What Should Unions Do?

John Hoerr

Harvard Business Review

No. 91307

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 HBR MAY–JUNE 1991

What Should Unions Do?

By any standard, the 1980s have been a difficult changed. Competition is global, technological inno-
decade for the American worker. When inflation is vation continuous, the work force increasingly pro-
taken into account, average weekly earnings have fessional. In such an economic environment, unions
dropped more than 30% since 1969. Dislocations are ill-suited to meeting the needs of either workers
caused by takeovers, shutdowns, and downsizings or companies. At best, they are an irrelevance—a
have pushed mistrust of corporations to new heights. leftover from a previous industrial era. At worst, they
Disgruntled employees are filing record numbers of are an obstacle to making companies and countries
wrongful discharge suits and job-discrimination and competitive. Little wonder, then, that unions are on
unfair-labor-practice complaints. And in the work- the wane.
place, employees are demanding more challenging What this perspective overlooks, however, is that
work, a voice in decision making, and greater job radical union decline is a peculiarly American phe-
security. nomenon. After all, companies around the world
In the past, turmoil on this scale would have driven have been going through the same sea change
workers into unions. Not today. Only 20 years ago, brought on by new technologies and global competi-
nearly 30% of private-sector workers belonged to tion. But while U.S. union membership (measured
unions. By 1990, union membership in private indus- as a percentage of all nonfarm employees, including
try had dropped to 12.1% of the work force, reducing those in the public sector) has declined by nearly
organized labor to what Harvard economist Richard 50% during the past two decades, in other industrial
B. Freeman has recently labeled ‘‘ghetto unionism.’’ countries, it has dropped only slightly (from 58% to
If this trend continues, by the year 2000, the union 50% in the United Kingdom, from 32% to 28% in
share of the private-sector work force will shrink Japan) or stayed steady (at roughly 43% in Germany
to 5%. and 36% in Canada) or even increased considerably
Ask a manager to explain this seeming paradox (for example, from 79% to 96% in Sweden). The most
between worker discontent and union decline and competitive national economies—in particular, Ger-
it’s likely he or she will say something like the fol- many and Japan—seem to combine technologically
lowing: the rules of the economic game have advanced and highly competitive companies with
far higher levels of unionization than in the United
States.
John Hoerr is a business journalist who has specialized in labor-
management relations for many years. He is the author of And the This suggests that while a particular kind of union-
Wolf Finally Came: The Decline of the American Steel Industry ism may be obsolete, unionism per se is not. Instead
(University of Pittsburgh Press, 1988). of speculating whether U.S. unions will—or

Copyright q 1991 by the President and Fellows of Harvard College. All rights reserved.

