Falling Into the “Work-Rule Hole”

“America’s unions have shown an amazing willingness to make sizeable concessions on wages—and even on work rules—to prevent plant closings and massive layoffs,” wrote Peter Drucker in Managing for the Future. But not always.

Lovers of Twinkies, Ding Dongs and Ho Hos have been crushed to learn that Hostess Brands, maker of these and other snack cakes, will be closing its doors and laying off more than 18,000 workers. Critics of unions have suggested that Twinkies fans direct their grief and ire at organized labor. Though Hostess reached a restructuring deal with the Teamsters, the workers in the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union said no and called a strike. That turned out to be the last straw—or the last bluff.

We can’t really say who occupies the moral high (or low) ground in this dispute. While a union walkout evidently triggered the end, workers had already endured severe wage cuts in an ill-fated bid to revive the company —while new executives were handsomely compensated. Yet we did notice a reference by David A. Kaplan in Fortune to “ludicrous work rules” being a crucial factor in Hostess’s fall.

For example, noted Kaplan, “the Teamsters had separate drivers for deliveries of such goodies as Yankee Doodles and Nature’s Pride Nutty Oat.” This, apparently, was a jobs-preserving rule agreed to in the last negotiation.

Work rules like that are a staple of union contracts, and Drucker considered them to be detrimental, making workers inflexible when flexibility is essential. “Work rules and job restrictions,” he wrote, “explain in large measure the higher productivity of Japanese-owned plants in the U.S. and Europe.”

But Drucker didn’t blame unions alone. Management, he felt, was equally at fault because of a “narrow focus on dollars per hour” that was shared by economists, politicians, the press and the public. “As a result, managements accepted, often eagerly, tighter work rules and more restrictive job classification in exchange against a few pennies less wage per hour,” Drucker wrote. “In the end, of course, work rules and job restrictions have proven more costly.”

As Drucker saw it, workers and businesses must “get out of the work-rule hole.” For Hostess, sadly, it’s too late for that.

How important do you think union work rules have been in undermining U.S. competitiveness?