Leadership Action Project Implementation Plan
Identify the critical issues for a company or community that your group targeted.
In recent years, the American auto industry has experienced major financial crisis. Poor management and over budgeting have caused a great deal of the pains currently being felt in the industry. Decreased profits and continuous low sales have forced these companies to review their bottom lines and reduce costs where possible. In this process Ford Motor Company (hereafter recognized as “Ford”), along with others, have seen just how detrimental the lavish benefits packages negotiated by the UAW can be.
This leadership action plan will focus on Ford’s UAW member employee benefits package. This plan will address the UAW employee benefits package and offer alternatives to the current agreement. This will allow UAW members to remain employed and prevent depletion of the workforce through lay-off while providing economically effective benefits to the employees. Issues considered for the UAW contract negotiations are:
o Health Care Coverage
o Retirement Planning
o Employee Work Schedule and Related Benefits
o Company Sponsored Group Life and Disability Insurance
Explain the idea to resolve the critical issue and improve an aspect of organizational performance
Collectively the following negotiations will be addressed in upcoming UAW contract bargaining and negotiations. Through a cooperative effort, it is the goal of Ford and the UAW to continue to provide well paying jobs to current and future UAW members while providing them with benefits that will meet the needs of their family units. It is Ford’s desire to complete the negotiations in a joint effort that will foster Ford’s ability to meet the needs of both parties.
Health Care Coverage
The cost of health care is continuously on the rise. In order to combat these issues, a variety of newer health care plans are being offered to businesses to reduce their overall annual premium expenses. The importance of economical health care for both the employee and Ford are recognized. In attempts to meet the need of both parties, Ford would like to introduce a series of options in regards to health care coverage for each eligible employee to review. Each of these individuals will be offered an opportunity to select the health care plan that is best for them and/or their family.
The term eligible employee refers to any current or future UAW member employed with Ford and not otherwise qualified for a publicly funded health care coverage program such as Medicare. Employees entitled to receive Medicare or another publicly funded source of health care coverage and do not require family plan coverage will be required to elect the publically funded health care coverage as their primary insurance. Ford will provide each of these non-eligible employees $1800 annually to seek an additional form of supplemental health care coverage. Eligible employees and their families will elect one of the following three health care coverage options:
Option I – High Deductible Health Care Coverage
This option will be offered to all employees and is an extremely beneficial option to those individuals and families with minimal health care costs. The medical portion of this plan will include no increase in premium payment deductions for the employee (individual or family coverage) for the length of the contractual agreement. Each employee electing this option will have an increased health care deductible of $3000 per individual or $5000 per family. This health care option will not require any co-payment options for office or hospital visits or prescription medication coverage. By utilizing a high deductible health plan, employees will be covered by insurance in the event of a catastrophic or costly event however will help bear the costs of their less expensive and routine medical care procedures.
The high deductible health care plan will include restrictions on the prescription benefits an individual or family receives. Costs associated with prescription medications will be applied directly to the individual or family deductible until it is reached. Additionally, the plan will require that any recurring prescription be ordered through a mail order pharmacy in attempts to utilize the negotiated drug pricing available, thus reducing prescription drug costs where possible. First time prescriptions may be filled at the employee’s local pharmacy, and generics must be requested unless contra-indicated by the prescribing doctor. Additionally, recurring prescriptions shall be filled in 90-day supply purchases where possible.
Vision and dental options will be optional for employees and their families’ separate of the high deductible plan. Those employees selecting these benefits will be responsible for covering 50% of the premium costs for these benefits. The dental plan will be provided through a DMO and will cover 100% of usual, reasonable and customary costs associated with routine dental work including oral exams, cleaning, fluoride treatments, and other preventative dental procedures. Additional procedures will be covered at the rates of 50% - 90% depending on classification. Individuals carrying dental coverage will have an annual member benefit of $1500 in regards to non-orthodontic treatment and a lifetime maximum of $2000 for orthodontic treatments. The company vision plan will be provided through a PPO and will cover 100% of usual, reasonable and customary costs associated with complete vision examination and vision testing, ophthalmologist examination. Frames, lenses, and contacts will be covered up to $350 annually per individual carrying vision coverage.
The high deductible plan will be accompanied with a Health Savings Account (HSA). The HSA has numerous short term and long term benefits to the employee. One such benefit is that the employee is able to utilize payroll deductions to deposit pre-tax income into a savings account to off-set health care costs as they are incurred. The monies deposited into the HSA will remain the property of the employee until utilized for health care benefits for the remainder of the employee’s natural life. However, the employee must utilize these monies for health care expenses. At any time, shall the employee not be employed by Ford, the savings in the individual’s HSA account will continue to be accessible for the individual’s use for selected health care costs. As an added benefit, Ford will provide each employee selecting the high deductible option the benefit of depositing monies annually into the eligible employee’s HSA account to be utilized at the employee’s will for associated health care costs. Ford will provide each individually covered eligible employee $150 annually for their HSA account. Individuals electing family plan coverage will receive $300 annually from Ford under this option. Further, eligible employees will have the option to select the amount of their regular contribution to be withheld from their regular pay check and deposited into the HSA account. It is the option of the employee to not withhold any monies for depositing into the HSA account.