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 should—survive, it is more interesting to ask: What
kind of unionism makes social and economic sense
given the new realities of global competition? In On the Future of Unions
1984, Freeman and his Harvard colleague James L.
Governing the Workplace: The Future of Labor and
Medoff published their now classic study, What Do
Employment Law
Unions Do? Today the question is: What should by Paul C. Weiler
unions do? Cambridge, Massachusetts: Harvard University
The materials discussed here (see insert, page 32) Press, 1990.
offer a powerful answer to that question. Taken to-
gether, they represent a new way of thinking about Unions and Economic Competitiveness
edited by Lawrence Mishel and Paula B. Voos
unions and their place in the new economy. On the
New York, New York: M.E. Sharpe, 1991.
one hand, they challenge the widely held view that
unions are irrelevant. On the other, they are equally Democracy at Work: Changing World Markets and
critical of ‘‘business as usual’’ as it exists at many the Future of Labor Unions
U.S. unions today. Finally, they suggest lessons that by Lowell Turner
both companies and unions in the United States can Ithaca, New York: Cornell University Press, 1991.
learn from unionism as practiced elsewhere. A Partnership in the Workplace
Three themes in particular emerge from this re- A joint agreement between Corning, Inc. and the
search: American Flint Glass Workers Union, January 1989.
1. U.S. unions face the same crisis as U.S. manage- ‘‘Industrial Restructuring and Vocational Training:
ment: dealing with the new realities of global compe- A Strategic Role for Unions?’’
tition. by Wolfgang Streeck
Unions don’t exist in isolation. They are part of Unpublished paper
an entire industrial relations system—the network Madison, Wisconsin: University of Wisconsin-Madi-
of interlocking institutions of management, labor, son, July 1990.
and government that grew up in the era of the mass- New Forms of Work Organization: The Challenge
production economy. In the last decade, economic for North American Unions
and technological changes have rendered many as- by Tom Rankin
pects of these institutions obsolete. Now companies Toronto, Canada: University of Toronto Press, 1990.
and unions must jointly reform the system they
The New Owners: The Mass Emergence of Employee
jointly built. Ownership in Public Companies and What It Means
2. Unions aren’t necessarily an obstacle to compet- to American Business
itiveness; indeed, under the right circumstances, by Joseph R. Blasi and Douglass L. Kruse New York,
they can make a pivotal contribution to it. New York: Harper Business, 1991.
Much as companies are struggling to define new
‘‘American Unions and the Future of Worker Repre-
ways of managing, a new model of unionism is
sentation’’
emerging that puts unions at the very center of
by Thomas A. Kochan and Kirsten R. Wever
companies’ efforts to improve their competitive- in The State of the Unions,
ness. In a world where success in the marketplace edited by George Strauss, Jack Fiorito, and Daniel
increasingly depends on creating more flexible, Gallagher
team-based work organizations, unions can be a Madision, Wisconsin: Industrial Relations Research
surprisingly effective means to integrate employees Association, 1991.
into managerial decision making. Similarly, the
Economic Notes
lack of an institution that gives voice to workers’ New York, New York: Labor Research Association
interests and perspectives can block companies’ November-December 1990.
efforts to adapt to change. Put simply, strong unions
can make stronger companies.
3. To act in this capacity, however, U.S. unions
must reinvent themselves much as some companies
are trying to do.
The U.S. industrial-relations system cannot be re-
invigorated unless unions carve out a new role for They must identify new ‘‘leverage points’’ for union
themselves. They must develop a vision of how influence. Finally, they must improve their own
workers should help shape the technological and so- human resources to help put labor’s new vision into
cial revolution that is transforming the workplace. practice.

HARVARD BUSINESS REVIEW May–June 1991 5

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 Unions and the Corporate ‘‘Governance obstacle to managerial flexibility than unions ever
were.
Gap’’ The human resource alternative to unions also has
positive aspects, especially where the HR staff con-
Managers unconcerned—or gleeful—about the ceives of its role as the ‘‘neutral’’ representative of
growing weakness of U.S. unions should remember employees. But there’s the rub. In the end, no com-
one thing. Industrial relations, like nature, abhors a pany will put the interests of employees over the
