Sharing profits with employees in the airline industry

Having skin in the game is a game changer

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Many employees in the airline industry participate in some form of profit-sharing and gain-sharing program.  A recent article in the Dallas Morning News shared some details on the value of the profit-sharing payouts provided by some major airlines, including Southwest, Delta, and JetBlue.

Profit Sharing in the Airline Industry

This information was obtained from the Aviation Blog article by Terry Maxon of the Dallas Morning News:

  • Southwest Airlines employees will split up $228 million in profit sharing in 2014.
  • Delta Air Lines distributed about $506 million on Feb. 14, representing an amount equal to 8.26 percent of their eligible 2013 earnings. In addition, employees during 2013 divided up $91.7 million in monthly performance incentives.
  • Alaska Airlines and its regional affiliate, Horizon Air, handed out about $84 million in annual bonuses in late February. Those bonuses were equal to more than 9 percent of their annual pay. Including monthly performance incentives, the carriers’ employees received nearly $105 million.
  • United Continental Holdings, parent of United Airlines, handed out $190 million in profit sharing to employees on Feb. 14.
  • JetBlue Airways handed out $12 million in profit sharing.

Many of these companies are covered by union contracts. Many of the best union free employers implement gain-sharing voluntarily as an important piece of their company culture, rather than as a union avoidance strategy.

Who’s the next perfect leader for Mozilla?

Leadership is many things, not just one

Given our tendency to search for that one perfect person to place at the top of an organization, I started thinking about who would be the next perfect leader for Mozilla, since the last guy lasted all of two weeks.  Take a look at the gallery of potential candidates, and tell me who you would pick and why.   All the candidates are proven leaders, and for purposes of the exercise, we’ll assume they are all equally qualified on the technical aspects of the job.

Who’s the best candidate?

This is a completely hypothetical exercise, but strangely fascinating somehow (to me, anyway).

 

 

Managers Manage the Company

Unions Administer the Contract

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I had a discussion the other day that I haven’t had for quite a few years.

It usually goes something like this:  “He’s a manager, but he says he can’t make his employees work because they tell him they have a union.”

This makes me crazy.  It’s not true, and it’s not that complicated. Manager’s direct the work as required by job descriptions,and classification assignment within the union contract. Employees perform the work as directed.

Rule #1 is managers keep their right to manage, even when a Collective Bargaining Agreement is in force.   You may have to follow certain rules, and you will likely face some limitations on what you can tell people to do, but you still keep the right to manage your business.

That’s why every collective bargaining agreement has a Management’s Rights clause that will include information like this, referenced below.

Management Rights clauses are contractual clauses found in union contracts that give management the ability to manage its business without interference from the union (except as agreed to).While not all inclusive, below is a listing of typical Management Rights found in union contracts giving management the right to:
  • Hire employees
  • Direct, control and assign employees work
  • To establish schedule and hours of work
  • Determine qualifications of employees
  • Discipline employees and terminate employees for cause
  • Expand and reduce the number of employees
  • Layoff
  • Recall from layoff
  • Establish and enforce rules of conduct
  • Consolidate, tranfer, or close its operations

Below is a sample clause management rights clause.  These kinds of clauses are by way of example only, of rights vested exclusively in the Employer and all rights which the Employer would have but for the existence of a collective bargaining agreement, including the rights to continue or discontinue any past practice or benefit, except as specifically modified by this Agreement, are vested in the Employer’s discretion.

ARTICLE 7—MANAGEMENT RIGHTS


The management of the Employer’s operations and the direction of its employees, including but not limited to the rights: to hire, classify, promote, transfer, lay-off, recall, discipline, discharge for just cause, suspend, direct, control, and determine the qualifications of employees; to maintain order and efficiency and to establish and enforce rules and regulations as well as absentee tardiness policies, safety standards, work loads, and schedules of production; to determine the location and extent of the Employer’s operations and their commencement, expansion, curtailment or discontinuance; to select, introduce, discontinue, eliminate or change equipment, machinery, processes or services; and to schedule and assign work to the employees, shall remain vested exclusively with the Employer.

 

Jay Hardy Sells Company to Employees

Hardy Diagnostics now employee-owned

Jay Hardy, President of Hardy Diagnostics, recently crossed a big item off of his “to do” list—he sold the company to his employees that he and his lifelong friend,Rob Shibata, founded 34 years ago.  “I have planned on doing this for a long time,” said Hardy.  “Owning Hardy Diagnostics has been tremendously rewarding for me.  Now everyone at Hardy Diagnostics can share in the joy and rewards of ownership, just as I have,” he said.

hardy emplyees

Employee ownership promotes participation and leadership on every level for the more than 230 employees of Hardy Diagnostics.  The company’s Open Book Management system encourages involvement and personal responsibility. As Rianna Malherbe, who has worked as a Technical Support Specialist for about a year puts it, “Having co-ownership means having a commitment to holding a bigger picture vision, even as I focus on everyday details of my personal role as part of our continuous improvement process.”

