About Labor Contracts and Performance Standards

Te GM-UAW Saturn Labor Contract: The GM Saturn Project appears to be a bold experiment in self-management and consensus decision making. Representatives of UAW will sit on all planning and operating committees, and work team will not be supervised by supervisors. Work Units, or teams, composed of 6 to 15 workers led by an elected UAW councilor will, form the basic productive group, ad they will be self-organizing, deciding who will do which tasks, maintaining their own equipment, ordering supplies, and setting relief and vacation schedules for group members. These teams will be responsible for controlling variable costs and quality.

Each group of three to six work units will form a “work unit module” led by a company advisor, providing the first managerial input. Advisors provide liaison with experts in engineering, marketing, personnel and other units, and they provide information to and from the “Business Unit” which will manage the entire plant. The Business Unit has the broad responsibility to coordinate all-plant operations and is made up of company representatives, an elected union official, and specialists. To complete the innovative organizational structure, two additional committees are envisioned, both of which have union representation: the “Manufacturing Advisory Committee”, which provides oversight for the Saturn complex, and the “Strategic Advisory Committee” which does long term planning.

The new structure at Saturn will replace the typical organizational structure of assembly plants, which had six layers of management. This hierarchy was headed by a plant manager, but before encountering production workers, there were the following layers: production manager, general superintendent, production superintendent (5 per shift), general supervisor (15 per shift) and supervisor/foreman (90 per shift).

Of course, the Saturn experiment will be watched, but it involves many elements that should produce positive results. First, it completely relaxes work rule, providing the kind of flexibility available to Japanese managers. But, in addition, Saturn uses team and self organizing work knit concepts that have been experimented previously with positive results.

Performance standards provide data that are basic to many decision making problems in production/operations management. The performance standard is of critical importance because labor cost is a very important factor, influencing many decisions. For example, decisions to make or buy parts, to replace equipment, or to select certain manufacturing processes require estimates of labor costs.

Performance standards also provide basic data used in day-to-day operation. For example, scheduling or loading machines demands knowledge of the projected time requirements. For custom manufacture, we must be able to give potential customers a bid price and a delivery date. The bid price is ordinarily based on expected costs for labor, materials, and overhead plus profit. Labor cost is often the largest single component is such situations. To estimate labor cost requires an estimate of how long it will take to perform the various operations. These estimates are also required for computing the capacity of the production process, and provide input to the estimation of delivery times for customers.

Finally, performance standards provide the basis for labor cost control. By measuring worker performance in comparison with standard performance, indexes can be computed for individual workers, whole departments, divisions, or even plants. These indexes make it possible to compare performance on completely different kinds of jobs. Standard labor costing systems and many incentive wage payment systems are based on performance standards.