Trust and turnarounds in manufacturing

December 13, 2016
By: Tim Heston

Lack of communication and trust may lie at the heart of a lot of problems at a lot of companies, in manufacturing and elsewhere.

On Sunday The New York Times published an exposé on the complicated world of private equity, both its winners and losers. Its winners include the executives who make investments in failing businesses and turn them into profitable enterprises. But winners aren’t just high-powered Wall Street types. Winners also include teachers who have pensions that rely on the high returns private equity provides. It also talks of the losers, including the laid-off workers and the communities devastated with shuttered plants.

Many situations in life have winners and losers, and it’s never fun to be the loser. But in Hosstess’s case, there could have been far more losers if the entire organization collapsed.

One part about the story rubbed me the wrong way, though. After the Schiller Park, Ill., plant reopened, workers returned—yet they weren’t told that the plant was actually destined to be closed. The story mentioned that informing workers of this would have violated labor rules.

I like to think that every organization could have a formal or informal “no layoff” policy. Two large vendors in metal fabrication, Lincoln Electric and Hypertherm, have histories of such policies. Some custom fabricators do too. Just after the Great Recession, I recall writing stories about B & W Trailer Hitches, a Humboldt, Kan., a fabricator that didn’t lay off anyone during the depths of the economic crisis.

I know this isn’t realistic for every company. Markets change, demand falls, and people make strategic mistakes. Life sometimes just isn’t fair.

So I know layoffs are just unavoidable. But how about keeping those layoffs secret? In Hostess’s case, what would have happened if those “destined to be laid off” employees in Schiller Park were told the truth, and they didn’t show up for work or (because they lacked real incentive to do otherwise) underperformed on the job? Perhaps the 1,000 Hostess employees today wouldn’t have their current jobs; and perhaps teacher pension funds, which rely on the success of private equity, wouldn’t be so secure.

Regardless of labor rules, was it right that those Schiller Park workers weren’t told they would be eventually laid off? It probably depends on the details, but at least for me, the whole situation stands on shaky ethical ground. That lack of communication and trust may lie at the heart of a lot of problems at a lot of companies, in manufacturing and elsewhere.

Tim Heston

Tim Heston

Senior Editor
FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-381-1314