How Bad Labor Relations can Kill Opportunities


American Proposes Chicago-Beijing Route – Los Angeles Times

A lot of lean is based on the idea of “respect for people.” That was often lacking when I worked at GM in the 90's. It certainly seems to be lacking in many airlines.

How hard do you have to work to get such bad labor/management relations as they have at American Airlines? American is pretty much excluded from the running to get a lucrative Dallas/Shanghai route because the pilots union won't cave on a work rule involving a difference in 15 MINUTES.

It also is an indicator of how far labor relations have deteriorated at the airline, which has struggled for three years to improve cooperation with union leaders. Pilots refused to sign off on a deal that would have allowed the longer flight times from D/FW without some improvements to their contract. Management, in turn, refused to negotiate on the issue.

With relations that toxic, it's LOSE/LOSE.

Before we go blaming the union or the pilots…. look at management. It's a money losing industry, yet management continually enriches itself (through “retention bonuses” usually) and forces job and pay cuts on employees.

Leaders of the pilots' union have been angry at the company since early this year, when it gave bonuses to about 1,000 executives and managers, with a few topping $1 million. Pilots are still living under wage concessions they approved in 2003, when American was near bankruptcy.

Is there a lean lesson here? I think it's helpful to look at situations of companies that have totally botched up their management/”worker” relationships. Even if American were working to reduce waste from its processes, it still has this HUGE “respect for people” hurdle to get over. That's the hardest part to change, the management culture. United Airlines is working on lean (with their unions) — but how much are they working on the people side?

When private equity firms or other investors go stomping around factories looking for turnaround opportunities (interesting article in FORTUNE magazine about Wilbur Ross doing this in the auto world). The obvious things to look for are on the balance sheet (inventory, orders) and the shopfloor (disorganization, opportunities to improve flow, etc.).

But I wonder how much they dig into the people side of things. Are employee/management relations good or so damaged that you'd either not be able to turn the place around, or you'd have to replacement management. Or, like some GM factories, maybe the workers are all so scarred and worn out by bad management that they wouldn't be willing to work with anyone??

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. I saw Jeffrey Liker speak last week, and he refers to Lean as an iceberg. Above the water are the visible tools – 5S, standard work, visual contols, etc. Below the water is the culture of the organization, or as Mark says, the “people” side. And, just as the bulk of an iceberg is under water and not visible, the culture of an organization is the bulk of the work with Lean, and is frequently hidden from view. As those of us who do Lean for a living know, if we don’t deal with the culture, or the “people side”, the tools are virtually useless. It appears American Airlines has something missing here, and it has little to do with a 15-minute difference. That’s the visible part – what’s under the surface is the problem. And it appears that it’s not going away anytime soon.

  2. Five years ago, a month after 9/11, I attended my 25th Business School reunion. One of the people addressing a special session was a section-mate of mine who happened to be Chairman of Singapore Airlines.

    He reminded us what the US airlines’ response to 9/11 was–basically to lay off a ton of people to meet the global decline in air traffic.

    Then he told us what Singapore Air’s response was: he took a 40% cut in pay, and management took something like 15% cuts. And they didn’t lay off anyone.

    Now let’s check the stats as to the world’s most respected airlines–by travellers, that is. Oh gosh what a surprise, Singapore outranks American.

    Ask an automotive supplier who they’d rather deal with–Toyota or GM? I’m sure readers of this blog can ratify what I suspect is the answer.

    IMHO, a lot of this is rooted in the fundamental subconscious beliefs driving American business: that the purpose of business is to make a profit, that business is done by corporations, and that the nature of business is to compete with other corporations.

    The driving model behind other, increasingly more successful economies, is that the purpose of business is to serve a number of constituencies; that business is done by people and communities; and that the nature of business is to make commercial interactions between buyers and sellers.

    Lean seems to me to integrally linked with this “commerce not competition” school of thinking, which is far more trust-based than the usual western MBA-based culture.

  3. A few comments:
    There was a post on this blog a couple weeks ago about Taylor and his scientific management stuff. I think part of the problem is that we aren’t really over that approach. The TPS ‘tools’ make a lot of sense even inside a Taylor orientation. The whole people side doesn’t.
    The people side is harder to ‘see’. Rother, Strook, Womack, and Jones wrote a book that helped us see the muda. Somebody needs to write the equivalent for the ‘respecting humantiy’ part. maybe somebody already has. Any suggestions?


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