Reference no: EM132749283

Power or Empowerment at GMIntroduction

• Effective September 25, 1990, the management of the General Motors (GM) Parma, Ohio, stamping plant finalized another three-year local agreement with the United Auto Workers' Union (UAW), Local 1005. It was the second local agreement they had negotiated together on time and without intervention from Detroit, since Parma's self-described revolutionary agreement seven years previously. It was revolutionary because Parma's management and union had abandoned their old hostilities and incorporated a team-based approach to work, setting Parma in a new direction. The 1990 agreement formally documented their joint priorities of team-based workgroups, extensive employee training, and a supportive working environment. The assistant personnel director for hourly employment, Bill Marsh, felt that, although this was another positive step in their ongoing relationship with Local 1005, the negotiating process seemed more "traditional" than the previous negotiation in 1987. Bob Lintz, the plant manager, agreed. Unexpectedly, the new Shop Committee chairman, who is Local 1005's prime negotiator, had introduced over 600 demands at the start of Parma's local contract negotiation. Even though management and the union were still able to finalize an agreement quickly, the tension created by the enormous list of demands still lingered. It could destroy the collaborative relationship that had been built over the past decade between management and the union leadership as well as the openness that Bob Lintz had managed to foster between himself and the hourly employees.

Background

• In the early 1980s, Parma's corporate parent, GM, conducted a capacity rationalization study that concluded that almost 75 percent of Parma's operations should be either eliminated or transferred to other GM facilities within three years. Despite a one-year lapse in formal relations, and with no contract in effect, Parma's management and Local 1005 responded to this threat to plant survival by conducting a joint effort to bring in new business. This joint effort led to a number of competitive assessments of Parma's operations that identified several noncompetitive work practices. To formally acknowledge this new collaborative relationship, a new labor agreement was drafted and ratified in 1983 by Parma's rank and file that resulted in fewer work classifications and emphasized a team-based approach to managing workgroups.

• To implement this agreement, Parma's top management and Local 1005 created the Team Concept Implementation Group (TCIG) to introduce this new Team Concept and spent $40 million on extensive training of the entire workforce in problem solving, group dynamics, and effective communication skills. By 1990, the Team Concept had empowered hourly employees to assume more responsibility in their jobs and to focus on problem-solving and work-related matters and to move beyond status differences exemplified by position titles or neckties.

• Roger Montgomery, who had chaired the Shop Committee from 1981 until 1990, felt that he had been able to put aside his past doubts of management's sincerity and work with Bob to create an environment based on teamwork and trust. He credits Bobs sincerity and openness with their ability to respect each other and work together for the good of the plant and its jobs. Roger believed that Bob had to overcome significant obstacles in creating this collaborative relationship at Parma, especially in convincing members of management and supervision. After years of open hostility between management and labor, Roger knew that Bob had supervisors and managers who didn't want to change. After years of fighting for employees by getting doors on bathroom stalls and eliminating hall passes, Roger felt that his union team had achieved greater consensus about the need for change. He felt lucky because even though some of his shop committee might not have agreed with him about every detail, they did support his efforts out of loyalty to him and to his relationship with Bob. Bob Lintz also felt that his managers and Local 1005's leaders had worked hard to overcome decades-long hostilities and build a positive and collaborative relationship.

The Situation

• Bob and his managers were concerned about the tension that had been created by the new Shop Committee chairman's large number of demands, especially because the union had made only about 100 demands during the previous contract negotiations. Roger had publicly endorsed this new chairman of the Shop Committee, yet management was not certain that he would continue Roger's strategy of collaboration within the union and between management and the union. With several new individuals in the union leadership, Parma's management also had to consider the possibility that the entire union leadership was actually becoming more adversarial, especially as the two political factions within the union continued to compete for support among members of Local 1005. Relations between hourly and salaried employees on the production floor could also suffer.

