The scandal of parasitical management
W. Edwards Deming, the wise man of American industry, said decades ago that industrial problems were overwhelmingly the failures of management rather than of labor. No flame thrower, Dr. Deming attributed U.S. manufacturing problems 90 percent to management, 10 percent to work force.
That kind of clarity now is 100 percent obstructed by most Republicans running for office. Call it the not-Gov. Walker, or –Gov. Kasich, or –Gov. Daniels principle. Instead, we have ongoing disgraces. The treatment of the work force by so-called managers at the beginning of the 21st century would often shame the 19th century, and the problem is politically exacerbated. Outright shameful conduct is at least passively condoned and is at worst actively supported by GOP leadership, who almost to a man always heed their corporate donors and future K Street employers. Call it the Gov. Walker, or Gov. Kasich, or Gov. Daniels principle. Three examples, out of many possible, follow below.
- Cooper Tires, of Findlay, Ohio: Unionized workers at Cooper Tires gave up millions in concessions in pay and benefits in 2008, to help save the company. Reviews of Cooper’s pay and benefits remain mixed among people who work there. Sales for the company have grown significantly, even in the sorely stressed economy that is the state of Ohio under Kasich, largely because the Obama administration bailed out the automobile industry (over GOP opposition). How did management at Cooper Tires return the favor? By locking out workers in November 2011—that would be right after Thanksgiving—and the workers remain locked out to this day. Lockouts always cost the company money, by the way; they entail hiring and training new help, with all the cost and risk entailed in higher turnover and lack of experience. That these are production workers doesn’t help. Meanwhile, compensation for five top executives at Cooper totaled $9,531,521 in 2010—up from the previous five years, and an all-time high, though listed as lower in percentage terms by Morningstar. The percentage ‘decline’ is owing to a decline in Cooper’s stock price, making options less valuable. Cooper CEO Roy V. Barnes took home $4.7M that year. The kicker is that the company, now pressuring employees to accept a worse contract, has ample funds on hand to purchase a plant in Serbia. Cooper Tire & Rubber still has problems with profitability in terms of its stock price, partly because the company is losing goodwill and suffering in public esteem over the way it is treating its employees. But cost-cutting measures have yet to extend to executive compensation for top management; the Human Resources officer responsible for pushing around employees in ways including the lockout also took home six figures in 2010. The excuse for raising executive salaries, of course, is the declining value of company stock options.
- Apple, Inc.: Software giant Apple is less susceptible to accusations of lack of innovation or of failing to move with the times. Nor is its profitability suffering. However, its executive compensation is suffering even less, so to speak. Business Week and the Wall Street Journal are among business publications reporting that Apple CEO Tim Cook will receive 2011 compensation valued at $378 million. This, as they point out, stands in some contrast to the $1M annually drawn by late Apple CEO Steve Jobs. It stands in more dramatic contrast to conditions at Foxconn, a Chinese sweatshop used by Apple, where workers committed suicide in waves in 2010. The Apple-Chinese sweatshop connection was highlighted again by Rachel Maddow last night and was reported again by the New York Times recently. It was reported earlier by the Guardian. The story will continue to surface until the conditions are addressed—meaning corrected, once and for all. Whatever the problems of our struggling heavy industry, Apple, Inc., cannot convincingly claim that its pockets are too full of nothing but lint to pay its cheapest employees. N.b. There is also that niggling question of whether Apple couldn’t make more of its products here in the U.S., of course. Another question we’re not hearing raised on the campaign trail. Could it be that Apple is avoiding OSHA and EPA oversight?
- American Airlines, Inc./AMR: Any passenger who has had to endure AA’s baggage policy, fees for changing tickets, multi-stop routes, and teeny-weeny aging prop planes understands intuitively why American Airlines might need to apply for bankruptcy protection. Like almost every U.S. airline except Southwest, AA socks it to you at every possible juncture, including a baggage fee for checking just one suitcase. At least the company does not charge a baggage fee when it has to check your small carry-on bag, for passengers shunted onto a plane with overhead bins too tiny to accommodate even a carry-on–a frequent occurrence. Since AA is also using an aging fleet and, as mentioned, a large number of smaller and less-safe planes, operating expenses do not look to go down any time soon. Be it noted that decisions not to upgrade the fleet, not to purchase new planes rather than maintaining clunkers, and not to purchase larger rather than smaller planes are all managerial decisions. They violate Deming’s core principles for management; see the link above. They have not made AA profitable. But needless to say, AA top management is not seeking to lay itself off in the bankruptcy. The bankruptcy move is being used to break airline unions. Haven’t we seen this before?
How the company treats passengers is also a managerial decision, or series of decisions, determined by managerial policy—although the corporation does not hesitate to blame ‘government’ at every opportunity. While it is risky to use individual first-person experience as data, I have a first-hand anecdote to fill in the broader picture. For common-sense reasons, I do not usually fly at Thanksgiving. Last Thanksgiving, however, I had to fly to another state to tour Alzheimer’s-certified facilities for my mother, who needed to be relocated. That project is accomplished; all to the good. The trip home to DC on the Sunday after Thanksgiving entailed my getting on four planes. Naturally, there was a mechanical failure on the first of these, a small prop plane, and the two-hour delay meant that I missed the next three connections. Incidentally, the announcement we got about this did not explain the mechanical issue but blamed ‘paperwork’ for the delay, also stating that many mechanical staff were off for the holiday.
I did not know that I was booked on AA in the first place; I had bought tickets on Delta and on a local airline. But Delta was borrowing American planes, or AA was borrowing Delta’s brand. Either way, when I phoned the company about the problem, I was shuttled via phone from one company to the other, each disclaiming responsibility. Both companies had overbooked virtually all flights for the day; “They all overbook,” as one airport employee remarked matter-of-factly. Perhaps company management thought that few people would be traveling over Thanksgiving. That said, the story for me at least had a happy ending: eventually I asked the right question of the right person, who pointed me to the right in-house phone, which got me to someone with an Indian accent who was able to put me on a direct flight to DC at no extra cost. In fact, for the first time in my life I came home with more travel money than I left with—a combination of refunds and vouchers for being bumped. The next day, American’s bankruptcy was announced. Click.
Treatment of customers, including a deliberate policy of overbooking flights, is again a managerial decision.
To call for an end to the lockout in Findlay, Ohio, go here.