STATEMENT OF THE HONORABLE STEPHEN GOLDSMITH, MAYOR OF INDIANAPOLIS, INDIANA *

STATEMENT OF GERALD W. McENTEE, INTERNATIONAL PRESIDENT, AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES (AFSCME) *

STATEMENT OF C. WILLIAM POLLARD, CHAIRMAN, THE SERVICEMASTER COMPANY *

STATEMENT OF MAX SAWICKY, ECONOMIST, ECONOMIC POLICY INSTITUTE *

STATEMENT OF DENNY HARRIS, EXECUTIVE DIRECTOR, SMALL OFFICE HOME OFFICE ASSOCIATION, RESTON, VIRGINIA *

STATEMENT OF ROBERT RZONCA, SENIOR VICE PRESIDENT AND CHIEF PERSONNEL OFFICER, IPSCO, INC. *

STATEMENT OF TOM DOUGHERTY, PRESIDENT, UNITED PAPERWORKERS INTERNATIONAL UNION, LOCAL 247 *

STATEMENT OF DAVID LIBBY, MANAGER, HUMAN RESOURCES, CHAMPION INTERNATIONAL CORPORATION *

STATEMENT OF JAMES J. DOWDALL, VICE PRESIDENT, LABOR RELATIONS, BELL ATLANTIC *

STATEMENT OF KENNETH CANFIELD, TELECOMMUNICATIONS TECHNICAL ASSOCIATE, AND PARTICIPANT, THE NEXT STEP PROGRAM OF BELL ATLANTIC, NEW YORK *

STATEMENT OF ELIZABETH JARRETT, PRINCIPAL, HARRIET TUBMAN LEARNING CENTER, P.S. 154 , HARLEM, NEW YORK *

STATEMENT OF LEROY BARR, MATH TEACHER, HARRIET TUBMAN LEARNING CENTER, P.S. 154, HARLEM, NEW YORK AND CHAPTER LEADER, THE UNITED FEDERATION OF TEACHERS *

Appendix A – Written Opening Statement of Chairman Pete Hoekstra, Chairman, Subcommittee on Oversight and Investigations *

Appendix B – Written Statement of Mayor Stephen Goldsmith *

Appendix C – Written Statement of Gerald W. McEntee *

Appendix D – "The Soul of the Firm" by C. William Pollard, Chairman of the ServiceMaster Company *

Wednesday, June 24, 1998

US House of Representatives

Committee on Education and the Workforce

Subcommittee on Oversight and Investigations

American Worker at a Crossroads Project

Washington, D.C.

The subcommittee met, pursuant to notice, at 2:12 p.m., in Room 2261, Rayburn House Office Building, Hon. Peter Hoekstra [chairman of the subcommittee] presiding.

Present: Representatives Hoekstra, Norwood, Hilleary,

Fawell, Mink, and Ford.

Also present: Representatives Ballenger, Souder, Schaffer, and Scott.

Staff present: Jan Faiks, Worker Project Director

Paul Boertlein, Worker Project Communications Director

Kimberly Reed, Worker Project Professional Staff Member

Arturo Silva, Worker Project Communications Assistant

Stephen Settle, Worker Project Counsel/Investigator

John Flannery, Minority Project Director

Brian Compagnone, Minority Staff Assistant.

 

Chairman Hoekstra. [presiding] The Subcommittee on Oversight Investigations and the Committee on Education and Workforce will come to order.

The subcommittee is meeting today to hear testimony for the American Worker at a Crossroads Project. Under Rule 12(b) of the committee rules, any oral opening statement at the hearing is limited to the chairman and the ranking member. This allows the subcommittee to focus on the testimony from the witnesses who have traveled to Washington to be with us today. I would like to say that rather than letting Ms. Mink hear one of my opening statements, I will take my opening statement and submit it to the record and will yield to Ms. Mink.

Ms. Mink. Absent the opportunity to respond, I think I’ll waive my opening statement to the end. Thank you, Mr. Chairman.

Chairman Hoekstra. All right. Great. Recognizing that we started late, I think that the panel knows what we’re trying to accomplish with the American Worker Project. I think it is important to move directly to the panel. I think we are fortunate to have the panels with us that are here today who are going to share their thoughts and experiences with new work environments.

We are trying to find out what is happening in today’s workplace. This hearing will feature individual and paired testimony that will highlight innovative and unique work environments and partnerships that are currently being used to maximize productivity and competitiveness in the American workplace.

It’s myth-busting testimony about union and management working together to create innovative, effective and cost-cutting workplaces which is a part of our on-going conversation.

I’ll now begin with Congressman Mark Souder, who is a member of our full committee. But due to the compelling nature of the testimony and his interest on this subject, he has asked to be here to be with us today. He will also introduce one of the witnesses today.

Mr. Souder. It’s a tremendous honor to be here to introduce the Mayor of Indianapolis. Indianapolis is the home of the Indiana Pacers and the Colts, and the Indianapolis 500. To political buffs, they know Indianapolis as the home of Steve Goldsmith, who invented reinventing government before it was cool.

Since 1991, when he was elected, Mayor Goldsmith has reduced government spending every year. He has reduced the overall bureaucracy while holding the line on taxes; identified more than $250 million in savings; has reinvested that savings by putting more police officers on the street; and implementing a $700 million infrastructure improvement program called "Building Better Neighborhoods."

This is just a start. I’ve seen the evidences in his community of interaction in public/private sector with minority communities. He has made Indianapolis one of the most exciting, innovative cities in the Nation. I’ve followed his career from the time he was a prosecutor, and he hasn’t disappointed anybody at any point. It’s a great honor to have the privilege to introduce him today.

Chairman Hoekstra. Thank you. Thank you, Mayor Goldsmith for being here. Our second witness today is Mr. Gerald McEntee, who is the International President of the American Federation of State, County, and Municipal Employees. Mr. McEntee is the International President of the second largest union in the AFL-CIO and one of the fastest growing in the Nation. Mr. McEntee was first elected president in 1981 and was re-elected in 1996 for his fifth consecutive 4-year term. That’s an impressive track record.

Mayor Goldsmith. I am happy with it.

