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Self-interests and Group-Interests in Employee Involvement Programs: A Case Study* DENIS COLLINS University of Wisconsin-Madison, WI53706 What happens in a unionized setting when a participatory management system is adopted? This question is examined based on afield study of a union manufacturing facility that has been operating under a gainsharing system for four years. As sug- gested by the political science literature on transforming political systems from authoritarian rule to democracies, the events resemble a complicated chess game among management, union officers, and union members pursuing their self-interests or group-interests during and after the transitional process. Although gainsharing bonuses have been minimal, the democratization of organizational structures and relationships has generated multiple beneftcial organizational and individual out- comes for management and union members. I. Introduction Juravich, Harris, and Brooks (1993) have appropriately questioned the assumption of "mutual gains" and "win-win" opportunities for labor and management from employee involvement (EI) programs. Based on a diverse sample of 236 El programs in Pennsylvania, Juravich et al. found that managers believed EI programs had their greatest impact on social-psychological issues, such as worker morale, union officer/ plant manager relations, and worker/supervisor relations. Union contacts believed that the largest impacts of EI program were in terms of product/service quality, safety and health, and union officer/plant manager relations. Due to these perceptual differ- ences, they concluded that "EI is considerably more complex than the mutual gains thesis implies" and that "a model explaining the differences between labor and man- agement perceptions is needed" (1993, p. 181). To better understand the socio-political dynamics and the countervailing forces that arise when organizations democratize their decision-making processes, I con- ducted a field study at a unionized manufacturing facility that adopted a Scanlon-type gainsharing plan. The organization was chosen specifically because management, union officers, and union members spoke favorably about the EI program, even though financial bonuses were not being earned. The political science literature on transforming political systems from authoritarian rule to democracies is employed to enhance understanding of the many interesting events that occurred during the first four years of the gainsharing plan. Deriving answers to Juravich et al.'s questions demands an in-depth case analysis. JOURNAL OF LABOR RESEARCH Volume XVI. Number 1 Winter 1995
Transcript

Self-interests and Group-Interests in EmployeeInvolvement Programs: A Case Study*

DENIS COLLINSUniversity of Wisconsin-Madison, WI53706

What happens in a unionized setting when a participatory management system isadopted? This question is examined based on afield study of a union manufacturingfacility that has been operating under a gainsharing system for four years. As sug-gested by the political science literature on transforming political systems fromauthoritarian rule to democracies, the events resemble a complicated chess gameamong management, union officers, and union members pursuing their self-interestsor group-interests during and after the transitional process. Although gainsharingbonuses have been minimal, the democratization of organizational structures andrelationships has generated multiple beneftcial organizational and individual out-comes for management and union members.

I. Introduction

Juravich, Harris, and Brooks (1993) have appropriately questioned the assumption of"mutual gains" and "win-win" opportunities for labor and management fromemployee involvement (EI) programs. Based on a diverse sample of 236 El programsin Pennsylvania, Juravich et al. found that managers believed EI programs had theirgreatest impact on social-psychological issues, such as worker morale, union officer/plant manager relations, and worker/supervisor relations. Union contacts believedthat the largest impacts of EI program were in terms of product/service quality, safetyand health, and union officer/plant manager relations. Due to these perceptual differ-ences, they concluded that "EI is considerably more complex than the mutual gainsthesis implies" and that "a model explaining the differences between labor and man-agement perceptions is needed" (1993, p. 181).

To better understand the socio-political dynamics and the countervailing forcesthat arise when organizations democratize their decision-making processes, I con-ducted a field study at a unionized manufacturing facility that adopted a Scanlon-typegainsharing plan. The organization was chosen specifically because management,union officers, and union members spoke favorably about the EI program, eventhough financial bonuses were not being earned. The political science literature ontransforming political systems from authoritarian rule to democracies is employed toenhance understanding of the many interesting events that occurred during the firstfour years of the gainsharing plan. Deriving answers to Juravich et al.'s questionsdemands an in-depth case analysis.

JOURNAL OF LABOR RESEARCHVolume XVI. Number 1 Winter 1995

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IL Gainsharing

Many management theorists have called for a better understanding of the increas-ingly popular gainsharing systems (Bullock and Lawler, 1984; Hammer, 1988; Leanaand Florkowski, 1992). Gainsharing, a derivation of the Scanlon plan, typically con-sists of four features: (1) a formalized suggestion system focused on improving theproduction process; (2) department teams, composed of a supervisor and three to fiveelected nonmanagement employees, that evaluate and implement suggestions; (3) aReview Board, composed of upper-level managers and one representative per depart-ment team, that evaluates the more costly and complex suggestions; and (4) agroup-based financial bonus wherein financial gains related to performance improve-ments are shared among all company employees (Collins et al., 1993; Graham-Moore and Ross, 1990; Lawler, 1986; O'Dell and McAdams, 1987; Schuster, 1987).Thus, gainsharing is a highly integrated form of EI that typically entails changes inorganizational structure, processes, and reward systems. Gainsharing differs fromthe Scanlon plan in terms of the factors that are included in the group-based bonuscalculation.

When appropriately implemented, gainsharing and other EI programs can gen-erate a variety of favorable organizational outcomes in unionized settings (Juravich etal., 1993; Lawler, 1988 et al., 1985; Voos, 1987, 1989). However, according to reviewarticles, many of the favorable improvements in productivity, satisfaction, commit-ment, and trust experienced at gainsharing facilities are quite modest (Bullock andLawler, 1984; Graham-Moore and Ross, 1990; Hammer, 1988; Lawler, 1988; Leanaand Florkowski, 1992; Schuster, 1983; White, 1979). Countervailing events that mod-erate expected desirable outcomes seem to occur when EI plans are implemented.

The political science literature on change from authoritarian rule to democracy —when power differentials are narrowed between sovereigns and subjects in politicalsettings — offers a general framework for understanding what occurs when gainshar-ing is implemented. In this sense, gainsharing represents what Dahl (1989) calls a"middle-range" democratic process. Gainsharing's institutional mechanisms — inparticular the suggestion system, teams, and the group-based financial bonus — holdmanagers accountable to nonmanagement employees and vice versa. In unionizedsettings, this transitional process is controlled by both managers and unions.