Companies that are employee owned are known as ESOPs (Employee Stock Ownership Plan). Over time, employees are granted real shares in the company at no cost to them.  There are about 11,000 companies in the U.S. that are ESOPs like Hardy Diagnostics. Due to employee involvement, ESOPs generally have a superior track record compared to other companies. An ESOP is 25% more likely to stay in business. ESOPs have 25% higher job growth over the last 10 years compared to the non-ESOP.  Employees at ESOPs have retirement accounts that are 2.5 times greater than their non-ESOP counterparts and they were four times less likely to be laid off during the recent recession.

As employee owners, they work within a culture of ownership that produces both rights and responsibilities: the right to be informed about the management, strategy, and financial health of the company. They are also encouraged to question practices that may not be in the company’s best interest. The net result is to work in a positive environment and share in the company’s financial success.

As an employee-owned company, Hardy Diagnostics will not be obligated to outside shareholders who care only about the bottom line. This ensures the freedom to emphasize other values, like community involvement, environmental responsibility, and the wellness and satisfaction of the workforce as whole people.

“A company made of hundreds of owners who really care about their work is a powerful, if not unbeatable, force in the marketplace,” states Jay Hardy. “I get a great deal of satisfaction, when an employee tells me that they actually look forward to coming to work each day,” he adds.

Hardy Diagnostics joins a long line of successful employee owned companies such as Southwest Airlines, Publix Supermarkets, Gore-Tex, Clif Bar, New Belgium Brewery, and King Arthur Flour. Employee owned companies are renowned as some of the world’s best companies to work for due to their high-involvement employee cultures. Hardy Diagnostics is a successful and rapidly growing company; employee ownership makes a piece of the pie that much more coveted.

Source: PR Newwire

Despite NLRB ruling, Northwestern players are a long way away from a union.

Fellow #HRpuckhead John Jorgensen shared one of his wry witticisms on Facebook yesterday on the heels of the NLRB ruling that student athletes at Northwestern University were employees, and entitled to a vote to determine if they should be represented by a union for purposes of collective bargaining.

“I just love listening to sportscasters discuss labor law as if they know what they are talking about.”

John’s observation aside, there was some decent reporting and analysis out there, including this as reported by ESPN:

In a potentially game-changing moment for college athletics, the Chicago district of the National Labor Relations Board ruled on Wednesday that Northwestern football players qualify as employees of the university and can unionize.

NLRB regional director Peter Sung Ohr cited the players’ time commitment to their sport and the fact that their scholarships were tied directly to their performance on the field as reasons for granting them union rights.

Ohr wrote in his ruling that the players “fall squarely within the [National Labor Relations] Act’s broad definition of ’employee’ when one considers the common law definition of ’employee.'”

Ohr ruled that the players can hold a vote on whether they want to be represented by the College Athletes Players Association, which brought the case to the NLRB along with former Wildcats quarterback Kain Colter and the United Steelworkers union.

Game Changer or Delay of Game?

This release from Indiana University was also pretty good. They discuss the following issues:

A potential game changer for college athletics model
If upheld, decision could raise Title IX questions

Here’s a quick summary of the salient points

  • Football players weren’t viewed as being primarily student due to the fact they receive compensation and their coaches exercise a high degree of control over schedules.
  • The ruling only applies to students at private schools. Employees of state funded universities aren’t covered under the National Labor Relations Act.
  • Questions remain open if the facts applied to the analysis applied to football players would apply to all other student athletes under Title IX, as explained by Kenneth Dau-Schmidt, the Willard and Margaret Carr Professor of Labor and Employment Law at the IU Maurer School of Law.

If this decision is upheld and college football players at private universities begin to organize, Dau-Schmidt added, there is a good question of how this system would work consistently with the Title IX requirement of equal athletic opportunities for women.

“Where there is a positive cash flow in college athletics, it’s usually associated with men’s football and basketball, not other sports. At the bigger schools, men’s football and basketball revenue supports the other athletic programs. Would Title IX mean that the football players have to negotiate benefits for all athletes and not just themselves? That would make for a very curious system of collective bargaining.