Chairman Hoekstra. Yes, a 4-year term is not a bad way to go either.

[Laughter.]

Mayor Goldsmith. No, I’m for it.

Chairman Hoekstra. What’s that?

Mayor Goldsmith. I’m for it.

Chairman Hoekstra. Yes, I’m for it, too. He’s the Vice President of the AFL-CIO; a member of its Executive Council; Chairman of the Federation Political Education Committee, and a member of its Organizing and Public Relations Committee. Thank you for being here today, Mr. McEntee.

For our third witness, we have a competing interest in introducing this individual. I’ve known him for a period of time. He’s on the board of directors for a corporation that I used to be employed by, but since he’s not my constituent, the honor moves to Mr. Fawell, who’s also a member of the full committee, but not a member of the subcommittee. Mr. Fawell, thank you for being here.

Mr. Fawell. Well, thank you. It’s a privilege. I think Mayor Goldsmith is a tremendous man. But Bill Pollard is also a fantastic individual, well respected in our Dupage County area. He’s the chairman of the ServiceMaster Company and served as its chief executive officer for 10 years. ServiceMaster happens to provide supportive management services to over 2,500 healthcare, educational, and industrial facilities and a variety for consumer services to over 6 million homeowners. It’s listed on the New York Stock Exchange with a customer-level revenue in excess of $5 billion. I think that of the shareholders, 20 percent are employees.

I believe, Bill, you had mentioned that ServiceMaster has been recognized by Fortune magazine as the number one service company among Fortune 500 and by the Wall Street Journal as a star of the future. It has consistently outperformed the market providing an average annual total return to its shareholders in excess of 20 percent for more than 25 years. So that’s quite a record. I think that if you’re talking about what should be happening in the 21^st century and some new and innovative ideas, I can think of no one else better qualified than Mr. C. William Pollard. He is somebody of whom we are very proud of back in Dupage County, Illinois, Mr. Chairman. Thank you for the honor of allowing me to say this.

Chairman Hoekstra. Great. Thank you. Mr. Pollard, welcome and good to see you again. Thank you for being here.

Our final witness is Mr. Max Sawicky who is an economist with the Economic Policy Institute here in Washington, D.C. Mr. Sawicky, welcome to you.

Mr. Sawicky. Thank you.

Chairman Hoekstra. Mayor Goldsmith, we’ll begin with you.

Mayor Goldsmith. Thank you, Mr. Chairman. I had an opportunity to testify a few times, but never where the chairman and the ranking member waived their opening statements. I don’t quite know what to do here.

[Laughter.]

But thanks for the time, and I appreciate Congressman Souder’s courteous and friendly introductions. It’s a pleasure to be Mayor of a suburb of your district, so thank you very much. Also, I can’t quite figure out how to do this. I’ve been mayor for seven years or so. If you would have told me at the beginning I would have been testifying before a committee of Congress with the president of AFSCME, it would have been a big shock actually.

[Laughter.]

I think I'm delighted to be here with him. We’ll see how this works out.

[Laughter.]

Most of my city workers, by the way, are AFSCME organized. Let me just make a very brief comment. Let me start first with the role of a Mayor just because I think it’s a little bit confusing here. This very important issue that the subcommittee is looking obviously affects our country and affects our cities.

A mayor has the responsibility as a public employer to manage his or her workforce well, which is one of the subjects you have invited us to speak about. It could also have a role similar to that of a Congressman or Congresswoman to be an advocate for our local economies. These are not exactly the same roles because it requires that I officially produce city services to have a good foundation for growth because prosperity and wealth are created in the private sector. They’re just rearranged in the public sector, but they’re created in the private sector.

So I have to manage my workforce in a way that produces the foundation for the economy to grow and not increase the cost. If we look at what cities have done in the 30 years up to the early 1990s as employers of last resort, they essentially priced themselves out of the marketplace. They scattered their businesses. One of the reasons we have full and prosperous suburbs is because people chose to invest their money or move their homes to where the property taxes were less and the infrastructure often worked better. So a mayor’s role has kind of a foot in each world. I think it’s important at least to start with that tension.

That tension is one I faced in 1992 when I got elected as mayor. I ran on a platform of not raising property taxes. My Chamber of Commerce said, "We appreciate your pledge, and by the way, we’d like $1 billion of infrastructure done as well that hasn’t been done in this city for the last 20 years. Go at it."

Now this seemed to be an inconsistent issue, which is, how do you do $1 billion in infrastructure and not raise your tax rate? I campaigned on a platform of privatization and delivery of city services. Indianapolis is the 12th largest city in the country; in terms of population, a little bit bigger than the District.

My first day in office, I went to meet with AFSCME trash-haulers, who are really big guys in Indianapolis. They expressed themselves very vividly and what they thought about my privatization platform in ways that I will not repeat for the committee, but made their point, nevertheless.

So I said, okay, we’ll try this differently. I will go out and I will do a different city work; perform a different city service each week – pick up the trash, cut the grass, fix the public housing, whatever the case may be. Inevitably in those visits, the city workers who were virtually all, for this purpose, AFSCME workers – different locals – who had really good ideas about how to be more productive. It struck me as quite strange that they had to shop those ideas to the mayor. There ought to be somebody between me and them that would listen to them.

So, essentially, what we did was abandon privatization. But we put in its place competition, because privatization assumes that the public employees are inherently inferior. Competition assumes that the public systems are inherently inferior; at least as we currently operate it. So we had no good information on how much it cost to fill a pothole, pickup a ton of trash.

We imposed activity-based costing and began the process of bidding out services. We’ve now bidded-out 80 services. What we’ve seen as a result of those 80 bids is savings of about $400 million. We have the largest waste water privatization in the country and airport privatization. But for the basic city services, much more frequently than not, the AFSCME workers have won the bids. But each time they’ve won the bids as a result of competition and empowerment, they’ve increased their quality and reduced their costs at the same time.

Often the conversations we have in this regard, especially, I think, in the coverage of national policy out of Washington, is the only way that you can save money is by doing worse or doing something less. Our goal has been to simultaneously do a better job and reduce the cost of the operation at the same time.