III. Transitions from Authoritarian Rule to Democracy

A rich political science literature is being developed to describe what happens whenauthoritarian right- or left-wing governments adopt democratic principles (Baloyra,1987; Di Palma, 1990; Diamond et al., 1989; Karl, 1990; Malloy and Seligson, 1987;Morlino, 1987; O'Donnell et al., 1986; Przeworski, 1986; Weiner and Ozbudun,1987). This transition often resembles a complicated chess game between the formerauthoritarian rulers and emerging political leaders who claim to represent the interestsof the formerly oppressed polity (O'Donnell and Schmitter, 1986; Valenzuela, 1989).Although each country's particular transition is unique, three common pattems have

DENIS COLLINS 59

emerged from these transitional experiences: (1) the former authoritarian rulersmanipulate the transitional process to enhance their own self-interests; (2) powerstruggles arise among the former authoritarian rulers, among the new political leaders,and between the authoritarian rulers and the new political leaders; and (3) hidden andsuppressed social and economic problems surface.

First, the former authoritarian rulers often manipulate the transition by minimiz-ing the diffusion of democratic processes and structures to safeguard their interests(Borzutzky, 1987; Conaghan, 1987; Duncan Baretta and Markoff, 1987; Malloy,1987; Vacs, 1987).

Second, power struggles arise because of disagreements among all parties overthe speed of the transition and its component institutional structures and procedures.Thus, both the former authoritarian rulers and the new political leaders experience fac-tional infighting during the transitional process due to different interests and expecta-tions (Di Palma, 1990; Remmer, 1991). This disunity is particularly obvious amongthe newly empowered leaders who typically fall into three categories: (1) opportunistswho fear a coup and often acquiesce in accepting top-down rules that result in arestricted democracy; (2) maximalists who are combative, reject compromises, andare willing to risk the possibility of a coup which could end the transition; and (3)recalcitrants who recognize coup possibilities and confront and compromise onlywhen their participation is guaranteed (O'Donnell and Schmitter, 1986; Payne, 1991).These leadership patterns can be found among both the former authoritarian rulers andthe new political leaders. For instance, Mikhail Gorbachev appears to have beenunsuccessful in developing a middle course that was acceptable to the maximalists —who complained that the reforms were developing too slowly — and the opportunistsand recalcitrants, who complained that the reforms were developing too quickly.

Third, hidden and suppressed social and economic problems surface. The formerauthoritarian rulers and the new political leaders must appropriately respond to theseproblems for the transitional process to continue. For instance, democratization inRussia has forced suppressed social and economic problems, such as crime, pollu-tion, and poverty, onto the political agenda. Thus the crafted, rather than imposed,transitional outcomes greatly depend on how the subgroups within both the formerauthoritarian rulers and the new political leaders respond to the uncertainty that dom-inates each stage of the transitional process (Di Palma, 1990; Karl, 1990; Malloy,1987; Przeworski, 1986; Weiner and Ozbudun, 1987).

IV. Application to Gainsharing: Go-Getters, Fence-Sitters, and Opponents

As shown in Figure 1, similar patterns are likely to appear in organizations that adoptgainsharing. At one extreme, some companies that adopt gainsharing are evolvingfrom an authoritarian or paternalistic model to a more participatory form of manage-ment. At the other extreme, companies adopt gainsharing because it fits the organiza-tion's existing management philosophy or structure (Collins et al., 1989). The more

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Figure 1

Democratizing the Workplace

ManagementEmployees

PackagedGainsharing Plan1) Suggestion System2) Department Teams3) Review Board4) Group Bonus

NonmanagementEmployees

Gainsharing Plan1) Suggestion System2) Department Teams3) Review Board4) Group Bonus

Managementl)Go-Getters2) Fence-Sitters3) Opponents

Nonmanagement1) Go-Getters2) Fence-Sitters3) Opponents

OrganizationalOutcomes

IndividualOutcomes

DENIS COLLINS 61

radical the organizational change to gainsharing the more likely social and politicalissues will arise.

Most organizations consist of a range of management and nonmanagementemployees who are either supportive of, opposed to, or neutral toward organizationalchange: "go-getters," "opponents," and "fence-sitters," whose attitudes and behaviorsparallel those of the political opportunists, maximalists, and recalcitrants, respectively.

Management and nonmanagement go-getters regard gainsharing as a positivechange that is beneficial to the organization and themselves. They actively supportgainsharing activities and participate in decision-making processes aimed at com-pany operations. Similar to political opportunists, they are more likely to give eachother the benefit of the doubt on sensitive or highly contentious issues. Nonetheless,due to existing power differentials, both parties will try to manipulate the gainsharingprocess to guarantee that their interests are met.

Management and nonmanagement opponents are highly skeptical about gain-sharing and may sabotage the system. Adversarial managers regard EI as a threat totheir power and fear gainsharing will increase the power of some nonmanagementemployees whom they believe are either untrustworthy or unqualified for this addedresponsibility. In this sense, adversarial managers espouse Aristotle's objections topolitical democracy: Democratic reforms are likely to result in mediocrity, rule bythe uneducated and unskilled, bureaucracy, instability, and lack of accountability(Ross and Collins, 1987). Adversarial nonmanagement employees are highly skepti-cal of managerial intentions due to their past negative experiences with managers.

Management and nonmanagement fence-sitters take a wait-and-see approachtoward gainsharing. They do not intentionally undermine the change nor do they exerttheir effort to make it work. If the system is beneficial to them and the organization,they support it; if not, they let the system fail on its own accord. The go-getters andopponents compete for their allegiance. Go-getters emphasize the positive aspects ofthe gainsharing intervention to encourage the fence-sitters to become more involved;opponents emphasize the negative aspects of gainsharing intervention to convince thefence-sitters to refuse to participate. Thus the following two "power game" proposi-tions below. In labelling these propositions in terms of a power game it is importantrecall that the concept of power is a neutral term describing the relationship betweentwo or more people or groups. It can be obtained, maintained, and distributed ineither ethical or unethical ways (Collins, 1992).

Proposition 1: Management and nonmanagement employees will likely manipulatethe transitional process based on their own self-interests or group-interests.

