Standing and Fighting- a key success.

Many leaders have taken the easy way out. Rather than taking strong stand against adversaries they have been willing to give in to unreasonable and uneconomical demands rather than standing a fighting.

This is painfully obvious today when we witness the problems in the automobile and its supplier industries. General Motors and Ford have bleeding heavily and are not able to compete against its non-union foreign competitors. Not only are their wages high, but they are forced to pay for workers who don’t work, fund pensions, and contribute to ever increasing health benefits. In addition, these companies are forced to operate in old, non-competitive factories in locations that have high taxes and worker protection laws.

All of these problems were not caused by the current management but by those who preceded them, especially the leaders in the 1950’s and 1960s. Following World War II, the United States experienced its most prosperous times. There was enormous demand for consumer and industrial products. During the war, the entire US manufacturing effort was focused on winning the war and not on providing consumer and industrial products. Further the US companies stood alone in the ability to provide these products worldwide, since the European and Far East producers had been devastated during the war.

Unlike other major companies in autos, steel, aluminum and transportation, GE was unwilling to “pay off” the unions with overly generous, non-economic wages and benefits. Instead, GE leaders took a strong stand in the mid-1950s against the then strong labor unions dominance and uneconomic demand.

Led by Lemuel Boulware, GE’s refused to participate in industry bargaining and negotiated with the unions on a company basis. They carefully thought though what was in the balanced interest of employees, investors, stockholders and made a “fair offer” prior to the negotiations. Though they were willing to make some concessions, they were firm and were willing to take a strike rather than give away the shop. They christened this approach “Doing Right Voluntarily” and used these policies and practices to assure that the company didn’t mortgage its financial future. In addition, GE made it clear that it was ready willing and able to move its established plants to friendlier, non-union locations, rather than be blackmailed.

This practice became known as “Boulwarism” and though it received a great deal of negative press, it worked for a number of reasons:

1. 
   First, GE had a long positive track record from the company’s inception of caring about its employees and their well fare. They instituted a suggestion system in 1906, a pension program in 1912 and insurance in 1920.


2. Second, the major GE union, the United Electrical Workers (UE) was a communist led union that appeared to be more concerned with having a people’s revolution than about the conditions faced by the GE workers themselves. This union was highlighted in the McCarthy hearings and was ultimately ejected from the CIO.


3. Third, the CIO created a competing non-communist controlled union, under Jim Carey, who aggressively sought to convert the UE members to the IUE. Further other powerful unions were part of the GE bargaining units, including the Teamsters and the IBEW. So Boulware divided and conquered the unions and didn’t have to face one dominate union, as there were in the auto, coal and steel industries.


4. Fourth, as we said GE did its homework and was willing to give the workers, both union and non-union, attractive and even innovative benefits before they were required. In most cases, the workers recognized that the benefits and wage increases were fair and balanced and were will to accept them without a strike. This neutralized the unions bargaining power.


5. Fifth GE hired the “Great Communicator” and the popular host of GE Theater, Ronald Reagan to tour all of the GE plants and spread the message of evils of Big Unions and Big Government. Reagan claimed to have visited 135 GE research and manufacturing facilities and met with some 250,000 individuals. It ultimately led to his own conversion and gave him the underpinning of his successful election to President of United States.
   Sixth and probably most important, GE was willing to close plants in unattractive union locations and move them to non-union cities. This was very powerful, since it gave the company power that the auto, steel and coal companies didn’t have. GE was an early proponent of moving to the southern US and overseas.
   

Overall the GE Boulwarism approach enabled the company to maintain control over its own destiny and not allow Big Unions and Big Government to dictate to them. GE was unwilling to mortgage the future for short term gain and was willing to take a strike if it was needed. This was sharp contrast to the other industry leaders who accept peace at any price and didn’t appear to care about the long term implications of giving away the shop.

This is just one of the elements that has enable GE to prosper and grow over its 126 years of existence, while other United States giant companies have gone out of business or are one the verge of bankruptcy.

The complete story can be found in Bill Rothschild’s latest book “The Secret to GE’s Success”, published by McGraw Hill and is now available Simplified Chinese, Korean, Indonesian, Spanish, Japanese and CD.