As we have bid these out, we have found a fair dislocation of middle managers –folks that we might call bureaucrats – and we have lots of them in our city government. They had been trained as city managers had over the last 30 years in this country. Their job was to get an order from above and tell somebody from below what to do. It was totally unclear that they were adding any value to the worker who they supervising.

As we’ve gone through this process, yes, we have dramatically reduced the city’s workforce, but we’ve not reduced the number of line workers. In this case, it happened to be union. The middle managers have been moved. They’ve been retired. They’ve been attrited. But as they’ve done that, the productivity of the line worker has actually gone up. Sometimes when the private sector wins, it takes our workers.

The waste water privatization was the largest in the country at the time. What we essentially did was we brought world-class management. They decided the best way they could run our plants was to take the AFSCME workers to do it. Because it was management that was requesting the value, it wasn’t the labor force itself.

Just in closing, let me add a couple of principles: One, the government is not set up to be managed very well because it doesn’t know its own costs. It doesn'’ know real costs.

Secondly, it doesn’t measure and reward performance. When we went to bid the fleet services in the City of Indianapolis, I was determined to outsource our central garage because as Congressman Souder mentioned, we’re known for a small, local race called the Indianapolis 500. In the Indianapolis 500 you change tires and oil essentially in 27 seconds. Our fleet took 27 days to change the oil in the police cars. It seemed unlikely that, no matter how good these guys were, that they were going to be competitive.

They said, "Now wait a minute, Mr. Mayor, you promised that we could bid." The local union president came in and said, "Listen, we’ll play this game with you, but we want to share in the upside." So as we become more productive, we want our pay to go up and we’ll work on a percentage basis. So instead of this natural loggerhead about collective bargaining contracts, essentially what they did is what I call "profit-sharing," they call it "game sharing" and we share the upside. It dramatically changed the way they work.

Now if we look at either the waste water contract that’s outside or the fleet system that’s inside, some very interesting things have happened in both of those. Grievances are down by 90 percent. Accidents are down by 90 percent. Injuries are down by the same percentage.

So the workers are being paid actually a little bit more than they had been before. They have much more responsibility and much more flexibility. I would suggest that they probably have more job satisfaction as evidenced by the reductions and sorts of adversarial and injury experiences we had before.

Government had to change the way it operates in order to insert this system. Not only in terms of measuring performance or rewarding performance, but in terms of the way it handles its authority as an employer. This top down, control and command authority that States and cities and the Federal Government use is not reasonably calculated to produce a workforce that makes sense. Job classifications have to be changed. Pay systems have to be changed. Purchasing systems have to be changed.

This little old lady, an elderly citizen of public housing, wrote me and said she has not had a shower that worked with hot water for two and one-half weeks and asked, "Why can’t you guys go fix this?"

In a story that I’m sure will resonate here, they said, "We can fix it. We’ve got the part backordered for 3 weeks. When it comes in, we’ll fix it."

I said, "Well, isn’t there anywhere in the city of Indianapolis that sells this part?"

They said, "Of course, there is. We can go down to the hardware store and buy it, but you don’t let us do that. That’s not something we’re authorized to do. You have to go through central purchasing to do that."

So we have to change the way we do business.

Finally, we have to trust each other. Our experience with AFSCME has not always been an easy one, but it’s been one that eventually has built on problem solving to mutual trust. The mayor’s responsibility is not to be the employer of last resort. It is to be an enlightened employer who produces high-quality city services that allows wealth to form in the city. I think we have a formula that works and one that we’d recommend for consideration by this committee as it looks at the relationship between labor and management either in the private sector or the public sector. Thank you very much, Mr. Chairman.

Chairman Hoekstra. Thank you.

Mr. McEntee.

Mr. McEntee. Mr. Chairman, if all the cities and all the mayors were like Indianapolis. Mayor Goldsmith, all I would say is Amen. Unfortunately, that’s not the case.

AFSCME has welcomed the movement for deep and lasting change in the way government operates. We’re proud to be part of that movement in many parts of the country. Nobody is more frustrated with bureaucratic inefficiencies than the front-line workers whom we represent. Nobody is in a better position to improve the quality of public services than those who perform the work are. The simplistic quick-fix approaches often proposed for reinventing government, lay-offs or outsourcing, for example, do not address the underlying challenges of delivering services in an increasingly complex and demanding environment.

Truly redesigning government requires policymakers and the unions and their members to break with the past and work constructively together to improve the efficiency and effectiveness of public services. We are doing that in Indianapolis as the mayor indicates in his testimony. He has made some excellent points. As he said, we, obviously, at times have some differences. I’m not going to go into a lot of detail about Indianapolis here. Instead, I’d like to make a few general comments about the overall topic.

In order to be successful, we think, the process of redesigning government should be based on certain principles. First and foremost is the principle of employee involvement. Front-line employees should be treated as resources and as partners in service delivery, instead of simple cost factors that need to be controlled. AFSCME affiliates are in a variety of partnerships for change around the country. In some cases, like Indianapolis, this has involved participation in competitive bidding where public employees compete directly with private companies for contracts that deliver services. In other cases, labor and management cooperate without public private competition. While AFSCME members have shown that public employees can compete successfully against private contractors when there is a level playing field. We also have shown that labor and management can work together, but without the threat of privatization looming over their heads.

The reality is that neither labor nor management can respond to the demand for top quality government services alone. Workers cannot deliver high-quality services unless management sees it as top priority. Management cannot deliver high-quality services to the public without enlisting the support and talent of those who do the work.

We believe unions are the best vehicles for enlisting the positive participation of State and local government workers. A collective bargaining relationship offers employees the protection of an independent voice and provides the best opportunity for establishing an effective dialogue between labor and management. It also provides a framework for establishing cooperative committees. Unfortunately, 27 States still do not grant all public employees the fundamental right to form unions and bargain collectively with their employer.