Proposition 2: Power struggles will likely arise among and between the go-getters,fence-sitters, and opponents in both management and nonmanagement groups.

Further, after gainsharing is implemented, some hidden and suppressed socialand economic problems will demand immediate attention. Nonmanagement employeeswho are go-getters and fence-sitters may offer suggestions about problems of which

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managers were unaware. Adversarial nonmanagement employees may demand thatcertain perceived work-related injustices be met immediately.

Lastly, the long-term legitimacy of the gainsharing intervention will be a functionof whether management and nonmanagement go-getters, fence-sitters, and opponentsbelieve that the intervention fulfills their previously unmet needs. Although it isessential for some nonmanagement employees to receive gainsharing bonuses toensure their participation, other nonmanagement employees will continue to partici-pate if they believe, for instance, that improvements in health and safety conditionsare due to the gainsharing system's suggestion and team process. Thus the followingtwo "outcomes" propositions:

Proposition 3: Hidden and suppressed social and economic problems will surfaceshortly after gainsharing in:iplementation.

Proposition 4: Management and nonmanagement employees will likely continue tosupport gainsharing as long as it fulfills some of their monetary or nonmonetaryself-interests and group-interests.

V. Methodology

Sample. A list of unionized facilities having a gainsharing system for at least fouryears was obtained from a leading gainsharing consulting institute. This particularfacility was chosen because it a priori represented a situation of countervailingforces. Financial bonuses were not being earned yet union officers, union members,and management spoke favorably about gainsharing.

This facility, located in a rural midwestem town, was established in 1938 andpurchased by a publicly-held corporation in 1947. Nonmanagement employees aremembers of the United Auto Workers. Elections are held every three years for unionofficers. When gainsharing was implemented in July 1988, the company had 95 per-cent of the domestic market for a particular type of truck clutch and about 35 percentof the intemational market. The facility was producing approximately 400 clutches aday with average monthly sales of $7 million. In 1988, 450 employees worked thethree daily shifts. Union members earned an average of $17 an hour, the best wagesin the local labor market. Due to increased competitiveness, its North American mar-ket share has steadily declined to a 1992 level of 80 percent. The field study was con-ducted in July 1992.

Data Collection and Presentation of Events. The field study analysis is based on13 semi-structured interviews, five with managers and eight with union members,that lasted approximately 45 minutes each, and archival research. The managers werechosen on the basis of their key positions on different levels of the organization'shierarchy — the plant manager, plant controller, regional controller, supervisor, andthe management-appointed gainsharing coordinator.

The union members represented go-getters, fence-sitters and opponents. The twogainsharing coordinators (one appointed by management, one appointed by the union)were asked to group union members into three categories — those who submitted a

DENIS COLLINS

high number of suggestions (probably go-getters), those who submitted a moderatenumber of suggestions (probably fence-sitters), and those who vocally refused to sub-mit suggestions (probably opponents). The gainsharing coordinators agreed on threehigh suggestion-givers, two moderate suggestion-givers, and two low suggestion-givers, whom they believed were representative of their respective groups. The eighthunion worker interviewed was the union-appointed gainsharing coordinator.

Each interviewee was asked to describe (1) company operations prior to gain-sharing implementation, (2) the rationale for implementation, (3) the effectiveness ofthe plan, (4) the evolution of trust or mistrust between management and union mem-bers during the plan, and (5) employee attitudes and reactions toward the financialbonuses, suggestion system, team meetings, and other gainsharing outcomes.

Additional information about the facility's gainsharing experience was gatheredfrom the gainsharing suggestion logs, minutes of gainsharing meetings and othercompany documents. I attended the company's plant review team meeting, severalstaff meetings, and a steering committee meeting to observe how managers andunion members interacted.

VI. Analysis: The Power Game PropositionsPre-Implementation Issues. Gainsharing implementation in July 1988 was an out-growth of several prior events. During the mid-1980s, the company's virtualmonopoly on North American sales was threatened by the entry of two large competi-tors. Simultaneously, one of the company's major customers demanded a 5 percentprice reduction over five years to reduce the cost of its trucks.

In 1985, a new plant manager arrived with three primary agenda items to reduce"nonwage" costs: (1) adopt a Just-in-Time (JIT) inventory system to reduce inventorycosts; (2) transform the quality circles into work cells to improve product quality;and (3) switch the bonus system from a 40 year-old piece-rate incentive system to agroup-based gainsharing bonus. The three ideas, listed from low to high according tomanagement's perception of union resistance, represented radical changes. Adoptinga JIT inventory system and work cells would dramatically change work processes.Gainsharing would also drastically change decision-making processes and the unionmembers' compensation scheme. Although management argued that these changeswould allow the same number of union members to produce 25 percent more truckclutches, union officers believed that, because the company would soon lose marketshare, these improvements would more likely result in a 25 percent reduction in theunion work force.

The adoption of a JIT inventory system required very little union assistance andwas accomplished in early 1986. In December 1987 and January 1988, managementmoved 450 new machines into the building to form work cells. Small cells of unionmembers were now responsible for organizing themselves to produce an entireproduct from start to finish. The adoption of gainsharing followed a more compli-cated path.

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During the Summer of 1987, a gainsharing steering committee of four managersand four union members was formed to consider the feasibility of implementing againsharing plan that could be linked to the soon-to-be-formed work cells. A piece-rate bonus system did not make sense for rewarding appropriate work cell behaviors,such as rotating jobs and attending meetings. The union president privately agreed tosupport management efforts to explore gainsharing as a pay alternative, but he wouldneither publicly support nor condemn the effort because of its negative fmancialeffects on union members who were currently earning substantial piece-rate bonuses.The union vice president agreed to shoulder the praise or blame for gainsharing.

Two people were chosen as gainsharing coordinators: one appointed by theunion, the other by management. Whereas nonunion companies have only one gain-sharing coordinator, most union facilities have two to oversee daily operations. Typi-cally, this is because neither side initially fully trusts the other side (Ross andCollins, 1987). The union's gainsharing coordinator is in a particularly delicate posi-tion: management never fully accepts the person because he or she is a union member,while fellow union members may reject the person for becoming "too close" to man-agement. Union officers chose an electrician who, in addition to being an eighteen-year member, was a manager for one year. The plant manager chose the quality circlemanager who worked well with the union gainsharing coordinator.