Option II – Traditional Health Care Coverage
Ford recognizes that high deductible health care coverage is not the best option for every individual or family. A more traditional health care coverage option may be more appropriate for individuals or families with increased health care costs. This option will be offered to all eligible employees of Ford and will not be associated with any premium increase for individual or family coverage. However, in attempts to reduce premium costs for the company, an individual deductible will be raised to $1500, and the family deductible will be set at $3000.
Ford will be utilizing a Health Reimbursement Account (HRA) with employees selecting this option. An HRA is the company’s attempt to reduce premiums, while helping the employee offset higher deductible costs associated with their health plans. At the beginning of each calendar year, Ford will deposit $750 (for each employee with individual coverage) or $1500 (for each employee with family coverage) into an HRA. These monies can be applied towards the annual deductible or additional costs associated with health care for the employee and/or their family. Monies remaining at the end of the year will continue to roll over into the employee’s account to be utilized the next year. At any time that the employee is no longer employed with Ford, the remaining monies associated with the individual’s HRA will no longer be accessible to that individual and will be the property of Ford. Should an employee utilize the entire amount Ford has deposited into the HRA, the employee will be responsible for meeting the additional deductible prior to 80/20 coverage being introduced. Once the employee’s deductible is met, the individual will be responsible to pay 20% of additional health care costs, and the insurance company will fund the remaining 80% of the costs. Employees and their families will be open to seek services from their selected medical providers and will not be restricted to a preferred provider list. In addition, employees will be responsible for paying an in-office co-payment for services rendered. The co-pay shall be set at $30 per office visit.
Prescription benefits associated with this traditional health care plan will have similar limitations to that of the high deductible option. Costs associated with prescription medications will be provided to the employee and their family through a negotiated formulary pricing structure and are eligible to change without prior notice. The costs for prescription medications will be shared by the insurance company following the employee meeting their obligated deductible. Payments for prescription medications provided by the individual will be applied to the identified plan deductible for the employee. Additionally, this plan will require that any recurring prescription be ordered through a mail order pharmacy and in 90-day supply where applicable, in attempts to utilize the negotiated drug prices. First time prescriptions may be filled at the employee’s local pharmacy, and generics must be requested unless contra-indicated by the prescribing doctor.
Vision and dental insurance will remain optional to each employee selecting an insurance plan associated with Ford. Dental coverage will be provided through a DMO and will cover 100% of usual, reasonable and customary costs associated with routine dental work including oral exams, cleaning, fluoride treatments, and other preventative dental procedures. Additional procedures will be covered at the rates of 50% - 90% depending on classification. Individuals carrying dental coverage will have an annual member benefit of $1500 in regards to non-orthodontic treatment and a lifetime maximum of $2000 for orthodontic treatments. The company vision plan will be provided through a PPO and will cover 100% of usual, reasonable and customary costs associated with complete vision examination and vision testing, ophthalmologist examination. Frames, lenses, and contacts will be covered up to $350 annually per individual carrying vision coverage. Each eligible employee electing this coverage will be responsible for 50% of the associated premium for this additional, and optional, coverage.
Option III – No Election of Health Care Coverage
Ford recognizes that health care coverage is extremely important to maintain a healthy quality of life. Additionally, it is the belief of the company that each employee working for Ford is better protected by electing to have health care coverage. However, the company understands that many times family members have alternative health care options aside from company sponsored health care coverage. Additionally, Ford understands that the election of health care coverage is an individual choice and should be left to each eligible employee and their family.
In the event that an eligible employee elects to opt out of company sponsored health care coverage, Ford will provide the individual with $600 annually, divided evenly amongst each paycheck in an attempt to share the savings of reduced premium with these individuals and families. It is not the intent of Ford to encourage any individual to not elect coverage for themselves or their families, but rather it is intended to provide an incentive to individuals electing optional coverage through alternative sources.
Retirement Planning
Retirement planning is an essential part of any employee’s career. It is reasonable to suggest that each employee works hard for a number of years with the expectation of being able to at some point retire and live a comfortable life style. In review of the current 401 K program, it is believed that there are ways to increase the employee’s potential 401 K earnings based upon increased efficiency, improved product quality, and operating competitiveness (2007 UAW-Ford National Negotiations Media Fact Book, 2007). Additionally, after reviewing the current Pension Policy, additional concerns regarding extended life expectancies have arisen. In attempts to combat these continuing concerns, an alternative Pension Plan will be offered to new UAW member employees.
401 K
It is believed by Ford that each UAW employee will benefit more equally in the company’s success if company sponsored 401 K contributions become associated with company profits. In these terms, the 401 K program will be offered to each UAW employee, and their percentage contributions will be determined individually. However, Ford will contribute to each employee annually based upon profit earnings following the fourth quarter annually. Profit sharing will be distributed into each employee’s 401 K no more than two months following the respective fourth quarter. Profit sharing will be determined prior to management bonuses, and contributions will be made before-tax deductions (2007 UAW-Ford National Negotiations Media Fact Book, 2007). Ford will determine profits to be shared based upon the following:
Total Profit Share Determination
All sales and profits are in respect to U.S. sales only. Total profit share is paid from the first dollar of profits and is determined by summing the following:
• 6% of profits up to 1.8% of sales, plus
• 8% of profits between 1.8% and 2.3% of sales, plus
• 10% of profits between 2.3% and 4.6% of sales, plus
• 14% of profits between 4.6% and 6.9% of sales, plus
• 17% of profits that exceed 6.9% of sales
Employee’s Profit Share Determination
Profit shares will be determined on an individual basis as follows:
| (1) Hourly Allocated Profit Share | = Total Profit Share | x Number of Eligible Employees __________________________ Number of Eligible Hourly and Salaried Employees |
| (2) Profit Sharing Percentage Factor | = Hourly Allocated Profit Share | / Total Eligible Pay of All Eligible Hourly Employees |
| (3) Employee’s Profit Share | = Profit Sharing Percentage Factor | x Employee’s Eligible Pay |
* Table taken from 2007 UAW-Ford National Negotiations Media Fact Book, 2007.