Redesigning government also requires reducing the bureaucracy and eliminating red tape. Government must reduce layers of management and give front-line workers more decision-making power on the job. In Indianapolis, a key turning point occurred early on. When our members found that they could not be cost-effective competing for road work if they had to carry excessive supervisory staff. The city, the mayor agreed, and some 17 supervisory positions were eliminated. For their part, the workers themselves found ways to reorganize work crews, improve work processes, and save on material and equipment costs. By flattening the bureaucracy and giving workers the latitude to make decisions, Indianapolis was able to reduce costs dramatically and underbid the private contractors, indeed, by a significant margin.

A third principle of redesigning government is to invest in worker training so they have the necessary skills to perform effectively in their new roles. In Indianapolis, city workers have been trained in specific accounting techniques. In the State of Ohio, the entire workforce has been trained in quality improvement techniques to enable them to participate in the ``Quality Services Through Partnership'' program.

A fourth principle for redesigning government is a long-term commitment to and protection for the workers. In Indianapolis, it is important to point out that there have been no lay-offs of bargaining unit members. Workers are more likely to participate enthusiastically in redesigning government when they see the effort as genuine and not as a threat to their employment.

Finally, redesigning government should be based on a commitment to delivering the highest quality services to the public in the most efficient manner and with the maximum of accountability to the public. In Indianapolis, the entire budget-making process has been revised to reward efficiency and savings. Employees, as the mayor said, share the rewards in the form of bonuses over and above their regular wages. The city also received some, as well.

AFSCME is proud of the efforts of our members in Indianapolis. They have shown that public employees are cost-competitive when they have adequate training and resources and when there is skilled leadership and commitment on the part of management and labor. With a win rate of about 80 percent, the AFSCME representative workers have consistently shown that they can outperform private contractors. In our view, the key to delivering top-quality services, there has been an effective labor management process and progressive leadership on both sides of the bargaining table. Each committed to achieving the exact same ends.

I want to close by thanking you again for this opportunity to discuss an issue which is important not only to the workers whom we represent, but also to the citizens of our local community who depend on the services which our members provide. We strongly believe that the challenge of reinventing government and maintaining effective, harmonious labor-management relations are interdependent. I would be happy when the opportunity to comes to answer any questions that the committee may have. Thank you.

Chairman Hoekstra. Thank you, Mr. McEntee. Mr. Pollard?

Mr. Pollard. Okay.

Chairman Hoekstra. You can relax. We’re not starting yet.

Mr. Pollard. Oh, you’re not starting yet?

[Laughter.]

Chairman Hoekstra. Excuse me. I’m sure Mr. Goldsmith and Mr. McEntee recognized what those funny bells and whistles mean. It means we have to go and vote.

Mr. Pollard. Okay. As long as you vote the right way, please.

Chairman Hoekstra. Yes, that's right.

[Laughter.]

 

We may only have one vote. But there’s not multiple bells.

Mr. Ford. They don’t believe freshman.

[Laughter.]

Chairman Hoekstra. It’s going to be followed by a 15-minute vote. We will stand in recess for about 20 or 25 minutes. All right? Thank you.

[Recess.]

Chairman Hoekstra. I will submit for the record, without objection, Mr. Pollard’s "The Soul of the Firm." Without objection. Thank you. Mr. Pollard?

Accompanied by Patricia Asp, Vice President for People and Claire Buchan, Vice President for Public Affairs

 

 

Mr. Pollard. Thank you, Mr. Chairman and members of the subcommittee. With me today is Patricia Asp, our Vice President for People and Claire Buchan, our Vice President for Public Affairs.

As Congressman Fawell commented in his introduction, we are a large, public company, today employing or managing over 230,000 people and serving over 9 million customers. In addition to operating under our company, ServiceMaster, we also provide services under such well-recognized brand names as TruGreen-ChemLaw, Terminix, and Merry Maids. While most of our business is located here in the U.S., we also serve in 38 foreign countries today.

We’re a company that has been through a lot of change. We have basically doubled in size every 3 to 3.5 years for the past 25 years. Over 50 percent of our workforce today would be represented by minorities and women. We aggressively have a policy of promoting from within 60 percent of our officers and senior managers who started with us in front-line, entry-level positions. The growth of our business has resulted ultimately also a remarkable growth in the value we have produced for our shareholders.

Today the market capitalization of our company is over $6 billion and part of our commitment to our employees is to have employee ownership. Today our employees – the people making it happen, own 20 percent of our company. They are the ones that really generate the capital in our company. So that is over $1 billion in the hands of the people that are producing.

But as a representative of the marketplace today and the subject you’re considering, the fundamental question that I’d like to present here is profit an end goal or a means goal? Are the demands upon the firm to produce profits consistent with the development of people? In a downsizing, restructuring environment where does the person fit? Should the corporation serve only as an efficient means of production for quality goods and services or can it also become a moral community for the development of human character and behavior? What is the social contract as we enter the 21^st century? Can a business be a community? Can it be a community with a soul?

I think those questions are facing us in the marketplace. I think I’d like to suggest they’e facing you as you consider the subject. We’re attempting to respond and give an answer to those questions. Now much of our business might be classified as routine and mundane. We do such things as clean toilets, maintain boilers, kill bugs, serve food, and care for lawns and landscape. Obviously, the task before us is to train and motivate people. So, yes, they can be more productive, be more effective in their job, but yes, have the opportunity to grow and develop. Yes, even be better people.

The objectives of our company are simply stated: to honor God in all we do, to help people develop, to pursue excellence, to grow profitably. Those first two objectives for us are end goals. The second two are means goals. As we seek to implement those objectives in our business, they provide a standard for us for seeking to do that which is right, avoiding that which is wrong. We don’t use that first objective as a basis for exclusion. In fact, it is the reason for our promotion of diversity as we recognize the potential and worth and dignity of every person.

Obviously, it doesn’t mean we do everything right. We experience of our share of mistakes. But because we have a mission statement out in front of us, we can’t hide our mistakes. They’re flushed out in the open, sometimes for forgiveness, correction. We have to deal with it. Nor is it a standard that we’re promoting here as a simplistic reason for financial success. It cannot be applied like some mathematical formula.