Three important issues were raised at the gainsharing steering committee meet-ings: (1) management commitment to gainsharing, (2) the nature of the bonus calcu-lation, and (3) voting rules for adopting gainsharing. First, union members believedthat they were taking all of the risks. They had heard stories about other companieswhose adversarial managers sabotaged the gainsharing system by not allowing non-management employees the time needed to write suggestions or hold gainsharingmeetings. Management used this opportunity to substitute the gainsharing bonus foralready existing managerial bonuses that were linked to schooling and extra hoursworked, a change they were planning to make a few years later.

The second issue pertained to the basis for calculating the group-based bonus.Gainsharing consultants typically recommend simple calculations using factors thatnonmanagement employees directly control or affect. Management proposed severalnarrow fmancial measures, such as labor hours and scrap. The union countered witha broad and ambiguous fmancial measure — Retum-On-Investment (ROI). Manage-ment argued against ROI because it contained too many items beyond the control ofunion members (such as sales volume, market fluctuations, etc.). Simply put, ROI isnot a meaningful measure of daily improvements in the work process, but the unionleaders remained adamant and ROI was adopted as the measure.

Why did the union members on the gainsharing steering committee lobby sostrongly for ROI? Although the company's stock is publicly traded, each facility'sROI was kept confidential. Union officers suspected that the facility's ROI was quitehigh but weren't sure. They wanted this number to improve their collective bargain-ing strategy and management's willingness to share ROI would be a sign of good

DENIS COLLINS 65

faith. None of this was explicitly stated at the meetings. Instead, the union simplymaintained that ROI would be the most appropriate measure and management con-ceded. From management's perspective, if the union members wanted to rely on anambiguous factor, such as ROI, they were willing to give it a try; when the unionrealized that it was not an appropriate measure, some other measure could beadopted. Management had no idea that this was a collective bargaining ploy by theunion until, with the union's permission, I told the new plant manager five years later(he laughed).

Third, what percentage of the vote should be necessary to adopt gainsharing?Union and management agreed that two separate votes should be taken, one for aban-doning the piece-rate incentive system and the other for adopting gainsharing. Eachrequired a different voting criteria. The issue of abandoning piece-rate incentiveswould be decided by a simple majority vote, while the adoption of gainsharing wouldrequire approval by 75 percent of the voters. Both union officers and managementbelieved that without overwhelming support from union members participationwould be too low for gainsharing to succeed. If the first issue passed, but the secondfailed, the union could suggest an alternative team decision-making process andfinancial bonus system. To obtain the 75 percent majority vote, the steering committeebelieved it was necessary to educate union members about gainsharing. A task forcecomposed of 25 union members, who had followings within the facility, and 5 man-agers was created to discuss the gainsharing plan line by line. The task force visitedother gainsharing facilities, including several other facilities operated by the company.

On April 18, 1988, the first issue passed as 60 percent of the union membersvoted in favor of switching from the piece-rate to the day-rate incentive. The secondissue failed because the majority vote was not large enough, 218 in favor (63.5 per-cent) and 125 opposed. Union members who voted against gainsharing were verysurprised that they were in the minority. They had expected most to oppose gainshar-ing as well as the day-rate incentive. Some union members thought that the 63 per-cent vote should be sufficient to implement gainsharing, but the plant managerdisagreed. He believed taking another vote in a few months was an opportunity to getthe union more active either in supporting gainsharing or offering an alternative plan.

Shortly after the April vote, the steering committee met to discuss why 37 per-cent of the union members opposed gainsharing. The list of reasons included:(1) some union members did not trust management, particularly the plant manager;(2) some questioned the fairness of the bonus calculation; (3) some did not thinkother union members would work hard under a group bonus plan so they wanted adifferent individual incentive system; (4) some resented the fact that union memberswere lobbying on management's behalf; and (5) some believed that gainsharingwould cause union members to be co-opted by "hanging out too much with a badcrowd (management)."

The steering committee decided that more education about gainsharing wasneeded. Many union members were surprised that the steering committee did not

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give up when the gainsharing vote was cast, indicating the seriousness of both theunion and management. Many also believed that gainsharing, now an extra financialincentive to the new day-rate, could increase their wages, and thus not hurt them inany way. Pro-gainsharing union members emphasized that if gainsharing was a man-agement sham there was a clause wherein the union could back out of the agreementafter giving 60-days notice. A second vote on gainsharing was taken on July 8, 1988that would make the plan effective retroactive to July 1. The vote was 78 percent infavor of gainsharing implementation.

Structurally, 22 quality circles were immediately collapsed into 15 gainsharing"cell teams" for the three shifts. Five "cell review teams" also were created to com-municate ideas among work cells that performed the same tasks but operated duringdifferent shifts. These teams had one person from each shift. Lastly, a "plant reviewteam" was established consisting of the plant manager, controller, cell supervisors,union president, chief steward, one elected union member from each cell team, allgainsharing steering committee members, and the two gainsharing coordinators.

Post-Implementation Issues. As expected, many of the quality circle leaders wonthe first set of elections for gainsharing cell team representatives. The teams receiveda large number of initial suggestions, many of them "comfort" suggestions. In addi-tion to immediate changes in work processes, union members wanted better workseats and more lighting, tools, fans, and floor mats. Over 350 suggestions were sub-mitted by union members during the first four months of gainsharing. Soon a sugges-tion backlog developed and some union members refused to submit additionalsuggestions until the first wave were reviewed and implemented. Those most reluc-tant to get involved were the older, senior union members. In their fifties and withover thirty years seniority, they were accustomed to the old work relationships. Inaddition, they did not think that their jobs were at risk if they did not change theirwork methods.

Immediately after implementation the financial bonus calculation was severelynegatively affected by a new product warranty problem. Warranty costs for the facil-ity had typically been about $20,000 a month. In early 1988 there was a major designflaw in a new clutch and by June warranty costs had risen to $50,000 a month, aproblem not anticipated by management. In July, just as gainsharing started, war-ranties increased to $150,000 a month and rose steadily until they stabilized at$400,000 a month by the end of the year. Over the next two years the faulty productdesign became a $12 million warranty problem. While some of the warranty prob-lems were questionable, management accepted all returns because of the two newcompetitors entering the market.

