Question

Acme Anvil is a small unionized machine shop. The anvil business is currently going through a slow period and Acme is looking to reduce its costs. Manage has developed a short list of possible alternatives. This list includes:

- 10% across the board wage cut

- 10% headcount reduction

- Elimination of the tuition reimbursement plan

The owner want the cuts to start immediately and is leaning toward the the wage cuts. Which should you choose, and what process should you follow to implement this plan. Does the selected plan require union negotiation/approval?

Answer 1

Ideally of the three above, elimination of the tuition reimbursement plan would have the least impact in a short time. Thus, it should be implemented. Wage cut and headcount reduction should be the last resort. Hence, the manager must seek approval from the union regarding this plan. To do this, the process must be built on trust and transparency.

1. Management should lead by example, where the allowance cut happens first at the top before communicating with the union.
2. To facilitate the negotiation, employers must share relevant data about wage information, revenues, performance, etc, which can make the decision justified.
3. Plans of compensating this loss should also be included, like making it available at a later time, or finding other alternatives.
4. Negotiation should also include, why this is the best option and least harmful but effective at the time.
5. The impact should be softened on low-wage workers or freshers who may actually need the reimbursement.
6. Management must also ask about feasible suggestions of the union in this regard.
7. After the union presents the approval, the plan can be implemented.

The same would be for wage cuts however, the impact would be more and this may require more negotiation with the union. Additionally, in wage cut, cutting other peripheral expenses should be considered first, like certain allowances, or upcoming bonus as it can reduce the impact on base salary.

As mentioned previously, management should lead by example, build trust and transparency of the workers, and spare the least earning workers as much as possible. Here, again with approval from the union, the plan can be implemented upon negotiation and clarity.

Yes, the selected plan requires negotiation and approval as the union is established as a liaison between management and workers, and the interest of workers is important here. If a decision is taken against them, without consent then it may cost the shop majorly in terms of turnover, demotivation, and criticism. Thus, it is essential to have their approval or consider their suggestion for a win-win situation for both. The relationship is built on trust and would thrive on it. negotiation/approval is needed in all three plans.