In a diverse and pluralistic society some may question whether that first objective belongs a part of a public company'’ statement. But regardless of where one’s starting point is, the principle that can be embraced by all, an important principle in the work environment and in the marketplace, is where it leads us. That is to the dignity and worth to every individual. So as we recognize the importance of dealing with the whole person in the work environment, we're seeking to link the performance of the task with the development of the person, at the same time assume the responsibility for what is happening in the person.

Drucker’s classic definition of management is getting the right things done for others. You can get a lot of right things done through others and become nothing more than a master manipulator. The question we keep forcing our managers to ask is, what is happening to the person in the process?

As we ask these questions and as they are integrated into our training and develop the force of self-energizing process that is never over, and really is our basis for continuous improvement. Does it work? Well, it has been working for 25 years in our company. Over 25 years.

Now, as I am talking about innovation in the work environment, there’s a whole list of things that I could bring to you today of some of the things we are doing in innovation. But already I counted on the importance of purpose and mission as far as motivating employees and recognizing that people don't just work for a living. They, in fact, work for a cause.

Second, the importance of ownership. No way could we motivate over 230,000 people to do things right and to do the right thing, if they didn’t feel like owners of the business.

The third is the training and development. That is a continuing task force. It is a growing challenge for us. Our training is not simply in the job task today. Our training must involve basic things like reading, like writing, like communicating. We have whole training in civility, of how people can get along with each other. Those are some of the tasks that are assumed, and must be assumed, by the employer today if they are interested in the growth and development of their employees.

Now we’re all familiar and have experienced some of the positive changes that have occurred because government has let and encouraged, and in some cases mandating social changes in conduct in the work environment. There has been a need for fair labor standards. There has been a need to protect and enhance the opportunities of certain classification of workers. These requirements have added to the cost of doing business, but they have provided for a healthier community and society. They provide households who in turn are productive, paying taxes and purchasing goods and services. But as these various legislative mandates are reviewed and as you think of the policy and the actions to be taken for the future, there are a few things I would ask you to consider.

The first is, simply put, under the phrase we’re all familiar with, what is good for the goose is good for the gander. As you consider legislation in the future, don’t ever exempt yourself from its application. Thank you for the actions you’ve taken to correct that. When you’re thinking for the future, I would encourage you to follow that standard.

Second and which is a very sensitive area with some of the remedies today, especially civil remedies are discouraging for the mediation and resolution of employment issues. Please reconsider the philosophy of using the court system and the trial bar. Be a primary incentive for enforcing legislation. As you pass legislation, consider the costs of making it happen versus pushing it off into another segment of our society.

A third and very practical area is an area with the cumulative effect of some of the laws today, dealing with discrimination have a presumption in effect that every termination involving employees in a protected class may be discriminatory. Thus, when a major employer faces an issue like restructuring or re-engineering, they are unable to think through alternative employment in this protective class. They must make a decision of laying off the entire class, group, protected or otherwise.

The net effect of this is that in our society today, there is far more dislocation of employment than necessary. How to resolve it? I don’t know. But it is an issue. More people are being dislocated today and it is an issue that there has to be an answer to. I think the American with Disabilities Act, Family Leave Act are both good acts. But they also have some very broad definitions in them and have created some ambiguity, some real difficulty in administration for employers. Those definitions need to be reviewed and tightened, if possible.

The Fair Labor Standards Act today is simply out-of-date. Where people are working, how long they are working, and different locations where they are working, today technology has allowed us to bring work to where the worker is not, the worker to where work is. Thus, people are working in all kinds of different environments. That act needs to be reviewed and brought up-to-date with where work is being performed today.

Then, six, coming back to this whole issue of what is the social contract in the 21^st

century? What is the role of government in setting some of the standards for this social contract? It is a serious issue in the workplace today. We live in a workplace that’s rapidly changing. We use words like downsizing and right-sizing to cover-up the fact that people lose their jobs for reasons other than performance. Some have suggested that we really live in a post-job world.

If one understands where we first got the idea of a job, it was at the beginning of the century. The idea that one could define job descriptions and job locations and then add them all up and perform a result. The fact of the matter is the job is changing so fast today, we have a hard time with job descriptions in our company, because people are being asked to do one thing today and something else tomorrow in order to meet the changing dynamics.

To give you an idea what that has meant to ServiceMaster, 75 percent of what we’re doing today in our company we were not doing 10 years ago. That has changed. That’s rapid change. That change has been brought about not by legislation, not brought about by some policy. The movements of the marketplace have brought it about. We have to move with the marketplace if we’re going to survive because we’re a marketplace entity. This means that the workplace has to become an increasing place for continuing education and training.

What I refer to as the University of Work, in fact, is an old idea that all of us have had sometime in our life. We’re going to go to school and the rest of our life we are going to work. The lines between education and work are blurry. In fact, if you take a look at what resources are being allocated today in adult education, 75 percent of education resources today are spent on people from 18 to 22. But almost 80 percent of the people’s potential for education or adult education, that resource allocation is going to have to change at some point. A big part of that is going to be the training that’s going to occur in the workforce.

Well, what role will government play in encouraging business to further invest and prepare the workers for the change that is currently and there before us? How will Congress encourage better communication between educational institutions in this country and encourage employers in determining what is the relevant curriculum?

Work and learning must go hand-in-hand if we are to continue to be competitive. Unemployment in our country is at an all-time low. I realize there are pockets in our country where there is high unemployment, but overall it is at an all-time low. There is for us, that one major employer, a scarcity of employees. Is anybody prepared to review the policy on immigration laws?

As we begin a new century, is it time once again to look at opening the doors of this country? Are we ready to seriously review that question? Many of us are sitting here, second generation immigrants, thankful that at one time somebody did open the door. Is this a policy that should be reviewed even with all of its political implications?

Another policy is simply one that maybe I’m in a unique position to discuss coming from business. But I think we need some vehicle for greater participation of employees in the governance of corporations today. The European model is not one that’s working. We operate in Europe. We operate companies in Europe. To have a forced standard that "X" number of people are on the board of directors doesn’t work. But there has got to be better models where we can get employees to participate more in the overall governance of the business today.

