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Can Lean Succeed in a Strong Labor Environment?

by Art Byrne
November 13, 2018

Can Lean Succeed in a Strong Labor Environment?

by Art Byrne
November 13, 2018 | Comments (4)

Well, the simple answer is yes of course it can. After all, Toyota itself has a labor union. And while it could be called a “company” union as opposed to the “international” type of union (one that is more common at the big three US automotive companies) it is still an organized labor union. A better example might be the former NUMMI joint venture between Toyota and General Motors in California. This was a plant that General Motors had closed due to the sever labor problems it had there over many years. When the two companies agreed on the joint venture Toyota was going to run it but General Motors insisted that they re-hire the same union work force that had caused them to shut it down in the first place. Within just a couple of years this became one of the top performing plants in all of General Motors. GM sent managers there from many of their other facilities to try and learn how this was done. Unfortunately, GM didn’t get much out of this as their managers went back to their traditionally run facilities and got very little traction.

I've seen lean take root in union environments. When I was a Group Executive for The Danaher Corporation, one of the Presidents of one of my Group companies (Jacobs Engine Company, or “Jake Brake” as it was more commonly known) and I introduced lean to Danaher using Jake Brake as the first example. While Jake Brake was a UAW (United Auto Workers) location we had tremendous success. Productivity increased from 3 brakes per man hour to 35. Inventory turns went from 2x to 25x. Lead time dropped from 85 days to 2 days and operating income increased from 4% to more than 30% over the first 10 years. In fact, from fairly early in Jake’s lean journey we had the UAW members conduct most of the plant tours for customers or Danaher’s senior management visits. They were proud of what they had achieved.

The same thing was true when I became the CEO of The Wiremold Company. There we had the IBEW (International Brotherhood of Electrical Workers), which had been in place for decades. In addition, as Wiremold began to acquire companies, 21 in all over about 9 years, several of these had long established unions. It didn’t really matter. We started kaizen activities in every acquisition right away even though it was pretty shocking to the acquired companies. Our results were similar to Jake Brakes and enterprise value increased by just under 2,500% in the first ten years after starting our lean journey.

Despite these successes, I don’t want to give you the wrong impression: implementing lean in a union environment is definitely harder than in a non-union one. There are more hurdles to overcome--the most important one is the one in your own head. If you come from a traditional management background you will probably take people for granted. And if you have a union, you are more likely to see people as “union members” rather than just people. To compound this, you probably will think of lean as “some cost reduction program” where a key objective is getting rid of people. If you start with any of these thoughts in your head the job of converting to lean is that much harder.

Instead, it is important to understand that lean is all about people. The thing you are trying to transform are the people. You are trying to help them see and remove the waste so that you can deliver more value to your customers and grow. To do this you have to stop seeing them as union members and just treat them as people. You are all on the same team with the same objectives. You can’t have a union team and a non-union team. People are people, treat them that way. That is the first and most important step.

Once you understand that, then you can begin to address all the other issues that make union shops harder to convert to lean than non-union shops. Work rules and job classifications are a couple of good examples to start with. These can also exist in non-union shops, where they are not governed by a written contract and are easier to change. Often, work rules have to be dealt with up front to even allow you to start running kaizen activities with mixed teams of salaried and hourly employees. If that is the case, you will need the cooperation of your local (I’m talking plant or warehouse or district office) union reps to allow suspension of any onerous work rules (that a salaried employee is not allowed to move anything or do any work on the shop floor for example) so that the kaizen can proceed. If you focus locally (i.e. keep the regional or national union reps out of the discussion) and are honest with your local union leadership about why you are implementing lean and what the benefits will be for the company and the workforce you can usually be successful. The benefits to the individual worker will be very clear from the very first kaizen and you will start to get buy in. Taking a setup from 2 hours to 15 minutes over the course of a one week kaizen, for example, will make the individual operators job easier and much safer. They will get that.

Of course you will have to promise that there will be no layoffs as a result of kaizen activities. Otherwise no one will want to make the improvements. Don’t worry about this. As you eliminate the waste your lead times will shrink and your quality and costs will improve so your growth will accelerate and you will need all your people. Think in terms of doubling in size with the same workforce. This is what happened at both Wiremold and Jake Brake.

