The full title of this post could have been "A Great American Business Success Story: American Airlines and the Ownership Centered Workforce." No, that is not a typo. The American Centrist praises American Airlines
for its well rounded and socially responsible business strategy (thanks to The Moderate Voice
for the link):
While the other so-called legacy carriers are also slashing labor costs and increasing efficiency in an effort to compete with successful low-cost airlines, American has been the most aggressive in emulating the positive employee relations of low-cost rivals. Indeed, when American's management intensified its cost-saving efforts, it didn't turn to high-priced outside consultants. Rather, it asked its employees, since they do their jobs day in and out and know them probably better than anyone else.
And it is working!
From the maintenance floor to the cockpit, American Airlines is daily scouring operations to increase efficiency and find even the smallest cost savings. It's paid off: Last week, the company announced its first profit in almost five years.
is the kind of business model that our major airlines need. Instead of trying to offset rising fuel costs by cutting employee headcount, pay, and benefits, they are tapping into those same employees' vast intellectual resources to cut true waste out of the system. Look at the article's opening examples:
Two American Airlines mechanics didn't like having to toss out $200 drill bits once they got dull. So they rigged up some old machine parts - a vacuum-cleaner belt and a motor from a science project - and built "Thumping Ralph." It's essentially a drill-bit sharpener that allows them to get more use out of each bit. The savings, according to the company: as much as $300,000 a year.
And it was a group of pilots who realized that they could taxi just as safely with one engine as with two. That was instituted as policy has helped cut American's fuel consumption even as prices have continued to rise to record levels.
This is the type of innovation and practical hard nosed thinking that made the USA the industry leader in pretty much everything 80 years ago, and will work again today. While in the past I have been pretty harsh on the major airline carriers, with American I will make an exception.
Ownership Centered Workforce
When President Bush talks of an "ownership society," I get tingles. Unfortunately, his idea of an ownership society is not what I have in mind. There is no pride in simply owning stock or a private retirement account. Each and every American having a few shares of GE, Disney, or GM does not create an ownership society. Instead, the idea of "ownership" comes from the work of our own hands and our own minds. For a rank and file employee like me, ownership comes from knowing that my ideas are considered, and may end up helping the company. Ownership comes from the feeling that people are counting on me to deliver results. Ownership comes from thinking of "the company" as "my company." Ownership comes from being treated as a resource, not overhead. This is how to build what I call the "Ownership Centered Workforce."
Removed from the employer / employee model, ownership comes from owning a home or a business. Ownership comes from becoming a valuable contributing member at a civic organization. Ownership comes from participating eagerly in all levels of government. Ownership takes effort, but ownership is rewarding.
The New Union Model
One key driving force behind this transformation may be the labor unions. Instead of simply acting as an opposing force against management, unions should actively work to integrate the labor force's unique non-traditional strengths into the overall business strategy of a company. That's how American Airlines can save $300,000 every year on drill bits. Yesterday's labor unions arose because of cash rich owners and management trying to squeeze every last dime from their employees at the expense of basic human dignity. The objective of those unions was to ensure that profitability was shared with employees in the form of a living wage. That primary goal of unionization has been realized, and unions have been struggling to find their role ever since (Ambivablog and The Yellow Line both have excellent posts regarding the future of the unions).
I propose that the next step union evolution be an effort to bring corporate ownership to union workers. Today's unions have pushed themselves to the brink of irrelevance by demanding anti-business practices such as "no-fire" rules, skill-ignorant seniority and pay scales, and costly and wasteful "union only" rules (such as requiring a union electrician to change every light-bulb). Instead of creating wasteful and foolish regulations, unions could work with management to further incorporate their members into the company's overall business model. Why should unions have to wait for executive visionaries to have the epiphany that the workers actually have good ideas? After all, it is the unions that have the most interaction with the employees, and it is the unions who should recognize the cognitive strength the rank and file bring to the table.
A second way to cultivate ownership in a company is stock. I mentioned before that owning stock doesn't create a true sense of ownership, and I believe that rule holds true for all situations but one: the case where the stock is for the company you work for. If unions would promote stock-purchase plans to their members, then the interests of both employee and employer would draw closer together. Employees would have a stake in the company's successes and failures, and managers would have to be sensitive to the large block of share-holders that were the union workers. In this model, both the success of the company and the well-being of the employees becomes the concern of management, Wall Street, and employee alike.
One frustration of the common cause approach is the seesaw approach to pay. There is too often a double standard wherein a company will announce layoffs, pay-cuts, or pension defaults, while simultaneously giving its executives huge bonuses and stock option packages in the name of "talent retention." Such a practice is as good as making an announcement ot employees that says "you're expendable, you don't count." Proportional pay increases and decreases for execs, managers, and employees strengthens ties across the corporation, and creates more of a sense of ownership. When a company does well, all should do well. When a company does poorly, everybody should cut back. It is simply elitist and wrong for top management to fly off to the Bahamas for week-long "Leadership Team Building Conferences" before the ink is dry on the order to slash employee health care benefits.
Resource, Not Expense
The burden of changing the employee / employer culture does not rest solely in the hands of the unions, however. Instead of "The Smartest Guys in the Room" type executives and Wall Street analysts insisting that employee compensation is the biggest inhibition to profits, the American Centrist encourages more and more independent minded business leaders to embrace this concept of an Ownership Centered Workforce. These executives realize that they have a whole drove of hardworking and creative Americans working underneath them, and leverage that strength.
When your employees know they hold real value to the company, and when they can take pride and ownership in their company, you will see dramatic results. Morale is boosted, and with this morale comes pride, creativity, productivity, and drive. When all these factors improve, costs and waste go down. When costs go down without cutting your workforce, we see profitability coexisting peacefully with corporate responsibility. In the business world, this is truly the American Way.