vacuum. As traditional unions decline, new institu- interests of shareholders in a direct conflict—if the
tions and practices will take their place. They won’t stakes are high enough. Thus the human resource
necessarily be better for companies or for the econ- approach tends to break down precisely where com-
omy. panies need it most: in situations of severe conflict.
This is the important implication of Governing the The very best HR systems recognize this fact by
Workplace by Harvard law professor Paul C. Weiler. going to great lengths to build fairness into nonunion
According to Weiler, the decline of unions has created grievance procedures. But only a small handful—
a political and legal vacuum—a ‘‘governance gap’’— probably less than a half dozen — take the ultimate
that can only damage relationships between manag- step of allowing for outside arbitration as a last resort.
ers and workers and the ability of the U.S. economy The trouble with both alternatives, argues Weiler,
to compete. Weiler explains what’s wrong with recent is that neither provides workers with an independent
alternatives to traditional collective bargaining and source of power inside the company. Laws that define
why ‘‘union representation is as attractive a form of workers’ basic legal rights don’t necessarily assure
governance as we have yet been able to devise.’’ that workers can exercise these rights free of coer-
As traditional collective bargaining has declined, cion. And too much regulation from outside impedes
argues Weiler, two alternatives have risen to take its efficiency. Human resource programs, on the other
place. The first is government regulation. During the hand, give workers some influence inside the com-
past 15 years, legal challenges have systematically pany, but they are not an independent source of
eroded the traditional concept of ‘‘employment at power. Collective bargaining is the only American
will,’’ which held that managers could fire workers institution that gives workers the ability to claim
at any time for any reason. In over 40 states, courts both kinds of protection—from outside and inside.
now allow employees to sue companies for wrongful For managers who know their history, Weiler’s
discharge; plaintiffs’ attorneys are doing a thriving governance gap should sound familiar: the previous
business. State and federal laws regulating work rela- system of U.S. industrial relations went through a
tionships—such as restrictions on polygraph test- similar crisis in the early decades of this century. For
ing—have also proliferated. a brief period in the late 1800s, U.S. unions had a firm
The second alternative is the development of more foothold in factories organized around production by
professional human resource programs at companies. skilled artisans, such as moulders and puddlers in
In effect, these programs are meant to fill a unionlike the early iron industry. But in the first quarter of
role and convince employees that they don’t need an the twentieth century, corporations shifted to mass-
independent union. They include mechanisms like production systems based on mass markets, stan-
quality circles to involve employees in decisions on dardized products, unskilled labor and the ‘‘scientific
the job and nonunion grievance procedures for dis- management’’ of work as articulated by Frederick
pensing workplace justice. W. Taylor. As a result, the artisan-dominated craft
Both these systems have their virtues—and their unions became increasingly obsolete. For the better
drawbacks. Government regulation, for example, has part of 40 years, the craft unions all but ignored this
the advantage of protecting the interests of all em- development — as well as the growing numbers of
ployees, not just union members. But regulation is unskilled immigrants working in the new factories.
a blunt axe and can often produce requirements in Meanwhile, antiunion companies tried to create
the law that bear little resemblance to workplace their own institutions—company unions or Ford’s
reality—from both workers’ and managers’ perspec- Sociological Department—to regulate labor-manage-
tives. Laws tend to work best where unions are pres- ment relations.
ent to make sure the laws are enforced. The fact is, It took the enormous social dislocation of the
nonunion employees are at greater risk of suffering Great Depression and the bitter labor conflicts of the
from employer abuses—no matter what the letter of 1930s to create a new system of industrial relations.
the law may say. At the same time, a panoply of The new ‘‘industrial unions’’ broke definitively with
standardized government-imposed rules adminis- the traditional craft model to organize all workers—
tered by government agencies is likely to be a greater skilled and unskilled alike—in an entire industry.