These warranty costs made it impossible for union members to earn a financialbonus. Based on historical standards the facility had to earn an ROI of more than 24percent before union members earned a gainsharing bonus. ROI for September 1988dipped to 20 percent and it declined to 14.3 percent in July 1989, one year after gain-sharing had been implemented. According to management, if warranties were not

DENIS COLLINS

included in ROI, or if some other calculation had been used, a bonus would havebeen earned. But this was not the case.

Some union members began to withhold their suggestions because they wereworking better yet no gainsharing bonus was being earned. Adversarial union mem-bers told other union members that management knew beforehand about the newwarranty problem and plotted to take money earned through gainsharing to pay forthe excessive warranty costs. Union leaders did not try to diffuse this false perception.

With the exception of elected team representatives, attendance at gainsharingcell team meetings was voluntary. Initially, most union members, except a few oppo-nents, attended the meetings out of curiosity. When no bonuses were earned, adver-sarial union members began to attend the gainsharing meetings to find out what wasgoing on. Although they did not disrupt the meetings, their presence was felt. Theywould sit in a comer, say nothing during the meeting, and disparage meeting eventson the shop floor afterwards. If a manager attending the meeting said something thatdemonstrated his ignorance about some aspect of the production process, the adver-sarial union members would spread jokes at the manager's expense.

As work cells and gainsharing evolved, it became obvious to upper managementthat supervisors had to be taught how to manage employee participation. Supervisorswere told to allow the gainsharing cell teams to implement even those suggestionsthat seemed trivial or inappropriate. If teams felt constrained in implementing smallsuggestions they would never advance to the stage of developing and implementingthe major ones. In addition, it was important for work cell employees to believe theycould stop production to discuss work-related issues. Supervisors would simply haveto trust, within reason, that discussions among union members were related to workrather than question them whenever they stepped away from their production task.

On the other hand, some union members were just slacking off. This had a nega-tive impact on the other union members who began to wonder why they should con-tinue to work hard while others slacked off and still got the same weekly pay. Beforegainsharing, a union member suspected of slacking off would be subjected to a time-study and an increase in his or her hourly production targets. With gainsharing, therewas no piece-rate incentive to modify and it was much more difficult for supervisorsto quantify employee productivity, especially since lower than usual hourly produc-tion totals could be the result of a team meeting or a new cell assignment. Some areamanagers and supervisors quit because they could not tolerate the ambiguity.

The experience of Buddy is representative of the dynamics associated with thesechanges for union members. Buddy, a reliable production employee who had beenearning high piece-rate bonuses, would malign management and encourage otherunion members to get involved in activities detrimental to efficient production, suchas rigging the ftre hoses so they would spray unsuspecting people. However, heviewed the new work cells and gainsharing as a constructive opportunity to changethe way he worked. He ran for the position of team representative and won becausethe go-getters, fence-sitters and opponents all trusted him. He made suggestions.

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encouraged others to make suggestions, implemented work process changes, andoccasionally annoyed managers just for the fun of it.

Buddy experienced "culture shock" at the plant review team meetings. First, hehad little interest in the financial and production data with which the meetings began.Second, he wasn't sure that the meetitigs were legitimate since die view about themon the shop floor was negative: The meetings were thought to consist of union mem-bers either doing management's job or rubber stamping management decisions.

Buddy concluded that, contrary to popular opinion, many of the union membersand managers actively participating in gainsharing activities were very sincere. Hededicated himself to being a good work cell leader and gainsharing cell team repre-sentative, finding these activities very fulfilling. Then some of his union adversarialfriends accused him of "sucking up" to management. Whenever he argued a pointthat gave management the benefit of the doubt somebody would sniff his clothes andsay: "You smell like management." When he stopped work to attend meetings he wasaccused of "goofing off' and trying to get out of production work. It didn't help thatno bonuses were being earned due to the warranty problem.

After six months. Buddy declared "I don't need this" and resigned his gain-sharing duties and went back to just doing his job. Realizing that his job was morefun when he was involved, he ran for team representative again, and was re-elected.This time he assigned a few opponents, including the union steward who was a mem-ber of his work cell, to several decision-making teams. According to Buddy, "I had tofigure out if what was said was sincere or just bull and who was just bitching for thesake of bitching." The new team members were surprised to see union members try-ing to solve work process problems, even without managers in attendance.

Gainsharing was the key campaign issue for the 1989 union elections. The publicpositions of the five incumbent union officers on gainsharing were: presidentneutral; vice president — strong supporter; chief steward — mild supporter; treasurer— strong supporter; and secretary — neutral. When two union members stronglyopposed to gainsharing ran for president and vice president, respectively, the incum-bent president responded by making several very public anti-gainsharing statements.In turn, the incumbent vice president created a pro-gainsharing ticket, running witha friend for president and vice president. Two anti-gainsharing union members ranfor the offices of chief steward and treasurer, while the incumbent neutral secretaryran unopposed.

The incumbent won the presidential election with 60 percent of the vote, com-pared to 25 percent for the anti-gainsharing challenger and 15 percent for the pro-gainsharing challenger. Anti-gainsharing candidates won the offices of vice presidentand chief steward. In a very close race, the pro-gainsharing incumbent treasurer wasre-elected. Union members were surprised by the closeness of this particular votebecause the incumbent had been an excellent treasurer for the past nine years andwas much more qualified than the anti-gainsharing challenger. The newly elected

DENIS COLLINS

union officers interpreted the results as a signal that union members wanted to retaintheir distance from management.

A company-wide employee attitude survey taken one year after gainsharingimplementation showed that, contrary to management's expectations, trust betweenmanagement and union members had actually declined. A survey administered tothirteen union leaders in October 1987, when gainsharing was initially beingexplored, asked them whether they strongly agreed (scored a "5") or strongly dis-agreed (scored a "1") with the statement "Employees here trust management." Theaverage score was 2.2. In the June 1989, this score declined to 1.8. The gainsharingsteering committee discussed the employee attitude survey results and decided totake "warranty" out of the ROI calculation.