Pension Plan
Currently, Ford is experiencing extreme pension pay outs with the extension of life due to modern medicine afforded to each of us today. In order to combat this problem, it is necessary to review the current pension plan and make revisions. Ford recognizes that an employee’s pension plan is utilized in long term retirement planning and, thus, current employees have already planned on life term pay out of the current pension program. For this reason, Ford does not propose changes to the current pension program for current Ford employees. However, it is inevitable that changes for any future employees will be necessary in order for the company to sustain the ability to carry through with pension payments.
Current Employees
Current Ford employees will continue to receive their Defined Benefit Pension. This pension plan assumes retirement at the age of 65 and following 30 years of service to the company. The pension plan described here will provide a monthly sum to each retiree meeting the above criteria for the remainder of their natural life. For a retiree retiring at the age of 65 with 30 years of experience, the average monthly pay out is $1,535. For retiring employees with 30 years of service that are not yet 65, the average monthly pay out is $3,020 until the employee reaches the qualified age to receive social security benefits. Upon eligibility for social security benefits, these monthly pay outs will be reduced to the regular rate of approximately $1,535 monthly.
New Employees
Ford proposes a Cash Balance Pension. This pension plan allows for one lump sum pay out to the employee at their selected time of retirement. Throughout the employee’s time with Ford, a regular contribution will be made by the company into the individual’s Cash Balance pension account. At the time which that individual so chooses to retire, that pension will be paid to the retiree and become the responsibility of that individual to disperse the funds for the remainder of their natural life. The Cash Balance Pension plan does not include any supplemental benefits should the employee choose to retire prior to their social security eligibility.
Employee Work Schedule and Related Benefits
Historically, Ford has prided itself on working with the UAW to provide all employees with excellent wages that are competitive within the auto industry and are above national averages for most other industries. The “average” Ford U.S. hourly employee, through a composite of production and skilled wages, earns $28.88 based upon an hourly wage and a cost-of-living allowance (2007 UAW-Ford National Negotiations Media Fact Book, 2007). On average, employees are paid an additional $8,106.60 per year for overtime premiums and pay for time not worked such as vacation, holidays, etc. (2007 UAW-Ford National Negotiations Media Fact Book, 2007). This additional pay results in a cost to Ford of approximately $627,880,489.80 annually, based on 77,453 hourly employees (2007 UAW-Ford National Negotiations Media Fact Book, 2007). The total annual compensation that Ford pays out to typical hourly employees, then, is $5,280,513,181, or $68,177.00 per typical hourly employee (2007 UAW-Ford National Negotiations Media Fact Book, 2007).
In these current economic conditions, however, while Ford is fighting for survival as a viable auto maker, tough decisions must be made. Ford employees at all levels will have to do some belt-tightening and make some sacrifices. This is difficult, it is painful, but it is necessary if Ford is to ride out this economic downturn and come out on the other side a stronger, more competitive, more profitable company. The main area of concern and focus is the additional $8,106.60 per year per hourly employee (or $627,880,489.80). A significant portion of this figure is wages paid out for time not worked. Cuts in these costs can make a substantial positive effect on Ford’s profitability. Ford’s main goal is to reduce these costs without changing the employees’ take home pay for time worked. This can be accomplished by reducing the amount of paid time off. Wages for time worked will not be affected. That will make the changes more palatable and acceptable to the employees. To this end, the following recommendations are made.
Vacation
With regard to vacation, there are two opportunities to reduce Ford’s costs; first in the way vacation is accrued and, secondly, in the way vacation is carried over from year to year.
Accrual
At this time, vacation is not accrued by employees. Currently, on the first day of the year, Ford credits to each employee’s account the number of vacation days for which they are eligible in that year, regardless of continuous service date. For example, if an employee is eligible for 20 days of vacation, effective his/her anniversary date of December 12th, the 20 days are credited to him/her on January 1st of the new calendar year, and he/she is able to take any or all of the days beginning on January 1st. This is despite the fact that they have not actually earned the vacation as of January 1st and, in fact, will not have earned the total 20 days until December 12th. When an employee leaves the company, Ford pays him/her for the vacation days not taken by the time of their separation. If the employee whose anniversary date with the company is December 12th leaves on January 10th, they are paid for those 20 days of vacation, even though no vacation days have been earned at that point. Thus, Ford is paying out wages for time not worked or earned. The recommendation, therefore, is to start accruing vacation time. For the hypothetical employee that has been discussed, he/she will have earned 5 days of vacation as of March 12th, 10 days as of June 12th, 15 days as of September 12th, and the full 20 days as of December 12th. Ford would still allow the employees to begin taking their vacation as of January 1st. If the employee decides to leave on June 13th, he/she has earned 10 days. If no vacation has been taken so far that year, the employee will be paid for those 10 days. If he/she has taken 15 days at the time of separation, the extra 5 days not earned will have to be reimbursed to Ford by the employee. This will mean that Ford no longer pays for vacation that has not been earned, and that will be a definite savings to the company.