6 HARVARD BUSINESS REVIEW May–June 1991

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 Seen from the vantage point of today, it is easy to economists and industrial-relations specialists sym-
forget just how successful industrial unionism was— pathetic to unions, focuses on the difficulty that both
and not just for union members but for the economy companies and unions have had in adapting to the
as a whole. The new industrial unions created proce- new rules of global competition. In the absence of
dures to protect workers from arbitrary treatment on strong foreign competition, argues Richard Freeman
the job. But the labor-relations system that grew up in one essay, unions could safely bargain for a share
around industrial unionism did far more than that. of the ‘‘monopoly rents’’ charged by U.S. companies.
By organizing all the major companies in steel, auto, By the 1970s, however, this was no longer economi-
rubber, and other mass-production industries, indus- cally feasible. ‘‘What worked for unions in the 1950s
trial unions successfully took wages out of competi- and 1960s did not work in the 1970s and 1980s,’’
tion. This put a stop to the destructive wage cutting concludes Freeman, ‘‘and it took too much time for
among companies that had often taken place during labor and management to realize this.’’
downturns. And by raising living standards for a Former Secretary of Labor Ray Marshall makes a
broad segment of society, industrial unionism made similar point about the 1990s in another essay in
possible the mass consumption on which a healthy Unions and Economic Competitiveness. Because
mass-production economy depended. In the postwar mass production was more entrenched in the United
era, U.S. companies and unions thrived on the rapid States than it was in any other nation in the world,
growth in productivity and output made possible by both managers and unionists are ‘‘more reluctant to
mass production and its economies of scale. abandon the adversarial and authoritarian systems
But the very success of industrial unionism also that it produced.’’ As a result, genuine worker partici-
sowed the seeds of its eventual decline. In order to pation is a great deal less pervasive in the United
defend workers against the abuses of scientific man- States than it is elsewhere.
agement, the new industrial unions accepted, even
embraced, all that went with it—in particular, the
rigid separation of thinking from doing, ‘‘managing’’
from ‘‘working.’’ Cut off from decision-making re- Germany’s Dynamic Unionism
sponsibilities, unions focused on protecting workers
from exploitation by using Taylorism as a base of In other countries, unions have followed a very
shop-floor power. They negotiated multiple job clas- different trajectory. Instead of being excluded, they
sifications, linked wage rates to the job instead of a have been integrated into managerial decision mak-
worker’s skills, and established seniority as the basis ing. In Japan, with its generally peaceful labor rela-
for promotion. This ‘‘job control unionism’’ gave tions, management invites union involvement to
unions a negative power to hamstring management improve productivity and quality. In Germany and
but not a positive power to influence operations. Scandinavia, on the other hand, laws require partici-
Rules bred more rules, eventually straitjacketing the pation. In either case, the entrenched position of
production system and creating unproductive hierar- unions allows them not only to withstand the winds
chies in both companies and unions. of economic change but also to make a positive con-
The costs of this system were obscured as long as tribution to corporate restructuring.
the U.S. mass-production economy dominated the For an idea of what this more dynamic form of
world. But since the late 1960s, changes in the world unionism looks like, consider the example of Ger-
economy have threatened to leave both U.S. compa- many, as described in Democracy at Work by Cornell
nies and unions behind. In a global economy, wage professor Lowell Turner. That country’s ‘‘codetermi-
competition is also global. And under the impact nation’’ law, which mandates representation for
of changing markets and technologies, companies unions and salaried employees on the supervisory
around the world are scrapping the old mass-produc- boards of all large companies, is well-known. Far
tion systems and converting to flexible manufactur- more significant for managerial decision making are
ing, flattening hierarchies, blurring the boundaries the plant-level ‘‘works councils,’’ elected bodies of
among functions and jobs, and encouraging—indeed, employees also required by law at every work site.
demanding—that workers make critical decisions on Although legally independent of both manage-
the factory floor. ment and union, works councils are usually domi-
Neither traditional American management nor nated by union activists, who imbue them with the
American unionism fits in well with this new eco- philosophy and policies of their national union. The
nomic environment—a fact that even strong union influence of the works councils varies from company
supporters now recognize. Unions and Economic to company. But in many workplaces, they play an
Competitiveness, a collection of essays by labor extremely active role—sometimes amounting to