• The list of demands from the new chairman of the Shop Committee could have resulted from the uncertainty that existed with the announcements of plant closings by GM. Since the mid-1980s, six GM stamping plants had been closed, and Parma's employment level had fallen. These plant closings and pressure from GM were the result of GM losing 10 percentage points of market share in under 10 years and corresponding deterioration in GM's bottom line. By the fall of 1990, GM was losing more than $1100 for every vehicle it produced in North America, in part because of GM's high fixed costs. With over $700 million in sales, Parma is an important plant to GM, but there is no guarantee that it would not be closed if demand for GM's products did not improve. Wall Street was criticizing GM for not being more aggressive in closing plants to remove excess capacity. The corporation was pressuring all of its facilities to reduce expenditures significantly and to eliminate all over time. Parma had made substantial progress in maintaining revenues amid declining demand, but it still needed to make significant improvements in productivity. For example, it still had to better utilize the transfer presses that stamp automotive doors and hoods. These presses were installed during the $600 million modernization in 1983, and in 1990 their uptime stood at 31 percent.

• Parma also needed to improve its quality and customer satisfaction. In 1989, Parma began supplying the metal frame for the minivan produced at GM's Tarrytown, New York, facility. Arthur Norelli, general supervisor of Dimensional Control, remembered that in his first encounters with Parma, "I found them initially very defensive, almost adversarial. They were always right until we proved them wrong. If we had a part that wouldn't go together properly, they would say 'Well, you're not putting it together right.'" Another customer, a transmission plant within GM's Powertrain Group, had concerns about Parma's ability to produce quality parts in a timely fashion. In 1988, Parma was Powertrain's worst supplier for transmission components. Bill Hurles, a materials manager within the Powertrain Group, remembered Parma back then as "very dependable and very antagonistic."

• In addition to pressures to improve costs, quality, and productivity, there were additional pressures on management from the union to bring stamping work in-house that had previously been outsourced. As Parma lost its prop shaft production to another GM facility, the union wanted to bring back the production of sheet metal blankings, the first step in the stamping process. Blankings had been outsourced to a supplier, Medina Blanking, Inc., which produced an excellent-quality product and had virtually become another department in Parma because of its highly responsive and capable delivery.

• As GM closed plants and continued to downsize, Parma's salaried employees, too, were being significantly affected by efforts to reduce salaried employment and eliminate management layers throughout the organization. With fewer salaried employees, workloads were increasing even as promotional opportunities, compensation, and benefits stagnated. As was the case at most GM facilities, Parma's salaried employees were not unionized. As part of its efforts to cut costs, GM had eliminated the salaried year-end bonus, had sharply reduced merit raises, and was considering other benefit reductions. Profit sharing for both hourly and salaried employees had evaporated as losses in GM's North American operations had mounted to several billion dollars annually.

• After 10 years of being a top manager at Parma and assuming responsibility for all of Parma's operations, Bob Lintz continued to fashion a top management team based on trust and openness. He also wanted his managers to be committed to eliminating hostilities that lingered between the stamping and components operations within the plant, as well as between hourly and salaried employees. He was also looking for people who would support his informal and highly participative management style and who would work to increase the level of involvement among Parma's hourly employees. Although the TCIG had formally disbanded, its efforts were still ongoing. The weekly floor board meetings, where union officials and superintendents discussed plant floor issues, were still active and productive. The biweekly joint meeting of Bob and his staff, along with the Shop Committee chairman, the president of Local 1005, and the Shop Committee, were ongoing as well. These groups were representative of the Team Concept at work at Parma.

The Conclusion

• Even though Bob's management team supported his desire to increase the level of involvement among Parma's hourly employees, Dean Baker commented, "Sometimes get frustrated, though, because wish he'd have a little bit more confidence in the management organization."

• Parma's lead training coordinator, Pat Camarati, was concerned that many of Parma's managers and supervisors saw the ongoing Team Concept training as more of a disruption than a necessity. Shop Committee member Ray Kopchak believed that, although they had made great strides, the biggest mistake the union and management could make was to assume that their relationship could continue to improve without hard work. Seven years after beginning a new collaborative approach, he still felt that the easiest thing to do was "to go back to the old traditional way. But don't want to do that, it's not necessary. We've proven that management and the union can work together."

• Did Bob Lintz's efforts pay off? In the years following, GM closed many more faclities but the Parma plant continued operations without a significant downsizing. Bob Lintz finally retired, but as of 2002 the plant appeared to be in no imminent danger of closing.

Review Questions

Question 1. How would you describe Parma's environment in terms of its level of uncertainty and complexity?

Question 2. How would you characterize Bob Lintz's approach to communication, decision making, and the exercise of power in creating change at Parma?

Question 3. What were the most critical issues still facing Parma, and what should be done to address them?

Question 4. How can resistance to change be overcome utilizing the existing workforce?