Now as I come to this close, I want to thank you again for the opportunity. I hope these brief comments may have sparked an interest for further inquiry. In the 21^st century, it is people and information technology that will be the two key resources for competitive advantage. You can’t have one without the other. So the fundamental question we ask in our business and I encourage you to ask is, how are we investing in our people? Are we investing not only in the public sector but in the private sector?

Let us never forget that it is only the private sector that creates jobs. All of the sectors of our economy, including the government, are economically dependent upon the growth and development of the private sector. The business community cannot solve all of society’s problems, but it can be a moral community for the development of human character and soul. That is the grand experiment of our company. Thank you.

Chairman Hoekstra. Thank you, Mr. Pollard. Mr. Sawicky.

Mr. Sawicky. I’d like to thank the committee for inviting me to speak and for putting me on a panel with such eminent persons. I read the testimony of my co-panelists with great interest. I appreciate the chance to react to them. The testimony and statements submitted by the panel are remarkable in certain ways, I won’t resist comments on them.

There’s a crusade for contracting or for privatization more generally. Generalizations advanced by that crusade often are found not to obtain. Privatization is really a matter of cases. There are some services, which lend themselves well to contracting or to some kind of privatization, and others, which do not. There’s no general principle that can be safely invoked. So I’ll try to be more specific.

In this crusade, there is a feeling or implication that the burden of the public sector can simply be taken up by outside organizations, something like a self-winding wristwatch that runs by itself. But, the common experience in contracting is that the role of government who acts as the intermediary for the customer, namely the taxpayer and the citizen, is absolutely crucial. Companies and organizations – nonprofit or profit – cannot be expected to fulfill public objectives. They have their own organizational objectives.

For business firms, economists would say the mission is to make money. Few economists would dare to suggest otherwise. Demonstrations that markets work efficiently rests entirely on the premise that companies will try to make money. That's what they are supposed to be about in a market society. Which is why the statement by Mr. Pollard is so remarkable: there's so much there that goes beyond the interest of the owners of his company. I don't mean to suggest that he's not doing his job, far from it. But what is clear is the incredible contrast between the portrait of a thriving company painted in his testimony and the rule out in the world.

We hear a lot from Wall Street to the effect that performance is the opposite of what is described by Mr. Pollard. We have people with nicknames like Chainsaw Al who are well regarded by shareholders – if not by their employees – for doing the opposite of what Mr. Pollard discusses. Workers in fact and in orthodox economics models are treated as commodities, completely interchangeable parts with no past, no future, and no function other than to help a profit-seeking organization make money.

The theory of the firm, as Mr. Pollard calls it is supported by a lot of experience: companies are first and foremost focused on making money. It turns a out that the problem for privatization. Somebody who intends to improve public service delivery has certain public objectives in mind when they engage outside organizations. But the motive of the outside organization is entirely different. It's really the role of government in setting conditions for privatization that forces the contractor or vendor to fulfill the public interest. We would not expect it to come to that result on its own, as a general rule.

Rather than manage public employees, what privatization by contracting entails is managing contracts. That is not necessarily easy. I think Congress is well-acquainted with the problem because, of course, the Federal Government purchases quite a bit from one year to the next. Everybody here has some familiarity with the difficulties in purchasing goods and services efficiently. In a contract for public services, typically, there are a great many more problems involved because we're not buying grain or some easily described and specified commodity. We're buying a service that often entails clientele or beneficiaries whose interest are not the same as the people making the decisions or the people providing the service.

An other problem in public services is that the clientele often doesn't have a voice of its own, or is, indeed, disliked by the community at-large. That kind of situation can be dangerous for the well-being, not only of the clientele, but of the public. I think welfare reform is a good example – the fate of people in this kind of system may not become known and may not be much interested in by other players, including the company or nonprofit organization that's involved. So there's an extra difficulty with populations that are supposed to be served as a public policy who are not well-placed in the political process.

By contrast, for example, you have a group like veterans that is very well placed to voice its political objectives and to secure public services in a more advantageous way than other people who are served by Federal, State or local governments.

Now let’s get down to the issue of what this product is that we're supposed to be buying by contracting. A good example is local public education. The more complicated it is, the harder it is to write a contract, enforce a contract, monitor performance, react to performance, and correct mistakes.

There are a number of indicators that tell us how effective public education is, but we don't know how to weigh them, one against the other. There could be trade-offs between them.

Second, some things we expect from public education are not easy to measure in the first place. They rely on the testimony of people involved, which may not be obvious or easily obtained.

Finally, there are issues of fairness involved in the way education, and indeed many other public services, are provided. Again, this is not something the contractors by themselves could be expected reasonably to fulfill, except under the direction of the public management.

Some things that look simple on the surface can also be complicated. For instance, take the case of fleet vehicle maintenance mentioned by the mayor. We have a report by Elliott Sclar which talks about that. It's not as easy as it looks. It turns out that there's an inherent problem, which everyone has experienced if they bring a car in for service and they're not well-acquainted with the mechanics of their automobile. You don’t really know what's wrong. You're relying on the mechanic to tell you and it may take you a while to find somebody you can trust all the time.

Things that genuinely are simple, one would think like sanitation or trash pickup, don't necessarily lead to competitive market arrangements. It turns out that although sanitation is widely contracted out in the U.S., there is a high degree of market concentration in that industry. This means we expect the cost to be higher than it would need to be from an efficiency standpoint.

I have to agree with President McEntee that what distinguishes the mayor is uniqueness. If every city was like Indianapolis and every mayor like Mr. Goldsmith, I think we'd be having a different discussion today. If every company fit the description of Mr. Pollard's statement, I think we also would have a different discussion. Unfortunately, they don't.

Finally, there is an important, common element the mayor mentioned in a number of cases where he had reformed public services The common element in Mayor Goldsmith's story, whether he contracted or not, was good relations with the employees. We have to be careful in whom we rely on for testimony as to how good relations are.

The acid test of such a relationship is the employer's willingness to bargain, recognize and bargain in good faith with the way that the workers have decided to organize themselves as a collectivity. To raise their collective voice, they may resort to trade unions or to employee merit systems. Freedom includes the freedom to organize oneself and one's peers, and to raise the common interest in dealing with employers.