HARVARD BUSINESS REVIEW May–June 1991 7

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 veto power—in all matters involving hiring, firing, demise of the Beetle in the mid-1970s, various mar-
training, and reassignment in the event of reorganiza- ket crises, and recessions in the 1980s without major
tion and technological change. disruptions. Unlike auto producers in most other
This is especially true in Germany’s vast metal- countries, VW did not lay off workers or demand
working sector, where some 2.6 million workers be- wage concessions in the early 1980s.
long to IG Metall, the nation’s largest union. Like Of course, strong unions like IG Metall also im-
other German unions, it negotiates guidelines for pay pose constraints on management that make manag-
levels, hours, and working conditions on a regional ing harder. But in certain situations, such constraints
basis. Works councils at each plant then translate can be enabling. The pressure that IG Metall puts on
the guidelines into local agreements. German companies forces them to keep and retrain
Turner’s study focuses particularly on Volkswa- workers, use labor more flexibly, and move into di-
gen’s huge plant at Wolfsburg (in Lower Saxony near versified, quality, high-volume production. And in
the former border of East Germany), which employs the long run, VW is likely to have a work force that
some 62,000 people. Like auto factories the world is much more committed to a new way of working
over, Wolfsburg must adjust to rapid changes in the than would be the case in a nonunion enterprise.
international car market. Management is cutting Turner’s book compares the IG Metall experience
costs and employment levels and wants to install with that of its U.S. counterpart, the United Auto
more efficient work practices. Instead of waiting to Workers (UAW). While the UAW is involved in some
be consulted, the 69-member works council—62 very advanced worker participation efforts—
seats are held by IG Metall members—is taking the especially, what amounts to comanagement with
initiative to make sure the plant restructuring also General Motors of the Saturn plant in Spring Hill,
works to the benefit of employees and conforms to Tennessee—it has had only scattered successes. Ac-
union philosophy. cording to Turner, this is largely because authoritar-
Take the example of team-based manufacturing, a ian traditions persist at many auto plants. Even when
strategy recently adopted by German auto companies managers introduce more participatory organiza-
as one means of competing with the Japanese. As tional structures, they usually do so unilaterally—
VW and other producers began moving in this direc- sometimes pressuring the local union to accept them
tion, IG Metall developed its own set of ‘‘group work’’ under the threat of a plant shutdown.
concepts designed to protect workers from layoff or Turner suggests that lack of an active union role
transfer to lower paying jobs. The program empha- in company decision making goes a long way toward
sizes retraining and a work organization that gives explaining the crisis of the U.S. auto industry. In the
employees real decision-making power. In 1988, absence of institutional mechanisms such as those
works councillors from all VW plants adopted the provided by works councils, there is no sure way for
union program. Now VW management must negoti- companies to integrate employees into the change
ate on that agenda if it wishes to install teamwork. process. Instead of defeating or marginalizing unions,
IG Metall’s interest in work reorganization illus- Turner argues, U.S. companies need to accept them
trates how a union can take the lead on important as legitimate partners in participation. And unions,
issues instead of merely reacting to a company pro- ‘‘in the interest of their own survival,’’ need to jetti-
posal—and in the process force management to son their traditional passivity and start making posi-
change its own thinking. The union’s group-work tive contributions to company performance in the
policies are the product of nearly two decades of areas of productivity, product quality, and process
research and activism. In the early 1970s, the union’s flexibility.
national staff of ‘‘work humanization’’ specialists To that end, many of the authors of the texts cited
began research on work reforms to address rising here argue for laws mandating worker participa-
discontent on auto assembly lines. Despite manage- tion—along the lines of those in Germany and other
ment’s lack of interest at the time, the union kept European nations. Weiler, for example, says that
track of changing technologies and promoted its own every workplace with 25 employees or more should
vision of what the content and shape of work should have an Employee Participation Committee (EPC)
be. And now that the companies too want to reorga- with members elected by all employees. Modeled on
nize work, the union, with its strong influence in the German works council, the EPC would have to
the works councils, has the power to turn its vision be consulted on all decisions affecting the work force
into reality. and would have a voice on a far broader range of
Turner argues that this system is a potent mecha- subjects than provided by traditional collective bar-
nism for smoothing the company’s adaptation to new gaining.
competitive realities. Partly because of a strong Weiler concedes that mandatory participation laws
union and active works councils, VW weathered the have no chance of being enacted in the near future.

