How can employee-owned companies move beyond the traditional, adversarial contract bargaining process to an approach that builds trust and partnership between labor and management?

In order to answer that important question, the Worker Ownership Institute and the Northeast Ohio Employee-Ownership Center sponsored a forum on "Innovative approaches to collective bargaining in ESOP companies." The program was hosted by Republic Engineered Steels and United Steelworkers of America local #1124 at the local's hall in Massillon. Crucial to the process is, first, establishing a relationship between management and the union that stresses partnership, communication, and teamwork before contract negotiations and, second, conducting negotiations to avoid destroying this hard-won relationship.

This does not happen automatically in employee-owned companies, as all the union and management participants in the seminar could attest. Even in 100% employee-owned companies both sides bring a lot of baggage from the past to the bargaining table. Despite the change in ownership, old adversarial relationships die hard, and ghosts of past conflicts haunt present bargaining.

The traditional approach to contract bargaining often results in labor and management taking extreme positions, then gradually trading concessions until one group gives in to the other. Often the longest lasting result of this process is a sense of victory on one side and failure on the other. With one side winning (+1) and the other side losing (-1) this zero sum (1-1=0) fosters animosity. The process can destroy any trust and cooperation that may have been developed previously and is so important to the success of employee-owned companies. This type of bargaining can also result in protracted negotiations as each group maneuvers for the most powerful position and strategy. These strategies can undercut the partnership that ought to exist in employee-owned companies. In fact, since members of labor and management are in the same boat, with their jobs and pension benefits on the line with the success of their company, the process seems unnatural and inappropriate.

An alternate approach suggested by Jack Buettner of the Federal Mediation and Conciliation Services is an interest-based approach to contract bargaining, or what he calls "positive sum" or "mutual gains bargaining." This approach, to use Buettner's carefully crafted phrasing, is "a problem-solving process conducted in a principled way that creates effective solutions while improving the relationship." The steps in such a process:

For this type of bargaining to be effective, a cooperative relationship must already exist. Dave Leisure, former vice-president of USWA local # 1124, and Rick Miller, Vice President of Human Resources, Republic Engineered Steels Incorporated (RESI), explained the importance of trust and building relationships between labor and management. They revealed the importance of the H-1 system in building that relationship at RESI. The H-1 system institutionalized the participatory system. Firm institutionalism was crucial to the establishment and maintenance of trusting relationships between labor and management. Leisure and Miller noted that the H-1 contract language was "enabling language," it did not provide specific details but broad avenues for the participation of labor and management in the decision making at RESI.

The H-1 process at Republic is typical of the expanded scope of collective bargaining taken at some ESOP companies. An increasing number of labor contracts in employee-owned companies provide for various forms of joint decision making about subjects that used to be management prerogatives. This contract language often provides for worker participation in what used to be management decisions at the shop floor and plant levels. These contract provisions seem to fulfill the wishes of Lynn Williams, former Unites Steelworkers' President who told Steelworkers that, "management is just too important to leave to the managers."

With the guidance of Walt Sharp, a consultant, the H-1 process was jointly developed by management and labor as a group. The guiding principle behind the H-1 process, according to Miller, is "a commitment to communication, and the realization that capital investment by itself would not make us the preferred supplier."

Republic's cost reductions, quality and productivity improvements, and wage and benefit enhancements can be attributed to the cooperative process established by the H-1 language. The "Target 60" provision in the latest contract, which represents the goal of $60 million in permanent structural cost savings, is an example of what can be achieved with this process. Of those savings, one-half would go to the employees as supplemental income, initially, and then as an increase in base pay when the savings are verified. Presently $22.5 million worth of permanent structural cost savings has been realized.

The process has not been easy or quick, noted David Leisure, "To make this process work takes an investment of time by everyone: for training, for answering the questions people have, and for establishing the relationships."

It took three-and-a-half months for the whole shop to complete the program, but Brennan explained that the program allowed the employees to learn about one another and establish some common goals.

Despite being ill, Jim Daulton, chief union steward and human resources team member, appeared courtesy of video tape. Daulton recounted the changes in bargaining from the traditional adversarial to a bargaining process he described as "win-win." Once a sense of trust and partnership was established between the management and union employees, a change in bargaining tactics was possible.

The sense of trust and partnership grew not just between the two bargaining committees, or management and the union but among fellow employees as well. "People trust each other as people and trust each other to get their job done," explained Daulton. He attributed the gains in productivity that Dimco-Gray has made to this new sense of partnership and trust that has been established.

Was the forum useful? One employee-owned company and union found the program of immediate help. The Marland Mold company in Pittsfield, Massachusetts, took a break from their contract bargaining to attend the session. Upon the bargaining committee’s return to Massachusetts, the negotiations went quickly and amicably. According to Mike Surowiec, president of IUE Local #225, after returning to Pittsfield on Thursday night, "we sat down Friday and had a contract by 3:30 p.m. that same day.... We listened to some of the other participants at the program and how they handled their negotiations. It seemed to help us focus on the bottom line and stop the b-s-ing. Some confrontational aspects that had existed were dispelled." Don Madison CEO of Marland added, "I think it made us take more of a team approach in solving the contract negotiations." Ray Janas, chief shop steward, thought that "we came back to Pittsfield that night with different views and ideas on how we negotiate against ourselves, for ourselves, and for the future."