At the heart of this strategic perspective is recognition of the powerful and leading role of labor in development. "Labor" is not a code word for union. Labor is organized and unorganized and we must work with both sectors. Labor refers to people who work for others-- in production, service, and lower levels of management and supervision. Labor is key because it is "the back that turns the wheel" or "the brain that makes the judgment" in production. By definition, it has the greatest access to important information, it will determine the level of productivity and efficiency, it can block or encourage the growth of the firm, and it is part of the broader community. Its power in the company must be recognized and encouraged by our policy initiatives.
New forms of labor participation in the firm and in the economy are a key element of our new paradigm of community economic development. The new economy requires a high level of participation, consultation, and involvement in all aspects of decisionmaking by all the stakeholders. Transforming the image of labor from that of just another commodity or a cost in production to that of a full partner is one of our key objectives in extending and expanding democracy and participation in our society. This makes business and social sense.
Our successful work with labor is our key competitive advantage in promoting genuine community development on the High Road. Our understanding, commitment, and capacity to bring labor forward as a strategic leader in the health and development of the firm, despite the obstacles, is the most important advantage we have in retaining the assets of our economy and promoting development that is economically, socially, and environmentally sustainable.
Labor--organized and unorganized--is in the key strategic position to determine the success or failure of a company. Labor makes key daily judgments in production and it is labor's morale and energy that encourages or blocks smooth operations in the firm. Its full engagement in the company can lead to:
Labor is also a key source of information about the problems and opportunities inside the firm, and information is crucial to developing effective policy. Workers--organized or unorganized-- provide the best source of non-public information about a company, by virtue of the fact that they:
Workers often do not know the significance of the information around them, nor what to do with it, nor how it can and should be used. Traditional relations of production discouraged workers from becoming aware of the centrality of their role or the benefits that might come from analyzing what is going on. Neither unions, managers, local government, development corporations, or others in the community yet reach out routinely to employees as a source of information. Yet their information is critical for a new strategy for development and needs to be part of the foundation of effective action at the firm, community, or macro level of the economy.
To secure this information requires patient education and outreach. Employees often feel legitimately insecure in providing information, knowing that if they were found to be the source of the information, it may cost them their job. Those who seek the information must be careful to preserve scrupulous confidentiality.
There are two benefits from gathering worker's information: the information itself, and the resulting change in the consciousness of the worker. A person working for a wage becomes someone who is responsible for what is going on in the company--and this transformation lies at the heart of our strategy.
A relatively small percentage of the workforce is organized--now 14.1%30-- and only a few of the smaller companies that dominate a local economy are organized. This is a real weakness in our economy. Strong and effective unions in companies large and small are central to the High Road of development. Why? Unions represent the effort of workers to define the labor contract collectively, not only in their negotiations with management, but also in the internal debate on what constitutes a reasonable contract. Unions provide contact among the workers in a company with workers in other companies, and relations with other sectors of society. This broad framework promotes education, accountability, solidarity, and political action.
Unions protect the contract rights of the individual in conflicts with management as well as with other workers. In employee-owned companies, unions are an essential protection of minority rights in conflict with majority will. Good managers value good unions. Unions provide organizational structure in production. They make it possible to have structured agreements among representatives which makes negotiations more efficient and typically improves the content. Strong CEOs want strong managers, who inevitably make mistakes if they are doing their jobs. With unions, employees have protection from those errors. This system can strengthen everyone in their part of a company's necessary division of labor. Unions are also a source of information for the company about what is going on in other parts of the sector.
As in all human undertakings, labor organizations and their leaders range from the excellent and competent to incompetent and corrupt. Within labor there are "High Road" and "Low Road" unions shaped by history, leadership, and composition. As with local management, each situation requires concrete analysis to determine action and policy. But the existence of a union is overall, a positive factor in our approach to community development and company development, because it reflects organization and leadership within the firm. This can facilitate the flow of information and make access to it easier. Additionally, the parent union can be a source of broader information about the company and other firms in its sector, and it can also provide financial and other resources to meet the needs of the company and the workers. Union organization, however, can block access to information too as can management, so that an informed policy on the particular local, its larger union and the local labor council are also essential.
Critical and very positive changes are taking place in organized labor. For decades, labor leadership defended the private sector's right to be the steward of the economy. Here is George Meany, president of the AFL-CIO in 1955.
Where management decisions affect a worker directly, a union will intervene... (But) those matters that do not touch a worker directly, a union cannot and will not challenge. These may include investment policy, a decision to make a new product, a desire to erect a new plant so as to be closer to expanding markets, etc...
After decades of this passivity, organized labor is coming alive at every level, re-examining its various roles with a critical and creative eye. Leaders are now wide open to new options that benefit their members and allies, and they now represent a potentially powerful array of resources and influence. They value High Road strategic thinking and concerns about industrial retention and development work. Some emerging leaders recognize that unions will build their organization and representation only if labor takes a lead role in all aspects of the firm and the economy. They point out that failure to advance the broader issues will ultimately lead to failures in organizing drives. We activists who carefully preserve and develop our role with organized labor will give our projects enormous competitive advantage in years to come, and we who do not will fail no matter how well intended-intentioned we are.
"Capital Strategies" is the term that has come to describe labor's entry into issues and concerns historically reserved for the private sector in the traditional economic paradigm. The most concise and complete definition is offered by Randy Barber,
A capital strategy is an integrated approach to trying to affect all aspects of the structure, finance, and operations of both single employers and entire industries.31
These strategies are becoming more complex and effective as labor gains experience. Their use involves research, technical work, organizing, finance, politics, legal tactics, and pure power. They usually require finding individuals within the firm or industry who share our objectives--at least in part. They require a dramatic shift in the attitude of leaders who want to use them. Capital strategies acknowledge the strengths of the marketplace and require mastery of the skills necessary to use those strengths for labor's advantage.
