Negotiation Analysis

May 2, 2010 UPS/Teamsters negotiation in 1997 Introduction In 1997 united parcel service and the Teamsters were on table again after 1993’s contract negotiation. It was common since 1980’s that union sent signals to management about large concessions before every negotiation. Union made it clear before the 1997 negotiations started that â€Å"These negotiations are about only one thing and that is making improvements that will give our members the security, opportunities, safety, and standard of living that they deserve† (Witt, Wilson, 1999). In 1996 UPS reported $22. 4 billion of sales. 0 percent of the ground package delivery business was under control of united parcel service. UPS had 185,000 Teamsters employees. Majority of these employees were part timers and other full timers. While reported being a profitable company UPS management said that to stay profitable and beat its competitors they need to negotiate the contract wisely and its employees need to coo perate with them. The emphasis on international business and expedited air shipments was driving the growth of the company. The air side of UPS operates virtually separately than the ground operations. This is where people worked odd hours and had to meet tight operational deadlines. The ground portion also consisted of majority of the part time workers (Budd, 1997). The Teamsters was part of the AFL-CIO. AFL-CIO was a federation consisted of 78 different national and international unions. Overall it had most than 13 million members. Teamster was a big in it as well. It was presenting 1. 4 million members including about 400,000 pensioners both in United States and Canada. Union leaders told its members to be offensive in the negotiation to stay in power. Teamster had many part timers in their membership and these part timers made 57% of the total UPS employees. These part timers had big stakes in this negotiation and were looking forward to get heard in the negotiation. The subcontracting was a big issue for these part timers which also made a big part of the total Teamster labor membership (Bacon, 1997) & (Witt, Wilson, 1999). Analysis At the time of 1997-contract negotiation, democrats were in power. Mr. Clinton was on the president seat. As democrats are seen historically in favor of the unions, teamster could expect government support for sure. The 1997 economy was doing great. It had the great combination of strong growth in domestic product, individual income and very low inflation rate. There was also very low unemployment rate at this time. Economy was expanding in year 1997 since 1991 (USDA, 1997). All this was favoring teamster, which was all ready for the negotiation with UPS. Solid economy meant that UPS was doing great in the business. UPS reported a great sale in year 1996, which was, suppose increase in 1997. Management had no reasons to lay back on employee demands. They were in a good position to be more generous and giving to their employees if they wanted. Low unemployment rates also put UPS in a difficult position. If Teamster wanted to go on strike UPS could have hard time filling all the vacancies. The situation was in great favor of the union side if they wanted to strike (Lecture notes). Initial demands Both sides came with their own plans and claimed their plans to be beneficial to the employees. Both UPS and teamsters saw advantage of controlling the pension funds. Management wanted withdrawal of its contribution to the pension funds. By pulling out of this plan company could be better off financially. It could cost UPS around $700 million in withdraw liability charges. To get out of 31 multiemployer plans. Instead UPS was willing to contribute $1 billion a year to a single-employer plan. UPS wanted the full control of the pension funds. UPS offered to provide a single benefit pension plan to both full and part time employees. Another offer that management made on the table was to create a new company administered health care program. The union administered the current plan and management wanted full control of the program and promised to provide same existing benefits (Bradford, 1997). Union opened with demands that it claimed to be essential for its members. These demand included fair wages and decent pensions plan. At the time full time UPS employees earned $19. 50 per hour and also 410 to $11 per hour in fringes. According to the union management their members deserved to be able to live a decent life. Next union concern was about its part time employees. As more than half of the employee working at UPS was part timers, their voice was also strong in the negotiation demands. Union demanded to make these part timers full timers and provide them same wage rate and full timers. Job security was also an issue that union wanted to be addressed in the negotiation (Bradford, 1997). UPS believed in subcontracted to make company more profitable and union was well aware of this fact. In the previous negotiations UPS had won subcontracting provisions and management wanted to keep this benefit in their plate in this negotiation as well. But, union did not like the way things went in the last negotiation, and this time they wanted to make sure that they do not let management