Eliminating job classifications will take more time. We started with over 60 at Wiremold and got down to about 6 but it took some time and some negotiation. I think the important thing here is to make sure no one loses pay as a result of these changes. If you reduce peoples hourly pay rate as you move to fewer and more general job classifications you are asking for a lot of trouble.

As you move down the lean path you will be making a lot of gains, freeing up floor space and cash and increasing your earnings. I strongly recommend that you share some of these gains with your entire workforce by instituting a profit sharing program. Make it very simple. Share profits from dollar one on some percentage basis. At Wiremold the profit sharing pool was equal to 15% of the pre-tax profit. We divided that amount by the straight time wages for that period, (a month or a quarter) and then multiplied that percentage by straight time wages for that period, to determine your profit sharing payout. Everyone, from CEO on down was in the pool. We paid out quarterly. It really got everyone's attention and helped them understand how their efforts to remove the waste could wind up in their own pockets. It created a great sense of teamwork.

I could go on but I think you get the point. Lean is all about people. Treat people like people not union members and you will greatly increase your chances of success.

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4 Comments | Post a Comment
Karen Martin November 13, 2018
4 People AGREE with this comment

Very good post, Art. An important topic that doesn't get aired nearly enough.

We've worked with many clients with unions--often multiple unions--and leaders are often afraid to engage union leadership upfront. We insist on it and they're often pleasantly surprised when union leadership responds favorably to Lean.

After all, if unions were formed to "force" respect for people and Lean centers on respect for people, it can be a beautiful marriage. It's music to union leaders' ears that their members get to design their own work processes after boundaries are set by leadership. And that no layoffs will occur as a result of improvement (which we also insist on).

It's wonderful to see trust levels grow between senior leaders and union leadership in the process of deploying true Lean management.

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art byrne November 15, 2018

Karen, thanks for your comments. I'm glad you enjoyed the post. Once you understand that moving from traditional batch manufacturing to lean is "all about people" it becomes easy to take the next step and understand that all your people are the same and needed to be treated as such. You can't have a "union" team and a 'non-union team". Your trying to make everyones job easier and safer as you remove the waste. We always made sure to put the local union leadership in the initial lean training and on the first kaizen teams so they could have first hand experience. This always worked well. Companies who look at lean as some headcount reduction program won't be successful with lean and probably deserve to have a union.

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Harry Kenworthy November 19, 2018

Art - fully agree. When I was in a VP of Mfg. (NYSE company), all of our facilities in the Northeast were unionized - UAW, IBEW, and Paperworkers. I always walked the shop floor every day to develop relationships and management credibility. When we began Lean in the mid-80's (our tier one [to Toyota] Japanese JV helped us) we sent union leadership with a management team to a Richard Schonberger session in 1988 (before Womack). It helped further relationships and also everyone was sharing the same experiences. The union members loved the fact that they were going to an off site session, all expenses paid, learned a lot, and subsequently were very supportive of our efforts.

We introduced the ability for any new management personnel to be able to do actual production work to "walk in the employee's shoes" and learn first hand about how the work was done.This was done with a union person standing at the job guiding them in the work, so there was always a union employee at the work site (no loss of work).

Broadening of job classifications happened via mutually agreed trials and then subsequentlly in the contract. The broader classifications resulted in more pay.

On a separate note, in our government consulting we had a city in the Northeast as a client and convinced them to introduce Lean to their union leadership. 15 union presidents, along with some management members attended the thrid two day boot camp we did. The union presidents were very receptive and understood the principles of Lean (we told them no layoffs because of Lean), however, they pointed out management issues of poor supervisors/managers who didn't treat their team members with dignity and respect which was a serious issue the city had to address and it was very difficult for the Mayor and City manager to come to grips with this.

Our view was always "people are the business". If we focus on the "business", then we will be even more successful.

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art byrne November 19, 2018

Harry, thanks for your great editions to the post. I have always preached that "lean is all about people". What you are trying to transform is the people. If you treat them with respect, listen to their ideas, support them, and  work alongside them it doesn't matter if you have a union or not you still will be successful with lean. In my experience it is usually middle [and sometimes upper] management that is the biggest obstacle to a lean conversion. It is not the union. 

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