by Art Byrne
I suppose the flip answer to this question is “Well, unstuck it.” After all if a union is “stuck in its ways” it is only because management allowed this to happen. If you want to change this and move to lean then it is management’s responsibility to get the union to change its ways. In fact because we are talking about moving to lean it is more specifically the CEO or leaders role to lead the change as lean has to be led not managed to be successful. You may want to start by asking yourself why did we get a union in the first place? Were we taking our people for granted? Were we treating them poorly? What is the root cause and once we had a union how did we let them get “stuck in its ways?”
But lets back up for a moment. I think the bigger question here is can you implement lean in a union environment? After all unions have contracts and work rules and plenty of specific job classifications all of which seem counter to the environment you find in a lean company. Switching from a traditionally run batch company to a one piece flow, lean company is hard enough without the complications of a union. Can you do both things at the same time? You would be surprised at how many traditionally run companies conclude that you can’t and decide not to even start on the lean journey.
The truth is it is very possible to implement lean in a union environment. I have done it many times. Sure it is harder to implement lean in a union environment do to the existing work rules and contract. It may take a little longer as you work around the obstacles but the fundamental approach is no different nor are the outstanding results.
Converting to lean is all about people. It is not some capital investment project. The thing you are trying to convert are the people. You need to change the way they think and act. To become lean you have to remove the waste from all your processes in order to be able to deliver more value to your customers. You need to have all of your employees engaged in this effort. Lean is a team sport and everyone needs to be on that team. As a result the most important first step is to stop differentiating your people as union or non union. You are all simply associates working for a common goal. Everyone benefits if you deliver more value to your customers than the competition can. You need to understand that the best ideas to remove the waste will come from the people doing the work. It is your job as leader to facilitate and encourage this. Respect your people. All of them.
One of the best examples of converting to lean in a union environment is the joint venture between Toyota and General Motors called NUMMI. When Toyota decided it needed to produce cars in the US it chose to start with a joint venture. GM was willing and had an idle plant in Fremont, CA that it was willing to contribute as long as Toyota agreed to hire back the UAW employees that GM had laid off when it had closed the plant which at the time was one of their worst performing plants with high absentee levels and lots of labor management issues. Toyota was reluctant but took on the challenge. They took teams to Japan and trained them in the Toyota Production System. They treated them with respect, asked for their ideas and let them make improvements. Within a very short time NUMMI became the best performing plant in GM. Unfortunately GM was not able to transfer this success to its other plants and eventually went bankrupt.
When I first became a Group Executive at The Danaher Corporation one of my Group Companies was Jacobs Engine Brake or Jake Brake which made engine brakes for big diesel trucks. In fact my office was in the Jake Brake building. Jake Brake was really struggling and myself an the President of Jake Brake , George Koenigsaecker, decided to convert it to the Toyota just-in-time system in order to save it. George had come across the Shingijutsu consultants, all ex Toyota, and we convinced them to help us. They were a big shock to our system, but in a good way.
Jake Brake was a UAW union shop so we got the union heads involved from the start so that they could understand what we were planning to do and why. The UAW regional area head wasn’t too interested and our Jake Brake shop leader, Big Benny, was at best very skeptical. We were very honest and up front with them and made sure there were no surprises and that we kept our word. Our pace of change was very rapid and that led to some pushback as you would expect. On the other hand every time we created a new cell we painted the area and equipment and added better lighting, Jake Brake looked like a cave when we started. Our associates appreciated the cleaner better environment. In addition they understood that every move we made with their input was making their jobs easier and safer. We freed up space and added some employee recreational areas they could use during breaks. I remember once creating a new machining cell despite a lot of pushback from the guys in that area that the machines were too close. Even so they agreed to try it. We came back a couple of weeks later and they had moved the machines much closer freeing up more than 50% of the space. Their reaction now was “Hey, why didn’t we do this sooner.” In fact when the Rales brothers who owned over 50% of Danaher came to visit George had the UAW members do all the presentations on the shop floor. They were very enthusiastic and led the Rales brothers to ask George and I afterwards, “how soon can you do this in the other 12 Danaher companies.” With the UAW’s help Jake Brake achieved a 29% gain in productivity in brakes per man hour for each of the first five years of their lean journey.
When I left Danaher to become the CEO of The Wiremold Company which made raceway and fittings for the electrical industry we had the IBEW as our union. Wiremold’s earnings had declined by 82% in the two years prior to my arrival so it was clear that we needed to convert to lean as soon as possible. One of the first things I did was to outlaw the wearing of ties in the company. Historically the managers and engineers wore ties and the workforce did not but they were convinced that ties cut off circulation to the brain. This was a big shock to the salaried workforce but it put us on a better path to functioning as a team where you were judged by your contributions not your uniform or status.
