March 12, 2012

Fortes Fortuna Adiuva

The other day I told a BSU story about one of my classes and how it was a good example of how "Fortune Favors the Bold", or in the original Latin "Fortes fortuna adiuva".

I had another class example of the same thing that was more successful, in my opinion, than the last example.  It doesn't help that I like telling stories and one that makes me look good tends to top the list.

Before I get to the story I have a bit of advice for anyone who reads this and is either in college or thinking about going (or going back).  The first bit is to avoid taking any class where the instructor wrote the textbook for the course.  Believe me when I say you'll save yourself a lot of heartache if you do this. On the flip side, always take the course instructed by an adjunct professor if you have a choice.  It has been my experience that adjunct professors were experts in their field who either loved what they did or had a true passion for teaching, usually both.  There were two courses I had to take, the first taught by the textbook author and the second one by an adjunct.  The first day of the first course the instructor informed us that anyone working more than 10 hours a week was doomed to fail his course. He then went in to a good half-hour detailing his career, how he wrote X number of books and how many times he was consulted for this project or to serve as an expert witness in a court case.  Not once did he indicate any real world experience as he had gone straight from undergraduate to graduate studies and then right into teaching.  The second course was taught by a man who worked for a local major employer for the last 20 years.  He loved what he did and just enjoyed teaching what he knew to others.  His intro was maybe all of five minutes and then he got down to work.  One of the first things he did was "correct" some of our book learning.  "Nobody who does this work for a living does things that way." he would tell us, "This was was much faster and gave close enough of an answer."

I was taking a Labor Relations course taught by an adjunct professor who had finished his career working as the head of Human Resources for a national food company.  This class, much like my other one, had a big exercise where the students were broken up into competing groups.  In this class, we were broken into 10 teams and matched up into five pairings.  One half of the group were management and the other half were labor in a "fictional" furniture manufacturer.  Each group was given a brief overview of the company and a copy of the current union agreements.  The goal was to renegotiate the union contract.  I was on the management side and my group elected me the CEO of the company.

Even though this was a fictional company we were told that all of the numbers and paperwork were pulled, and altered slightly, from an actual company in the Midwest.  The professor admitted that the data wasn't recent and if we felt like updating the figure we could go ahead and pull more recent industry and location data.

Since I was CEO of this company I took charge.  We had a management team meeting and all started looking over the documentation.  We figured out that the union would probably be asking for a large raise and some added benefits and then would let us negotiate down to "reasonable" increases in pay and benefits.  My concern was with the contract itself since I thought that while we could easily negotiate in good faith, it was this document that would  be scrutinized in court if need be and would be the source for negotiations in the future.

As we poured through the paperwork the rules-lawyer in me saw a couple of things.  Nobody else saw any problems, but I sure did.  The intent of the union contract did not match up with the written word.  This just didn't seem right.  The intent of the contract was that the company was basically self-insured.  Employees paid a set amount towards their insurance and after a certain deductible the insurance would kick in and pay a large percentage of the costs.  The problem was that the contract actually stated, in quite clear terms, that the company would pick up the medical tab after a certain point. It was almost as if someone had done a bad find & replace job.  The company was profitable, but a single organ transplant would wipe out a year's profit.  Of course the actual insurance would take care of most of the expenses, but if they denied coverage......

There were a couple of other minor issues with the contract and my goal was to simply plug up these holes.

“‘Right to Work’ Laws – Low Wage Scheme,” Economic Outlook, January 1955 
Outside of class I decided to go ahead and research the actual company and job market, updating the stats.  When the professor said that the data wasn't recent, he understated things because it had been  a decade.  I was able to figure out that if we needed to completely restaff the company, something not recommended for many reasons, just the base wages would be a good 25% increase from what our class figures were.  I'm certain actual costs would be much higher since you couldn't just replace that many skilled workers at that cost.  You would have to pay a good premium to steal away employees from other companies as the local unemployment rate was too low.  There would be all manner of other issues, but just knowing this one wage data figure gave us a lot of room for negotiating.

I decided to give my professor the update figures in case he wanted to use them for the class, or at least future classes.  He was thankful and decided not to share the data with the rest of the class because they had the same opportunity to get the data themselves.  Evidently in several years of teaching this required course for business management students I was the only student to bother do this extra work. He then decided that I needed to step back and let the rest of my team handle the actual negotiations.  The excuse he gave the rest of our group (management and union) was that I was going to Mexico to scout for possible factory locations.  That was just a feather in our cap since it looked like we might be willing to relocate the entire operation overseas.

I met with my management team and showed them my findings and laid out my ideas for negotiations, which were basically to fix every hole in the contract and give the union whatever they wanted for wages and benefits that were under a set percentage.  As we expected the union side asked for a flat 10% raise and seemed willing to negotiate.  My team agreed to the 10% as long as we got the  full list of contract changes.  The union side didn't see any issues with what we were asking for and were positively giddy that they got 10% when they were hoping for 6%.  Our group was the first to finish negotiations.

The last thing we had to do was give our presentation.  I asked the professor if we could go last and we let the union give their side first.  The rest of the class served as the union meeting audience and the shareholders when management spoke.  Since I was the CEO I asked to present to the class, which only made sense.  All of the other groups had similar results, the unions got 5-6% raises and the management teams got some small general concessions.  When our union leaders spoke the class was positively astounded that they got 10% for what seemed like some meaningless contract changes.

When I got up to speak on behalf of management I had a tough room.  When I addressed the class I brought up what the real problems with the contract were and the potential future issues that were mitigated by this re-write.  I then went in on the local job market where this company was based and explained that we did not negotiate with the union on salaries because we were already paying below market value.  If they had asked for even more money the union would have received it, but they didn't.

I'm not sure how much of the class got it or even cared, but my management team got A's for the exercise and afterwards the professor told me that if he was still working at his old company that I'd have had a job offer on the spot.  That was mighty high praise and I've used him as a job reference in the past.

I've always said that 50% of success if simply showing up, 50% is doing your best work, and 50% is figuring out when the rules, like basic math, don't apply.

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