The job guarantees are in exchange for concessions made by the union membership to allow for measures that would help increase profit and productivity while reducing expenses and process redundancies in the manufacturing function. These measures include no wage increases for the next seven years except for quarterly cost-of-living adjustments to keep pace with inflation. In addition, the employees would have to allow Xerox to bring in temporary workers, outsource low-value-added jobs and exercise greater flexibility in promotional and transfer activities within the unionized ranks.
The contract was negotiated one year early to help support the organization's restructuring plans and remove any barriers. The fact that both sides were willing to open negotiations early, and make compromises, reflects the strength of the company's union/management partnership Xerox has been painstakingly cultivating during the past decade with the Amalgamated Clothing and Textile Workers Union (ACTWU), which represents the manufacturing, supplies and distribution workers at the Webster facility.
Since 1983, the two parties have been working together as business partners to bring about change in the manufacturing function that will help Xerox in its goal of being "The Document Company." This partnership includes sharing all financial information, participating together in training sessions and serving as equal members on work teams. Through the partners' combined efforts, the U.S. manufacturing function in Webster has enlisted greater employee involvement, installed increased flexibility and has transformed into focus factories that employ the use of work teams.
An old partnership rekindles out of a need for survival.
The foundation for today's partnership between the union and its members and company management was established back in the 1940s when Xerox was the Haloid Co. The Wilson family, who was the prime stockholder in Haloid, believed in cooperation between employees and management. This philosophy continued through-out the '50s and '60s as Xerox established itself as the copy-machine maker. The company was making lots of money, so negotiations throughout this period were fairly uneventful as Xerox shared its profitability with workers through lucrative wages and benefits. And, "It was relatively easy to pass the additional costs on to customers who didn't have many alternatives in the marketplace," says Joe Laymon, director of corporate industrial relations for Xerox.
According to Laymon, the amiable relationship between the union members and management broke down in 1973 when the membership rejected a proposed contract and struck the company for two weeks. Both sides saw how detrimental this could be for the company — and in turn the workers — and agreed to work harder at avoiding such action in the future.
As the company moved into the 1980s, however, it became evident that simply avoiding conflict between the two parties wasn't enough. The organization needed to establish a genuine partnership. It was vital for success; indeed, even for survival.
Facing stiff competition from Japanese companies that had entered the industry during the 1970s, Xerox's market share had shrunk from 80% to less than half. Profits ceased to increase at the rate they had previously, revenue became flat, and expenses soared. "The foreign competition was selling products at a price that it cost us to make them," Laymon says. "And the products were of outstanding quality. For the first time, the American consumer had a choice, and their choices were based on quality, price and delivery. In all three of those areas, we tended not to be the best provider."
David Kearns, who was the CEO of Xerox at the time, and Paul Allaire, current CEO, who was then company president, determined that to take back its market share, Xerox would have to reduce the costs of doing business, become more efficient and produce better quality products. Employee involvement within manufacturing, they believed, would be one essential tool for meeting those objectives. Because the workers in this area were members of the ACTWU, union support would be essential for success.
Complete cooperation between the company, ACTWU officials and union workers wouldn't happen overnight, however. Although the 1980 ACTWU contract contained a clause that the union would "explore the concept of employee involvement," the document didn't make any concessions for enabling the company to increase operating flexibility and productivity, and reduce labor costs. In fact, it stipulated that employee-involvement initiatives couldn't affect wages, jobs and work rules. What's more, managers wanted employee involvement to happen during employees' off hours. And, workers weren't sure that their input wouldn't cost them their jobs.
Teamwork spreads across the company with union support.
It wasn't until after the next labor/management negotiations, in 1983, when a real strategic partnership began to materialize. By this time, the employee-involvement concept had been in the air for three years at Webster. Workers already had received some problem-solving and team-work training — jointly paid for by the company and the union.
Then the company launched its Leadership Through Quality program, a TQM process. Through it, all employees, including the unionized workers at Webster, received more extensive training in such disciplines as problem solving and effective team skills.
Initially, the union wasn't involved in putting together the program, says Gary Bonadonna, manager of the Rochester regional joint board of the ACTWU and international vice president of the main union, because it was a top-down initiative. However, the company included union officials' input before the program rolled down to the union's membership. They ensured that the program fully incorporated employee involvement.
