A comparative analysis of cases of conflictual labor relations in the corn processing, steel, paper, and coal industries.

Author:Birecree, Adrienne

The role of strategic choice in firm responses to competitive pressures, the changing character of approaches to labor relations, and the effects of both of these on organizational performance have gained widespread attention in the globally competitive environment that has prevailed since the 1970s. A primary focus has been on labor-management cooperation as the best solution for poor performance. Cooperation, it is argued, increases the organization's competitive edge through improved productivity, product quality, organizational flexibility, and responsiveness to changes in the external environment [Konzelmann Smith 1995; Delaney, Ichniowski, and Lewin 1988; Kochan, Katz, and McKersie 1986; Katz and Sabel 1985].

Studies of the relationship between cooperative labor-management programs and organizational performance have yielded mixed results.(1) Most reveal insignificant long-term gains associated with cooperative initiatives. Part of the problem may be that what constitutes a truly cooperative system has yet to be developed in the United States. Nonetheless, the belief that cooperation benefits performance continues to dominate popular opinion as well as professional literature, and the benefits of cooperative approaches remain the focus of most studies, often without adequate consideration of the actual costs that such approaches may entail.

At the same time, it is well known, especially among workers and organized labor, that many firms continue to employ relatively adversarial approaches to labor relations as part of their efforts to solve competitive problems. Such approaches include hard bargaining with threats of mass layoffs and plant closures if concessionary demands are not met. At times, they have resulted in lengthy, violent strikes and union decertification. Cutcher-Gerschenfeld, McKersie, and Walton [1989] note an emerging dichotomy in labor-management relations with both relatively cooperative approaches and increasingly adversarial ones being used. Freeman [1986] explains the decline in the unionization of the U.S. work force and unions' increasing inability to organize new locals primarily as the consequence of firms' aggressive anti-union strategies. Surprisingly, however, in-depth analyses of the determinants and consequences of increasingly aggressive labor relations strategies are relatively rare in the literature [Adams 1988; Birecree 1991, 1993; Bandzak 1992].

This article presents a comparative analysis of four case studies of companies operating in four different industries where notably adversarial strategies were employed and/or adversarial outcomes realized in labor-management relations. The four firms are Clinton Corn Processing Company (CCPC), a leading producer of high fructose corn syrup (HFCS) and a subsidiary of Standard Brands, Inc. (SBI); U.S. Steel Corporation's (USS) Gary Works steel-producing unit; International Paper Company (IP), the leading commodity paper (paper grades used in producing paper bags, boxes, etc.) producer in the United States; and Pittston Coal Group (PCG), the largest U.S. producer and exporter of metallurgical coal and subsidiary of the Pittston Holding Company. The purpose of the analysis is to uncover elements common to the four cases and to determine if adversarial labor relations affected firm performance/viability in both the short and long run. We first describe the method that guided the analysis of the individual case studies and the identification of patterns across them. We then present the patterns discerned and the conclusions that can be drawn from them.

The Productive Systems Framework

Each of the original case studies was conducted using a productive systems framework [Wilkinson 1983; Tarling and Wilkinson 1987].(2) The productive systems approach, unlike more mainstream methodology, is built upon historical and empirical investigation of how firms, industries, or economies have behaved, rather than upon a priori assumptions about how they should behave. Its underlying premise is that institutions play a critical role in determining both the behavior and performance of the system. A productive system is any organization/institution engaged in the production of goods or services for market, the primary objective of which is to create wealth for distribution among its various stakeholder groups (owners and shareholders, managers and workers). Its most important elements are labor, the machinery and equipment used in production and the technology embodied therein, and the structure of ownership and control. At a macro level, the productive system is a nested, hierarchical system in which the global economy constitutes the highest level and the work place the lowest. Conditions at each level of the system influence and are influenced by developments in the others.

In this study, the primary focus is the corporation. The corporate-level productive system is subject to pressures from its environment, including but not limited to product market conditions, financial and stock market conditions, external labor market conditions, technological change, and the behavior and performance of other firms with which it must compete. Change in any productive system arises from changes in this external environment.

At the same time, corporate responses to environmental pressures create feedback effects that, in part, determine the future environmental conditions to which the firm and its competitors must eventually respond. Events in the bituminous coal industry in the late 1970s and early 1980s illustrate this dynamic. Expecting that growth in demand and prices for coal would remain strong as the result of the energy crisis and escalating oil prices in the mid-1970s, major coal producers and energy conglomerates invested heavily in new mines and the overhaul of old ones with the latest mining technology in order to increase productivity. The bulk of the new and modernized capacity came on line at the same time that international markets were glutted with an excess supply of oil, which adversely affected the demand for and price of coal. Rapid growth in the supply of coal exacerbated the situation in both international and domestic markets. Coal operators who had expected high returns on investment thus faced environmental conditions, partly of their own making, that were radically different from those expected. Lower than anticipated profitability led them to develop new strategies.

Change in a productive system also can result from internal strategic choices. For example, a firm may innovate or assume industry leadership to gain competitive advantages. Or, it may maximize short-term performance objectives that eventually undercut its own long-term performance. The CCPC case includes an example of just such a situation. The company originally was the sole supplier of HFCS because of patent ownership. In an effort to increase short-term profits, SBI sold licenses for the technique to other major grain processors and eventually lost its position as the industry's leading producer of HFCS. SBI's decision also resulted in long-term excess capacity in that market segment. Consequently, environmental changes that the company itself precipitated led to declining profitability in its Clinton subsidiary.

Whatever the source, adjustment in productive systems also involves complex social and technical interactions. Innovations in technology in particular can create a powerful impetus for change by requiring new or different skills and the restructuring of traditional jobs and internal labor markets. These changes in turn affect both the technical and social relations of production. Technical relations are those mutually interdependent relationships between different types of labor, machines, materials, and services required for production and distribution of goods or services. In the production of steel, for example, skilled workers monitor a capital-intensive, closely integrated continuous process technique of production that begins with the fabrication of raw materials that are then combined in a blast furnace to produce iron. The process continues to refine the iron into steel, which is then east, rolled, coated, and finished into various shapes and qualities. Effective technical coordination of raw materials, skilled workers, and machines is important for efficient production because any disruption in the process subjects the steel and equipment to costly damage.

Social relations of production involve the interrelationships among stakeholders at various levels in the system: owners and/or...

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