Andy Stern, President of the SEIU, on why unions can't turn back the clock on outsourcing.
ANDREW STERN, THE PRESIDENT OF
Here is an HR shocker. If SEIU President Andy Stern were heading HR in a large company rather than the heading the countrys largest union, he would outsource a lot more. His outsourcing providers would be unions.
Take the example of what Stern did with
Unions could be this countrys largest HR outsourcers, says Stern in an exclusive interview with HRO Today following the rancorous AFLCIO (American Federation of Labor - Congress of Industrial Organizations) meeting in
A CHANGE AGENT'S RISE
Vision comes to prepared spirits. And if ever one person was well-prepped to have a new vision of labor, it is Andy Stern. He started as an activist in SEIU Local 668, the
Today, Sterns vision of labor is crystal clear. And he is unhappy with what he sees. That is why he has envisioned splitting with the AFL-CIO, an organization he sees as out of touch with todays business reality, which includes the terrible troika of workforce dislocation: globalization, outsourcing, and Wal-Mart. There is a difference between making change and thinking change, says Stern. But the plan that [AFL-CIO leadership] passed in
At the March AFL-CIO dustup in
The second and much bigger fight is for control of the AFL-CIO, of which SEIU is part. Five major unionsSEIU, Teamsters, Laborers, United Food and Commercial Workers, and Unite Hererepresenting 40 percent of AFLs membership all side with Stern against AFL-CIO head John L. Sweeney over the syndicates $120 million annual organizing budget. Stern and company wanted Sweeney to return $42 million in dues to the unions for organizing activities, while Sweeney offered only $15 million and proposed boosting political and lobbying spending from $32 million to $45 million annually. Sweeney won this round. But insiders contacted by HRO Today expect that Sweeneys victory will be short-lived, since he stands for re-election in July 2005, and faces major opposition in light of declining membership. Sterns ultimate proposal is to reorganize the AFL-CIO from a patchwork quilt of 58 units into 20, each focusing on specific industry segments. This reorganization, Stern sees, is just one step toward making unions relevant to the modern economy. The rest of his plan is more complex, and a far cry from the traditional semi-Marxist labor versus management dialectic.
STERN'S RADICAL CORPORATE-IZATION
In the 1970s, pro footballs Pittsburgh Steelers won multiple championships with its famous Iron Curtain defense, which featured a unique attack: Rather than targeting just one ball carrier, the Steelers tackled the entire backfield, on every play. Andy Sterns union-organizing technique is Steelers Revisited. Take the example of 10,000 building maintenance personnel in northern
In this situation, a typical union would target one employer, get a CBA in place, and then target other employers in the area. But SternSteelers Reduxtackled the entire market at once. He told all the employers that his CBA would be void unless 50 percent of them agreed. In the end, more than 70 percent did. By tackling an entire industry segment, Stern created market-wide wage, benefit, and quality standards, which added significant value for both employers and employees.
In another variant on this theme, Stern tackled the challenges of an
Stern is now also a devotee of a hightech tactic for spreading his reform message. He is now an inveterate blogger, the term for people who use Web logs, or personal Web pages. (You can find his newest Web log submissions at both the UniteToWin.org and PurpleOcean.org blogs.) In a recent article he put up following that fractious Vegas meeting, he wrote: At the recent AFL-CIO Executive Council meeting in
While some elements of Sterns corporate- ization are mechanical, the real difference between Andy Stern and the legacy union movement is in what he sees as a need for a new strategy to deal with market forces such as globalization, outsourcing and what he calls the Wal- Martization of wages, or in other words, a mad race to the bottom.
Stern uses a private-sector analogy to illustrate how to introduce a new strategy to address the mega-market shifts now facing the AFL-CIO. Several years ago, he explains, IBM faced a moment when its business model no longer worked. It had to change or die. It brought in a new leader [CEO Lou Gerstner] and moved rapidly into services. It changed, rather than continue selling a losing proposition. And now it is once again a leader. Stern sees most of labors value proposition as hopelessly broken. The AFL-CIOs focus on spending more money on public relations and lobbying is horrifyingly wrong, in his mind. Just by spending more on our PR, we are not going to turn the clock back on outsourcing or globalization, Stern says intensely. And we have problems of our own making. For example, there are more people flying on airlines than ever, but we have 12 or 14 airline unions who do not cooperate, which has helped create airlines financial problems. There is no unified plan for portable pensions or healthcare or training. It is a failed strategy of not uniting and not understanding the business realities.
