Does the Stakeholder Capitalism Movement Create the Environment for Union and Management Reset?

This Enterprise Engagement Alliance YouTube Show, “Unions in the Emerging Era of Stakeholder Capitalism,” suggests that a new generation of both management and labor leaders could lead to an era of greater cooperation between labor and management. What is lacking are trust and business and labor leaders knowledgeable about the potential benefits of labor-management collaboration and how to fully capitalize on it.
 
Unions with a constructive mindset can create significant value for organizations in terms of worker voice, training, healthcare, safety, wellness, and worker onboarding, and senior management can benefit by having a more open mind to the role that unions can play in sustainable performance. These are some of the key findings of the Enterprise Engagement Alliance YouTube show, “Unions in the Emerging Era of Stakeholder Capitalism,” featuring Thomas Kochan, George Maverick Bunker Professor Emeritus of Management at the Sloane School of Management at MIT and Larry Beeferman, Independent Consultant and Fellow at the Harvard Law School Center for Labor and a Just Economy.

Click here to view the show. Click here to listen to the podcast.
 
According to Kochan, union and management relations hit their high point in the 1980s and early 1990s, until the US entered the era of shareholder value maximization, pushing companies to shut down union facilities and export jobs overseas. The good news now for the labor movement, he says, “is the enormous increase in worker interest in organizing and gaining a stronger voice at work. And that activism is leading to a bit of a reassessment on the part of some business executives that I think is starting to move us in a more positive direction that I hope we can sustain.” Kochan co-authored an article in Harvard Business Review, "The Labor-Savvy Leader," which argues that "the time has come for management to start working with--rather than against--organized labor," especially because union organizing is once again on the rise in the US. 

Labor-Management Cooperation Can Enhance Performance

The reason for progress in the end will be driven by economics. Kochan says there is ample evidence that organizations with a high level of labor- management cooperation can outperform non-union organizations as a result of greater involvement of workers in continuous improvement, quality, productivity, and efficiency; and economies of scale in training and development, healthcare and wellness, onboarding, and potentially other human resources functions that can be more effectively managed across multiple corporations.
 
For labor-management cooperation to sustainably enhance performance, “it has to start and be grounded with workers on the front lines, contributing ideas for continuous improvement,” he underlines. As an example, he cites the labor-management participation of the Kaiser Permanente organization. “Now, it has had some rocky times and it's going through some challenges right now, but by and large the  foundation of that partnership is right there in what they call unit-based teams; that is, teams of various doctors, nurses, technical specialists and service employees who meet to talk about how to do one of four things: improve cost controls; improve service quality; improve the patient experience in terms of attitudes, and improve Kaiser as a place to work. They take these missions as the compass for how they focus their energies in monthly meetings to discuss ideas and then follow up. There's a very well-developed training process for participants on how to conduct these meetings, how to follow up on them, how people will be held accountable, and how their actions have improved quality, patient outcomes, safety and health of the workforce, and so on.”

Beeferman points out that unions can help enhance employee involvement and engagement because employees have greater trust that they can speak their minds to the union, and because, unlike their management, employees can fire their unions. In addition, Kochan notes that most employees have a greater confidence in the union than in the human resources department when it comes to whistleblowing or bringing to light workplace indiscretions or even making suggestions for that matter.
 

Trust the Major Impediment to Progress

The biggest challenge to improving labor-management relations is trust, Kochan and Beeferman agree. “The question is how to regain it,” asks Beeferman. The answer in part, answers Kochan, is training on both the management and labor side. “With the decline of unions has come the loss of management who understand how to work with unions, as well as an aging generation of union leadership who might not be as attuned today to the needs of younger workers.” Kochan sees a need for training a new generation of management in both labor and in corporations on the components of effective labor-management cooperation focused on sustainable value creation that grows the pie for all stakeholders.

Just as an adversarial approach by unions creates management distrust, the adversarial approach to unions undermines worker trust, they both agree. “Trust is earned, and it has to be demonstrated that there can be a positive relationship between the union and the company. That often means starting on small projects," suggests Kochan."That enables you to build personal relationships between the leaders of the company and the leaders of the union. The goal is to develop some common vision for where you want to go and what's needed in the business to be successful and what changes are coming down the road that are going to require some adaptation and innovation.”
 
If a company is facing union organizers, it’s a bad idea, he says, to “bring in a bunch of anti-union consultants to fight the union to the death. That really creates an atmosphere that is almost impossible to overcome in the short run. If you don’t respect workers’ rights and you as an executive don’t listen to what workers are saying and take the egotistical approach some executives have taken that says, ‘I know what's good for you as workers and I’m a good employer and I take care of you and we don't need this third party,’ that is fighting the labor wars of the past with rhetoric that has no meaning to workers and creates distrust.” Instead, he says management should say “all right, here's the reasons I think you don't need to organize, and make your case respectfully, making it clear that the company will accept the results.”

Kochan says there are multiple case studies of unions working together with management to achieve critical goals and that these examples can be used to demonstrate how unions can be positioned as value creators, rather than as adversaries. That said, neither Beeferman nor Kochan would comment on whether some unions might or could reposition themselves as value creators and make their case not only to workers but to shareholders that current management is failing to maximize shareholder value as a result of poor people management and that constructive labor-management relations is a logical solution. 
 
For More Information
 
Bruce Bolger, Founder
Enterprise Engagement Alliance
Bolger@TheEEA.org