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Local 190 is in an awkward position as a result of the proposal and implementation of the wage reduction strategy in 1983 by the Deloitte plant of Adam Baxter Company. This is due to the poor economic situation of the industry in which the firm is operating. Since the late 1970s and early 1980s, rival firms in the same industry have experienced losses with some reducing the wages of their employees and others winding down. Despite these trends, the Deloitte plant operations within the industry are phenomenal as a result of its increased production, sales, and profitability. It is as a result of this fact that Local 190 believes that the firm should actually be looking into the possibility of raising and not reducing the wages of its employees.
Given the prevailing relationship between the company, the trade union, and the employees, there are several factors that might determine the outcome of this negotiation for better or for worse. First, the firm can give in to the trade union’s demands of raising basic wages earned, introduce an incentive program to boost the morale of employees, reduce the production rate by 80% as a means of reducing injury at the workplace, and most importantly, improve the overall training offered to employees before commencing and during their work tenure at the firm.
These considerations will not only improve the productivity of the employees but will also reduce the firm’s operational costs, which will, in turn, enhance the profitability and sustainability of the firm in the short and long term.
On the other hand, the firm can choose not to meet the demands of the trade union. In this respect, they will have the option of firing and replacing all the employees after the expiration of the contract. However, this move will trigger a strike from the current employees. This will negatively affect the operations of the firm. Secondly, this approach will also increase the operating costs of the firm since it will have to incur additional expenses in the process of advertising, hiring, and recruiting new employees. Finally, the productivity of the firm will be reduced since new employees will require time to adjust to new working conditions to meet the current production targets.
Mistakes Made and Best Moves by Each Side
Adam Baxter and Local 190 have both made several mistakes in the course of these negotiations. The biggest mistake made by Adam Baxter was to totally ignore the grievances raised by its employees that have been presented to them through their trade union with regards to the wage reduction proposal in 1983. It thus became clear that the firm had no intentions of raising the wages of its employees, especially after critically analyzing its move of encouraging veteran employees to retire and, in the process, hire rookie employees who are not covered by the escrow account, hence reducing the firm’s expenditure on wages.
Furthermore, the firm has also threatened to terminate the contract if no consensus is arrived at, a move that threatens the job security of all employees since the 52-week lay-off notice will not be effective. This further increases the tension between the firm and its employees and encourages the possibility of a strike.
Local 190, on the other hand, did not rigorously analyze the 1978 contract, hence the development of the current situation. Local 190 should have critically analyzed every term and condition of the contract, especially with regards to the wage increment and reduction clause. It would have been wise for the union to have presented other factors that could have been used to consider the terms of increasing and reducing wages, such as the profitability of the firm. This move would have ensured that despite the poor economic performance of the industry, the Deloitte plant employees would have been enjoying a wage increment other than a cut.
The best move made by both sides was to abide by the terms and stipulations of the 1978 contract. This was important as it eliminated the possibility of a strike prior to the expiration of the contract. In the process, the firm’s operations have been improved, and employees’ job security has been guaranteed in the entire period.
Positive outcomes would have been achieved if the 1978 contract was drafted in a manner that protected the best interest of both the employer and the employee. This contract should have thus considered enhancing factors such as working conditions, incentives, production targets, calculation of wage rates, and, most importantly, dispute resolution mechanisms. These are critical considerations as they aim at enhancing the relationship between a firm and its employees, resulting in the short and long term sustainability (Bowen, 2013).
Recommendations to Improve the Overall Outcome
Given the fact that the firm is operating efficiently and profitably, there are high chances that the firm could have changed for the better. This can, however, be achieved if the following recommendations are achieved. The union should advocate for a sit-down strike instead of the traditional outside strike and take the plant hostage to deter any production activities. This approach will reduce the possibility of the employer hiring a new workforce or relocating the production plant, hence leaving them with no option but to agree to negotiations for a new contract that will be fair to all.
Bowen, H.R. (2013). Social responsibilities of the businessman. Iowa City, Iowa: University of Iowa Press.