HEALTHCARE HORROR SHOW
While unions own value propositions need revamping, there are other market forces that Stern sees as even more ominous for American business. In Sterns view, healthcare is the 20,000 pound elephant that everyone is afraid of acknowledging. A recent
According to Terence O'Sullivan, head of the Laborers International Union, another AFL-CIO unit, 80 percent of negotiated wage and benefit increases go just to pay for healthcare costs. O'Sullivan has written recently that healthcare and hospital costs are driven up partly by the costs of paying for uninsured employees whose non-union companies fail to offer benefits. In Sterns opinion, our failure to address healthcare cost control has forced companies to shift costs to employees. What makes the situation particularly desperate for unions is that their ability to stanch the bleeding is limited because 84 percent of union members live in 12 states, leaving labor with little organized power in the remaining 38 states. In an ironic sidebar, Andy Stern notes that the healthcare cost climb has helped create some odd winners. The competitive advantage of coffee chain Starbucks, for example, comes largely from its guarantee of health coverage for all employees. That will last for a while, as long as [Starbucks] margins are strong, Stern observes. That is, until the Wal-Mart of coffee comes along and crushes their margins.
MEETING GLOBALIZATION HEAD-ON
While the AFL-CIO will be spending more money on PR and lobbying for protectionist barriers to globalization, Andy Stern will be making lots of international flights, adapting his union to the inexorable trend.
Stern is quite concerned about the impact of Wal-Mart on the plight of American workers. It used to be that what was good for GM was good for
While Wal-Mart provides a specific challenge, Stern claims that the bigger threat comes from global Wal-Mart-like players from
Stern used the same tactic with
In a 2004 edition of The McKinsey Quarterly, Farrell, the head of the McKinsey Global Institute, wrote: But understandable as the protectionist reaction [to the hardships of globalization] might be, it is misguided, since it would forestall not only the problems but also the benefits of offshoring. Less understandable, perhaps, is the failure of corporations and governments to do more to ease the suffering of its victims In healthy economies, companies create new jobsoften with higher wages and higher value added to the economyfor most of the people who lose their old ones. Companies can make it easer for their workers to adjust by committing themselves to continual on-the-job learning and retraining programs. Policy makers can assist them by offering tax credits or other incentives for companies that hire and train displaced workers. Generous severance and relocation packages can help as well. So too can wage insurancethe McKinsey Global Institute estimates that for as little as 4 to 5 percent of the savings gained from offshoring, companies could insure most full-time workers for up to 70 percent of any difference between the wages they received on jobs they lost and the wages they might receive on their new jobsif indeed these jobs paid less. Companies could also offer health care subsidies for up to two years.
Stern wholly endorses Farrells concept of helping companies share the risk of worker dislocation. Why cant a high tech company operating in Silicon Valley or
Does that mean that Stern, the leader of the countrys biggest union, is actually a fan of outsourcing? Hey, we represent lots of outsourced workers, he smiles. Janitors, security officers, healthcare workers, they are all doing outsourced work. To us, the question is whether [the outsourcing] is all about paying less wages and rewarding campaign contributors [in the case of public-sector outsourcing], or about quality and efficiency.
Stern pauses, knowing he is on to a big thought. We cant reward work with a race to the bottom on wages, he says, slowing his pace and deepening his voice for emphasis. That is not the American Dream. [HRO]
ANDY STERN'S 3 BIG IDEAS FOR HR LEADERS
As the leader of a 1,800,000 union, the nations largest, Andy Stern is as much a Human Resource leader as any reader of this or any other HR publication. And he has Three Big Ideas that just might inspire you to look at your job a bit differently.
IDEA 1: DEEDS ARE BETTER THAN WORDS.
Think about how to reward workers rather than stockholders. When you say We are investing in people, is that just empty words? There is a role for an intermediate organization that helps you truly invest in your people.
IDEA 2: ARE UNIONS AN ANTI-COMPETITIVE FORCE OR ELECTRICITY?
The sum total of the wage race to the bottom is that this generation of American workers will be the first ever to have a worse quality of life than their parents. To try to stop the wage drops, unions have been an anti-competitive force, protectionist. But what union wages should be is like electricity, which allows their users [employers] to operate more efficiently with better quality.
IDEA 3: PRIVATE RETIREMENT ACCOUNTS SIDE-BY-SIDE WITH SOCIAL SECURITY.
Maybe the only interesting part of President Bushs proposals on Social Security reform is to have workers put money in an account as an add-on for retirementsetting up a national annuity system in addition to Social Security that is portable from employer to employer. It would take a portion of employees retirement investment and outsource it with some [principle] guarantee. Unions could play a role in helping administer this.