With declining sales further reducing ROI, and with the introduction of a new"continuous improvement" program for all corporate facilities, a new plant managerwas put in charge. Although union officers interpreted the 1989 election results as asign to reduce team-building interactions with managers, the new plant managerpushed in the opposite direction, asking the gainsharing steering committee todevelop policies that would increase trust between management and union members.A task team visited other production facilities with progressive management-laborrelationships and recommended four major changes where were soon implemented.First, all management staff meetings were opened to union officers. Second, managersdiscarded their ties and reserved parking spaces. Third, new company letterheadincluded both union and company insignias. Fourth, the gainsharing bonus calcula-tion was revised a second time.

It was obvious to everyone on the steering committee that the ROI measure hadto be abandoned in favor of measures more directly related to daily production. Fourhistorical bonus factors were constructed: (1) operating expense to sales — 29 per-cent; (2) inventory days — 30 days; (3) scrap parts per million — 55,000; and (4)attendance — 96.7 percent. A financial bonus would be earned in any month that anyone of these measures improved. For instance, each employee would earn a $30bonus in a month that achieved the following goals: (1) a 27 percent operating-expense-to-sales-ratio, (2) 27 inventory days, (3) 50,000 parts per million of scrap,and (4) 97.4 percent attendance. Management also agreed to continue to report ROIat the monthly plant review team meetings.

Shortly after the new bonus calculation took effect, a few bonuses were earned.However, they were so small that some union members joked that "the monthlybonus payout is convenient because you can put it into the coffee machine." Thesteering corrunittee decided to change the payout system from a monthly to a semi-annual distribution.

The recession, along with the new competition and warranty problem, negativelyimpacted the facility. Sales, which had been $7 million a month, steadily declined toa low of $4.4 million in July 1991. In 1990 management began a series of layoffs

70 JOURNAL OF LABOR RESEARCH

based on seniority, followed by a series of "bumpings" initiated by union memberswanting more desirable shifts. As a result, there were tremendous changes in teamdynamics, particularly those led by younger union members who were either laid-offor bumped. When business picked up and jobs were added, another round of teamturnovers occurred when previously bumped union members requested jobs on themore desirable shifts as they became available. Thus, the work cells and gainsharingcell teams were constantly in fiux.

In December 1990, the plant manager implemented major cost-cutting measuresacross facility operations, including an indefinite cancellation of gainsharing cell teammeetings. In early spring the plant manager had second thoughts about his decision.Due to reduced communications, obvious and necessary changes were not beingmade by frustrated union members. He rescheduled the gainsharing cell team meet-ings for June 1991.

One of the first suggestions at the June meetings was the need to clean the facil-ity. Maintenance problems had been delayed and work areas were not appropriatelyorganized. Management devised a "housekeeping" contest wherein the cleanest workcell won a pizza. Two hours prior to a "surprise" audit, a well-connected supervisorencouraged one of his work cells to close down operations and clean in order towin the contest; later they worked two hours overtime to make up for the lost produc-tion time. When that work cell won the award, union members complained the con-test was contrary to both union and gainsharing philosophies as the whole wassacrificed so a few people could win a pizza. Management cancelled the contest.Some managers were struck by how quickly gainsharing had become identified withunion solidarity.

Union members have debated the consistency of having individual awardslinked to the gainsharing program. For instance, in November 1991, managementbegan a monthly "beyond the call of duty" award where managers and union mem-bers nominated others for providing extra assistance. The gainsharing steeringcommittee members voted on which of four levels of awards, if any, should be given.The highest level award offered a choice among 200 lottery tickets, a portable colortelevision, 10 shares of company stock, a $500 savings bond or a $200 charitablecontribution. One of the first union winners declined the award because, as a self-proclaimed opponent, he viewed it as a bribe from management that was "pro-indi-vidual" and "anti-brotherhood." The gainsharing cell teams debated this issue andconcluded that the awards were welcomed by a large majority of union members.They remain in effect.

Sales increased in early 1992 and by March had reached the July 1988 level of$7 million a month. At the time of the 1992 field study, managers believed the facilityhad entered a recovery stage. Yet, due to complaints by adversarial union membersabout the lack of gainsharing bonuses, some managers argued for their elimination.However, a majority of managers believed that this would generate additional ill feel-ings among other union members, most of whom wanted to keep the bonus.

DENIS COLLINS

As a result of the bonus problem, the gainsharing steering committee wasreviewing additional factors that could be part of the bonus calculation. For instance,they were exploring ways to include aspects of division operations affected by unionmembers. Gainsharing was not an issue during the 1992 union elections. At the timeof the field study, an estimated 25 percent of the union members were stronglyinvolved in gainsharing activities and 10 percent were opponents. The remaining 65percent were fence-sitters.

As demonstrated by the list of events summarized in Table 1, there is evidencesupporting the two power game propositions. As predicted by the first proposition,gainsharing implementation resulted in several power games between managementand union members during the transitional process. As predicted by the secondproposition, power struggles did arise among and between both management andnonmanagement go-getters, fence-sitters, and opponents.

VII. Analysis: The Outcomes Propositions

There was a strong consensus among management and union members, even thosewho were still adversarial, that gainsharing was essential to the company. Both man-agement and union members benefitted directly and indirectly from four years ofgainsharing. Table 2 provides a list of these many inter-related benefits.

Direct Benefits to Both Management and Union Members. These include: (1)better production processes, (2) new machinery, (3) improved product quality, (4)more in-house work, (5) improved collective bargaining negotiations, and (6) fewergrievances.

1. Better production processes. Union members have offered and implementedmore than 2,000 suggestions that have greatly improved the production process,generated tremendous financial savings for the company, and improved working con-ditions for union members. For instance, one work cell that filled boxes with scrapand disposed of them in a heat treatment dumper permanently located on the otherside of the facility at a cost of at least $60 a shift, purchased a $4,700 moveabledumper that saved the company at least $50,000 the first year alone and saved theunion members a lot of physical aggravation. A new procedure for receiving steeldeveloped by an office team saved the company $12,000 a year. Many similar sug-gestions have been made.

2. New machinery. Using their gainsharing cell team's monthly budget, unionmembers have purchased many new machines and the best available tools to improveproduct quality and reduce production time.

3. Improved product quality. Many team discussions pertain to making a highquality product on the first try. Shoddy work is likely to be detected earlier and elimi-nated, rather than passed on to the next group or to the customer.