take advantage of subcontracting. Union was very strong on the belief that its members deserved the job security which is only possible by getting rid of the subcontracting. Job safety and health improvements were also great concerns to the union in this negotiation. Union believed that UPS employee get injured more often safety was a big concern. Union believed that present safety programs were not enough. An improvement was definitely needed in this area as well (Schulz, 1997). UPS strategies To prepare for the 1997 negotiation, Teamster started analyzing management previous and up to date negotiation tactics. Management strategies included shift of more workload to lower wage part timers and also expand subcontracting. Even though company was making profit at the moment, company wanted to save money to increase its total profit (Witt, Wilson, 1999). Management proposed little wage increase than in the past negotiations. Starting with lower wage increase could benefit the company in counterbalancing any workers proposal during the negotiations. Division among part timers and full timers could also benefit management as both sides would have different priorities and will benefit management on the negotiations table (Witt, Wilson, 1999). In 1994, when UPS raise the package weight, many reformers wanted to walk out but many old-guard local leaders urged them not to work out. Management believed that same will happen if the members wanted to strike in this negotiation. Management was under impression that if the top union leadership will want to have a strike the old-guard locals will not support it (Witt, Wilson, 1999) & (Bradford, 1997). Union strategies Union was well aware of the fact that membership unity was the key for the success of the negotiation. To build membership unity union wanted to make sure they everyone is on the same page. Union started a yearlong campaign to well prepare for the negotiation table. Before the contract was expired, union took a survey of all its members. The survey wanted everyone of rank his or her priorities of the demands. The very key thing in this survey was that members were also asked about the activities member were willing to participate to help win this negotiation (Witt, Wilson, 1999). At the end of the surveys completion union had a good idea of what its membership wanted and how the things shall be proceed. This step helped union gain its members’ confidence and its members also felt being part of the process. The surveys helped Teamster to talk to their members and encourage them to get involved into contract campaign. Teamster’s main mission was to find a common ground for all its membership (TDU, 2007). Union leaders tried emphasizing on the common interests of both part timers and full timers. Union tried convincing its members that no matter whether they are full timers or part timers, the issues they will be fighting for on the negotiation table will be beneficial to both sides. A better pension plan will benefit full timers as well the part timers as better pension plan will encourage full timers to retire early. Finding this common ground was important for the union, so that it can make management’s strategy of division among full timers and part timers would fail (Witt, Wilson, 1999) & (TDU, 2007). To make its campaign successful teamster focused on building a stronger network among its members. Union tried making as many members possible to get involved in the campaign. Teamsters built a member-to-member network to spread the word about the campaign and to get as many UPS Teamsters involved as possible. Negotiation Table By knowing exactly what its members wanted, teamster started negotiation by being very aggressive about its demands. On the start of the bargaining, UPS opened by asking for huge concessions. It was nothing new for the Union. It was a very commonly used tactic by the management to stat with low offering so teamsters lower their expectations. Management wanted to make sure that it does not end up giving up too much and by making initial offers very low it can change Teamster’s minds to fight for big concessions (TDU, 2007). There were two big issues where both sides fell apart. First issue was the pension plan. As we mentioned earlier both sides was benefits in controlling the pension funds. UPS offered one plan on the negotiation table. Under which the future retirees will get monthly benefits equal to $100 each month for each of the years they have worked for the company. Under this plan a full time employee who would retire after working for 35 years for the company would earn $35,000 each month as their pension. Under this plan part time employees were also eligible for the pension plan. The plan offered part timers half of what was offered the full timers. The previous plan was a multiemployer plan that UPS wanted to get rid of. According to management this new plan would pay employee more than what is being offered under the multiemployer plan. Teamster on the other hand was not willing to change the pension plan. It wanted to keep the multiemployer plan but wanted to improve the multiemployer plan and raise the benefits offered under the plan (Bradford, 1997). Under multiemployer plan