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Words to the Wise: Lessons from Unionizing Successes – Reinforcing the Value of Exceptional Management Practices

(December 2023)


Headline: “Wells Fargo Becomes First Big US Bank with Unionized Branch” (1)


This headline from the week before Christmas 2023 should get the attention of CEOs and HR Leaders across the country regardless of business sector or organization size.  Even if leadership and HR are confident that their workplace is relatively at low risk for unionization, this news should serve as a motivation for proactive assessment of the work environment, workplace policies and practices, and the employee value proposition in general. Personally, I’ve always disliked losing the opportunity to be proactive.  When you do, you find yourself in a reactive mode which generally leaves you with fewer options and less control of the situation.


But this headline is not cause for overreaction either, a typical knee-jerk response by many leadership teams results in frantic calls to the CHRO asking “are we at risk?” and “what should we do?”


I prefer to react calmly, keep things in perspective, and ensure that leadership understands the context and implications of such headlines in the corporate world.


Unless HR has been asleep at the wheel – i.e., negligent – your organization would have no reason to panic.  But consider it an opportunity to review and reinforce your company’s relationship with its employees, and importantly to assess your management capabilities and performance in facilitating exceptional employee experience.


People managers are on the front lines of the employee experience (EX).  EX is created through the company’s culture, and all the experiences of the employee journey, including the ways managers engage employees daily.


And people managers have the most difficult job in any organization, whether they manage 1 or 100 employees – let’s face it, getting work done through others is no simple task.  Other factors contribute to the employee experience of course – e.g., work-life balance, staffing levels, development, and career opportunities, etc.  But, because the single greatest determinant of whether employees feel valued is the relationship they have with their managers, companies should invest considerable time and resource to ensuring that managers understand their responsibilities with respect to employee engagement and are fully capable of fulfilling them.


How important is making sure you’re providing exceptional employee experience?  It’s only the key driver in providing exceptional customer experience (CX)!  Research by MIT shows that “…companies with great employee experience (i.e., low work complexity, and strong behavioral norms for collaboration, creativity, and empowerment) were innovative and profitable and had higher levels of customer satisfaction.” (2)

 

Perspective – Employees

 

With respect to the headline above, a banker at the Albuquerque branch of Wells Fargo said worker frustration has lingered at the location for years but reached a "boiling point" as recently as six months earlier.  The employee added that a key concern for the workers centered on short staffing, saying Wells Fargo forces employees to take on the workload of multiple colleagues. “The staff cuts are outpacing anything we can keep up with," she said, adding “we are organizing a union to build a better Wells Fargo for workers and customers, yet the bank continues to try to resist change."


Wells Fargo employees around the country have been advocating for improved wages and working conditions, including the ability to better push back against aggressive sales tactics and other management practices that have negatively characterized Wells Fargo for a while now.


The Albuquerque Branch vote came as Wells Fargo faces growing union campaign activity in its branches and call centers. Branches in Florida and California have separately petitioned to join the union, and union organizers expect more requests in the coming months.  The workers say they are understaffed, underpaid, mismanaged, undervalued, and unappreciated - asserting that change at Wells Fargo is past due, and that workers need more voice on the job for them to be better advocates for themselves and their customers.


Lesson Learned – don’t let employee-related issues reach the “boiling point”.  Managers must have a finger on the pulse of employee sentiment and HR should take the lead in ensuring a high level of competence for managers to lead effectively.  HR must also drive initiatives to ensure a workplace environment and workforce policies that achieve leadership objectives regarding culture and the employee value proposition.

 

Perspective – Management

 

“We respect our employees’ rights to vote for union representation. At the same time, we continue to believe our employees are best served by working directly with the Company and its leadership,” a Wells Fargo spokesperson said in a statement.


Wells Fargo President and CEO Charles Scharf said at a Senate hearing this month he believes the bank works best when management has a direct relationship with its workers, rather than having to negotiate with a union.  He reaffirmed the company's opposition to unionization and defended its freedom to discuss the subject with workers.


Wells Fargo hired Littler Mendelson P.C., a top employer-side labor law firm, to advise the bank on its efforts to stop the union drive. The bank has distributed anti-union flyers and used small group meetings to discourage workers at the branches from voting to join, according to union representatives.


However, worker complaints over alleged illegal anti-union activity carried out by Wells Fargo remain under review at the National Labor Relations Board (NLRB), with charges regarding a range of claims alleging illegal retaliation, discipline, and alteration of the terms of employment, according to the NLRB.


And the NLRB under the current administration has implemented pro-union rules that make it easier for unions to organize – and therefore harder for companies to hinder organizing efforts – giving unions a “significant boost”. (3)  Because the NLRB pendulum swings wildly depending on presidential administrations, it behooves companies to be very well-grounded in this area of labor law and always in tune with which way the union winds are blowing.


Lesson Learned – ensure management knows and follows the law.  HR should take the lead in developing and delivering basic employment law training for managers – including executive leadership – and refresh at least annually.  And in the event of a union organizing campaign, the company should not engage in any actions that potentially violate labor laws.  When management is better prepared to be proactive, it mitigates the risk of being reactive.

 

Perspective – Environmental

 

The union drive at Wells Fargo comes amid an increase in organizing campaigns this year, including efforts involving employees at some of the nation's largest companies, such as Starbucks, Apple, Amazon, Trader Joe's, and REI.


