Conflict Assessment Report Between The Boeing Company and The International Association of Machinist and Aerospace Workers (IAM): Negotiation and Conflict Management
Conflict Assessment Report Between The Boeing Company and The International Association of Machinist and Aerospace Workers (IAM): Negotiation and Conflict Management
This paper is an assessment of a conflict that took place between The Boeing Company and one of its unions, The International Association of Machinist and Aerospace Workers in 2008.
Conflict Assessment Report
The Boeing Company is the world's top aerospace company and the biggest manufacturer of commercial jetliners and military aircraft. The company designs and manufactures rotorcraft, electronic and defense systems, missiles, satellites, launching vehicles and advancing information and communication systems, and providing military and commercial airline support services (Boeing, 2010). Boeing has been a leader in the aerospace industry for over 100 years (Boeing, 2010). The business manufactures products such as the 737, 747, and 777 airplanes that are used in commercial airline travel. Boeing is a major service provider to commercial airlines, NASA, operates the Space Shuttle and International Space Station, and the United States government and its defense agencies.
Boeing is organized into two divisions. The first division is Boeing Commercial Airplanes, which is comprised of commercial jetliners that service the globe. Boeing Commercial Airplanes is approximately 75 percent of the world fleet currently in service (Boeing, 2010). The second division is Boeing Integrated Defense Systems. The division provides defense systems, space system products, and supports the United States government and several defense agencies.
Boeing is headquartered in Chicago, Illinois. The company employs over 157,000 people in the United States and in 70 countries (Boeing, 2010). Boeing has customers in more than 90 countries around the world (Boeing, 2010). Boeing’s mission statement is, “People working together as one global enterprise for aerospace leadership” (Boeing, 2010).
Nature of the conflict
On September 6, 2008, Boeing made headlines when approximately 27,000 of their employees in California, Kansas, Oregon, and Washington went on strike (Healy, 2008). Boeing was in negotiation with the International Association of Machinist and Aerospace Workers (IAM) about pay, benefits, and job security. Scott Carson, President and CEO of Boeing Commercial Airplanes issued this statement one day before the strike began, "Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement. Unfortunately the differences were too great to close" (Healy, 2008).
The key stakeholders in this conflict were Boeing employees, their families, and the customers and suppliers affiliated with Boeing. Other stakeholders of Boeing include the company’s stockholders, investors, NASA, all branches of the military (Army, Navy, Air Force, Marines), the United States government to include departments such as the various intelligence agencies and the Department of Homeland Security, and numerous organizations associated with Boeing’s overseas operations.
My goal of this project is to analyze this conflict from the perspectives of The Boeing Company, the IAM, and the stakeholders. I commence this document by describing the conflict assessment strategy. I then analyze the structural, psychological, and interactional features of the conflict. Next I discuss the conflict management plan used by both sides. Finally, I conclude with ideas for how both sides could have handled the conflict differently.
Conflict Assessment Strategy
Because the author does not work for The Boeing Company, and the conflict took place in 2008, gathering information will primarily be conducted by researching articles on the Internet from various sources. The primary websites will be Boeing (www.boeing.com), and The International Association of Machinists (IAM) (www.goiam.org). A third major source of information will be Boeing’s Form 10-K filed with the United States Securities and Exchange Commission. The Form 10-K furnishes facts and figures as far as production and revenue flow that resulted from the strike.
Wehr conflict assessment guide
The author will use the Wehr conflict assessment guide. The primary reason for utilizing Wehr’s method is because it is the most appropriate and straight forward method to apply to the circumstances surrounding the Boeing versus IAM strike. Wehr’s conflict map poses a series of direct questions that will best analyze what occurred.