Carry Over
Currently the practice is to allow employees to carry over vacation days from one year to the next. Although this situation does not involve Ford paying for time not worked, it does add to the company’s liability and diminished profitability. When employees carry over their vacation into the next year, Ford is required to show the outstanding vacation as a liability on the balance sheets. As liability increases, profitability decreases, and vice versa. Therefore, by simply requiring all employees to take their earned vacation time by the close of business on December 31st or lose it, there will be no liability for unused vacation in the newyear. The elimination of this liability will result in greater profitability and will be reflected on the balance sheets and the profit sharing payout to the employee.
Neither of these recommendations will produce any changes in employees’ paychecks, but will be recognized by the employees through profit sharing agreements and will also benefit Ford by reducing costs and liabilities. At this time, there is no recommendation to decrease the number of vacation days for which employees are eligible. However, this option should remain open and be reviewed and addressed at a future date.
Holidays
Paid Holidays
At the present time, Ford offers its employees between 15 and 16 paid holidays, plus 2 extra personal days annually. This represents wages paid for time not worked. There are 15 scheduled holidays for 2010 and will be used for the purpose of example in this proposal (UAW Local 1216, 2006). The identified holidays are as follows:
Jan. 18, 2010 - Martin Luther King Jr. Day
April 2, 2010 - Good Friday
May 31, 2010 - Memorial Day
July 5, 2010 - Independence Day
Sept. 6, 2010 - Labor Day
Nov. 2, 2010 - Federal Election Day
Nov. 15, 2010 - Veterans Day
Nov. 25, 2010 - Thanksgiving Day
Nov. 26, 2010 - Day after Thanksgiving
Dec. 24, 27, 28, 29, 30, 31, 2010 - Christmas Holiday Period
The recommendation is that the company observes the following 7 paid holidays plus allow each employee 2 additional paid personal days for 2010, for a total of 9 days of paid time off:
May 31, 2010 - Memorial Day
July 5, 2010 - Independence Day
September 6, 2020 - Labor Day
November 11, 2010 - Veterans Day
November 25, 2010 - Thanksgiving Day
November 26, 2010 - Day After Thanksgiving
December 24, 2010 - Christmas Eve
(Note: January 1, 2010 is included in the 2009 Christmas Holiday Period.)
This recommendation is fair and equitable, and will bring Ford’s practices in line with general manufacturing industry standards. Ford remains committed to providing paid holidays to the employees, but must correct the overextended position in which it now finds itself in regard to paid holidays. This recommendation allows Ford to accommodate and reward employees while maintaining competitiveness with other manufacturers in the area of paid holidays.
Plant Shutdown
December 27, 2010 through December 31, 2010 will remain as a plant shutdown period. However, this will not be paid time off. And, although it will affect the employees’ paychecks, it does not decrease their wages for time worked. December 27th through December 31st represents time that the employees are not working; therefore, they are not automatically owed wages for this period. Notwithstanding, employees are not likely to be very accepting of this particular point, because it will result in a smaller check for this period.
Overtime
Scheduled overtime is a significant chunk of the $8,106.60 additional wages per average hourly employee that needs to be addressed in an attempt to cut costs and increase profitability. Ford’s recommendation is that all overtime hours be cut. One reason for this is the softening demand for some vehicle models. Other auto manufacturers, such as General Motors, have dispensed with scheduled overtime. And, “since revenue is recognized as soon as vehicles leave the plant, [a] cut in scheduled overtime will directly impact revenue” (Chang, 2007). Ford would benefit from maintaining the current core staff level, but limiting them to a normal eight-hour shift and no more. The core staff level should be able to maintain optimal productivity. At those times when the core staff level is not sufficient to cover Ford’s production needs, the company can hire interim, temporary workers on an as-needed basis. When the economy and Ford’s condition turn around, and the core staff level needs to be increased in order to adequately cover production requirements, new employees can be selected and hired from the interim, temporary workers that Ford has already trained. One advantage of this change is that Ford would be able to control costs better. The company would pay for extra help only when needed. Those expenses would go away when the core staff level is again able to meet the production requirements. A second advantage is that Ford would not have to bear the expense of benefits for the temporary help. Those costs would be borne by the temporary agency that supplies us with the interim workers. And, third, Ford is spared the expense of paying its regular employees at an overtime rate of time and a half. The downside is that many employees have come to expect and rely on overtime pay, and this will be another sore point for them. However, this is a necessary change that must be adopted in order to keep the company viable.