The common element in the mayor's story was this cooperation, which in some cases has apparently made all the apparatus of competitive bids unnecessary – an afterthought or transaction cost, as economists would say. Such costs could be avoided simply by establishing decent working relations with employees who everyone seems to agree know how to do this work. Of course others agree that the employees in these situations – the front-line people know how to do this work, by and large. When they don't know certain things, they can always hire somebody, just like everyone else, to tell them things they need to know of a technical nature.

If they're given a chance to discuss reorganization or even participation in competitive bidding, I think the testimony that we've heard so far is that they can do well. A crucial thing is that this collective voice has to be genuinely independent and real.

U.S. history confirms this, in the sense that the greatest periods of union advance in the United States in the 20th century were during the world wars. The government realized that it wasn't enough simply to try to deal with workers as individuals. They needed trade unions because trade unions were legitimate reflections of workers' aspirations.

A true independent voice is an indispensable partner to any kind of reorganization, whether it is some kind of restructuring – as was done in Indianapolis with the fleet vehicle maintenance – or through cooperative, but nevertheless competitive bidding processes. You wouldn't ask an employer to be the only witness as to the happiness of their employees.

So it really comes down to the workers having a genuinely independent voice. I think that's an indispensable ingredient to any kind of reorganization of any type that we could touch on today. Thank you.

Chairman Hoekstra. Thank you.

We now go to the little green, yellow, and red lights. Green light means we've got about five minutes. The yellow light means we've got a minute and the red light means we're done. This is for how we control ourselves as members. Thank you all for your testimony.

Mr. Pollard, Ms. Mink and I have had the opportunity to visit the sweatshops in New York where some of the worst abuses of workers is occurring in our country today. At the same time, we have run into organizations such as yours. Have you thought about what might work with governance? I think the European model doesn't work. Are there limitations today as to what you would like to do within ServiceMaster to carry out your vision for the company, but you can't because of the impediments of Federal law?

Mr. Pollard. No, I can't say there are any significant limitations in our ability to accomplish our objectives or to run our business because of Federal law. I did refer to a dilemma that I think any major business has when they face restructuring decisions. I think that how to solve that is not an easy question. But it does need to be studied. I do believe if you spoke with CEO’s from major corporations they would consistently tell you that when facing a restructuring decision, the legal advice is they must treat everybody the same.

If you have other positions in the company or you have other locations for these same people, as a CEO you can't take the risk of trying to move that person in the other position. This is because, even though you pay the same, it might be perceived that the position might be a lesser position. So, if you offer a lesser position to someone in a protective class, you presumptively have violated the law. As a result you don't bother moving the person. You just go through the layoff and take the restructuring charge.

What you are reading today about restructuring and re-engineering is widespread throughout the country. There are people who need to look at this issue. It is just that I don't know how to address it. That is the human decision-making that is occurring. It is a major business decision we are facing. That's a limitation that we face.

I do think we will increasingly be facing issues with respect to some of the archaic standards in the Fair Labor Standards Act with the mobility and flexibility of how people work today. That definitely needs to be addressed.

Chairman Hoekstra. What about the issue of governance? I find this intriguing. I know that the company I used to work for tried increasing employee involvement and ownership for the product. Are you experimenting within ServiceMaster in ways other than employee ownership?

Mr. Pollard. Yes.

Chairman Hoekstra. Improving governance?

Mr. Pollard. We’re experimenting in governance in the sense that we have participation from senior management in board meetings. We have yet to figure out the best way to have entry-level, front-line people participating or understanding those deliberations. That's a goal for us in the future, to have that as a meaningful involvement.

The European model that I said isn't working is that typically there's always two meetings. There's the official meeting for the employee representatives there for all the official action that's taken and then there's the second meeting.

Chairman Hoekstra. Where the decisions are made? That's not a workable model. You’ve got to make this substantive if it's going to work. I was going to say, Mr. McEntee; do you have a response?

Mr. McEntee. No, I think it’s accurate to say that the workers know what is real and what is not real. They know what is blue smoke and mirrors. They know what is substance. They know what is trust. They know what sincerity is. They know as much about the job and the performance and their performance as anyone else. I don't know how to describe or define governance. It’s a partnership.

There are some rather good examples. Saturn, for example, in Tennessee is a true labor management cooperation. The one we have in Indianapolis with the mayor. The one we have in Ohio with the governor. The one we have with the mayor in the city of Philadelphia. They’re all based on trust. They’re all based on labor management relationships. They’re all based on giving the workers real input of substance into the job. Not to say that they're always right. Not to say that they can't be wrong. But having a forum where that can happen, that's a bottom-line to the situation.

If you're looking for a law in our area, in the public sector, we don't have collective bargaining in any number of States. So we don't have labor management participation in those States. We believe that you need a union. We believe that the union provides you the best institutional vehicle for the purpose of labor management cooperation. That it’s hard to achieve it without institutional vehicles that represent the workers.

Chairman Hoekstra. Thank you. Ms. Mink.

Mrs. Mink. Thank you very much. My welcome to all of our panelists today. I apologize for being late, but we had a very important vote concerning my sugar industry, and I’m happy to report that we won.

[Laughter.]

Chairman Hoekstra. We got rid of the subsidy?

Mrs. Mink. No, you didn't.

Chairman Hoekstra. Yes. Oh, sorry.

[Laughter.]

Mrs. Mink. We saved 400,000 jobs in America. It was a very important in my district.

Chairman Hoekstra. Well, congratulations on your win.

Mrs. Mink. Thank you very much. The status of workers is very important to me and so these hearings are important because we’re trying to understand what to expect in the future. My colleague, Mr. Scott, has to leave. He has to go to an important Ethics Committee meeting. So I will defer to him for whatever comments he has to make until he has to leave.

Mr. Scott. Thank you. Mr. Chairman, I think she’s deferring so she’s not taking her time and she’ll get her time.

Chairman Hoekstra. She always outmaneuvers me on this legalistic stuff.

Mr. Scott. Just checking.

Chairman Hoekstra. So I just take her word for it and let her do whatever she wants.

[Laughter.]