8 HARVARD BUSINESS REVIEW May–June 1991

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 Companies, not without reason, would regard the The union agrees to eliminate old work rules to make
EPC as a precursor to a union. Unions would view way for team production. In exchange, it usually
the EPC as a company union, designed to keep ‘‘real’’ wins improved job security, gain-sharing, or higher
unions out of the workplace. Without such a legal wages. Because ‘‘unions have more to trade,’’ they
mandate, participation may never become as perva- ‘‘can bargain better than nonunion workers [who]
sive in the United States as it is in Germany. Still, have no institutions to represent them.’’ And since
some U.S. companies have voluntarily installed most joint programs in unionized plants emphasize
highly participative work systems. As other essays the quality-of-worklife goals of workers as well as
in Unions and Economic Competitiveness indicate, the productivity goals of management, these pro-
America-style worker participation—with unions— grams tend to have greater legitimacy. Thus they are
can work very well indeed. more likely to survive. ‘‘Ironically,’’ write Eaton and
Voos, ‘‘it is precisely because unionized workers can
say ‘no’ as a group that they can also collectively say
‘yes.’ ’’
Worker Participation, American-Style One company that is realizing the benefits of union
participation in work redesign is Corning. The com-
Since the 1960s, when team-based production pany is converting all of its 28 U.S. factories to team-
began on a very small scale in the United States, the based production in partnership with the American
most publicized examples generally have come from Flint Glass Workers union (AFGW). The company
nonunion plants. As a result, managers have com- decided a few years ago it could remain competitive
monly assumed that nonunion companies are better only by giving line workers more responsibility in
at worker participation and employee involvement decisions about production. Corning is now in the
than union companies are. But according to recent midst of rooting out old production lines and retrain-
research reported in Unions and Economic Competi- ing virtually all of its 20,000 employees to work in
tiveness, this is no longer the case. the new systems. About two-thirds of these workers
For example, economists Adrienne E. Eaton of need remedial education in reading and math.
Rutgers and Paula B. Voos of the University of Wis- Corning’s initial decision to shift to self-managing
consin have recently analyzed an extensive 1987 sur- work teams was made by management alone. But it
vey of innovative practices at large nonunion and wasn’t until the AFGW, which represents most of
union companies, conducted by the federal govern- Corning’s hourly workers, became actively in-
ment’s General Accounting Office. Nonunion com- volved—or, in the intriguing metaphor used by both
panies led in only one such practice—the use of managers and unionists, ‘‘bought ownership’’—that
profit-sharing plans. But profit sharing does not re- the restructuring surged ahead. Eventually, the two
quire a fundamental restructuring of a company and sides articulated an extraordinary new relationship
is a weak motivator unless accompanied by em- in a short, clearly worded philosophical statement
ployee participation. called ‘‘A Partnership in the Workplace.’’ Among six
On the other hand, a production system organized ‘‘essential values’’ listed in the agreement are: ‘‘rec-
around self-managing teams forces the most deep- ognition of the rights of workers to participate in
seated changes and produces the best results in terms decisions that affect their working lives’’ and ‘‘a work
of productivity and quality. The General Accounting environment free of arbitrary and authoritarian atti-
Office data show that by 1987 unionized companies tudes.’’
reported more use of teamwork than nonunion com- At Corning, the union has influence over the con-
panies. ‘‘The nonunion sector is no longer more inno- tent and administration of all company training
vative than the union sector,’’ write Eaton and Voos, programs. At about a dozen plants, plant redesign
‘‘if in fact it ever was.’’ committees, including shop-floor workers, are now
In a similar study, Maryellen R. Kelley of Carnegie- devising plans for restructuring jobs. Self-managing
Mellon and Bennett Harrison of MIT examine the teams have been installed in sections of more than
experience of more than 1,000 manufacturing plants 20 plants, and company and union officials are start-
that used labor-management problem-solving com- ing the redesign process in the others. As part of the
mittees in the 1980s. The nonunion workplaces were new partnership, employees cannot work them-
not only less likely to provide workers with real selves out of a job through this massive involvement
protections such as job security but were also signifi- effort. If more efficient practices enable Corning to
cantly less efficient than the unionized plants. reduce the work force, it will do so by attrition.
What explains such findings? According to Eaton Unfortunately, initiatives like that of Corning and
and Voos, most team-based work systems in a union- the AFGW are exceptions. Just as striking as Eaton
ized setting are the product of a formal quid pro quo. and Voos’s finding that teamwork is more prevalent