Getting that first contract takes a long time

What no one has mentioned so far is this.  So far, all the players have done is win a ruling that they are entitled to vote to decide whether or not they want to be represented by a union.  Setting aside all other likely challenges, the NLRB still has to hold the election, and a majority of players will have to vote in favor of the union in order for them to win the right to bargain for a collective bargaining agreement.  And then they have to negotiate and agree to a collective bargaining agreement.

Initial collective bargaining agreements are notoriously difficult to obtain.  Many times, workers vote for a union and then never obtain a collective bargaining agreement.  In this situation, many of the current student athletes will have graduated and moved on into the real world by the time any contract is reached.  I know of one current situation where a Teamsters local has been bargaining for more than two years to get a first contract in a distribution warehouse. Just imagine how complex the negotiations for student athletes will be compared to that.

This story has a long way to go before we see how much of a game changer it actually will be, especially without a vote being held yet, and with the difficulties many unions face in obtaining initial contracts.

Employee Owned Businesses the New Future Model for US Business?

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This was originally written in December 2008.  It’s still worth a read and some consideration as a company business strategy.

Employee Owned Companies

In my career, I’ve worked for two employee-owned companies. Both were excellent employers.

Being employed by a company  you own a stake in makes a huge difference in the company culture. My mantra for 2009 is that company culture is ultimately the one reason that drives a business to excellence, superseding talent, compensation, visions, missions, innovation and any other reason you may throw out. Without a strong vibrant encouraging culture, none of these other factors can flourish.

Employee ownership is the single strongest differentiators in business, and is sorely under-utilized. I am not talking about employee stock purchase plans. I am talking about actually owning shares that you receive as part of your annual compensation.

This would do far more to help rebuild economies than a piece of adversarial legislation like the Employee Free Choice Act ever could. Business and employees don’t need 3rd party interveners and relationships based on adversarial negotiation. They are mutually engaged in seeking the best outcome for business success, in a way that serves the interest of all stakeholders.

Employee Stock Ownership Plans are one way of achieving this. I saw a really great story about such an example of this in a story from the Naples New this weekend.

In their own hands: Employees run the business at Florida Company

In a rare move to save his company, a dying man initiated a complex process
to put his 30-year venture into his employees’ hands.

Larry Bill had battled cancer for years and needed to address Pelican
Wire Co.’s future without himself at the helm.

There were potential buyers, including a Chinese company, said Ted
Bill, his son and company president.

Instead, the Bill family embarked on a nearly nine-month process of
transferring ownership to Pelican’s 48 employees in an employee stock ownership
plan, or ESOP, which Ted Bill referred to as expensive, although no figures were
disclosed.

The transaction was completed this fall, about six months after Larry
Bill died.

“He always had a passion for the employees,” Ted Bill said. “He wanted
them to come to work feeling like they had an ownership stake.

Employee Owned Businesses the New Future Model for US Business?

Work looks different when you’re an owner

Worker owned companies are better

Over the course of my career I’ve been privileged to work at some excellent companies. Three of them, Texas Instruments, Andersen Windows, and my current employer Publix all had plans that allowed the employees to own an interest in the company via stock or an ESOT or profit-sharing. These companies shared some common elements.

They were profitable, and high performing. The employees were committed and engaged. The cultures were viewed as enviable. The ownership aspect may not have been the only driver of this success, but it is certainly a major contributor.

When you are an employee AND an owner, it makes the workplace look different. I can attest personally, it makes you think differently about how you treat company resources.

Skin in the game makes you a better player for the team.

I was reminded of this when I saw this headline from the LaCrosse Tribune, Badger Corrugating hands over 40 percent ownership to workers.

Check out why the owner gave nearly half the family to his employees:

ESOPs are an increasingly common tool used by businesses to spur growth, save on taxes and get workers more involved in decision-making, said Mary Jo Werner, a CPA and partner with Wipfli in La Crosse.

The plans serve as an option for retirement savings, giving employees a nest egg to hold and sell when they leave the company. Nearly 10.3 million workers in the United States share ownership in their company through an ESOP, including employees at the La Crosse-based grocer Festival Foods.

A percentage of a business’ profits are not taxed with an ESOP, equal to the percentage of the company owned by workers. Tax savings are reinvested into the company.

Ownership can change a worker’s feelings about the fate of the company, engaging them and inspiring teamwork. That kind of attitude adjustment is another potential boon for ESOP businesses, Werner said.

“If you have a stake in the outcome, if you’re an owner in something, you’ll work a little harder,” Werner said. “Be a little more mindful of what opportunities there are for the company.”

Sounds like pretty good advice. Maybe more companies should look at this strategy in the future. There are plenty of great companies to benchmark against. check out this list of great employers from the National Center for Employee Ownership.