Unions have enjoyed a revival of sorts with popularity today greater than at any time since the 1960’s.  Over 2,500 union representation petitions were filed in fiscal year 2022 — a 53% increase over the previous year.  The service sector and other less-unionized sectors could theoretically join the union campaign surge.  But unionization in the service sector is perhaps logistically more difficult than in historic union strongholds like manufacturing since workplaces in the service sector tend to differ in at least two important aspects:


  • Turnover – attrition rates are much higher in the modern service sector than in the workplaces of the past, potentially weakening worker solidarity and reducing the incentive to fight for a better working environment at a particular establishment (because workers don't expect to work there long-term).

 

  • Workplace Attributes - service sector workplaces tend to be smaller, potentially increasing the logistical difficulty and transaction costs for unions to organize because they must be organized one by one, branch by branch or store by store.

 

While the share of unionized workers in the United States hasn't moved much, the victories have helped workers see what unions can offer, said Susan Schurman, a labor studies professor at Rutgers University and president of the International Federation of Workers Education Associations.  "Workers in sectors that have not had a union presence in the past have been following the press, and they see what unions can do”, she said.


Some headlines may proclaim a resurgence for unions in America, however, the Bureau of Labor Statistics (BLS) recently released its 2022 union data which shows that - far from a resurgence - the share of unionized workers has continued to decline.  Last year, the union membership rate fell by 0.2 percentage points to 10.1% — the lowest on record. This was the second year in a row that the union rate fell.  Only one in ten American workers is now in a union, down from nearly one in three workers during the peak of unions back in the 1950’s when unions played a critical role in boosting wages for American workers and reducing income inequality in the early-to-mid 20th century.  In the financial services sector specifically, just over 1% of employees are unionized. (4)


Closer to home, Hawaii has the distinction of being the state with the highest percentage of union members among its total working population – 21.9% in 2022 according to the Bureau of Labor Statistics, this rate virtually unchanged since 2012 when the rate was 21.6%. (5)  The point being that in Hawaii, unions have a different profile when compared to the national labor profile, a “closer race” if you will.  Management and HR leadership must pay attention to internal sentiment and external forces when developing and assessing talent management strategies and workforce metrics.


Lesson Learned – this is no time to panic.  But it’s also no time to stand still and ignore the trends in the talent management market.  It is a dynamic environment where the rate of change will only increase.  The scales have tipped strongly in favor of employees with respect to workplace flexibility, competitive compensation, health & wellness, and career mobility.  Companies that develop agile and innovative HR programs and processes will have a competitive advantage in creating attractive cultures and workplaces that deliver on the employee value proposition.  That’s really all employees want from their organizations.

 

Exceptional Management Practices

 

Research by the USC Center for Effective Organizations finds that the key to survival, stock price growth and earnings growth is “structural cohesion”, which is an employee‐generated synergy that propels a company forward in the direction needed to respond to change.  When structural cohesion is high, firms can withstand change and thrive; when low, they go out of business.  What the research shows is that as the rate of change increases, the impact of HR investments is more significant on the firm’s performance.  The higher the rate of change, the more important it is to invest in the right type of HR processes in the firm.  Simply stated, firms that value employees, which share the wealth, that are willing to take the risk and create an environment that strengthens structural cohesion will outperform their peers. (6)


Basically, employees want to feel valued by their companies.  A 2021 Gallup study found that 70% of the variance in team engagement is due to the manager alone.  So, it makes sense to focus attention on making our managers our most significant competitive advantage in the talent market.  To move in that direction, I recommend that companies proactively develop and implement exceptional management practices to increase employee engagement and drive company performance such as the following:


  1. Know how your employees are feeling about working at your organization and whether they feel their contributions are valued – regularly assess employee sentiment and take actions to improve the employee experience based on the feedback employees provide.

  2. Ensure your people managers have baseline competencies to manage at best practice levels.

  3. Ensure managers at all levels know how to respond to employee questions, concerns, and complaints – i.e., make communications a core management capability.

  4. Ensure competitive compensation and benefits and ensure your employees know the value of the total rewards they receive – provide an annual total rewards statement to employees that clearly conveys the value of all benefits and programs paid by the company on their behalf.

 

 

Conclusion

 

There are other steps a company can take to create organizational capability and increase employee engagement levels, but the above short list would be a very good starting point for developing a solid talent management foundation upon which to build.


Your employees are your greatest asset.  Your people managers are your greatest competitive advantage in the talent market.  Heed the lessons from these unionizing campaigns and don’t ever let your employees reach the “boiling point” of believing that the only way to have a voice in your company is to have a union representing them.

 

 

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(1) Bloomberg Law News, “Wells Fargo Becomes First Big US Bank with Unionized Branch”, December 2023

(2) MIT Center for Information Systems Research, “Building Business Value With Employee Experience”, June 2017

(3) Crowell & Moring LLP, “The NLRB’s One-Two Punch Gives Unions a Significant Boost”, September 2023

(4) NPR Planet Money, “You may have heard of the 'union boom’. The numbers tell a different story”, February 2023

(5) U.S. Bureau of Labor Statistics, “TED: The Economics Daily”, February 2023

(6) University of Southern California Center for Effective Organizations (CEO), “HRM in IPOs”, August 2010



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