I have coined a word to describe the impact of unions on organizations. They “complify” the situation. “Complify” is my pet word for the opposite of simplify. In a time where every organization is struggling to remain viable, the presence of a third party between management and workers is an inefficiency we can no longer afford as a society. I believe the automobile industry got that message last year.

In addition to complifying things, the unions add non value adding management jobs, which raise the costs of things. They also create significant work for lawyers, who we all know make a pretty good buck. You have to pay the salaries of the union officials and the people who work for them, including the lawyers and the people who work for them. That cost is paid out of union dues, which lower the standard of living for the workers. So, the union officials bid up the salaries to allow the workers to not take the brunt of their expenses, but that makes the organization less able to compete – i.e. the automobile example.

Here is a note from a student of mine in an online class. This scenario is so typical it has been mentioned by numerous people who work in a union setting.

Well we have a union at the Post Office for the carriers, but honestly other than if you get fired, they don’t seem to interfere or help out too too much. And yes I think rewards and pay should be based on the quality of the work you do. Too much with the unions is based off of seniority. You can be lazy, but if you’ve been there longer than someone else, you get most everything over them. I don’t think that is right. Unions need to have some sort of penalties and accountability for their members who don’t pull their weight.

I once worked in a union factory as a non-unionized engineer. I witnessed some of the ways this system drains money and time away from the vital work of the organization. The workers got to vote on which union to have represent them every three years. When I was there, it was time for an election.

The campaign seemed similar to a High School election where people were putting up posters and giving out trinkets supporting their candidate. It turns out this election was unusual because there were normally only two groups running (Party A, and Party B). In this election there was a third Party C that was known to be linked to a communist organization. The Party C group had infiltrated the society for several years preparing for this moment to take control of the factory. By this time, they had placed some highly capable people in key slots within the organization. The campaigning was fierce, and there was a lot of mud being slung around.

The election day came, and when the votes were counted, Party C had the most votes at 41%. The rest were split between Parties A and B. The plant manager was highly disturbed that a known communist group had taken over his operation, but was powerless to do anything about it because the election was done according to the rules. But this plant manager was clever enough to go back and re-read the rules one more time very carefully. He picked up a loophole that the lawyers had inadvertently placed in the contract.

The plant manager summoned all workers to a large meeting to announce the winner. He got up and said. “In this election, Party C received the most votes at 41% while Party B got 31% and Party A got 28%. That leaves us with a large problem because the Union rules in paragraph 4.3.b state that ‘There shall be an election every three years, and the party which receives more than 50% of the vote will be the ruling Party for the succeeding three years.’ Unfortunately, none of the parties in this election received more than 50% of the votes, so this election is void according to the Union Bylaws. We will have another election in two weeks to see if one Party can gain more than the required 50% of the votes.”

Of course Party C shouted all kinds of foul language at the manager, but he had the upper hand because he was only going by the contract. Starting the next morning the HR manager of the plant took the leaders of Party C one by one into the office and told them their services were no longer required at this plant. For months thereafter, there were people carrying signs outside the plant about unfair practices.

I am sure this particular situation hardly ever comes up, but my observation is that there was a lot of dither and wringing of hands that took the focus off the critical work of the plant for months. This would not have happened if there was no union in the organization. While this example is rather extreme, I think it is illustrative of how the existence of unions, serves to “complify” things in an organization. That raises costs and lowers efficiency at the very time when organizations are feeling the competitive pressures from global competitors like never before.

Managers need to be particularly careful when setting up measures that they actually drive the behavior that is desired. It sounds ridiculous to think a measure would actually drive people to do the wrong thing, but it happens in every organization on a daily basis. Be careful it does not happen to you. 

For example, in an effort to boost sales, the CEO instituted “number of sales calls” as a measure. This was based on historical data showing total revenue is highly correlated with the number of sales calls. Unfortunately, with the new measures in place, your sales team spends significantly less time and energy on each individual customer in order to get more sales calls accomplished. This reduces the “hit rate” at closing sales. You are pretty sure the data for this year will show a negative correlation between revenue and number of sales calls, but the measure will show a stellar year, and the sales team will be richly rewarded for making a lot of calls.

In an effort to reduce costs, a measure has been set to decrease the amount of rework in the factory. Rework has accounted for 30% of the product cost, and the goal is to cut that in half. So far the measure is on track, but you have discovered the inspectors are passing slightly defective product that would have been previously rejected. You are fearful that customer satisfaction will take a hit, but at least the level of rework measure will look good so workers will get their bonus.

One significant problem has arisen due to the measure selected for “employee satisfaction.” Based on some HR literature, the senior management has focused on training as the key driver of employee satisfaction. A strong link has been shown between training and motivated employees. Everyone in the organization must have at least 50 hours of training a year for the company to score well on the measure. You are finding that people are being forced to attend training they don’t want or need in order for the corporation to get a maximum score. However, the employees are very unhappy because nobody is there to backfill for the 50 hours they miss, so they have to work extra hard to make up the time. Of course, there is no overtime available because that is too costly. Employees seem really up in arms about this issue and are considering bringing in a union, but the measure is going to show outstanding “employee satisfaction” for the year.

It is critical for managers to verify that the behaviors being driven by the metrics on which people are being compensated are really helping  not hurting corporate performance.