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Dealing with Employees/What does it mean when a company has a union?

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Question
I've been reading Common Stocks and Uncommon Profits, which says: "those companies that still have no union or a company union probably also have well above average labor and personnel relations."
What does it mean when a company has a union, and how can you tell that a company has a union?

Answer
Dear Philip:

Thank you for your questions.  

What is a union? Unions are a legal construct all investors should understand. Why? Because unions are essentially a legal agreement among the rank-and-file workers (not management) to negotiate pay, working conditions, and employee benefits as ONE person.  This means that all the company's rank-and-file workers must vote to have a union represent them in their labor negotiations with management. Collective bargaining, as such unionized negotiations are termed, makes it more difficult for management to hold down the costs of its labor force. Essentially, negotiating for all employees as ONE gives the labor union greater bargaining power with management.

Why should this be a concern for an investor?  Because labor unions negotiate higher wages and benefits for their members, the employees.  Unions also make it more difficult for management to promote great workers and fire bad ones. They also negotiate expensive bureaucratic work rules that make it difficult for managers to manage the workforce efficiently.  All of these things that unions do for their members raise the company's cost of doing business which in turn lowers profits. And, when a unionized company's profits are lower than its competitors' cost of doing business because they don't have unions to deal with, then the value of the unionized company's stock price falls relative to its competitors' stock price. Hence, you probably would want to invest in a company that didn't have a unionized workforce because those companies' operating costs would be lower than companies with unions.

Final question: How do you know a company has a union or not?  This requires your research. If the company is a public company, i.e., publicly trades its stock on a national exchange, then their Annual Report should reveal whether or not they are unionized.  So, read the company's annual report.  Also, you could probably google the "company's name" and "labor union" which should return several entries that will answer this question for you.

Philip, I hope this response helps you resolve this challenge.  Also, be aware that my book NATURAL BORN MANAGER (available at www.edparr.com) is a very useful tool for resolving many of the common and most of the uncommon managerial challenges you will ever encounter.  The best of luck to you!

Cheers,

Ed Parr

Dealing with Employees

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Ed Parr

Expertise

How to organize employees, how to stop infighting, how to handle problem employees, and more. I have 25+ yrs. of managing within a variety of industries and labor environments. I have managed from 50 to 1,000 staff on projects with P&L responsibility ranging from $100K to $30MIL. I currently serve as a management consultant to business and government. I enjoy helping people, especially supervisors and managers, evolve in their careers.

Experience

Over 15 years of senior management experience including: systems development, technical help desks, customer service, back-office operations, branch administration and regulatory compliance. Responsibilities have been as large as 1,000 professionals delivering projects with P&L as high as $30 million and assets totaling more than $10 billion. Customer interaction has ranged from customer service reps to CEOs. Greatest accomplishment: Helping employees be all they can be.

Organizations
Institute of Management Accountants (www.imanet.org)

Publications
Purchase my book "NATURAL BORN MANAGER" at www.edparr.com (get a 10% discount via the Pay-It-Forward link).

Education/Credentials
A graduate With Distinction of the Thunderbird School of Global Management, Ed is a 35-year veteran of organizational leadership. He is a Certified Management Accountant (C.M.A) who has worked in management positions ranging from team leader to senior executive. He has managed as many as 1,000 employees deployed in multi-site facilities and consulted with or managed for both large and small organizations including Bank of America, JPMorgan Chase, E.D.S., PricewaterhouseCoopers, and Sprint Corporation. In addition, Ed is an 10-year contributor to AllExperts.com as a pro bono management expert, advising managers, supervisors, and employees around the globe providing them practical solutions to their everyday workplace challenges. Finally, Ed is an avowed Accountability Manager who strives to learn and educate others about the fundamental truths of management.

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