewed union leaders and management at Trico and Lee Smith of the ICC, who helped Trico start and finance the study teams. PEWS staff members Terry Flynn, Mike Gaffney, and Peter Lazes, as consultants to Trico and the UAW, provided training, technical assistance, and consultation throughout the CST process. Their experiences and insights were helpful in writing the shorter account of the Trico experience that appears in this book. This version was written by Morten Levin and William Foote Whyte. Special thanks go to Trico's chief executive officer and the

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union president, as well as to consulting engineer Gene Simons, who provided honest, thoughtful reviews of the study and countless details on Trico's CSTs. Chapter 6, "Starting a Cost Study Team," was written by Ron Mitchell. The material in the chapter is based on the experiences of the PEWS staff with CST -type activities and reflects the contributions of the entire staff. The same collaboration occurred in the writing of the introduction and chapters 4 and 5. The resource guide was researched and annotated by Taylor Hollander, a PEWS graduate research assistant, who also provided valuable comments on the manuscript at various stages. Thanks also go to Davydd Greenwood for his comments and encouragement. Finally, we are grateful to Shannon Armstrong, Sharon Dalzell, and Caren Lee Michaelson for their word processing and organizational skills and general forbearance. We also thank the ILR Press for its encouragement and for dealing with the complexities of a collaborative project; Erica Fox deserves special thanks for her extraordinary editing skills and diligence.

A Fighting Chance documents an inexpensive, Aexible strategy to save jobs and enhance a company's competitive position. It presents three case studies of firms that have used this innovative strategy called cost study teams. The authors discuss the effects of the teams on union-management relations and explore the elements that have led to their success or failure. A Fighting Chance also includes a manual of step-by-step guidelines for the formation of cost study teams. "A Fighting Chance is an important book ... it describes how companies that have had the courage to break with tradition and involve workers have achieved greater competitiveness. This book demonstrates that workplace participation can be profitable-for workers, companies, and, ultimately, the nation." Mario M. Cuomo, Governor of New York "American companies faced with international competition do have alternatives to cutting wages, downsizing, and outsourcing .... A Fighting Chance .. . is an important resource for anyone concerned with competitiveness and the future of America's jobs and standard ofliving." Jack Sheinkman, President Amalgamated Clothing and Textile Workers "{A Fighting Chance] fills an important niche in the literature on productivity improvement, participation, and multi-stakeholder efforts." Susan Mohrman Center for Effective Organizations University of Southern CalifOrnia

Cover design by Kat Dalton

ISBND-6754b-l45-X