The Wehr Conflict Mapping Guide begins with a summary of the conflict by asking, “What is going on here?” Second, the question “How did we get here?” will answer with an explanation of the history of Boeing and the IAM and how the two sides arrived at the 2008 clash. Third, the context of the conflict will establish the scope of the setting such as the geographical boundaries, relations, communications networks, and decision-making tools (Wehr, n.d.). The Boeing strike affected numerous parties ranging from employees, their families, and customers. How primary, secondary, and third parties were involved and affected will be the next point of discussion. The Wehr conflict map will continue with an explanation of the experiences, interests, perceptions, and values among the stakeholders, including those that are fact-based, value-based, and interest-based (Wehr, n.d.). After that, the dynamics of the conflict dynamics, together with how the matters changed over the duration of the strike will be discussed by quoting both sides of the argument and presenting a timeline. Because both Boeing and the IAM are part of a formal policymaking framework, the routes and alternatives to ending the strike were carried out by official means. This will be shown by citing how each party relayed information between each other. Additionally, the author will offer a list of alternative solutions. Finally, the author will identify how the conflict could have been curtailed or completely avoided.
Socio-Political Perspective: Structural Dimensions Assessment
Boeing’s corporate values are leadership, integrity, quality, customer satisfaction, people working together, a diverse and involved team, good corporate citizenship, and enhancing shareholder value. Boeing’s website states, “In all our relationships we will demonstrate our steadfast commitment to each value” (The Boeing Company, 2008). Part of Boeing’s business plan is its labor plan, which is what the organization calls an “Internal Corporate Culture Plan” (The Boeing Company, 2008). This means Boeing builds a customer focused environment while keeping employees actively involved in organizational processes. The labor plan includes studying the labor groups and total headcount, labor rates, constructing organized labor and incentive plans, considering any outsourced labor and restrictions on hiring non-resident labor (The Boeing Company, 2008).
A culture of teamwork has been encouraged at Boeing. Boeing emphasizes and realizes that their strength and competitive advantage comes from their employees. Engineers and mechanics have been brought together to engage in activities which help them to understand organizational work processes. By having the two departments work closely on projects they are able to solve problems quickly for a better product.
While Boeing holds enormous power due to its size and reputation, it is also vulnerable to its labor organizations. Approximately 37% of Boeing employees are unionized (United States Securities and Exchange Commission, 2008), and the company cannot predict the stability of the relationship with its unions. Boeing claims that it “went to extraordinary lengths” to conduct open negotiations and to understand the key issues expressed by the IAM (The Boeing Company, 2010). Some of the things Boeing offered to the workers were an 11 percent wage increase, a $2.28 increase to starting minimum pay, bonuses, cost-of-living adjustments, improved pension benefits, and enhanced health care coverage (The Boeing Company, 2010).
Even as Boeing held an enormous amount of power, the IAM had the power to confront Boeing about its contract and win. At the time of the 2008 strike, the IAM had the most pull it ever had, due to Boeing's backlog of the highly anticipated 787 Dreamliner worth approximately $155 billion in sales to Boeing (Hoop, 2008). According to Boeing’s Form 10-K, the IAM strike reduced revenue by approximately $6.4 billion (United States Securities and Exchange Commission, 2008).
The union workers had a sense of their power. On the day of the strike more than 7,000 machinists marched out of the plant in Everett, Washington to vote (Hoop, 2008). Simultaneously, 2,000 of the 3,600 machinists marched from the Renton, Washington site (Hoop, 2008). Another worker spoke of how labor has been disrespected by being one of the first to be outsourced, and that if the union did not strike at that moment that it would appear weak. Union workers emphasized that they wanted jobs to remain local so that people could provide for their families. Additionally, employees were irritated that as Boeing’s profits went up, their wages did not. Striking workers held signs that read, “Record profits mean record contract,” “It’s Our Time!” and “Boeing Profits Up Over $13 Billion!” (International Association of Machinists, 2008).
Suppliers such as Hamilton Sundstrand and Spirit AeroSystems felt the impact of the strike early during the ordeal. Spirit AeroSystems was forced to shorten their workweek. Economic analysts stated that if the strike lasted for more than three months it could have had a long-lasting effect on United States exports. Another company affected by Boeing's strike was Ryanair. Ryanair delayed new routes from Edinburgh, Scotland by six weeks because Boeing was unable to deliver new aircraft. Ryanair's deputy chief executive said that anyone traveling before that date would receive a refund, thereby hurting Ryanair’s profits.