UPS was paying for other retirees of Teamster who never worked for UPS. Under multiemployer plan, UPS was subsidizing other companies’ benefits. UPS did not want to do that any longer. As their mission was to increase company profit and stay in the competition, the best alternative for them was to get out of multiemployer plan and take control of the pension funds. In a statement UPS said that it wanted its money to go to only its employees. Another point UPS made was that company will earn a greater investment return on contributions made to a pension plan controlled by company compare to the multiemployer plans (Bradford, 1997)& 15 & (Krause, 1997). Second big issue that made both sides apart was about part time workers. UPS wanted to keep part timers to stay flexible. Part time workers have been part of the company since expedited service has started. Company made an argument that not only part timers let company work be flexible but also short length shifts are less tiring than the full-length shifts. Arguments were being made that it is hard for a person to unload or load a trailer for continuously eight hours. When part timers were very beneficial for the company, Teamster was very well aware of that fact that part timers get paid less and receive less benefits compare to the full timers. UPS wanted to continue its expansion of its part timer work force. Teamsters knew that they had to stop this expansion for its members well being (Krause, 1997) & (Bradford, 1997). Union surveyed many part timers before negotiation started and they found that these part timers did not feel like being important in the company. Many of them were looking for other jobs, as their part time jobs at UPS were not paying enough. Teamsters argued that corporate managers are holding on to the worker’s wages as corporate profits are increasing and executive salaries are also increasing with it. All this is affecting part timer who are facing insecure jobs and a low pay (Grant, 1997). A final offer on July 30th by UPS did not include what teamster was willing to settle for. UPS offered to start providing 200 new full time jobs per year; expansion of subcontracting for the feeder work and it did not include a decent wage increase for the workers. UPS also stood still on its decision of taking full control of the pension funds. On August teamsters decide to go on strike, the strike which changed the history of labor force forever. Teamster Strike From the very beginning, the union’s contract campaign was designed to build a broad public support. This support could help teamsters win a good contract or win in a strike if needed. The campaign held a message that Teamster’s fight is not only about fighting for wages per hour but about the future of good jobs. Teamsters spread its word not only within the US but also many European countries where UPS was planning to expand its business to (Witt, Wilson, 1999). Union kept its position strong on the issues of retirement funds and worker’s health insurance. UPS in its previous negotiations also offered the same pension plan but this time teamsters were not willing to play this game. UPS use to take this offer off the table at the very last minute in return to get union accept other concessions. In the end management asked union for the extension of the agreement but union denied. On August 1997, teamsters went on strike (Witt, Wilson, 1999). Success of Teamsters strike had many reasons behind it. Around the time of the strike UPS owned about 80% of the ground delivery business. Clearly a strike would affect company’s stability and put some economic pressure. UPS was not conglomerate with any company, which could help it get through the strike. UPS workers use to go to each city so it became known very quickly. Another specific incident that helped this strike was that it happened in August when congress was not in session. During this period it was easy for the Teamsters to get all the media attention they needed (Cabell, 1997). UPS strike also got great support from the international unions of UPS in other countries. This involvement raised the public awareness not only in Unites Stated but also all around the world. When employees in U. S. went on strike employees in many other courtiers participated in activities like sick-out or temporary disrupted package deliveries (Budd, 2008 pg 450). At the end of 16-day strike union had a solid victory. Where originally company offered only 1000 full time jobs for the part timers ended up creating 10,000 full time jobs. UPS also agreed on keeping the existing multiemployer pension plan. It was a big victory for Teamsters. Besides winning on the two biggest issues Teamsters also won on others concerning issues. There was $3. 10 an hour wage increase over the course of 5 years contract period for the full timers. UPS originally offered only $1. 50 an hour increase. Part timers also got wage increase more than what company originally has offered. They got $4. 