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Unions Target Cleaning Services Industry can Benefit from Stabilized Workforce
September, 2007
By Bill Garland
Unions, particularly SEIU (Service Employees International Union), have conducted drives to increase membership in major U.S. cities in the last few years, with recent large citywide contracts being obtained in Houston and in Florida. These drives have been different from previous practices, in that the union does not go after just one account or building, but targets an entire cleaning contractor and all of its accounts with hopes of obtaining citywide recognition from that contractor. The union then approaches other major contractors with the ultimate goal to organize the entire city under one agreement.
In Canada, unions have developed a very strong presence in Vancouver and Montreal with company-wide agreements, but not necessarily agreements covering all contractors or the entire industry. Now, some of the tactics used in the U.S. are becoming evident in Canada, and the first target has been the cleaning industry in Toronto.
Historically in Toronto, the unions have organized the office building sector on a building-by-building basis, and primarily in the larger properties in the downtown core or on the subway lines where they are easy to organize. In other sectors such as health care and education, the contractors have assumed existing workers and unions. In Ontario, under the Employment Standards Act and the Labour Relations Act, there is no obligation for contractors to assume an existing bargaining unit or union, but only to offer the employees similar wages and conditions of work.
Although experience in other heavily unionized markets such as San Francisco, Chicago, New York and Montreal shows that relationships among players can be adversarial, in the proper environment they can be a win-win for both sides. Like anything else, the unions need to be managed by those who are paying the bills - and that is those managers/owners who are employing the contractors.
FORGING A PRODUCTIVE RELATIONSHIP
In the past few months there have been a couple of examples of contractors voluntarily signing collective agreements for all of their accounts on a citywide basis because they understand the benefits of paying higher wages and benefits. Many would disagree with this, but the days of plentiful cheap labour are diminishing.
Higher wages can be justified, but do present new challenges for the contractor. In order for these changes in the marketplace to be successful, rest of the industry must be at the same level, while the wages in the collective agreement must be able to be borne by the managers and owners of real estate - i.e. the customers - without significant burden.
It is going to take time - probably five years - before the cleaning industry can work out the delicate balance between higher wages and the higher productivity necessary to pay the increased wages. Nevertheless, increases in wages do not automatically translate into higher costs, as one might assume.
Experience in other cities reveals that companies will get smarter about how they perform services. Those that don't get sharper likely won't survive. This is probably the first challenge that will come from this new environment. That is, many companies will fight it and will not survive the new management style necessary or the costs involved.
Union drives such as the one currently underway by SEIU (Service Employees International Union) are very well funded and bring dozens of union organizers into the target city for as much as a year. They have been very successful in these types of drives in many other markets.
Some companies have signed collective agreements with unions other than SEIU, believing these other unions also represent the best interests of the workers and understand the need to work in the best interests of the client. Generally, these companies have experience in other markets and understand the benefit of all sides working together and not having an adversarial relationship.
HIGHER WAGES, LOWER TURNOVER
Higher wages can benefit both the contractor and the employee. Obviously the employee makes more money and perhaps gets benefits, which are obvious pluses, but what are the advantages for the employer or contractor? The major benefits are as follows:
( less turnover of staff -- higher wages create a more stable labour force and reduced turnover;
( less training -- with less turnover there is a need for less training and, even better, there is an incentive to train, which has not been there in the past due to turnover;
( a more satisfied employee - this alone creates more productivity as employees spend more time working and less time complaining about working conditions;
( less need for quality control - the cleaners are in the area sufficiently long enough to know its requirements and where problems occur and prevent them from happening;
( less supervision - supervisors can now be more productive in the areas they need to be, such as managing and working with the customer instead of chasing around nightly replacing staff and taking care of staffing issues; and
( less account turnover - the above factors lead to more satisfied clients, which lead to less account turnover since the majority of account turnover takes place due to client complaints with service, not price.
As a result, executives of the cleaning firm tend to spend more time on customer satisfaction or building relationships in cities with higher wage levels. Whereas, in cities with lower wages and high turnover, almost half of their time is spent on staffing issues, which takes away energy and time from focusing on their customers.
Significantly, there is typically less competition in unionized cities and thus higher profit margins for the successful contractors. This is due largely to less account turnover and a more satisfied customer. In many cities that are highly competitive, profit margins are simply not high enough to provide the level of service and quality programs needed in the industry.
If the entire industry is not on the same level playing field, it will be a tough market for a number of years as the unionized companies try and compete with non-unionized companies. In Quebec, the industry is governed by wages established by the provincial government by decree for the cleaning industry, and this generally works to keep everyone at the same level. However, it is difficult to control those companies that sub-contract their work.
These benefits make unionization sound rosy but there is one strong caveat:
owners and managers must control the costs and what they can afford.
Bill Garland is Managing Director of Daniels Associates Inc., a consulting firm specializing in building operations and cleaning services. For more information, see the web site at www.danielsww.com.
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