Boeing is important to everyone in the globe to include all airlines, airline employees, everyone who flies, every organization that relies on travel, and everyone that buys a product from a company that depends on business travel. Therefore, it can be said that the entire world is a Boeing stakeholder, and the affects of the strike were felt by those beyond Boeing, its suppliers, and the union.
Psychological Perspective: Psychological Dimensions Assessment
“The most common negative emotion associated with conflict is anger” (Folger, Poole, Stutman, 2009, p.45). Anger was the dominating factor driving the IAM strike against Boeing. An angry, discordant relationship between Boeing and the IAM had prevailed for almost 60 years (Weber, 2008). The machinists were angry over Boeing’s power to outsource work. Union officials aimed to humble management and force them to rethink how they treated the IAM workers in previous contracts; however, they underestimated the willpower of Boeing’s Chief Executive Officer, W. James McNerney Jr., and other executives. Boeing’s management asserted that globalization was necessary to get work completed around the world, notably in countries that might help the company sell more planes and provide Boeing with record profits.
Two additional negative emotions that played a part in the strike were concern and distraction. Boeing employees and their families were concerned about living on the $150 per week strike pay and how their financial livelihood would impact the upcoming holiday season (Weber, 2008). Workers were unable to fully concentrate on their work as the strike loomed ahead. Some had already staged marches around the factories, which took time away from production.
While workers were nervous about the strike, one positive emotion workers felt was relief. Employees felt relief from working long hours and the pressure of deadlines. Some looked at the strike as an opportunity to get away from the conflict. For those workers the strike was a type of vacation.
Since World War II the IAM has went on strike seven times against Boeing (Weber, 2008). A 69 day strike in 1995 negatively affected morale for years (Holmes, 2005). The last time the IAM went on strike was in 2005 for 28 days (Weber, 2008). Recognizing the long-standing morale problems, McNerney desired to break the cycle between the union and Boeing. McNerney brought in a new team of Boeing negotiators to obtain information about specific contract terms the machinists would agree to, and which ones were non-negotiable. Doug Kight, chief management negotiator, stated Boeing took that route in order to “listen very carefully to our employees”, and “that Boeing wanted to share its success with the workers while ensuring it would stay competitive” (Weber, 2008).
Leaders of the IAM were suspicious of Boeing’s early start and the new manner of their cooperation. They resigned to thinking that Boeing executives wanted additional time to bargain for lesser terms, as they had always done this in the past. The contract terms included offers to remove medical benefits for some retirees, and eradicating a traditional pension plan for new employees and replacing it with a 401k-like retirement program. Union leaders warned those were “sure strike-starters” (Weber, 2008).
Union chief negotiator Mark Blondin skeptically participated in the early negotiations, and said, "I sensed a PR thing coming, and sure enough that's what happened" (Weber, 2008). After two months of negotiations, the IAM leaders did not think they were making progress and advised their members to start saving for a strike. The IAM felt like Boeing left them with a “take-it-or-leave-it” attitude, which resulted in halting talks before the IAM took a vote to strike. Boeing used Seattle radio stations to make their case and persuade workers to read the details of the offer, thereby shaping workers expectations to fit Boeing’s. This angered union leaders as they felt this infringed on the negotiation process by going over their heads.
One circumstance that contributed to the 2008 strike was that some union members were still disturbed about the outsourcing stipulations that were included in the 2002 contract. That contract went into effect due to the union failing to get a two-thirds vote for a strike, despite the fact that many workers were in opposition of the clause. "It puts our members' jobs at risk," said Blondin, putting the blame for lost jobs and reduced wages on Boeing’s shoulders (Weber, 2008). The union wanted the right to bid on more work that Boeing outsourced.
