Wednesday, November 14, 2007

Labor Strikes in the New Millennium

There have recently been some high profile labor strikes in the news. As I write this, Hollywood writers are on strike. Not long ago there was a brief strike at Chrysler before their new labor contract was approved. But frequent or large numbers of labor strikes across the country are a thing of the past. Often, when there is a strike it is of short duration.

However, there are a few exceptions in recent years, like the Goodyear strike a few years ago, where the strike lasted longer and had more serious ramifications for both sides involved. In many ways that strike reflected a reality faced by many American manufacturers. Key facts included:

The United Steelworkers union called the strike because Goodyear had announced plans to close two plants (Gadsden, AL and Tyler, TX).

Goodyear expected to be $2.2 billion short in covering pension obligations in 2006 and said it could save $50 million/year by closing a U.S. plant.

Goodyear said the union refused to help them to remain competitive in a global economy, and the contract provisions the company wanted would protect jobs long term and provide for retiree medical benefits.

The Union said they had agreed to closing a plant and cutting pay and other benefits in the 2003 negotiations, and now was being asked for similar concessions again.

In 2003, Goodyear lost more than $1 billion, took on billions in debt and saw its stock go down from a high of $20 per share in 2002, to below $4 per share in early 2006. The stock later rebounded to the $14 per share range.

One complicating factor in negotiations was that senior executives received huge bonuses in 2006. Securities and Exchange Commission records showed Goodyear CEO Robert J. Keegan collected a $2.6 million bonus in 2005. Head of North American tire division, Jonathan D. Rich, was paid $680,000.

Ultimately the strike was resolved with the union being unable to prevent the plant closures, but preserving some benefit previsions for current and retired employees.

This strike illustrated the issues presented by a number of situations in American manufacturing. We live in a global economy and there are ever expanding alternatives for where goods can be manufactured for less. The collective bargaining process cannot prevail against market pressures. A strike is never a pretty situation, and I do not envy those involved on either side.

Sunday, November 11, 2007

Determining Fair Pay

Pay issues at work can be among the most emotional in the workplace. When employee pay amounts are allowed to evolve without benefit of some structure, they can sometimes become skewed and unfair. Many a sleepless night is experienced by people who are unhappy about pay or related issues, along with turnover and other problems experienced by the organization.

Compensation system development programs determine how much to pay employees using objective and unbiased guidelines. Organizations need to make valid comparisons in order to keep rates of pay fair and current. It is essential to also consider such factors as total compensation (i.e., pay, benefits, etc.), and legal exposure, in order to make the best use of compensation dollars.

Such compensation processes provide for development and implementation of strategies, systems for the control, validation and integrity of compensation data, and benefits products. These processes also play a quality assurance role, such as analyzing and evaluating compensation plan deliverables and providing advice and guidance to the management team.

There are three key issues that must be addressed when designing a compensation structure:

Internal equity - Are the jobs within the organization fairly priced in comparison to one another?

External equity - Are the jobs within the organization fairly priced in comparison to those of other organizations with which it competes for employees?

Individual equity - Are the jobs within the organization fairly priced in comparison to one another in the eyes of employees?

Have you noticed evidence of these tools being used within organizations or companies you are/were involved with? Watch for them and see the role they play in providing fair and equitable compensation.