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Job Security Equals Company Security

Posted on May 22, 1987. | Permalink

Job Security Equals Company Security

Tom Peters

Early this May the United Auto Workers sealed a landmark contract with Case-IH (Tenneco's farm-equipment subsidiary). This is the first time the UAW has negotiated full-employment protection in a major contract.

Regardless of economic or technology changes, 3,500 Case-IH workers are guaranteed 40 hours a week of pay. If product demand rises, the Guaranteed Employment Level will rise too. As well, the contract requires rehiring one laid-off worker (of 1,600 UAW members laid off before this contract) for each two positions vacated from attrition.

In return, management got workers to accept a record 39-month wage freeze and a two-thirds reduction in job classifications, from more than 300 to 100. Case-IH also gained unprecedented flexibility to shift work around (to ask factory workers to wash windows, for instance) and to substantially increase mandatory overtime, if needed.

Of late, unions have put job security above wages on their bargaining agenda. The epic 1984 GM-UAW agreement, though less sweeping than Case- IH's, protected workers with more than a year's seniority from being replaced by new technology and outsourcing, for example.

Some critics charge that such agreements are rear-guard actions by weakened manufacturing unions to protect their most senior (and overpaid, these critics contend) workers at the expense of more jobs and future members. There is some truth to this charge.

But job security is neither a new concern nor a union-led idea. Most labor historians trace the concept to 1806, when cotton-mill owner Robert Owen, faced with a raw-material shortage, kept his New Lanark, Scotland, work force on the payroll at full wages during a four-month shutdown, during which his workers took up maintenance tasks. Later, Owen was a leader in innovation. His loyal work force was more receptive than others to wrenching technological and organizational changes, and he posted record profits.

In the U.S., nonunion firms such as IBM and world arc-welding equipment leader Lincoln Electric have had no-layoff policies since the early 1900s.

I believe that the time has come for broad-scale employment guarantees at union and nonunion companies. Paradoxically, since we are beset with unprecedented change, we must offer the work force unprecedented security. That is, most firms are demanding that workers take on new roles, regularly shift roles, perform multiple tasks and continually offer productivity and quality- improvement ideas (including laborsaving ideas). Such whole- hearted involvement, flexibility and risk-taking cannot be expected without some guarantee of security in return.

But defining "guarantee" is not easy. Whose jobs should be guaranteed (everyone's, people above a certain seniority)? What should jobs be guaranteed against (new technology, out-sourcing, economic downturn)? To what extent should jobs be guaranteed (so many hours per week, weeks per year)? How flexible must workers be (accept location shifts, new jobs, extensive mandatory overtime)?

Lincoln Electric, for instance, guarantees 30 hours per week for anyone with more than two years seniority. But overtime can run high, and job and location reassignments are rampant in bad times. Lincoln's guarantee, unlike others' such as IBM's, is formal, but it can rescind or modify it with six months notice.

Many other strategies can abet formal or informal guarantees. At IBM's Lexington, KY, typewriter operation, staffing is pegged at 85 percent of what's needed for normal demand. An employee is told to expect 10 to 12 Saturdays a year of overtime if production demand is normal and up to 22 Saturdays if demand surges. Subcontractors take up the rest of the slack as needed. Motorola also staffs to 85 percent of normal demand in its semiconductor operations; it hires "temp" contract workers, with six-month contracts and pay equal to permanent employees, to make up the difference.

Re-deployment and re-training are other effective tools. Digital Equipment has slashed factory jobs by 4,500 since 1984; 3,800 of the displaced workers have accepted extensive re-training and permanent reassignment, including about a hundred supervisors who have become salespersons. During the 1981-1982 recession, office people and factory hands at Lincoln Electric took to the field to sell -- and raked in $10 million in incremental revenues. Buick informally agreed with the UAW to establish an Employee Development Center, where any worker (of any seniority) displaced by new technology gets at least one year's training in a new skill that Buick needs.

These strategies are also practiced by the Japanese. Their vaunted lifetime employment only covers 20 to 30 percent of the country's work force, predominantly males at big firms. Hordes of temporary-workers (primarily women) are used to take up slack when demand is brisk -- and are released instantaneously when demand softens. Subcontracting is another big swing factor.

To meet volatile conditions, American companies must look to labor as the chief source of value-added, not merely a "factor of production" to be optimized or minimized. We must seek to add jobs (or maintain current job levels) by shifting from a cost-minimization strategy to a revenue-enhancement strategy -- the best way to avoid labor gluts is to make up for labor-saving achieved via technology by selling more!

A thoughtful employment guarantee is a key to implementing this strategy and becoming more effective competitors.

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