4. More in-house work. A union member suggested the purchase of a machinethat would permit the facility to produce its own materials rather than purchase them

72 JOURNAL OF LABOR RESEARCH

Table 1

Chronology of Power Games

Summer 1987

Union president privately supports gainsharing but was publicly neutral.Union vice president agrees to shoulder the praise and blame for gainsharing.

Fall 1987

Management appeases union objections by substituting the gainsharing bonus for already existingmanagerial bonuses they wanted to eliminate anyway.Union is adamant about using ROI improvements as the gainsharing bonus, even though this probablywill not generate bonuses, to improve its collective bargaining strategy.Management accepts ROI improvements as the bonus factor although it probably will not generatebonuses.

Spring 1988

Management rejects union request to accept 63.5 percent majority vote in favor of gainsharingimplementation in order to get the union more active in plan development.

Summer 1988

78 percent of union members vote in favor of implementing gainsharing. Gainsharing is implemented.

Fall 1988

Fence-sitters withhold suggestions due to lack of gainsharing bonuses.Union leaders do not diffuse false perception of union members regarding who favored ROIimprovements as the bonus calculation.Opponents attend gainsharing cell meetings to obtain information to disparage management.A few union members use gainsharing discussions as an excuse for slacking off.Some supervisors, ambiguous about managing participation, quit.Opponents ridicule former members who become fence-sitters and go-getters.

Spring 1989

Go-getters put fence-sitters and opponents on gainsharing cell teams and task teams to increase theirinvolvement.Anti-gainsharing candidates win union elections.

Summer 1989

Warranty expenses are eliminated from the ROI bonus calculation.All management staff meetings are opened to union officers.Ties and reserved management parking spaces are eliminated.Steering committee designs new letterhead that has both the union's and company's insignias.

Fall 1989

Steering committee develops four new bonus factors to replace ROI,With union's insistence, ROI is still reported at monthly plant review team meetings.

Winter 1990

Plant manager cancels gainsharing eell team meetings indefinitely due to the recession.

Summer 1991

Cell team meetings are reinstated.

Union members argue that the housekeeping contest is contrary to both union solidarity and gain-sharing philosophy.

DENIS COLLINS 73

Table 2

Gainsharing Benefits to Management and Union Members

Direct Benefits to Both Management and Union Members1. Better production processes2. New machinery3. Improved product quality4. More in-house work5. Improved collective bargaining negotiations6. Fewer grievances

Direct Benefits to Union Members, Indirect Benefits to Management1. Easier work tasks2. Greater voice in decision making3. Better managers4. Leadership opportunities5. Improved health and safety

Direct Benefits to Management, Indirect Benefits to Union Members1. Greater worker identification with company problems2. An easier decision-making process for tough decisions3. Greater quantifiability of production factors4. Direct communication with union members, rather than through union officers5. Less need for management supervision6. Recycling and energy savings

from suppliers. The $35,500 machine saved the company $396,000 in vendor costsand brought in additional jobs.

5. Improved collective bargaining negotiations. In 1992, union and managementagreed to begin contract negotiations early, and settled early. Communication isbetter and more frequent. Because all management staff meetings are open to unionofficers, some potentially difficult collective bargaining issues are discussed prior toformal negotiations. In particular, this has helped the company in its response to therecent crisis in health care costs, an issue that had already led to a union strike atanother company facility. Union officers who attended management meetings onhealth care costs viewed the health care cost problem in the same way as manage-ment. A joint management/union team was formed to examine the issue. In addition,the union knows the facility's ROI numbers, which helps their side of the bargaining.

6. Fewer grievances. Prior to 1988, the facility averaged thirty pending grievancesa day. Since work cells and gainsharing, there have been only about twentygrievances filed, and none during the last two years. According to one supervisor, theunion members "can only really file a grievance against themselves because theyorganize their own work, set their own schedules, and set their own work quotas."

74 JOURNAL OF LABOR RESEARCH

Rather than writing up a grievance, union members now submit the problem as againsharing suggestion and discuss it at the next cell team meeting.

Direct Benefits to Union Members, Indirect Benefits to Management. Theseinclude: (1) easier work tasks, (2) greater voice in decision making, (3) better man-agers, (4) leadership opportunities, and (5) improved health and safety.

1. Easier work tasks. The statement most often made by union members regard-ing the benefits of gainsharing is that "it makes my job easier." If they do not like theway the work is processed they can change it. If factory ventilation is inadequatethey can purchase a fan. If their work is physically stressful they can purchase apulley. Some managers cringe at this often stated benefit, mistaking the term "easier"for "slacking off,"

2. Greater voice in decision making. Gainsharing gives union members anotheroutlet for expression of their opinion on company operations. They can fulfill theirown work needs with the team budgets and no longer have to convince supervisorsthat what is obviously needed ought to be purchased or redesigned. This is particu-larly important with regard to health and safety improvements.

3. Better managers. According to union members, EI has exposed bad managersbecause they can no longer hide. These managers must face the union members atteam meetings and respond to their concerns. Some of the worst managers have leftthe company.

4. Leadership opportunities. Prior to gainsharing the only real leadership posi-tions available for union members were within the union. Now they can be team rep-resentatives or participate on a variety of task teams. Gainsharing allows some unionmembers, such as Buddy, to take responsibility for their own work rather than relyingon a manager.

5. Improved health and safety. Many gainsharing suggestions pertain to healthand safety improvements. For instance, teams purchase exhaust fans for better venti-lation, rubber mats to cover wet floors, and work station adjustments to prevent backproblems and other common health ailments.

Direct Benefits to Management, Indirect Benefits to Union Members. Theseinclude: (1) greater worker identification with company problems, (2) an easier deci-sion-making process for tough decisions, (3) greater quantifiability of productionfactors, (4) direct communications with union members, rather than through unionofficers, (5) less need for management supervision, and (6) recycling and energysavings.

1. Greater worker identification with company problems. Management believesthat union members are much more responsive to a host of organizational problemsthat they would have previously ignored. For instance, an office employee who knewthat a competitor was underpricing them attended a different gainsharing cell teammeeting to determine how the work cell could reduce costs to meet the competitor'sprice. Operators who, prior to gainsharing, would allow a machine to be wrongly

DENIS COLLINS 75

installed and then complain about it to management now take responsibility forinstalling all new machines.