This same year, the ACTWU contract was renegotiated. During discussions, union officials made a suggestion. "If you're serious about getting the members' support for resolving problems and reducing costs," Laymon remembers them saying, "then take away their biggest fear, which is the loss of employment." The union representatives said that the membership had to be assured that any ideas that they offered wouldn't be used against them.
Xerox agreed, giving the workers three-year job guarantees. In exchange, the union members accepted a freeze in pay for the first year of the contract, a cut in benefits coverage from a 100% company-sponsored plan to an 80/20 plan, and a no-fault absenteeism provision, which would allow termination for four absences in any 12-month period. In addition, Laymon negotiated for the ability to hire a buffer, or temporary, work force and the opportunity to outsource any work that can't be performed competitively inside. "At the time, plants were closing across the country," says Bonadonna. "People were worried that Xerox was going to be forced to do the same things."
Even with training and a contract to support employee involvement, however, the initiative didn't take hold right away. "For approximately one year after the contract, employee involvement was stagnant [within the union membership]," Bonadonna says. "People were upset, they felt that the only reason they had to give concessions was because the company hadn't managed right." As a result, he says that workers remained uninvolved as a way to strike back at the company.
It's ironic, then, that it was the manufacturing function at Webster that really gave employee involvement its impetus. Because costs of manufacturing remained high, Xerox management announced that the company could save $3 million by moving production of the wire harness — the configuration of strands of wires that delivers the current throughout the copier — to its plant just outside of Mexico City.
According to the contract, says Laymon, the company has to give the union membership within any area for which outsourcing is a possibility the opportunity to make it competitive. "A small study team, made up of company and union employees, will be appointed to work for three to seven weeks to reduce the cost of doing business in an operation to competitive norms," says Laymon. "If they fail, the company reserves the right to outsource the work."
The company commits to providing the teams with all financial, engineering and legal support that's needed. There are very few areas that the teams can't explore, wages and benefits being two of them. The teams work fairly autonomously and are allowed to work uninterrupted toward the objective of meeting the external benchmark.
For the wire-harness operation, a team of eight people, led by a management member and a union employee and made up of both members of management and union workers, did an analysis of where the manufacturing costs were higher in Webster and why. Ron Slahetka, vice president of Webster manufacturing operations, said that the team found ways to reduce overtime, redesign factory layouts to cut down on overhead costs and production redundancies, and implement more self management.
For example, the team learned that the wire-harness operation was being charged for one-sixth of its building's electric bill, although it was using only a 50th of the electricity. It also was being charged fully for the overhead of the building's lobby — including fees for security guards — because it was located closest to it. Other findings for savings included using cheaper material, purchasing new, more efficient equipment and employing different training techniques. The team's changes resulted in $2.9 million in savings, and preserved more than 180 jobs. "I didn't think they could do it at first," Bonadonna says. "I was told by managers that there was no way. But they did it."
Company and union partners redesign Xerox's factories for improved productivity.
After this initial success, employee involvement in Webster caught on. But despite the improvements being made, the company realized in 1990 that it no longer could operate the manufacturing operations as it had in the past. "Many had grown to be large, unmanageable operations," says Laymon.
The industrial-relations director took union representatives on benchmarking trips to focus factories in California, Texas and Europe. A focus factory replaces the assembly line with self-managed cells that produce narrow lines of products. The cells contain their own finance, engineering, HR and quality staffs, and reduce the number of management personnel, pushing decision-making down to empowered employees. "These factories were smaller, self-contained, quick-to-respond entities that were more manageable, had higher productivity, better team cohesiveness and higher quality of work than non-focus- factory operations," says Laymon. The cost of their operations also was lower.
The company set up a focus team made up of both Xerox and union officials to design and implement focus factories for Xerox. Laymon assigned an industrial-relations representative to the team, Slahetka represented operations, and Bonadonna and one other person represented the union.
The team began work on the project in late 1990, two years before the next contract negotiations. "We struck an understanding that because this was such a major deal and it would help in determining how much work would be assigned to Webster and how much work would stay in Webster, we wouldn't wait until 1992," Laymon says.
Because the company planned to implement the new factories under the existing contract, the union membership had to permit changes in work rules. Says Laymon, the company needed, "the ability to move people without regard to seniority, for the purpose of staffing a product line with the most qualified individuals to get the product out as quickly as possible and with as little cost and as high a quality as possible."
