Thursday, July 5, 2012

Productivity, Customers, Right-To-Work States, Unions and Government

Businesses are made up of people. The purpose of any business is to serve other people, especially customers. Thus, employees act in their best interests by doing everything reasonable to help their enterprises compete successfully to get and keep customers. Give them the biggest bang for their buck, in other words.To repeat, organizations exist to serve people, so the best way people can serve an organization is to serve those people served by that organization.

That means customers are job #1. That requires a relentless focus on productivity and customers, or finding new ways to do old things better at a lower cost. That's what companies such as Wal-Mart, Apple, Toyota and other companies in the private sector have done while building huge and sustainable businesses to the benefit of their customers, employees, suppliers, communities and owners.

In that spirit of always getting better at serving customers through innovative approaches, the self interests of union and government officials are often quite different than the people whom they purport to serve. "Creative destruction" is a hallmark of successful private enterprises but not easily found in hidebound bureaucratic union dominated and government public sector operations.

Accordingly, effective actions to "save the middle class" will only result from the success of our private sector individual U.S. businesses taken as a whole. That's where the wealth to fund governments and unions originates.

Union and government officials are merely intermediaries between customers and the people who serve them, and frequently counter-productive ones at that. As a consequence, truly acting in the best interests of the middle class means standing up to the negative impact that unions and governments have.

Simply put, both union leaders and government leaders often stifle much needed productivity and customer focus by moving too slowly in a globally competitive market economy. By making a concerted effort to defend the status quo, they prevent meaningful and necessary progress in enhancing the productivity of the people.

In fact, both union and government officials often see business interests as in opposition to their own, and they're right. What the rest of us need to see is that union and government officials are acting in opposition to the interests of the general welfare of We the People.

Stated another way, the real interests of organizations, including businesses, and their employees, who often are union members, are completely aligned whereas unions and government bureaucracies are not.

While I readily acknowledge that much of the foregoing will not be popular, that doesn't make it untrue.

Airbus Over Alabama tells the story of two much different U.S. work environments. It uses Airbus, a European company that competes with Boeing in manufacturing and selling airplanes, as an example of why unions aren't a positive influence in global competition:

"It's hard not to see the political lessons in Airbus's announced plans for its first assembly-line plant in the United States. The Toulouse-based aircraft maker spent more than eight years, and put up three separate bids, for a $35 billion contract for Air Force tankers, only to lose out to American rival Boeing last year. The takeaway for Airbus appeared to have been that if it wanted to bid for U.S. government contracts, its best interests include American assembly lines.

Hence, its new $600 million facility in Mobile, Alabama is now due to turn out 40 to 50 jetliners yearly by 2018, with about 1,000 full-time employees. Airbus now assembles A320s at its plants in Germany, France and China.

Even without the global politics of airline manufacturing, the economic incentives for Airbus to build more plants in France are difficult. With a headcount of 1,000, the new plant would easily surpass France's various thresholds for taking on a welter of worker "protections" and the burden of union bureaucracies.

But it's worth noting that Airbus didn't just pick the U.S. over France, Germany, or China. It chose Alabama over the rest of the U.S. Gee, there's plenty of factory space available in, say, California or New York. What's Alabama got that these famously "smart" states haven't got?

Not least, it's that the Yellowhammer State is one of 23 right-to-work states, which means workers are free to decide if they want to join a union. That not only makes the Alabaman labor market markedly freer than France, but also struggling states across the U.S.

Airbus isn't the first foreign enterprise to notice Alabama. The state also hosts Mercedes-Benz and Toyota production facilities. Airbus says its sister company, American Eurocopter, already operates in Mississippi and Texas—two more right-to-work states."

My Take

Non-union foreign owned auto manufacturing facilities are plentiful in the U.S. For example, just look at the right-to-work states where BMW, Toyota, Nissan, Volkswagen and other competitors have located their U.S. facilities. In right-to-work states and not in Michigan.

And then take an additional few minutes to consider why both government and the Boeing unions fought long and hard to keep Boeing from using its newly built South Carolina manufacturing facility recently. Or why Airbus, Boeing's competition, is locating in Alabama and not Seattle.

Leaving wages aside, productivity differentials of at least ~25% are prevalent in a well managed non-union manufacturing facility. That's simply due to the silly and unproductive work rules a "defend the status quo, increase dues and fight the company at all costs" union attitude introduces to  the work environment.

But we can't afford to play intramural games which weaken a company's competitive product offering any longer, if we ever could. Today we as a society, as well as employees, need to do everything reasonably possible to enable our businesses to effectively compete and win globally.

In that regard, the government's bailout of the UAW in the GM situation won't help GM or its employees to defeat global competition over time. Only cost competitive and world class products will do that.

And now Boeing's union facilities will have their hands more than full with competition from the new Airbus Alabama facility.

Summing Up

Only a relentless focus on productivity and customers, and an awareness that the organization's interests and those of its employees are totally aligned, will allow U.S. based operations to compete with all comers. And allow government to offer affordable and valuable services to We the People as well.

And to do that will require a total organizational emphasis on speed, experimentation, continuous and rapid improvement.

In reality, today's union and government officials don't help that competitive process --- not at all.

Thanks. Bob.

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