Layoff Benefits
This is another area where employees are paid when no work is performed. Ford employees are eligible to receive benefits while they are laid off for either part of or a full week. When employees are laid off for partial weeks (i.e. working less than 40 hours in a week), the company pays them a portion of their wages that will bring their total unemployment benefits up to 80% of their regular base salary which causes expense to Ford of approximately $194.19 per day per laid off employee (2007 UAW-Ford National Negotiations Media Fact Book, 2007). When employees are laid off for full weeks, Ford supplements their unemployment benefits so that the amount they receive is 95% of their weekly after-tax pay which costs Ford approximately $509.55 per week per laid off employee (2007 UAW-Ford National Negotiations Media Fact Book, 2007). Savings will be realized when this practice is discontinued. If employees are laid off, it means that production has decreased because consumer demand has declined. This should be offset by reduced wages due to the layoffs. However, Ford is paying out wages for no work. Although this means that laid off employees will receive less than they have been used to, their pay for time worked has not been affected. All that has happened is that Ford is no longer paying wages for work that has not been done. This change will significantly reduce the company’s costs and positively influence its profitability.
Company Sponsored Group Life and Disability Benefits
Preparing for the unexpected is an area which Ford is not willing to compromise. When it comes to an employee and their family being able to continue meeting individual and family obligations, Ford will be there to help. Company sponsored life and disability insurance benefits will continue to be provided and sponsored by the company. As always, employees will continue to have access to additional optional life insurance coverage. The following outlines these benefits for the purpose of contract negotiations:
Immediate Benefits
· Life Insurance – Life Insurance benefits are intended to provide a onetime pay out in the event of employee’s death. Life insurance benefits range from $40,000 - $81,000 per employee.
· Accidental Death and Dismemberment Insurance – Accidental Death and Dismemberment Insurance provides additional monies in the event that an employee is injured or killed as a result of an accident. This benefit will range from $20,000 - $41,000.
· Survivor Income Benefits – Survivor benefits are intended to assist eligible survivors in the event that the Ford employee dies. These benefits will be paid in the amount of $650 monthly for survivors not eligible to receive social security and $350 monthly for survivors who are eligible to receive social security benefits.
· Short Term Disability – Short term disability benefits are intended to provide short term relief in the event that an employee is injured or sick and unable to work due to incidents such as an accident or pregnancy. Short term disability is provided for a term of one year. If the employee remains unable to work after one year, long term disability benefits will be provided. Short term disability benefits will provide $425 - $850 per week to these employees.
· Long Term Disability – Long term disability benefits are intended for individuals who are injured and unable to work for a period of more than one year. Long term disability benefits will not be provided to employees during the first year of their disability. Long term disability benefits will provide $1,525 - $3,380 monthly to these employees.
Optional Benefits
· Group Life Insurance – Additional life insurance will be optional for each employee to provide an added benefit to the individual’s selected beneficiaries. Insurance may be selected to cover the employee and covered dependents. These insurance options will be offered at minimal costs to the employee. The costs of these policies will be deducted automatically from the employee’s paycheck upon selection of coverage. Optional coverage is available to employees in the amounts of: $10,000 - $200,000 per employee, $5,000 - $75,000 for spouses, and $2,000 - $30,000 per dependent child.
· Accident Insurance – Optional accidental death insurance is provided to each employee and their covered dependents. The cost of these benefits will be deducted from the employee’s paycheck upon their selection of coverage. Accident insurance will be available to employees in the amounts of: $10,000 - $200,000 per employee, 50% of employee’s coverage for spouses, and 10% of employee’s coverage for each dependent child.
*All Group Life and Disability Insurance Benefits were taken from 2007 UAW-Ford National Negotiations Media Fact Book, 2007.
What is unique or special about this idea?
Ford is in a unique situation in that they, unlike other large companies, are required to engage in contract negotiations with the UAW on behalf of a large portion of their workers. Most companies are able to control these factors regardless of employee approval. In this unique situation, the recent economic downfall has forced both Ford and the UAW to begin looking at how their group affects the overall picture of company success. This concept is special in that it encourages cooperation and understanding of both parties opposed to the former “win-lose” mentality. The proposal provided here requires concessions on both ends of the spectrum in order to meet the needs of all parties.
How might you push the unique/special elements of the idea further?
The uniqueness of this proposed plan can be pushed further if we understand that two sides, typically opposing, will act as a team. In the past, these parties have acted against each other in order to win their own individual arguments. The UAW fought for increased pay and benefits regardless of practicality. In addition, they held over the company’s head that they could go on strike should they not “win” their battle, thus causing the company to lose profits due to inadequate production which causes reduced sales. However, the situation has been somewhat reversed. Ford now has the upper hand in that they are striving to stay afloat. Without the cooperation of the union, Ford could potentially go bankrupt, thus causing all of its employees to lose their jobs. The cooperation between Ford and the UAW is necessary in order to meet the needs of each party, survival for the company and the continuation of jobs.
Who are the stakeholders?
Stakeholders in this specific situation range from the public, who may purchase or have purchased Ford vehicles, all the way to the individual family members of the Ford employees and everyone in between. In the sense that every day citizens are stakeholders, there is a risk that if Ford is unable to remain in business, they are affected through reduced vehicle purchase options, vehicle service (and parts) availability, as well as reduced competition in regards to American auto makers. Ford and its stockholders, along with its salaried and hourly employees, hold a stake in this contract agreement in terms of Ford maintaining its profits and sustaining job positions. Given that the contract is approved, there is a higher likelihood of reduced job loss for the company employees, including UAW workers. However, additional concessions required by Ford can cause an increase in staff reduction. Eventually, if the contract is not approved, Ford and its employees may all find themselves unemployed if the company is forced into bankruptcy. Further, each individual member of all Ford employees’ families are stakeholders in this contractual agreement in that any case causing job loss or benefit reduction, ultimately affects the employees and their family members’ standard of living and quality of life.