The history of poor relations between Boeing and the IAM added to the conflict. While conducting last-minute talks during the 2005 strike between Jerry Calhoun, Boeing’s Human Resources Vice President, and Mark Blondin the two were deadlocked over an additional issue concerning worker training. Blondin asked, "I just don't understand why you always fight us." Calhoun replied, "You just don't get it. We represent Corporate America. You represent labor. We are always going to be adversaries" (Holmes, 2005). When 87% of the workers walked out on September 3, it was evident that many had been ready to strike by the already customized t-shirts reading “It’s Our Time This Time” (Weber, 2008).
Communication Perspective: Interactional Dimensions Assessment
The conflict style of The Boeing Company is collaborating. Boeing brought in negotiators to help defuse the situation with the IAM. However, one day before the strike began Boeing issued the following statement, "Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement. Unfortunately the differences were too great to close, "said Scott Carson, President and CEO of Boeing Commercial Airplanes (The Boeing Company, 2010). Boeing claims that it “went to extraordinary lengths” to conduct open negotiations and to understand the key issues expressed by the International Association of Machinists and Aerospace Workers (The Boeing Company, 2010). While the IAM felt like Boeing took a “take-it-or-leave-it” position, Boeing did make attempts to negotiate contract details.
The IAM leans to the competing conflict style. The union employee’s actions indicated that they were looking out more for themselves. The IAM was weary from low morale that stemmed from a length strained relationship with Boeing, and they demanded a piece of Boeing’s growing profits. A cable news network broadcasted Scott Daniels, a striking worker, who said, "We're not greedy. We just want a piece of the pie" (CBS News, 2008). Given that statement, the IAM would not budge during the initial negotiations.
The IAM positioned itself as the victim. The IAM felt victimized when Boeing outsourced work. As stated above, the union workers felt they were not receiving a fair share of Boeing’s growing profits. Union workers were determined to stand their ground and fight for their demands, positioning themselves in an attempt to break the company’s willpower.
On September 12, 2008 Scott Carson published in Boeing’s Mid-September update, “Rest assured that we remain open to finding a way to get our whole team working again. We are committed to reaching an agreement that rewards our employees for their hard work while enabling Boeing to remain the industry leader” (The Boeing Company, 2010). At first, Boeing positioned itself as willing to compromise; however, the company would not go to the extent asked for by the IAM. Executive leadership stressed that globalization was essential to help the company sell more planes.
According to the Seattle Times (2008):
Doug Kight, Boeing's top labor negotiator, said federal mediators are in constant touch with both sides. But there have been no direct talks since the strike and no progress. "The differences in our positions are wide," said Kight. Agreed Mark Blondin, national aerospace coordinator for the International Association of Machinists: "There's no movement."
Conflict Management Recommendations: Informal and Direct Strategies
On May 9, 2008, The Boeing Company issued the following statement about the negotiations the company would undertake with the IAM:
We have a tremendous opportunity to conduct these 2008 negotiations with the IAM differently than in the past. The company has experienced unprecedented success in the market and recognizes that employees have worked hard to achieve continuous productivity gains. The strength of our order backlog, in terms of its spread over the product line and geographic diversity of customers, creates an opportunity to increase the company’s stability in our cyclical industry. At the same time, our competition in the aerospace and services market remains fierce. The challenge we collectively face – the company, the IAM and employees – is to sustain this momentum. If we succeed together, we’ll stay competitive, fulfill our customer commitments and provide good jobs for generations to come. We intend for these negotiations to be open and transparent. We have begun conversations early to resolve issues sooner and move away from last-minute bargaining… As we discuss, listen, and seek to understand each others’ positions, we want to be respectful and continue talking when we disagree. Ultimately, we seek solutions that are in the best interest of employees, our customers, our communities and our company.