For example, Slahetka explains that the focus factories brought together two previously separate plants — one that built new machines and one that remanufactured the same machines. With the new factory, the machines would be built and remanufactured on the same assembly line, "using one set of toolings and one set of people who had skill and experience on that particular product." The union had to allow for job reclassifications for this to occur and had to protect the pay of workers who changed jobs.
The focus team created six focus factories by early 1991, used for consumer-replacement units, low-volume machines, mid-volume machines, high-volume machines, components and color machines. Slahetka says giving labor and management equal voice in the design of the focus factories had advantages. "You get the workers' views and you also get the managers' views in terms of the bigger picture," he says. "And when you get both views, you get more data and can come up with more effective solutions. Also, if everyone's involved, it's easier to implement."
Adds Bonadonna: "It wouldn't have happened without [both parties]. You need labor and management working together to make these things happen."
According to Laymon, the focus factories as designed by the company and the union have decreased product-development costs 30%, improved quality by 100 times and increased return on investments from 8% to 14%. Also, the amount of money spent on training and retraining has decreased. "The teams tend to be more cohesive than they were before," Laymon says.
Most of the teams within the focus factories work autonomously or semiautonomously. Where once there was one supervisor for every 20 employees, for example, there now are four semiautonomous groups of employees who share one coach or facilitator. Other groups have no supervisors at all. The teams have within them group leaders who they elect themselves for various lengths of terms. The company provides training on company time for both the leaders and the team members. Many of the teams do their own scheduling, overtime balancing, ordering of parts and the assigning of employees to daily, weekly or long-term tasks.
To reach the level of a totally autonomous work group, a team must pass certain objective gates. These include:
- Do the members know how to work as a team?
- Do they know how to lead?
- Do they know how to participate?
- Can they deliver a product within a cost specification, and have they demonstrated this within a specific period of time?
The average team takes two to three years to get to this point. "The reason it takes this much time is because we're looking at those objective measures," says Laymon. "Can this team continue to deliver a product to a customer over a period of time that meets the customer's quality and price specifications? Once we see that, and the team has made an appeal for autonomy, we make the decision to pull supervisors and overseers and all the other inspectors and checks and balances and let the team work autonomously."
Union officials and management personnel embrace teamwork together.
During the implementation of the focus factories, Laymon was working on another project — smoother negotiations between the ACTWU and Xerox. Although relations between the two parties were strong, as witnessed by the successes of the partnership thus far, contract negotiations remained arduous. Talks often lasted up to four months, including weekends. Each side brought in as many as 40 representatives and 200 demands.
Laymon did an assessment of the negotiation process, looking at who usually was at the table for both sides, what skills were needed at the table and whether the people at the table had the right skills. "When we looked at the objective of the activity, we quickly concluded that we had too many people at the table and not enough of the proper skills," Laymon says.
When the two sides came to the table in 1992, there were only seven members on management's negotiating team and 14 on the union's. The two sides set some reasonable working expectations to start every morning at 8:00 and to conclude at 5:00. They agreed not to work weekends. "We agreed to use discipline to get the job done within working hours," says Laymon. "We also agreed that, unlike in the past, we wouldn't inundate the system with frivolous issues. We would go to the table as a company only with those things that we needed to change to run the business more effectively. The union agreed that they would come to the table only with those things that their membership needed, and not a wishlist of wants."
As a result of the preparation, the union's needs only numbered 12 and management only had seven requests for change. Talks concluded after five weeks, with just one three-hour Saturday meeting.
The new negotiation process stuck. The contract ratified in June took just three weeks to deliberate. Preparation for its negotiation included the formation of a task team, comprising Laymon, Bonadonna and other management and union representatives, to look into bringing costs down and new business into the Webster plant.
The negotiation process is reflective of the partnership that Xerox and the ACTWU have worked so hard to cultivate. "This relationship has been successful because we don't view each other as adversaries or enemies," Laymon says. "We view the competition as a common foe, and we know that that foe will continue to beat us if we don't act as a common friend or a team. This requires tremendous cooperation, dedication and a common vision that only when the customer is satisfied, we prosper."
He admits that the relationship is growing still, as the two parties struggle through the restructuring. But Ron Slahetka sums up the motivation to keep it alive: "We're working together to become the best manufacturer of copiers and duplicators in the world."
Personnel Journal, August 1994, Vol. 73, No. 8, pp. 46-53.