HARVARD BUSINESS REVIEW May–June 1991 9

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 at union plants is the fact that team-based work sys- works councils. But local unions can begin today to
tems are still so rare in both union and non-union represent employee interests and concerns on work-
sectors in the United States. For the most part, man- restructuring projects. New Forms of Work Organi-
agers remain unwilling to part with authority or to zation by Canadian labor consultant Tom Rankin
manage the social revolution that’s needed to change provides a rich portrait of how a new-model local
a company’s culture. As a consequence, it appears union operates. His book is an extensive study of
that unions will have to transform themselves and, an advanced work system at Shell Canada’s Sarnia,
in the process, hasten the transformation of the en- Ontario chemical plant. For more than a decade,
tire U.S. industrial relations system. workers have been running the Shell plant through
a network of semiautonomous work teams designed
jointly by the company and the Energy and Chemical
Workers Union (ECWU).
New Leverage Points of Union Influence Like the team plants at Corning and other compa-
nies, the Sarnia system has no resemblance either to
If a new kind of unionism can contribute to com- Taylorism or to job-control unionism. There are only
petitiveness, how should U.S. unions reorganize to two work classifications—process operators and
bring it about? Put another way, what are the leverage maintenance technicians. One process team runs the
points for redefining union influence in the new entire plant on each shift. The average team member
economy? Consider four: training, work redesign, can perform 70% of the tasks required to run the
employee ownership, and the new work force. plant. Pay is linked to skill and knowledge, rather
The training dilemma facing most U.S. corpora- than to the job itself or to seniority.
tions is by now thoroughly familiar. Global competi- There is little rule making at Sarnia; instead, labor
tion requires a skilled work force. And yet, most and management make decisions based on values
companies devote few resources to training line expressed in a philosophical statement. Conditions
workers because they fear that other companies will of employment are continually renegotiated as cir-
snap them up. Similarly, most workers lack incen- cumstances dictate. For instance, managers and
tives to buy training for themselves. workers jointly agreed to switch from an 8-hour to
With the exception of the building trades, unions a 12-hour shift by majority vote—a change that in a
have traditionally left training to management. But traditional union setting would have required
in recent years, some unions have begun to play a amending the formal labor contract. Team members
more active role in employee training—largely in train one another, participate in hiring new workers,
response to shifts in markets or to rapid technologi- and settle most grievances on their own. From the
cal change. For example, the UAW jointly runs train- local union’s perspective, its efforts at Sarnia are an
ing institutes with the Big Three auto makers. So attempt to shape the work organization ‘‘in a direc-
does the Communications Workers of America tion consistent with a democratic vision of the work-
(CWA) with AT&T. And the United Steelworkers place,’’ writes Rankin. At the same time, intense
(USW) will soon start a Career Development Insti- worker involvement has also made the plant ex-
tute funded by major steel producers. All these pro- tremely efficient; output has gone as high as 195%
grams are designed to ensure that workers can of design capacity.
acquire the skills they need to remain employable Union influence over training and work redesign
in a more competitive economy. makes sense where unions already exist. But there
Providing workers with training through joint are also leverage points for unions even where they
labor-management programs is an especially attrac- do not have the formal right to represent workers.
tive role for unions to play. Training is one area where In particular, two long-term social trends may consti-
the overlap between labor’s concerns for social jus- tute the union equivalent of growth markets: em-
tice and companies’ concerns about competitiveness ployee ownership and the expanding presence of
is great. In a provocative paper entitled ‘‘Industrial women and minorities in the workplace.
Restructuring and Vocational Training: A Strategic In The New Owners, Joseph R. Blasi and Douglass
Role for Unions?,’’ University of Wisconsin sociolo- L. Kruse of Rutgers University chart the startling
gist Wolfgang Streeck argues that union involvement rise in employee ownership at publicly traded U.S.
in ‘‘skill formation’’ will play the equivalent role in corporations. This trend extends well beyond equity
the new economy that wage formation played in the stakes granted to workers in Employee Stock Owner-
mass-production era. ship Plans (ESOPs), which are usually at privately
A related leverage point, as the Volkswagen and held companies. Public corporations have also been
Corning examples make clear, is work redesign. It transferring large quantities of stock to their employ-
may be a long time before most U.S. companies have ees through 401(k) savings plans, in which both em-