Union members have a better understanding that the facility's profitabilityensures their own job security. In response to a management promise not to layoffunion members as a result of suggestions that improve the work process, one workcell reorganized itself such that two positions were unnecessary. The two unionmembers, who agreed to this arrangement, were bumped to another shift without anycomplaints. As a sign of the barriers which have been broken, the plant managerchallenges visitors to guess which people attending a meeting are managers and whichare union members. At a meeting of eight people, I was wrong about three of them.

Prior to gainsharing management feared what union members would say if theymet customers. Now, customers can speak directly with union members manufac-turing their product. Recently a team of union members visited a customer anddetermined that color coding the company's parts would greatly reduce mis-communications. Union members now visit suppliers as well, giving advice on howto improve their product.

2. An easier decision-making process for tough decisions. With union officersattending management staff meetings, the union serves as a buffer for tough deci-sions. For instance, prior to gainsharing management would notify the union justprior to a layoff. Now union officers analyze the financial numbers and they can fore-see when layoffs appear to be inevitable. Union officers can urge members to workharder or smarter to prevent a layoff. If not preventable, the layoff is anticipated.Similarly, as noted earlier, union members are exploring altemative ways of fundinghealth care benefits.

3. Greater quantifiability of production factors. Gainsharing suggestions and thebonus calculation have forced managers to better quantify company operations. Any-thing that union members affect, and that can be measured, may be included in thebonus. For instance, managers are now trying to determine how to quantify customerservice and certain shipping factors.

4. Direct communication with union members, rather than through union offi-cers. Prior to gainsharing managers often felt compelled to speak with union officersbefore suggesting that an employee change his or her work methods. In addition,union members would not perform someone else's job and they would ask the unionto clarify new directions from management. Now union members demand that man-agers communicate directly with them.

5. Less need for management supervision. Gainsharing has given union mem-bers who serve as work cell team leaders responsibility for some discipline issues.Because cell members organize themselves, they encourage each other to put in a fairday's work. Supervisors no longer have to constantly monitor behavior. When thereis a major discipline problem, union members demand that the supervisor take appro-priate action. There is also less need to supervise the implementation of productionchanges because the union members take responsibility.

76 JOURNAL OF LABOR RESEARCH

6. Recycling and energy savings. Gainsharing has greatly increased recyclingcompany wide. One employee suggested that a baler be purchased to recycle card-board. Within nine months one department recycled 27,745 sheets, saving $11,000.A union member actively involved in environmental issues determined how to recyclecomputer paper throughout the facility and where to sell it.

As demonstrated by the list of benefits summarized in Table 2, there is evidencesupporting the two outcomes propositions. As predicted by the third proposition, ahost of hidden and suppressed social and economic problems surfaced shortly aftergainsharing implementation. As predicted by the fourth proposition, managementand union members continue to support gainsharing because it fulfills some of theirmonetary or nonmonetary self-interests and group interests.

VIII. Concluding Comments

Juravich et al. (1993) have appropriately questioned the assumption of "mutualgains" and "win-win" opportunities for labor and management operating under Elprograms and recommended the need for a more complex understanding of them.This in-depth case study offers insight into both issues.

I developed a socio-political framework that took into account the multilevelevents, including countervailing forces and multiple outcomes, that occur when gain-sharing is implemented and institutionalized in a union setting. As suggested by thepolitical science literature on countries transforming their political systems fromauthoritarian rule to democracy, there were different response patterns to the gain-sharing plan based on whether a manager or nonmanagement employee associatedwith the go-getters, fence-sitters or opponents. By democratizing work relationships,power struggles occurred within and among subgroups. Each subgroup was chal-lenged to appropriately respond to hidden and suppressed social and economic prob-lems as they surfaced during the transitional process. Union officers manipulated thegainsharing process the most, pushing for the adoption of a financial bonus calcula-tion that, while making it almost impossible for union members to earn a bonus,made the collective bargaining process easier. It is essential to note that such Machi-avellian power games can be found in all organizations, not just those adoptingdemocratic structures and processes (Collins, 1992).

This analysis also demonstrates the importance of grounding the findings oflarge empirical data set analysis with case study analysis and vice-versa. If this facil-ity had been included in a large sample of union companies surveyed about the suc-cess of El programs, the results could be positive, ambiguous, or negative, dependingon how the researchers operationalize "success." Managers and union members usedthe El program to meet particular needs, some of which were mutually held. If thegoal of the plan was to improve product quality, it was a tremendous success. If thegoal was to improve health and safety conditions, a benefit found in the Juravich etal. study that is rarely mentioned in the participatory management literature, it was atremendous success. If the goal of the El program was to improve employee satisfac-

DENIS COLLINS 77

tion, it was a minor success. If the goal was to generate financial bonuses for unionmembers, the plan failed. In this particular case, union officers gave greater priorityto the acquisition of secret ROI numbers for collective bargaining negotiations thanto the development of an equitable financial bonus calculation.

Organizations do not make El changes in a socio-political vacuum. As such,results are unpredictable and varied. At this particular facility, there were unforeseenwarranty problems, a deep recession, job bumpings, and financial bonus manipula-tions, each of which negatively affected the El experience. In the general scheme ofthings. El is still but one aspect of organizational life.

From the perspective of union members, including the opponents, gainsharing isa way to address their grievances, improve health and safety conditions, and obtainbetter tools and machinery. There is greater autonomy and responsibility amongthem. Those who actively want to participate in work-related decisions can do so.From management's perspective, the facility is operating more efficiently and provid-ing a better quality product at much lower costs. In addition, hidden and suppressedproblems have been discussed at team meetings and acted on, union members nolonger have to be constantly monitored, and work relations are improving. Nonethe-less, like all evolving democracies, paradise still beckons.

NOTE

*I gratefully acknowledge support from two sources: The Graduate School, University of Wisconsin-Madison and the Association for Quality and Participation and also thank Timothy L. Ross of the RossGainsharing Institute for his research help. An earlier version of this paper was presented at the 1993Annual Conference of the Society for the Advancement of Socio-Economics.

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