by Phil Wilson
Unions and the Corporate “Death Spiral”
A friend of mine recently interviewed for a big promotion to a top HR role. His final interview was with his future boss and 2 operations leaders. The interview was winding down and my friend started to relax a little – he was feeling pretty good. Then his future boss asked, “What questions do you have for us?” What would you ask in that situation? My friend is pretty quick on his feet and asked a great question: “What’s the number one priority I can support each of you with?” But my friend was a little surprised by the answer he got. That’s right – he got the same answer from each person: Retention. Retention. Retention. In Deloitte’s 2015 Human Capital Study of over 3,000 companies, 87% rated retention as a high priority. And things aren’t improving. In a new 2017 study by Future Workplace and Kronos once again found 87% of employers saying improving retention is their top people priority. Chances are good retention is at the top of your HR priorities too. And no wonder. Voluntary turnover is estimated to top 20% in 2017. The direct costs of turnover are estimated at over $11 billion dollars each year. And those are just the direct costs. If you lose an A player and replace them with a B or C player it could kill your company. What does all this have to do with unions? Everything. I have been researching and writing a lot about retention over the last couple of months (check out here, here and here). It is the topic of my next book. But most people who write or think about retention don’t consider its impact on labor relations and union vulnerability. I recently did a webinar for our retainer clients on this topic and thought I’d share a few highlights. Here are 3 ways retention plays a key role in your labor relations strategy. Turnover is the Canary in the Coal Mine Some voluntary turnover is inevitable. Sometimes it’s a good thing. If nobody leaves you don’t get a chance to inject new talent into the organization. And if you have a C-player in place you’d love to throw them a going away party. Hopefully they’re headed to your biggest competitor while you are busy replacing them with an A-player. But turnover can quickly get out of control. Losing a top performer puts enormous stress on an organization. The teammates left behind are forced to pick up the slack. If your hiring process and talent pool isn’t top notch you lose ground fast. The business starts pushing for any warm body, which compounds the stress. This pushes your teams and your leaders to the breaking point. Before long you’re in the retention death spiral. You lose ground to competitors because you’re fielding a bad team. And the teammates who are left usually don’t have the option to leave. They are stuck in a bad situation. Engagement and cooperation plummet. People quit caring about the organization, the customers, or their teammates. And if they can’t change their situation internally they look for help outside the organization. That’s how union organizing campaigns begin. During most of the 20th century miners would take pet canaries down with them into coal mines. Canaries were very sensitive to carbon monoxide levels and could warn miners of a problem in time for them to get to safety. Watching turnover can do the same thing for companies. It is a true “Left of Boom” early warning sign. Caught early enough you can stop problems from spiraling out of control. If you have a location with abnormal turnover pay close attention and support that facility. You might just stop the death spiral. Unions Cause Turnover What if a union gets into your company? That creates an even bigger turnover problem. A recent study by Professor Brigham Fransden of BYU concludes that unions that get into companies – especially when the election results are close – lead to all kinds of bad outcomes for employees (and ultimately company owners). First the top, highest paid talent leaves the organization. This happens at a higher rate than at the companies that don’t unionize. The study also finds at the same time – contrary to union promises – compensation for the employees who stay behind don’t improve. The effect is that total wages drop (as older, higher paid talent is replaced with younger, lower paid talent). Company owners may think this is a good thing. But it’s not. Those lower paid employees are also lower skilled. Eventually this takes a big toll on the unionized company. The study also found that these companies fail at a much higher rate than the companies that avoid unionization. Here’s why this is a big deal to your labor strategy. Some top executives seem to believe that we don’t have to worry about unions any more. They point to things like a more business-friendly administration and unions are getting embarrassed in high profile elections, like the recent Boeing and Nissan debacles. Unfortunately, that’s about as deep as many executives get into labor issues these days. But like my friend’s interview, when you start talking about retention you will get everyone’s attention. That’s why when you communicate about labor strategy you should also explain the negative impact unions have on retention. Blended companies (those who already have unions) should also pay special attention to turnover at these locations and look to negotiate terms that help counter these problems and retain top talent. Developing Leaders Stops Turnover The third way retention impacts your labor strategy is that your best tool to reduce turnover is also the best way to prevent union campaigns: strong first-level leaders. If your “early warning” training is focused on union cards and legal “do’s and don’ts” you are probably wasting a lot of money and missing a huge opportunity. You can’t ignore union cards and legal requirements. But for almost all companies the emphasis should be much heavier on developing strong relationships between first-level leaders and their teammates. The good news is you can do both at the same time. The same skills that help identify problems early are the ones that help make sure employees feel comfortable and safe approaching their leaders with concerns. Your leaders must learn to “run to the smoke” and then to be approachable, which creates the “draft” that draws the smoke to them. The good news is that investing in these skills doesn’t just prevent small problems from turning into union organizing issues. It also reduces turnover intention by 71%. Make retention a key part of your company’s labor strategy. Your top executives will thank you for it. After all, the odds are pretty good it’s at the top of their priority list too.