Capital strategies typically begin at the firm level but should not end there, for inherent weaknesses can doom a strategy that remains focused on one firm. Labor needs strategies that eventually link firms together and that seek broader political change on state and national levels. They need to be part of the fight for national policies that promote and support our efforts on the local level.
The Variety of Tactics
Capital strategies have many different tactical components. Many were developed by creative union leaders over the last 20 years in response to the shifts in the economy. The list is getting longer as labor gets more sophisticated, but it now includes:
1. Corporate or comprehensive campaigns to influence the outcome of corporate takeover maneuvers or to prevent a corporate strategy that attacks labor's interests;
2. Community and government involvement in efforts to maintain, modernize, or expand corporate facilities through coercion, as with the eminent domain strategy used at Morse Cutting Tool, or by persuasion as with the use of public subsidies to offset extraordinary costs;
3. Exchange of government resources for the company, such as training dollars for pro-labor objectives;
4. Investment pools that favor workers and companies that are pro-labor, such as the Crocus Fund in Manitoba. The Crocus Fund was created by the Manitoba Federation of Labor in 1993, capitalized by provincial monies, pension fund investments, as well as the investment of almost 16,000 citizens of Manitoba who receive a tax credit in return. The Crocus Fund has accumulated more than $90 million and is used to retain Manitoba companies and promote employee and local ownership. It has been very successful and is growing rapidly. It is similar to the Quebec Solidarity Fund and other funds emerging in Canada that now represent $4 billion out of a total of $7 billion of Canadian venture capital, and more importantly, the participation of 500,000 individual investors.
5. Negotiated production agreements that cover issues of product, process, finance, and marketing, intervening in topics that are the traditional realm of management.
6. Participation in management as a labor strategy.
7. Partial or total purchase of the company along the lines of the United Airlines buyout;
8. Demands for access to corporate information;
9. Established rights of first refusal as part of a labor contract in the event the company becomes available for sale;
10. Use of union pension funds for the public interest: withdrawing them from investment in companies that pursue Low Road strategies or investing them in companies with the High Road approach. For example, Local 675 of the International Union of Operating engineers in Ft. Lauderdale Florida developed an aggressive strategy for its pension fund. Workers discovered that pension trustees had invested in companies engaged in anti-union activities, including construction of the National-Right-To-Work Committee headquarters in Virginia. The union took control and withdrew its money from that investment moving it to make affordable mortgages available to their members. The union then financed the development of an office park with 30 buildings constructed with union labor. These and other projects helped Local 675 leverage over $400 million of construction work for local building trades members.32
Several components are essential to successful use of these strategies.
1. Good Information: Accurate and timely information is a key requirement for successful capital strategies. Sophisticated training and research programs for unions, community organizations, and local government can help secure and analyze this type of information systematically.33
2. Research and Analysis: At the heart of practically any effective capital strategy is an independent analysis reflecting labor's interests and values. It covers the plant, the company, the sector, national/international factors, and available options.
3. Technical Skills and Capacity: Labor must have the capacity to perform the tasks that are needed to buy, run, and improve a company so that it is driven by labor values.
4. Finance: Access to money is needed for purchase, working capital, and all the other components of capital strategies.
5. Education and training of the membership: This is fundamental and must start at the beginning.
6. Help: The AFL-CIO and some international unions are developing sophisticated internal capacity to help with all the components of capital strategies. Probably 20 different consulting firms also share labor's interests and specialize in aspects of this work.
A number of dangers and problems often emerge in the use of Capital Strategies.
1. Falling prey to management's anti-labor strategies: Some of these ideas are often initiated by management--particularly plans for ESOPs and participation programs--and are intentionally or unintentionally also anti-worker and anti-union. After investigating the situation, a union may want to proceed with the program, but should use it as an organizing tool taking advantage of the space and any ignorance by management to turn the tables.
2. Turning over leadership and initiative to the technicians. While acknowledging expertise, labor leaders must be informed and in control of the important decisions involved in capital strategies. The must not abdicate the responsibility of grasping the significance of technical issues and making the right judgments. The technician or consultant's job is to develop the capacity of the union or group of workers to lead by transferring as much skill as possible, not to create an unnecessary dependency.
3. Failing to organize, educate, and involve the members from the very beginning. Every aspect of our strategy requires the training and education of leaders and participants. But often, the pressure of "doing the deal" takes over and educational is forgotten. Complex and pressing problems of finance, legality, management, or some other critical technical component demand the time and resources of leaders. This is normal. Leaders seeking to apply this strategic framework, however must give training and education of new leaders and the rank and file a priority level equal to that of hiring a good attorney or investment banker.
4. Being cynical and superficial: Passion can create possibilities. These campaigns typically require strong charismatic leaders who help people rise to the challenges of the difficult. Those skills need to be cultivated and nurtured in the mix of talents essential for these projects. On the other hand, passion and charisma are only good if they set the stage for the hard and persistent work required if the benefits of capital strategies are to be realized. These projects demand persistence and determination.
5. Seeing only the immediate battle as important: Achieving the immediate objective of saving the company and jobs is important but it is only the first step of many. The criteria for judging success have to consider the project's contribution to strengthening the broader effort to build the movement.