Ending the Era of Employee Entitlement

Foundries and diecasters nationwide face the task of convincing workers to accept the wrenching changes in their organizations, made necessary by leaner times, as the era of entitlement ends.

Consider the poster child of the era of entitlement: American Axle & Manufacturing Holdings. Many of AAM’s domestic competitors (Dana, Dura Automotive Systems, Delphi, and Metaldyne) filed for Chapter 11 to shed excessive debt and renegotiate union contracts. In 2008, AAM sought comparable terms from the United Auto Workers; the answer was “no.” AAM endured a 14-week strike to obtain the same concessions the UAW had negotiated with its competitors. Little wonder, then, that CEO Richard Dauch, when speaking last year at the Detroit National Summit, decried “the entitlement mentality that is so pervasive in today’s American culture, nowhere more entrenched than in Detroit.”

Foundries must overcome the same entitlement mentality in their own workers, and so far, many have been unsuccessful. Intermet couldn’t overcome its employees’ perceptions entitlement, and now it is gone. Ditto for West Irving Die Cast. These are just two examples of metalcasting companies undone by their employees’ sense of entitlement.

Employers can combat this thinking by abandoning traditional command-and-control style of management in which workers’ pay and promotion have been based on seniority. Today, a company’s survival requires a participative environment in which rewards are based on skills, knowledge, and productivity. The task of improving performance needs to be shared by all.

Employers are fighting psychology, the perception of entitlement. In the past, although domestic companies competed with each another, in many basic industries wages were out of the equation because unions negotiated industrywide pay levels. Workers were entitled to annual wage increases, lifelong insurance coverage, and retirement security.

Competition from imports was not an issue. Now, imports have overwhelmed the automotive segment of themetalcasting industry, and dominate many other segments, too. Business is poor and overcapacity is high. Yet, employees’ perceptions of entitlement persist.

The perception of entitlement
The perception is the employees’ psychological attachment to the belief that economic changes affecting their employers do not apply to them. Convincing foundry workers otherwise means persuading them to make the jump from a comfortable past to a chancier future when rewards are based on competitive performance.

The response to this emotional perception of entitlement is to develop a counter-psychology of “shared mission.” Rallying employees to partner with management to improve productivity, cut per-unit labor costs, and preserve jobs requires communications, action, shared sacrifice, and shared rewards.

Executives need to plan and implement ongoing communications that wrap an overarching emotional theme of shared mission around the facts of their own competitive situation. A theme, like “Our War On Competition,” must denote togetherness. Success depends on effective two-way communications: downward from management and then upward from the employees.

Downward communications start with executives holding employee meetings at individual plants to discuss company business, industry problems, and review what the competition is doing. Unfortunately, many metal casters with multiple locations leave the job to the harried managers of individual plants, hoping they will do the right thing.

The second step is to direct the communications to the workers’ level by asking plant managers and department heads to meet regularly with their departments, to discuss what the management overview means for them, in their specific plant or department.

Generalities don’t count, focus does. This is the third step — upward communications: listening to employee ideas for eliminating waste by working smarter, rather than harder. Department heads and supervisors often need specialized training in the theory and practice of effective communications to be effective.

The fourth step is to publicize the employee ideas that are implemented. For example, in a large, multi-shift foundry, the fact that management took action to cut work-in-process based on the ideas of first-shift coremakers will not be known to thirdshifters in finishing, unless they are told.

The message of effective, joint labor/management cooperation also must reach into employees’ homes to their entire families, via newsletters and other vehicles. Spouses who shop for the youngsters’ clothes, for example, don’t share a psychological sense of entitlement. They know a job that exists under a concessionary contract is better than no job at all.

Over time and with proper encouragement, employees develop a sense of empowerment. They understand management is working honestly with them to improve their company’s competitiveness and their own job security. Employees realize that managers and workers are sharing the burden.

Shared sacrifice, shared rewards
The fifth step is to share the sacrifices. If the health insurance deductibles must climb to prevent double-digit premium increases, managers must make the sacrifice first before asking employees to do so. Doing so reinforces he shared mission.

As the atmosphere improves, employees respond enthusiastically to invitations for their ideas and incentives for better productivity. In concessionary times, the only way a foundry or diecaster can replace guaranteed pay and benefits is through a pay-for-performance program, like a gainsharing plan.

Gainsharing is a group pay-for-performance program that rewards employees for improved performance above a threshold predetermined by management. Typically, the results of an effective gainsharing plans are a 17-22% improvement in employee productivity and costs-of-quality. (See “Meeting and Beating The Imported Competition,” FM&T, March 2005.)

Under a gainsharing plan, employee performance is quantified and given a dollar value. Employees typically receive half the value of their improvement above the threshold, and their employer the other half. For every dollar paid to employees for their improved performance, a company saves a like amount in lower labor costs (less overtime), and reduced material expense (less waste.) Employee bonuses have to be earned and re-earned each short gainsharing period, thus eliminating any sense they are entitlements. With gainsharing, workers can improve their own pay and job security. They know that the more they cooperate, the better they will do.

As the era of entitlement ends, metalcasters may face pushback in the form of labor unrest. Since survival is at stake, the transition from a comfortable yesterday to a chancier tomorrow makes risk this necessary.

Executives often need outside help to create a sense of shared mission and implement a performance-based pay system to allow employees earn the benefits that once were taken for granted … if they want a better tomorrow.