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 ployee and employer contributions are invested in they must be prepared to take responsibility at the
the company’s stock, profit-sharing payments made highest strategic levels of a company. Union repre-
in the form of stock, employee stock-purchase plans, sentation on the board has worked out well in the
equity reimbursements in return for salary and bene- USW companies, though the union has had to invent
fit cuts, and stock options programs. a set of procedures to govern the practice. Typically,
Blasi and Kruse calculate that 10.8 million workers the board of an ESOP company includes one or more
own an average of 12.1% of the stock in 1,000 public members of the local union, as well as one member
companies. By the year 2000, they estimate, more nominated by the USW president. The outside repre-
than a quarter of publicly traded companies will be sentatives usually are either technical experts—for
at least 15% owned by their employees. These em- example, ESOP lawyers or ecnonomists—or promi-
ployee-owners could exceed the total membership nent retired union officials from the Steelworkers or
of the entire union movement. What will happen other unions. Wary of possible conflicts of interest,
when employees discover the degree to which they the national union does not try to influence how
own their companies, and, in particular, the extent they vote. At most, the union directors are expected
to which their life savings and retirement funds are to bring employees’ perspectives to decision making.
tied up in a single company’s stock? Like other con- Finally, just as corporate managers are confronting
stituencies, they may want to organize to demand the challenge of managing diversity, unions are strug-
more voice as owners. gling to find ways to meet the needs of new social
This development should challenge unions to re- groups entering the workplace. In ‘‘American Unions
think their traditional opposition to employee own- and the Future of Worker Representation,’’ MIT’s
ership. Unionists are generally skeptical about Thomas A. Kochan and Northeastern University’s
employee ownership because they think that relying Kirsten R. Wever cite the much quoted statistic that
on stock ownership as a retirement benefit (which four-fifths of new entrants to the work force between
is the normal practice in many ESOP companies) is now and the year 2000 will be women, immigrants,
not a good idea. But as employee ownership spreads, or members of a minority group. They traditionally
some kind of institution will have to give voice to the have had trouble getting jobs with a promise of high
interests of employee-owners. It is not inconceivable pay and career status. According to Kochan and
that unions could play such a role in the future. Wever, the challenge for unions in the 1990s is to do
One union that has overcome its skepticism and for this new work force what they did for industrial
learned how to increase its strength and influence workers half a century ago: ‘‘improve low-wage jobs
through ESOPs is the Steelworkers. The severe reces- held by people with little labor market power who
sions of the 1980s left scores of metalworking compa- are outside the realm of traditional union constituen-
nies on the verge of bankruptcy. To avoid shutdowns, cies.’’
the USW began using ESOPs to mount worker buy- Some of the most creative union organizing efforts
outs. It also has formed ESOP partnerships with man- are aimed at these groups. Consider two examples
agement in healthy companies. As of early 1991, the (both reported in Economic Notes, the bimonthly
union was involved in ESOPs at 25 companies, many newsletter of the nonprofit Labor Research Associa-
of which are majority worker-owned. The companies tion).
range in size from fewer than 50 to 4,000 workers. In California, 18 locals of the Communications
The USW in no sense ‘‘runs’’ these companies, Workers of America have sponsored an Association
but it stamps its influence on them. To make sure for Workplace Justice. Aimed at educating nonunion
workers aren’t dependent on the price of the com- employees about their rights on the job, the associa-
pany stock for their retirement benefits, the union tion operates a toll-free Workplace Rights Hotline
demands a pension plan along with stock ownership. and conducts workshops on employment law.
It also requires that the company pass through full The International Ladies Garment Workers Union
stock-voting rights to employees and set up an exten- (ILGWU) is using unorthodox organizing techniques
sive worker-participation program—thus guarantee- to reach the more than 100,000 immigrants who
ing an employee role in work restructuring. Finally, work in garment shops in Los Angeles, El Paso, and
the USW demands board representation in compa- New York City. They speak little English, usually
nies substantially owned by an ESOP. Workers and do not understand their legal rights, and are afraid
their representatives now sit on the boards of 17 to jeopardize their jobs. Working with community
companies. groups, the ILGWU counsels these people on their
The idea of labor sitting on the board is highly rights under immigration and labor law and teaches
unpopular with most managers—and with not a them English as a second language. The union takes
small number of unionists. Still, if unions really them in as ‘‘associate members’’ at dues often as
want a voice in managerial decision making, then low as $1 a month. In some cases, these associate

HARVARD BUSINESS REVIEW May–June 1991 11

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 members go on to win formal union representation best global manager. During the past few years, a
at their shops. Here, the union role may be a combi- small but dynamic cottage industry of ‘‘prounion’’
nation of old-and new-style unionism: gaining jobs investment bankers, pension analysts, MBA-trained
and justice for the unorganized and helping to train management consultants, work-organization spe-
and stabilize the new work force. cialists, and the like has grown up to help unions
Of course, if unions are to make a serious contribu- represent their members at a time of constant com-
tion in any of these new areas, perhaps the biggest pany restructuring. This may represent the first step
challenge of all will be an internal one: developing in developing the broad managerial and organiza-
their own human resources. As the global economy tional skills that unions increasingly need.
becomes more complex and the efforts of companies If unions can develop these skills, all the while
to respond to it more diverse, unions are going to staying true to their basic social vision, the economy
have to learn new skills and develop new kinds of as a whole will benefit. In the end, the challenge
expertise. The union leader of the future will, most facing organized labor is not so different from that
likely, have to combine the political instincts of the facing business—to reinvent the institutions on
traditional organizer with the business savvy of the which a sustainable, competitive economy depends.

12 HARVARD BUSINESS REVIEW May–June 1991

This document is authorized for use only in Prof. Narendra Singh Chaudhary's Industrial Relations & Labour Laws_09/30/2022 at SOIL School of Business Design from Sep 2022 to Mar 2023.