Identify the components of a critical Force Field Analysis.
A Force Field Analysis consists of three main phases. The following describes these phases and identifies these areas for this specific situation:
I. The Unfreezing Phase – This phase is intended to identify the “threats facing the organization that make for an urgent need to change” (Lussier & Achua, 2009). In regards to the Ford-UAW contractual agreement, the reason for an immediate need to change is the significant financial impact upon the organization with the imminent threat of bankruptcy and job loss. Currently, Ford is facing tremendous pressure on its financial position and is going through a recession phase. This major financial crisis is partially due to the costs of employee benefits which are extremely high.
II. The Changing Phase – This phase of the Force Field Analysis is the implementation phase where change happens. At this part of the Force Field Analysis, there is recognition for the need to change and for leadership within the organization or group to begin the implementation of new concepts or ideas. In regards to Ford and the UAW, the acceptance of the contractual agreement followed by implementation of the agreed upon procedures are put into place.
III. The Refreezing Phase – In the Refreezing Phase old “habits, values, traditions, attitudes, and mindsets are permanently replaced” with new “behaviors, values, and attitudes” (Lussier & Achua, 2009). At this point in the Force Field Analysis, the new concepts have been accepted and leadership needs to freeze these new and accepted concepts of these individuals. In regards to Ford and the UAW, this phase would begin when the new concepts are accepted by all and have been implemented. Upon the completion of implementation, leadership refreezes these new ideas for them to remain permanent until unfrozen and changed again. Without this phase, old habits are likely to return and interfere with new and accepted concepts.
What are the benefits and risks of this idea?
| Benefits | Risks |
| Ford will increase profits. | The plan could be rejected by the UAW |
| The company will be placed in a better position financially | Qualified employees may seek alternative employment with other companies |
| Relationship amongst UAW and Ford will be improved | Benefit standards could decrease |
| Employee moral will be boosted |
|
What issues – or “stumbling blocks” – can you anticipate that might make it difficult or impossible to implement your idea?
It is well known that human nature resists change. Unfortunately in the current financial situation of Ford, change is inevitable. The changes proposed here could offer both the company and employees opportunities for the future. However, there is always the potential to stumble in the process of eliciting change. A major stumbling block that can be anticipated in regards to the proposed plan would be that the union resists the change and, therefore, rejects acceptance of the proposal. Rejection of the initial proposal will have to be handled through continued negotiations and could create volatile situations for both Ford and its employees.
What actions might you take, for each stumbling block listed above, in order to prevent that stumbling block from killing your idea?
For any foreseeable stumbling block, there can be attempts to prevent the block from occurring. In the case of the union contract approval, it will be important for the union as well as the employees to be fully aware of the plans being offered. In addition, highlighting the negative and positive effects of the suggested concessions and proposal it can help to offset resistance. Ford can work with the union to encourage cooperation from the UAW members by offering informational meetings and expert speakers on the topics related to the suggested change. Additionally, Ford management and union representatives could work together to solicit feedback from the union members. By allowing these members a lengthy opportunity to learn about the plan and to get their questions answered, the likelihood of resistance will be reduced.
Which people, groups or organizations (if any) should you bring into this implementation in order to facilitate its successful implementation?
It is suggested that the following groups be incorporated into proposal and negotiation of these anticipated changes:
· Executive Member Negotiating Team (including Board of Director representatives, executives, and representatives from all levels of management)
· Union Member Negotiating Team (including officers, unit representatives, and representatives from all management/supervisory levels)
· Human Resources Specialist
· Legal Counsel (independent or Union Representative and Ford Representative counsels)
· Financial Specialist (including accountants as well as financial product specialist knowledgeable on retirement planning and insurance products)
What authorizations must you obtain (if any) to implement this idea? Include any legal licenses or certificates that might be needed.
There are no legal licensures or certifications necessary to implement these changes for the UAW members’ benefits plan. The only approval that must be obtained is approval of the contract by the UAW and ratification of it by the union’s members.
What are the anticipated cost and income potential of this idea? Attach a cash-flow spreadsheet [if appropriate].
There is a great amount of anticipated cost savings associated with these proposed savings ideas. Utilizing high deductible health care coverage saves on average 50% - 60% in premium for an organization (Boop, 2008). Additionally, the identified dental and vision plans will require the employee to pay half the premiums, again reducing costs to Ford. In regards to paid holidays, Ford will be reducing the quantity of these days by approximately 45%, thus reducing the expense of these holidays equally. With the changes to the pension plan from a defined benefit to a cash balance plan, the costs savings will be assumed to be approximately 50% as well. The 401 K plan identified will reduce Ford’s regular employee contribution and shift this to a savings vehicle for the employee. Other listed benefits will remain the same, thus providing no percentage in reduction to Ford’s costs.