Boeing’s document continues on, breaking down each area of conflict. In each area, Boeing begins by sympathizing with the IAM, but does make various points on how they may or may not be capable of meeting each of the IAM’s demands. For example, under the subject “Pay and Benefits” Boeing states (2008):
Providing an outstanding pay and benefits package to employees enables the company to attract and retain the talented people who build, support, and improve the world’s finest aerospace products…At the same time, we need to recognize that any increased costs cannot be passed on to our customers through pricing of our products and services. We continue to face relentless competition…All costs associated with increased wages and benefits must be covered by productivity increases throughout our operations over the life of the new collective bargaining agreement and beyond.
The example shows that Boeing does understand that competitive pay and benefits are important to sustain high performance employees. Equally important to Boeing is that it keeps salaries reasonable in proportion to its revenue.
In another section, “Incentive Pay”, Boeing says it wants workers to share in the successes, and they will look at opportunities that will allow workers to earn additional pay. Clearly, by using rhetoric such as “wants”, “we will work with”, “we intend to look”, and “our discussions will focus” Boeing is extending the olive branch to the union workers to ensure them that they will bargain certain terms.
For the next four months Boeing and IAM leaders negotiate. Boeing’s website tracks several stages of the process such as the dialogues and offers to increase pay, pension, and health care.
Fast forward to October 14, week five of the strike. IAM District 751 President Tom Wroblewski blogs on the union’s website (2008):
The Federal Mediators adjourned talks today between the Machinists Union and the Boeing Company without reaching an agreement. The Union had hoped Boeing would come to the table looking to resolve this strike, which is in its fifth week; however, this was not the case…The Company is attempting to put the Union in an unacceptable position to bargain away our members' jobs...it has become apparent that the long-term strategy of The Boeing Company is to eliminate these IAM positions and replace the Union workers with outside suppliers. The words "flexibility" and "competitiveness" for Boeing appear to mean eliminating IAM jobs. It is a systematic attack on the employees who have generated unprecedented success for Boeing… The fact is our members have bent over backwards for this Company to make them profitable. We have participated in every lean program, new initiative, fixed vendor mistakes and offered alternative ideas - all to make them successful. It is our members who consistently step up and get the job done for Boeing. We will continue to do that, but not at the price of our jobs. The Union will continue to look for ways to resolve this strike so that our members can return to building airplanes and making Boeing record profits, but it cannot be at the price of selling out thousands of our members' jobs.
The IAM uses language unlike Boeing. The union’s tone comes across as negative and angry that Boeing will not negotiate more on their terms. Additionally, the union alludes to the notion that the company does not fully recognize their hard work and sacrifice.
The negotiations between the two entities fall under distributive bargaining, as outlined in Module 6, Theme 4 of the course material. In this case, there is only so much to go around as Boeing can only make offers based on their profits and future orders. The parties both use power as bargaining tool. Boeing holds power because it is the employer, it has the capital, and it has a vast team of legal and negotiating experts. The IAM holds power as they are the employees that hold the technical expertise to build the parts and planes that provide Boeing with its revenue.
On October 28, 2008, Boeing and the IAM reached a tentative agreement and the union members returned to work on November 1 (Carson, 2008). The new contract allows Boeing to remain flexible while rewarding its employees and speaks to their job security issues.
Conflict Management Recommendations: Third Party Interventions
Boeing introduced the Alternative Dispute Resolution (ADR) process in 1998. ADR is available to all Boeing employees in the United States with the exception of executives and those covered under collective bargaining agreements (union members). ADR has provided amicable solutions to over 1,000 disputes between managers and employees, and has proven successful in resolving problems quickly while increasing morale and reducing costs (Potter, 2008). ADR is voluntary, and the initiating employee may stop the process at any time. Boeing prohibits reprisal for using this course of action.
The goal of ADR is to resolve disputes in a fair, calm, professional, and timely manner while improving communication between management and employees. Since implementation of the ADR program in 1998, 89 percent of cases have been settled quickly by the end of the second step (Potter, 2008). Ninety-five percent of personnel those that used ADR said they would use the process again to resolve a dispute at work (Boeing Frontiers, 2007). Additionally, more information about the program, as well as on-line training, is available on to employees on Boeing’s TotalAccess intranet (Potter, 2008).