When I announced that we would be implementing lean I did the initial training myself and made sure that all our union heads participated in the training and were on the first kaizen teams. I also made the pledge that no one would loose their job as a result of our kaizen efforts. I didn’t ask for anything in return from the union which of course would have been shocking in a traditionally run company. Even so it was important to send the message that we were all on the same team and no one would be hurt as we improved. That was all nice but it didn’t stop the workforce from bringing our first kaizen teams to a screeching halt. The teams were half hourly and half salaried employees and when the salaried employees started moving things or using tools to make adjustments to the equipment the work force pushed back that that wasn’t allowed in the contract. Yikes! It took us a few hours with the union heads to work things out and get the kaizen teams back on track. The thrust of that discussion was “hey, we are all in this together and if we don’t improve Wiremold will go out of business and we will all loose our jobs.”
After that we were able to conduct our kaizen activity without problems and we did a lot of them. We always published the results so that everyone could see the type of gains we were getting. We also did this to teach people to celebrate if a kaizen team was able to go from 8 people needed to do a job to 3 people instead of being just scared that they would loose their job. We of course lived up to our no layoff from kaizen activity pledge but how you do it is also important. For example, if a kaizen team went from 8 people to 3 the team leader would naturally offer up his/her 5 weakest people to be freed up. Instead we wanted the 5 strongest to be freed up. This gave us a chance to promote a few people as a result of the kaizen, another reason to celebrate. It also gave us flexibility in manning as we had 5 people available who knew the work in that area who could step in if someone were out sick. Most importantly it forced the 3 people remaining to step up and with our help improve their skills.
Another hurdle with unions and lean is the number of job classifications that unions tend to create over time. At Wiremold I think we had 63 different hourly job classifications. With lean we only needed about 5 or 6 as lean requires a flexible multi skilled workforce. For example, in our prior functional state a worker might only do one job or run one machine. When that machine is then moved into a one piece flow cell that has 8 operations needed to make the product complete then that operator will need to learn all 8 jobs. We started by just eliminating any job classifications that had no one currently in them. Then step by step over a couple of years we were able to get down to the 5 or 6 classifications needed. We made sure no one lost pay as we consolidated the classifications.
Of course after our associates were comfortable that they weren’t all going to get laid off it didn’t take them long to say, “Hey, I used to just do one job and now you put me in this new cell and I do 8 jobs what do I get for that? In our case we had the perfect answer, profit sharing. Wiremold had always had a profit sharing program but when I got there it was only paying out at about a 1% rate above base pay. We set an objective of getting it to 20% and with our aggressive kaizen approach we got close to that a few quarters but for the most part we were averaging about a 14% payout which was a significant boost in everyones pay. We paid out quarterly and held an all employee meeting each time to discuss the results and what we needed to focus on in the current quarter to get better and increase the payout. We got a lot of good questions at those meetings and always answered them honestly which is important but which a lot of traditionally run companies don’t do.
As we grew Wiremold, we more than quadrupled in size in just under 10 years, we did a lot of acquisitions some of which also had unions. One small company we bought in Patterson, NJ was represented by IBEW local 3 witch was rumored to be controlled by the mafia. This business made poke thru’s that were in the floor outlets used to bring power and data to the middle of open spaces mostly in commercial buildings. This business fit with our underfloor duct business in WV so we knew upfront that we would eventually move it and told them that. But our WV operation was building a new plant so the move was two years away. In the meantime we started kaizen with the existing union. We worked with them on the shop floor and with their ideas we created new cells and made their work easier and safer. In the end we gave them good stay bonuses and severance and helped them find new jobs as the kaizen activity had expanded their skill levels. They had learned a lot and had only good things to say. By the time we moved the business to the new plant sales had grown by 133%, inventory had dropped by 77%, we needed 66% fewer people in the new plant despite the sales gain and space was reduced from 50,000 sq. ft. to 4,000 sq. ft.. We never heard anything from the mafia!
A union is not a barrier to implementing lean. Just treat you people as people not as union and non union. Lean is all about people. Teach your team how to see and remove the waste with lots of kaizen activity. Make sure kaizen teams are half hourly and half salaried. Respect your people. Listen to them. The best ideas on eliminating waste will come from the people doing the work. Your associates will very quickly understand that you are helping make their jobs easier and safer. For example at Wiremold we took a 14 hour rolling mill set up to 6 minutes, a 150 ton punch press set up from 3 hours and 10 minutes to 1 minute and an injection molding set up from 2.5 hours to under 2 minutes. No one was complaining about that. The worst thing you can do is talk yourself out of going down the lean path because you have a union. What you really have is a capable group of people who want to be on the winning team if you will let them.
Art Byrne is the retired CEO of The Wiremold Company where his lean strategy increased enterprise value 2,467%. He is also the best selling author of The Lean Turnaround and The Lean Turnaround Action Guide.