| *Dollar Amounts in Thousands | | Cost Trends | | Potential Average
Cost Reductions |
| | 2008 | 2007 | | | 2011 |
| Employee Benefit | Company
Costs | $ 21,460 | $ 21,140 | | Savings | $ 14,167 |
| Medical | 13% | $ 2,790 | $ 2,748 | | 50% | $ 1,385 |
| Dental | 4% | $ 858 | $ 846 | | 50% | $ 426 |
| Vision | 2% | $ 429 | $ 423 | | 50% | $ 213 |
| Paid Vacation | 17% | $ 3,648 | $ 3,594 | | 45% | $ 1,629 |
| Paid Company Holidays | 8% | $ 1,717 | $ 1,691 | | 0% | $ 1,704 |
| Ford Flexible Work Program | 6% | $ 1,288 | $ 1,268 | | 0% | $ 1,278 |
| Savings & Stock Investment (401K) | 6% | $ 1,288 | $ 1,268 | | 6% | $ 77 |
| Ford Retirement Plan | 18% | $ 3,863 | $ 3,805 | | 50% | $ 1,917 |
| Vehicle Purchase Plan | 12% | $ 2,575 | $ 2,537 | | 0% | $ 2,556 |
| Community Service Plan | 8% | $ 1,717 | $ 1,691 | | 0% | $ 1,704 |
| Ford Employee Recreation Program | 8% | $ 1,288 | $ 1,268 | | 0% | $ 1,278 |
| Total Costs | | $ 21,460 | $ 21,140 | | | $ 14,167 |
What milestones should there be in the development of this idea?
Ford and the UAW through this contract presentation and negotiation phase will reach a new milestone when it comes to communication. This proposal has been designed to foster a relationship far beyond that of prior interactions. Plans identified through this proposal are meant to offer a win-win situation for both parties, rather than a win-lose situation which has previously been fostered. With this new understanding and cooperation, both parties (Ford and the UAW on behalf of its members) will be able to continue growth in the future.
In the event the implementation does not go to plan, what is your escape plan?
As previously discussed, it is the intention of Ford to work with the UAW to arrange for industry experts and specialist to offer support and assistance to the UAW members in fully understanding the range of benefits being offered to them. In addition, these professionals will be expected to provide guidance to the union members to increase their understanding and further foster an understanding that change is imminent. However, it is very likely that, even post ratification of the contract, UAW members may be resistant to change. In these times, it is important to remember to hear the members’ voices and to offer them outlets for their frustrations. Each employee will be encouraged to speak their mind through participation in the Employee Assistance Program, including private counseling and guidance sessions which are completely confidential from Ford. It is, however, important to remember that, once the contract is ratified, the changes are imminent; and, it will further be the continued focus of Ford to achieve acceptance from all its employees.
Whom, aside from the idea development team, will you tell about this idea and how? Write a story board to bring your idea to life.
The implementation plan offered in this proposal does not require a development team. However, individuals previously listed as necessary to be involved in the change will all be aware and involved in the further development and acceptance of this proposal.
Identify the components of your communication plan.
The identified proposal offers a variety of solutions related to the UAW members’ employee benefits package to help Ford reduce costs for the company as a whole. The plan identified through this proposal only addresses employee benefits for UAW member employees of Ford. The benefits offered currently to these employees have been reviewed and determined to be excessive in regards to Ford’s affordability of employee benefits packages. Therefore, it is the intent of this proposal to offer alternatives to these current high costs benefits while reducing negative effects on the UAW member employees and providing a win-win situation for both Ford and the union.
The benefits identified in the above proposal include modifications to employee’s health care, retirement planning, schedule of work and related benefits as well as company sponsored group life and disability benefits. Each of these areas has negative and positives in regards to the changes. However, the ultimate goal of the proposal is to increase profitability and thus prevent job loss. Both the negative and positive aspects of each area will be addressed and are identified below.
Health Care Coverage
The benefits associated with the health care coverage offered is that each eligible employee has options to select the coverage that best fits their needs. In addition, there will not be a premium increase for the associated health and prescription benefits to any eligible employees. However, the deductibles for these health care options have increased. Ford is offering two options for combating these issues. The first is providing the employee with a Health Savings Account in attempt to save pre-tax dollars to help offset medical costs as they are incurred. The other option is for Ford to offer a Health Reimbursement Account in which half of the individual of family’s deductable is supplied by Ford thus reducing the cost to the employee.
Vision and dental coverage for employees and their families is optional. The premium for this coverage will be shared equally amongst Ford and the employee. However, there will be no deductable associated with normal and customary procedures as outlined above. In addition, Ford is now offering the options to opt out of company sponsored health insurance and participate in an alternative plan of your choice. Increased options are available for the employee based upon all of the offerings outlined in this proposal.
Retirement Planning
The ultimate goal of Ford is to become more profitable. Employees may review the 401 K program and suggest that the employee is losing previous contributions that the company put towards these savings vehicles. However, just the opposite is true. Ford is offering a unique profit sharing 401 K program that tally’s the employees total earnings into their 401 K based upon Ford’s annual profits. The profit sharing calculations are listed above. By reducing the costs to the company, profits will be increased, thus increasing the annual contribution to the UAW member employee post quarter four of each year.
