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    Entries in labor (57)


    We're all in this together. Unless your Business Unit stinks...

    I'm sure you have heard something in the news about the current strike at Verizon Communications, notable for not only the sheer numbers of workers involved (about 45,000), the seemingly irrational timing of calling a stike in this economic climate, but also for the nature and nuances behind the dispute.

    The striking Verizon workers represent and support Verizon's landline business, a business that according to the company is in decline. Whether it is due to more consumers choosing to simply forego a fixed home landline in this age of mobile telephony, or the simplicity and low cost of services like Skype, the facts seem to be clear that the landline business is not where growth and increased profitability for the company will lie.

    Most of us these days when we think of Verizon, see it only as a wireless/mobile company, with a national presence, constant broadcast advertising, (Can you hear me now?), and retail locations popping up all over the nation. In fact my local Krispy Kreme establishment was closed recently and now has re-opened as a Verizon Wireless store.  Sadly, the conveyor belt that used to carry the tasty donuts for their sugary glaze coating is gone as well.

    But the 45,000 striking workers from the landline side of the business point to the overall growth and success of Verizon Communications (the consolidated landline and wireless sides), to argue against management's insistence on concessions and increased contributions to health care and retirement plans. Why should we, they argue, have to 'give back' when the organization overall is performing so well?

    I don't really know enough about the details of the contracts and the proposals to come down on the side of either the striking workers or Verizon management as to the specifics of the dispute, but to me the interesting angle is the internal division at play here.  While most of us have not been caught up in a strike like this one, I bet we have all been part of organizations with variations in performance (and contribution to profits and growth), across lines of business, regions, product lines - whatever.

    Once the enterprise achieves a bit of scale there are bound to be some parts of the organization that simply perform better than others. And while sometimes individual contribution to the success of these better performing business units is recognized (unit specific bonuses or awards), often it really isn't singled out, particularly when for many organizations it can be difficult to fairly and accurately allocate shared corporate overhead costs to product lines or business units.

    So while compensation might be tied to business unit success, things like benefit plans, retirement programs, PTO policies and the like are almost never variable inside and across competing business units within a larger organization. Whether or not you are a high-flying sales rep in a growing product line, or a administrative support person in a declining business, most companies treat you the same way with respect to benefits. After all we're all in this together, right?

    The Verizon situation is certainly complicated by the fact that the declining landline business is unionized, and the growing and more exciting wireless business is not, but the larger issue that seems to position one side of the business against another is certainly fascinating.

    I am sure we have all had different times in our careers when we looked at a business line in our organizations and thought - 'Man those guys are killing us'. But I doubt we ever as HR or Talent pros advocated for whacking their benefits or PTO because of it. Seems kind of a tough position to defend.

    What's your take - should non-compensation related items vary inside organizations according to contribution to success?


    The NBA, where a 30% pay cut was the better option

    So the National Basketball Association, henceforth referred to as the 'NBA', 'The League', or 'The Association', fresh off by most accounts was a very successful season, one that started with the LeBron James 'Decision' drama last summer, followed by a compelling regular season that saw several young players raise their play to superstar status, and capped off by a dramatic Championship series were the aforementioned James' Miami Heat team was defeated by a rag-tag, inspirational band of tattooed milliionaires from Dallas, has managed to follow up on its recent success and buzz by failing to forge a new labor agreement between the owners and players, resulting in a classic 1930's style Lockout1.

    The lockout has effectively stopped almost all league business, imposed a ban on teams having any contact with their players, and has even resulted in the scrubbing of the NBA's and associated team websites from player photos, bios, and really most signs that people actually play the games2.

    Since in a lockout situation the owners no longer have to pay the players, one might think the teams could settle in for a protracted impasse, since player salaries make up the majority of team expenses. But even though the lockout is but a few days old, some teams are already making decisions that seem primarily intended to reduce non-player labor costs. Case in point - the Los Angeles Lakers decision to decline to renew the contract of long-time Assistant General Manager Ronnie Lester3.  

    From the ESPN Los Angeles piece on Lester's departure from the Lakers:

    Barring a last-minute change of heart, Lester's 24-year run with the Lakers will end when his contract expires this month. By then, at least 20 other Lakers staffers, including almost all of the scouts who work under Lester in the basketball operations department, will have already packed their belongings and headed home. They've been told little by the team, except that employees whose contracts expire on or after June 30 would not have their contracts renewed, and their jobs may or may not open up again down the line.

    So on the surface it seems like a sad, but kind of straightforward deal. The League is in what appears will be a lengthy labor dispute, the upcoming season is perhaps already in danger of being delayed, if not totally canceled, and teams like the Lakers are taking quick and aggressive steps to reign in labor costs that are still in their control.  Makes sense right, and really isn't all that noteworthy a story. 

    That is until we catch one more little tidbit about the Lester employment situation with the Lakers, buried about 2/3 the way into the piece:

    Lester wasn't fired or laid off. By all accounts, he's still greatly respected within the organization and around the league. Lakers general manager Mitch Kupchak considers him both a friend and one of the best assistant GMs in the league. He just didn't protect himself well enough last summer when the Lakers gave him the option of signing a one-year contract for the same pay as before, or a three-year deal at a 30 percent pay cut.

    Now it gets more interesting. Apparently this time last year, the Lakers offered Lester a choice - re-up for one year at his current salary, or take a 30% hit but get the security of a three-year deal. Twelve months ago the lockout might have seemed a possible but unlikely outcome given the apparent irrationality of a collection of mostly billionaires (the owners) and millionaires (the players) being unable to agree on a fair division of a massive pot of revenues4. But even as far back as last summer even the most optimistic observers of the NBA scene were expecting a labor problem, and a likely lockout. 

    As an executive on the inside, Lester had to know that the lockout was likely, and he must have also suspected that in the event of a lockout, front office personnel might be in a tenuous situation. But knowing that, and presented with a three-year, 30% pay cut option, he elected to re-up for the single year, maintain his salary level, and leave himself exposed to the contract non-renewal it appears he is facing this month.

    Tough call, even when not staring an impending business crisis in the face. But it is a good question to ponder, even if a theoretical one.

    If your employer offered you a three-year guarantee with a 30% pay cut, would you take the deal? 

    Or would you roll the dice like Ronnie Lester did, maintain your salary for the time being, and take your chances?


    1. That sentence was over 100 words in length. Ridiculous. Get an editor.

    2. It is really kind of jarring. Take a look at NBA.com if you don't believe me. The front page of the Knicks team site features a tribute to the team's dancers and the 'Knicks Now' section is mainly about some recent community outreach efforts by the club featuring team executives.

    3. Lester's best season of his NBA playing career was 1981-1982, when he averaged 11 points per game for a pretty bad Chicago Bulls team. The second leading scorer on that team was Reggie Theus, possibly more well known to readers as the star of Saturday morning classic 'Hang Time'.

    4. There is quite a difference in opinion how profitable (or not), the NBA is, and whether or not the players or owners are mainly responsible for the current labor crisis. Some good background can be found on the FiveThirtyEight blog at the New York Times site.

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