HR in Small Business

When Serious Materials acquired Republic Windows and Doors, union-management relations got a much needed breath of fresh air. Republic had nearly vanished amidst economic meltdown and accusations of misman- agement and corruption. Serious Materials, by contrast, is a firm with a high-minded business strategy and a commitment to fair-mindedness.

The problems became public when workers at Republic staged a six-day sit-in at the Chicago factory, which had been one of the largest window-glass factories in the United States. When orders from construction companies stopped coming in, management, after just three days' warning, closed the plant without granting workers any severance pay or giving the legally required 60 days' notice, and filed for bankruptcy. Bowing to public pressure, the company's lenders, including Bank of America, reached an agreement to give the workers $6,000 apiece in severance pay.

But that wasn't the end. The workers turned to the National Labor Relations Board with another complaint. They said Republic's owner, Richard Gillman, had secretly begun transferring the company's machinery to a (non-union) window-manufacturing facility he bought in Iowa just before closing the Chicago factory. In fact, all the equipment would have been gone, they said, except that their six-day occupation of the factory interfered with the plan-they wouldn't allow Gillman to enter. Employees also followed trucks carrying machinery to learn where it was being taken. The union demanded that the machinery be returned to the Chicago plant, so a new owner could operate it.

Meanwhile, a hero arrived on the scene: Kevin Surace, founder and chief executive of Serious Materials, a maker of eco-friendly building products, including energy-efficient windows. Surace saw acquisition of the Republic facility as a chance to expand into the Chicago region with a ready-made plant and equipment, not to mention trained people eager to work.

When he decided to make an offer, Surace did some- thing unusual: instead of talking first to the firms' main creditors, he made his first visit to the employees' union, the United Electrical, Radio, and Machine Workers of America. He met with the union's president, Carl Rosen, as well as several Republic workers. Rosen recalled that Surace's reasoning was that for the deal to work, he needed a skilled workforce. The parties agreed that Serious Materials would make the facility a union shop, and employees would be paid their former salaries and receive credit for their seniority at Republic. Only then did Surace approach Bank of America. The bank initially wasn't interested, so Surace went to General Elec- tric, owner of the lease on the equipment, and bought out the lease, a coup that convinced the bank to sell. Surace announced plans to reopen the plant and rehire all the 300 employees who had been laid off when Republic closed its doors. The resulting publicity quickly brought in inquiries and even some paying customers.

Since the acquisition, the Republic story may be nearing its end. County prosecutors brought charges against Gillman for looting the business and stealing machinery for the Iowa enterprise (which also failed, less than two months after it launched). Because Repub- lic had been in bankruptcy, the equipment was not Gillman's but belonged to his creditor, GE. State's Attorney Anita Alvarez said, "Just two weeks before Christmas, in a dire economy, the company shut the doors of their business and deserted their workers and all of their families." Gillman denied the charges.

A sign of Surace's very different attitude toward his workforce came a few months after the acquisition by Serious Materials, when Vice President Joe Biden came to visit the Chicago facility. Biden was there to represent how the Obama administration's economic stimulus plan was supporting "green" initiatives. Surace noticed that onstage for the press conference were various dignitaries but no representatives of the workers. In spite of the Secret Service's reluctance to add last minute guests, Surace insisted that workers have a face at the press conference. By the time the TV cameras were rolling, the cast of dignitaries included Armando Robles, a maintenance worker and the president of the employees' union.

Questions

1. Richard Gillman attempted to stay in business by transferring work to a nonunion facility, and Kevin Surace plans to make the operation profitable as a union shop. Do you think the decision to rely on union or non-union labor spells the difference between the success and failure of this enterprise? Why or why not?

2. How (if at all) do you think Kevin Surace's initial approach to the union when acquiring the company will influence the business success of the window factory?

3. Imagine that Serious Materials has hired you as an HR consultant for the Chicago window factory. Suggest how the company can build on its initial goodwill with workers to create positive labor relations and a highly motivated workforce for the long run.