10 per hour wage increase where company originally has offered only $2 an hour. There were also limits on subcontracting on the final contract (Cabell, 1997) & (Schulz, 1997). Summation As we mentioned earlier political, economic environments were in favor of the union. Both sides referred to the previous negotiations and based on that built their tactics for 1997 negotiation. It was a distributive bargaining where both sides wanted to gain as much possible. One could say that union was being selfish on many aspects where it wanted more and more for its members. As it is a case in any distributive bargaining, both sides wanted more in their favor. There was no effort for mutual understanding and finding a common ground. Beside one or two issues almost every other issue could be resolved with little decent effort made by both sides. Both sides had strategies and both sides tried knowing what was going to be on the negotiation table. Based on our above analysis we can say that union was more successful in knowing management strategies and planning ahead for any of the management’s tricks. Union strength was not clear to UPS until it showed it power by pulling out a successful strike. Strike cost UPS millions in lost sales during the strike. Everybody seemed to be having won but UPS. More losses were alarming UPS as many shippers threatened to permanently shift to non-union competitors. Questions arise like what went wrong in this negotiation which leads to strike and whether teamsters were being simple selfish in what they wanted. UPS employees were enjoying relative job security at the time. Also, the turnout rate at UPS was low compare to the industry-wide rate. In many special jobs task managers like first-line managers were being paid the highest wages in the industry. The executives at UPS were not getting paid outrageously (USDA, 1997). Management might not have thought union will be that aggressive as it came out to be. There was a wall, which stopped each side from understanding one another. A good relationship of 82 years was broken with this strike. UPS and Teamsters needed to understand each other’s priorities and strengths. Trying method of interrogative bargaining could help both sides reach to an agreement without strikes and economic losses. In order to accomplish this, both sides must realistically share as much information as they can to understand each other's interest. A key for the Teamsters strike was its successful attempt to mobilize higher ranks. Involvement of the key individuals in favor for the strike was very important part of the successful strike. Next key for the Teamster success was to be able to know the issue that resonates with the general public. It was very important for UPS to know what Teamster’s strength was. Underestimating labor power was a key mistake that the management seemed to have made. Only an open and honest relationship among the management and Teamsters can help avoid strikes in future. References: 1. Witt, Wilson, Matt, Rand. The Teamsters' UPS Strike of 1997: Building a New Labor Movement. † Labor Studies Journal. 24. 1 (1999): 58-72. Web. 22 Apr 2010. http://www. accessmylibrary. com/article-1G1-54517324/teamsters-ups-strike-1997 .html (Pro-union) 2. TDU, â€Å"1997 ups contract: year-long contract campaign key to win†, Teamsters for a Democratic Union. 03-06-2007, Web. 29 Apr 2010. http://www . tdu. org/node/5252 (Pro-union) 3. Cabell, Brian. (1997, August 20). It's official: teamsters end ups strike. Retrieved from http://www. cnn. com/US/9708/20/ups. update. early/ (Neutral) 4. Bacon, David. (1997, August 24). The Ups strike – unions win when they take the offensive. Retrieved from http://dbacon. igc. org/Strikes/07ups. htm (Pro-union) 5. Michael Bradford. (1997,  August). UPS, â€Å"Teamsters boxing on benefits†. Business Insurance,  31(32),  1,25. Retrieved April 29, 2010, Business Insurance v31 p1, august 11, 1997. (Neutral) 6. JOHN D. SCHULZ. (1997, August), ‘Digging In’. Traffic world. V251 p10-13 august 18’97. http://vnweb. hwwilsonweb. com. ezproxy. lib. uwm. edu/hww/results/results_single_fulltext. jhtml;hwwilsonid=KSIR1EBXDQ24PQA3DILSFGOADUNGIIV0 (Neutral) 7. Kristin S. Krause. â€Å"Part-Time and Pensions. Traffic World v251 p11-12 August 11 '97. (Neutral) 8. John D. Schulz. â€Å"Keeping the dream Live,† Traffic World v249 p33 March 17, 1997. (Neutral) 9. John F. Budd. â€Å"What the Teamsters Knew. † Budd Jr. , John F, Initials. (1997, Nov-Dec). What the Teamsters knew. Across the Board, 34(10). (Neutral) 10. GRANT, L. (199 7). ‘How UPS Blew It. † Fortune, 136(6), 29. Retrieved from Master FILE Premier Database. (Pro-management) 11. Henry R Hoke. (1997,  September). â€Å"The UPS strike's winners and losers. †Direct Marketing,  60(5),  80. Retrieved April 29, 2010, from ABI/INFORM Global. (Document ID:  15113521). (Neutral) 12. John J. Schulz. August,1997), Many Winners, One Big Loser. Traffic World v251 p11-12+ August 25 '97. (Pro-union) 13. USDA. The 1997 Economy: An Overview. (1997), Economic research service. Web: http://www. ers. usda. gov/publications/aer780/aer780b. pdf (Neutral) 14. Robert J. Grossman. â€Å"Trying to heal the wounds – human resources management at United Parcel Service of America Inc after a labor strike. † HR Magazine. Apr, 2010. http://findarticles. com/p/articles/mi_m3495/is_n10_v43/ai_21136884/ (Pro-management) 15. Budd, John W. Labor Relations: Striking a Balance, 2nd Edition, McGraw-Hill Irwin Publishing: Chicago, 2008. (Neutral)