Lessons from the Heart of American Business by Gerald Greenwald & Charles Madigan

Author:Gerald Greenwald & Charles Madigan [GREENWALD, GERALD]
Language: eng
Format: epub
Tags: FIC000000
ISBN: 9780759521018
Publisher: Grand Central Publishing
Published: 2001-02-22T00:00:00+00:00

The employee ownership plan is straightforward. Take stock in exchange for salary cuts. That is what the United employees agreed to: long-term gain in exchange for short-term sacrifice.

The problem is that old behavior roars back onto the scene at contract time, particularly if a company is doing well. Over the past summer, the pilots’ showdown at United was a reflection of the fact that a lot of people still don’t realize that their roles have changed. They didn’t go on strike, but they did slap themselves in the face by damaging relationships with customers. It seemed to me that they were overlooking what they stood to gain over the long term.

Despite all the trouble, there was a silver lining to this big customer service cloud. In 1998 the pilots and I agreed that an ideal situation would be a new contract that took over a day after the old one ended. Of course, they missed that mark in April 2000. But they did get a tentative settlement in August, which is good given the historical fact that airline union negotiations generally take forever. Given that track record, they came remarkably close.

My argument had always been that it was an investment. My pitch was simple: You are going to buy stock anyway through your savings program. If you do that the typical way, you will earn your salary, send some tax money to Uncle Sam, and then start saving.

Many have become cynical about employee ownership because it has often been misused.

I told them employee ownership would give them a chance to cut Uncle Sam out of the formula, as they would be getting stock in exchange for untaxed salary.

Employee ownership presents a more difficult challenge when a company is a half step from the grave. The cuts in pay don’t produce enough cash fast enough and the company still doesn’t make it despite the efforts of its employees.

As a result, employees, particularly in the airline industry, tell stories about stock at Pan Am and Eastern, all of which ultimately became worthless.

There are also cases in which American managers believe that once employees become owners, everything will change dramatically. They expect a new dawn when everyone arrives for work that first Monday morning.

Believe me. It doesn’t happen.

Employee ownership gave United some very important advantages. The biggest one was that our employees were certainly ready for change; they even demanded change, even if they didn’t quite know what changes they wanted.

They were tired of being followers in the airline industry. They were tired of hearing about company losses. They were tired of command and control management style. They were tired of the ongoing fights between unions and management.

That gave us a fast start to shift power down to the employees, particularly those who were working directly with customers.

There were some pretty naive ideas at the beginning.

Some people thought that supervision would simply melt away and that employees would no longer be accountable for their work. Some assumed they would not have to work so hard.

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