Pension plans have been a long standing retirement tool for UAW members. In the past these have been defined benefit pensions which pay out a standard amount monthly post retirement. These payouts were intended to continue for the remainder of the employee’s natural life. However, the development of these plans came about when the average life expectancy was much lower than it stands today. It is continuously difficult for Ford to maintain pension payouts years after their intended end. This is one reason in which the company is opting to provide a cash balance pension to all new employees. The cash balance option does two things for the union member. First is that an identified percentage of each member’s salary is put away for retirement and earns interest while waiting to be dispersed at retirement. The monies are dispersed in one lump sum which allows the employee to choose how to further invest or save the money following retirement. The second benefit to the employee is that the cash balance pension is not focused in the stock market. Defined benefit plans frequently require the individual to opt how to invest the funds for the time being and thus are vulnerable to stock market shifts.
Employee Work Schedule and Related Benefits
Ford has reviewed options when it comes to the employees’ work schedules as well as the added benefits of vacation time, holiday pay, and overtime. Minor changes to these policies have been proposed in order to provide Ford with a significant savings. In reference to vacation time, the process for accrual will be modified. In the past, vacation time was provided to the employees at a given date rather than accrued as hours are worked by the employee. This allowed the employee to take vacation time they had not yet earned. Ford will be modifying this structure to an accrual system. The system will require the employee to earn vacation days based upon hours worked rather than simply being employed. In addition, Ford will begin requiring all vacation days to be taken by the end of the calendar year. This does not allow for the employee to build up vacation time year after year, however it does force the employee to take time off thus reducing stress and increasing the productivity of that worker.
In addition to modifications in vacation time, Ford will be reducing the number of paid holidays to its union member employees. The intention of this plan is not to take away from the employee, however it is meant to reduce the cost to the company and thus preventing extended plant shut downs. Employees will be offered standard holidays off with pay. In addition, each employee is allotted two additional paid holidays of their choice thus reducing the number of paid holidays from 16 to 9 days per year.
In contrast to the paid time off, Ford will require employees to take five days of unpaid leave at the end of the calendar year (December 27 – 31). Though this may appear to employees initially to be a difficult subject to overcome, the additional time off again offers employees’ time to spend with their families thus reducing stressors that can put a toll on an individual’s health. Though Ford will not be paying out wages to the workers during this time, they remain eligible for unemployment benefits through the state.
Ford will be eliminating overtime and layoff pay benefits as well. The current economical circumstances no longer afford Ford the ability to pay workers time and a half to complete the same amount of work nor does it allow for payout to employees for not completing work at all. Again, these may appear to be detrimental to the employee; however any means to increase profits ultimately helps the employee through profit sharing earnings.
Company Sponsored Group Life and Disability Benefits
The benefits identified in as company sponsored group life and disability benefits have not changed from the most recent contract negotiation. The benefits have again been outlined for the UAW members in this contract for convenience.
The communication of this plan needs to effective from day one. It is the intention to provide this information from management to the UAW in terms that will be found respectful and in the interest of the UAW members. Important for the communication is having all parties recognize the need for change. Without this understanding the plan will not be effectively communicated and the implementation will be difficult. The priority in communication is to identify Ford’s options and thus request cooperation in proceeding with the above stated modifications. In this situation Ford has two options, reduce costs associated with each employee or reduce the quantity of workforce. The goal of the UAW is to maintain positions for UAW workers within the organization and provide accommodating working conditions, benefits, and the like. Ford can continue to meet this goal if the UAW is willing to make concessions in regards to costs of employment. The outlined play identifies ways to do this without reducing wages or the number of positions available. By providing this information to the UAW, it is believed that they will cooperate and join Ford in the efforts to maintain a viable workforce while continuing to meet the needs of its employees in regards to the benefits package. Open and honest communication is necessary and will be encouraged by Ford during negotiations.
Provide a detailed operational action plan for the implementation of your idea. Include timing information.
The operational intention of this leadership action plan is to have contracts ratified and placed into effect by January 1, 2011. The following is a guideline of time frames and implementation processes:
October 2009 – December 2009 Continue making Ford Management fully aware of the proposed plan.
January 2010 Introduce the proposal to the UAW for contract considerations.
January 2010 – June 2010 Offer employee educational meetings and expert advice for the UAW and employees wishing to learn more about the options being offered for the new benefits package. At this time, it will be the responsibility of the negotiating teams (for the UAW and Ford) to be reviewing options to ensure appropriate questions are asked and answered prior to member ratification. Considerations for further concession shall be addressed in this time frame.
June 2010 – September 2010 Ratification of the proposal by the UAW members.
October 2010 Members begin selecting options in reference to the new benefits package (i.e., health care coverage, optional insurance coverage, contributions, beneficiaries, etc…)
November 2010 All optional coverage selected by eligible employees.
January 1, 2011 New Benefits Package in Effect
The following references were utilized in the development of this proposal:
2007 UAW-Ford National Negotiations Media Fact Book. (2006). Retrieved October 5, 2009, from
Boop, Gregory (2007). About.com. Retrieved October 9, 2009, from
Chang, Althea (2007, August 22).GM Cuts Overtime Hours on Softening Demand. CNNMoney.com.
Lussier, R & Achua, C. (2010). Leadership: Theory, Application & Skill Development e4. Mason, OH: South-
Western Cengage Learning.
The UAW Local 2016 provides a listing of the 2010 paid holidays
