Be Prepared, Very Prepared.

It’s worth it to avoid long term unintended consequences.

Collective bargaining can be a difficult task unless one is fully prepared. Preparation means planning and research to ensure that you have considered the multitude of possible outcomes and scenarios and determined the path best suited to achieving the results you want. Given the importance of labour as an input into production it seems logical that a significant effort would be put into preparing for negotiations well in advance. However, given our experience with various clients this does not seem to be the norm.

Quite often a prospective client will approach us for help with bargaining or bargaining prep one or two months prior to the expiry date of the current collective agreement. For the experienced labour relations practitioner, it is obvious that this is late in the game to start getting ready. However, given the number of times we have seen this behaviour it seems to be a norm. In a relatively straight forward situation preparation should begin at least six months in advance of bargaining and bargaining should begin two to three months in advance of the expiry date. In more complex environments the need is for preparation at least a year ahead of time if not longer.

One of the key reasons for advanced preparation is the need for a strong contingency plan – what to do if negotiations breakdown and a strike becomes a possibility. In the absence of considering your contingency plan you become vulnerable to the mere threat of a strike. When you are prepared you are able to negotiate in confidence without displaying any fear or concern regarding the threat of a strike. This in itself reduces the effectiveness of the strike as a bargaining lever for the union. Moreover, if the union membership, i.e. your employees know that you have the ability to withstand a strike for any period of time they will be less enthusiastic about supporting a strike.

Contingency plans can take a lot of time to prepare from scratch. However, once they become part of your routine in preparing for bargaining you establish a certain degree of immunization from the threat of a strike and are able to over time normalize the relationship between the organization and the union.

Notwithstanding the importance of strike preparation as a motivation for early planning and preparation, it is not the most important reason to get started early. In many organizations the negotiator or someone in the HR department will prepare a briefing note on what to expect in bargaining and what the recommended mandate ought to be. This is often a very short brief that hinges on information gleaned from reviewing four or five competitive collective agreements (if any), reviewing economic reports regarding the Consumer Price Index and consulting the internal finance department on what is budgeted for the coming year (and guessing what the subsequent years ought to be). This can hardly be called research or planning and leads to a settlement result that is not particularly strategic, predictable and very transactional.

The problem is that in a vast majority of instances this cursory treatment does not result in a catastrophic failure. Rather it is expected that 98% of the time the result will be a negotiated settlement. However, a negotiated settlement does not necessarily mean success. The downside is that by not preparing, the organization is not sure it’s establishing the collective agreement as an aid to facilitating the achievement of longer term strategically important results. A collective agreement is inherently “sticky” and difficult to change. On average, bargaining occurs every three years, so one needs to plot out what changes need to be made and be prepared for the process to take some time. The advanced negotiator is not thinking out three years but rather is considering how the contract will impact the organization ten, fifteen or twenty years down the road.

Questions that need to be explored include;

·       Is the retirement savings plan sustainable and affordable in the long run? Does it provide an adequate benefit for retirees?

·       Is the Extended Health Plan affordable? Is it competitive in terms of being a feature that helps attract and retain staff? How does it compare to the non-union or salaried staff plans?

·       Does the collective agreement create any impediments to operational flexibility now or could it potentially get in the way of future business needs? This might include restrictions on contracting out, terms and conditions related to the acquisition of new operating units within the geographic scope of the union, requirements regarding consultation on technological change, etc.

·       Are there provisions that allow management to make changes unilaterally to job scope, including the required qualifications for new positions moving forward?

·       What clauses in the current agreement create the greatest number of grievances?

·       What current practices are inconsistent with the intended application of the collective agreement?

This list is not intended to be exhaustive but is illustrative of the kind of enquiries the negotiator should be making in advance so they know where the business challenges are today and in the future. Moreover, in some areas the so-called language items that typically detail work related processes or define rights and responsibilities (e.g. job posting, vacation, temporary workers etc.) have a far greater impact on organizational performance then do the monetary clauses. In fact, organizations are highly likely to find that there are significant improvements that can be made in economic performance by changing management practices then could ever be achieved in negotiating monetary “improvements”. This is especially true because these collective agreement clauses tend to be the productivity sucking and culture influencing practices.

To fully realize the potential benefits flowing from good preparation not only do you need to start early but you also need a plan. The research is going to include looking externally at what is happening in the marketplace and looking internally on how work gets done.

Externally there are several things to consider. One of the most important is to ensure you are looking at the two-sides of the agreement with respect to the importance of remuneration. The organization obviously wants to ensure that it is not over-paying its workers relative to what its competitors pay. This creates a disadvantage in terms of the cost-of-goods produced. In analysing the costs the astute researcher knows that total labour cost is not simply a product of wage rates but is determined by a number of factors that need to be investigated.  Consider this: By paying a higher wage to attract a higher skilled workforce an organization may be able to produce more product with substantially less labour input and result in a significantly lower labour cost. This is a notion that ought to be thoroughly vetted during the preparations for bargaining. Or consider, if you could introduce safety enhancing and productivity enhancing technologies what would that do the cost of labour and cost of goods sold?

On the flip side the monetary package is important as the carrot needed to attract and retain the organizations workforce. Has the organization considered where in the marketplace it wants to be (Median, upper quartile, upper decile)? What roles are strategically more important to the organization? What benefits or non-wage items will help attract and retain the people the organization needs? Where is the market going?

One of the ways to explore the market is to review collective agreements from competitors in the sector in which the organization operates. This also may include reviewing all collective agreements in the geographic region even those in different sectors than in which the organization operates. In all instances the researcher is constantly balancing what is affordable and what is necessary for the attraction and retention and development of the desired workforce. This ultimately means establishing a benchmark that defines the organization’s stand on compensation and total rewards. By establishing this the organization’s bargaining position becomes quite defensible over time and becomes a known quantity and therefore far less controversial and can be nullified as a point of contention. This takes discipline which can only be established by institutionalizing internal practices that are consistent with the organizations intended strategic direction.

Having said this there is no point in reviewing four or five agreements. We live in a world where data is more available and can and should drive a lot of decisions. To be consistent with that notion we recommend reviewing as many agreements as possible from as many sources as possible. People often look for an absolute number so they know they are on the right track so we will suggest that a minimum of 25 agreements should be reviewed!

In reviewing those agreements, the researcher should also investigate what happened in negotiations to achieve the results. How long did negotiations take to settle, has the industry experienced strikes in the recent past? What is the trend regarding bargained results? Are agreements becoming shorter or longer? What issues are common? What issues are unique? What evidence is there that the union is pursuing a given strategy? If so what is it? What are the key issues driving the union agenda?

Research is about becoming more familiar with the marketplace. Yes, to a degree it is a competition, to know more than the other negotiator. The more of an expert you become the more credibility you will have at the bargaining table. Plus, you will be more confident, more committed and less vulnerable. These are all traits that lead to better outcomes.

Moreover, by understanding the details about what drives value for your organization the senior leadership can move out of simply supporting a transactional stance and invite the labour relations leader to be part of the senior management team that decides how work needs be performed to optimize the achievement of the organization’s goals. In other words, the surest way to get the best short and long term results is to do the preparation work, ensure the labour leader knows the organization needs and is fully prepared to negotiate well.