Wednesday, February 6, 2002

Managing & The Firestone Debacle

David Wessel's article in the Wall Street Journal on January 10, 2002, titled “The Hidden Cost of Labor Strife” describes how incorrectly reducing labor costs results in higher operating costs.

Fortune Magazine often cites various examples of correctly reducing costs in difficult times, while encouraging employees to remain sympathetic, helpful, supportive of your decisions.,

At Emerson Electric, we never had employees be sympathetic and helpful when we sought wage cuts, job rule changes or downsizing. However we never encountered labor strife and rarely a strike. Chuck Knight was a ferociously difficult CEO with his officers. But he was very reasonable and fair, with lower level salaried or hourly employees.

As a result, we never offered harsh and unreasonable terms in any negotiation. We were trained to manage with a union including candid, frequent communication. We stopped trying to decertify unions essentially because of the poor return on investment. If the union chose to strike, we had built a strike hedge and organized non-union employees to staff the plant. We never lost a strike.

This Wall Street Journal article is based on the findings of two Princeton University professors. Firestone Tire offered harsh, one-sided rule changes, wage cuts with new 12-hour shifts in an effort to reduce its Decatur, IL costs. They defeated the strike. Workers were forced to return to work and accept the new terms. As a result, this plant produced the bulk of the defective tires that resulted in 40 deaths.

Fortune Magazine cites the reasons companies are rated 'Best to Work For': (1) Employees are treated with dignity and respect, (2) The CEO is personable and uses “random walk” to talk to employees informally. Employees said they want to see the CEO, touch him and talk to him, (3) Knowing what is going on in the company and how it is doing. The reasons for decisions. Communicating the why for a downsizing and the alternatives. (4) In bad times management and employees are treated the same. (5) All of which leads to “trust” of management, an important factor. (6) Money or salary was not a prime factor.

Interestingly, terminated employees in a downsizing within these 'Best To Work For' operations, were often understanding and productive, even while working their last day on the job.

Companies considered by employees to be the 'Best To Work For' tend to be best performers.

See Fortune's "100 Best Companies to Work For”