ADR uses a four step approach with each step being mutually exclusive. The first step is One-on-One Discussion where the employee and manager meet in an attempt to resolve the issue. The second step is Internal Mediation. A trained resolution advocate from within Boeing facilitates dialogue between the parties. The advocate centers on helping the parties resolve the issues.
Step three is either a panel review or external mediation, depending on the case. A five-member panel hears presentations from all parties, reviews documentation, and interviews witnesses if the issue involves the alleged misapplication of a company policy, procedure, or process. The panel’s decision is based on majority vote. In the case of external mediation, an external employment mediator is chosen from a local panel if the issue is an asserted legal claim by an employee. Both Boeing and the employee take part in selecting the external mediator.
Step four is binding arbitration. Both parties sign an agreement to abide by the arbitrator’s decision if the matter remains unresolved.
All allegations are investigated by Boeing’s Human Resources department. Employees wanting to use ADR must file a report within 30 days of the incident or within 30 days of working through all other means of resolution with management (Boeing Frontiers, 2007). Terminated employees may use ADR as long as they request a review within 30 calendar days of their termination (Boeing Frontiers, 2007).
Spencer Dunn, the ADR leader in the Global Diversity and Employees Rights Group that runs the program, states, “It’s surprising the number of managers who end up saying this is a good process for employees, even though they’re the one the employee has a dispute with” (Potter, 2008).
Federal Mediation & Conciliation Service
To resolve disputes involving union workers, Boeing brings in its own team of negotiators from Human Resources with oversight from The Federal Mediation & Conciliation Service (FMCS). The FMCS’s mission is “advancing the nation’s welfare through effective settlements, improved labor-management relations and conflict resolution” (FMCS, 2010). According the FMCS’s website, “Dispute mediation - and other conflict resolution services such as arbitration - are the tools and techniques used by FMCS to promote collective bargaining, strengthen labor-management relations, and enhance organizational effectiveness” (FMCS, 2010). As in the case of the IAM strike, the FMCS tracked the progress of the negotiations. The FMCS published the following news release on October 27, 2008 in regards to the conflict:
Arthur F. Rosenfeld, Director of the U.S. Federal Mediation and Conciliation Service (FMCS), announced today that negotiators for the Boeing Company and the International Association of Machinists and Aerospace Workers (IAMAW) have reached a tentative agreement during talks overseen by federal mediators in the nation’s capital.
Rosenfeld said that no details of the tentative agreement will be released by the Agency. The tentative agreement is pending a ratification vote by IAMAW members.
The latest round of discussions between the parties in the presence of federal mediators began Thursday, Oct. 23, in Washington. The FMCS Director commended negotiators for the IAMAW and Boeing for their hard work at the bargaining table. “Both sides showed professionalism and a willingness to roll up their sleeves and to stick with the difficult task in front of them,” he said.
Conflict Management: Evaluation Plan
On November 1, 2008, the strike ended as 74 percent of union members voted to ratify Boeing’s proposal (Aero Mechanic, 2008). The IAM made gains in respect to job security, wages, pensions, and medical coverage.
According to Boeing’s 10-K (2008), the company lost approximately $6.4 billion in revenue. Perhaps a different negotiation tactic, or giving in to the IAM demands sooner, could have saved the company money.
The union was pleased with the results of the strike. As stated by IAM President Wroblewski (Aero Mechanic, 2008):
Your solidarity brought Boeing back to the table and made this Company address your issues. After 57 days, we gained important and substantial improvements over the Company’s offer that was rejected on September 3rd. I am proud of what we accomplished and want to thank our members for their solidarity and commitment.
Scott Carson summarized the worker’s returning to work in the following news release published on November, 2008:
We're looking forward to having our team back together to resume the work of building airplanes for our customers," said Scott Carson, Boeing Commercial Airplanes president and CEO. "This new contract addresses the union's job security issues while enabling Boeing to retain the flexibility needed to run the business. It rewards employees for their contribution to our success with industry-leading pay and benefits and allows us to remain competitive.
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