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.