Mr. Scott. Thank you. Mr. McEntee, we heard Mr. Goldsmith indicate that in these biddings that sometimes the city workers win, sometimes they lose. What happens to the city workers when they lose the contract?

Mr. McEntee. In Indianapolis, and I guess it’s a lot of the secret to the success. First of all, they’ve actually helped in training the workers to be able to compete, and that’s an important ingredient. The mayor wanted to privatize and contract out the wastewater treatment, which he did. It did not go out for a competitive bid in Indianapolis. But in that process, he worked out through a labor/management relationship that the new folks coming in and performing the service would accept to the greatest degree possible the city employees now performing the job, which they did.

Mr. Scott. Well, did they get paid? When they lost the contract, you said some would take the workers? Would the new employer pay as much as the City was paying?

Mr. McEntee. We had an election and we now represent those workers with the new employer. The contract now meets AFSCME standards as it did before. For the workers that the company did not accept and there were some, they were placed into other jobs in City employment with comparable salaries.

Mr. Scott. The private sector has…

Mr. McEntee. That doesn’t always happen, but it happened in Indianapolis.

Mr. Scott. The private sector has more of an ability to lay people off for short periods of time and then bring them back. Does that happen when you are privatized? Is that a way that the private companies can underbid the city contracts?

Mr. McEntee. It’s a method that they can use. You know, many companies in the private sector obviously have the private margin as the motive for existence. Contrary to my friend here on the left, which I applaud, a social contract in terms of the business community. Chainsaw Al and others don’t operate that way. So that is the method that they use. But some people in the area of privatization merely go in with bids that are low-wage bids or no benefit type bids. This allows them to compete very effectively. We don't think it's right. We don't think it's proper.

Mr. Scott. Do any cities require the bidding to assume a certain wage level so that the bid is on efficiency and not on the cutting wages?

Mr. McEntee. Some do. Some don’t.

Mr. Scott. Have you ever seen private companies do a low-ball contract to get the business and watch a city get out of the business to the point where they’re unable to compete again and then increase the prices?

Mr. McEntee. Of course.

Mr. Scott. That could happen?

Mr. McEntee. Oh, we’ve seen it happen, of course. What we’re prepared to do is provide to the committee any number of areas where that actually happened. Where they come in and do a low-ball bid with the result as you just mentioned.

Mr. Scott. Okay. Mr. Pollard, you had some interesting things to say about the civil rights laws. We’ve seen evidence that discrimination is still rampant in America. How would you improve the enforcement of our civil rights laws?

Mr. Pollard. I think we need to continue to highlight it in a variety of different ways. I can tell you that if my partner was here today, he would explain to you the real-live experiences he has had. The CEO of our company today is a Mexican-American who has risen through the ranks of the system. He would be much better to speak on that issue than I would because of his personal experiences. I will, though, tell you also that what I had mentioned in my testimony is not something that will be resolved in the courts. We have to figure out ways in which we get people talking, where we’re mediating and where in cases where there in fact is discrimination that we are assessing penalties. That the government that passes the legislation has the means to enforce the legislation. We've got to move away from expecting the Federal judges to be personnel directors today. That is, in fact, a significant issue if you look at the calendars of Federal judges today.

Mr. Scott. Well, my time has expired. I think we have to be careful. If you take that away, then you have to have something in its place. I’m not sure…

Mr. Pollard. I wasn’t suggesting taking it away. I was suggesting there's got to be some creative way to get at this.

Mr. Scott. I think we’ve been talking about mediation and some other possibilities, but I think you’re going to have to keep the courts keeping people honest. Thank you.

Chairman Hoekstra. I understand Mr. McEntee has to go.

Mr. McEntee. Yes, Mr. Chairman, if I could be excused?

Chairman Hoekstra. You can be excused, and I would hope that if the panel has any questions, that we submit to you that you be willing to respond to those in writing?

Mr. McEntee. We'd be glad to be of any help. Once again for having us.

Chairman Hoekstra. Thank you very much for being here. Ms. Mink.

Mrs. Mink. Yes, thank you. Sorry that Mr. McEntee had to leave.

I was interested in, and probably will put my questions in writing, determining how many cities and other public entities have had similar experiences as Mayor Goldsmith’s. Because I thought that his observations and comments were very interesting to see how he worked it out. He had an overall principle of wanting to privatize, but, in the end, what he did was work with the union, in his case, to come up with a satisfactory way in which the workers could also participate. The question I really wanted to ask Mr. McEntee, and perhaps Mr. Pollard or others can respond, related to the circumstances that the mayor described where he had a sitting union with whom to work with. Would that outcome have been possible where there was no union?

Mr. Pollard. That would have been…

Mrs. Mink. Who would represent the workers? Who would put in the bid? Who would be the functioning so-called employee participants? I have difficulty in looking at it as a real solution.

Mr. Pollard. Well, Congresswoman, that’s a very valid question. In fact, in certain situations there is no question, but there is a role for union and in fact the union represents groups of employees. We could cite situations here where they don’t effectively represent groups of employees as well. The fact of the matter is there has to be communication and participation between the employees and management or you're going to create an adversary relationship and not have the result. There has to be legislation and review to make sure there are not abuses of the system. We just have to look at the history of our country to know that there are abuses and there can be abuses. I think on the whole issue of privatization, which I didn't really come to testify about today, but our company is involved in the privatization process. Some of the services we offer are services in public schools and other places.

The important thing is to recognize that the openness of either having a situation like Indianapolis or having the alternative of private contractors doing it is positive. Let the city, let the school district, and let even the Federal Government make the decision of what is best as part of serving the citizens and the employees working. The dynamic of having alternatives allows the best decision to be made. So the fact that there’s competition here and that I think is very important in the whole privatization.

Mrs. Mink. My experience in the public sector with which I’ve been involved with most of my career is that where you are dealing with a newly-created function, a newly-created responsibility, where you can start at zero and try to develop a program. Nobody calls that "privatization," if you open that up for private contracts and bids. That’s expected. It is where existing services have been long enduring in the public sector that people feel threatened with loss of jobs and where restructuring of service creates dishevelment of what people expect. Then we get into the discussions of accountability and service and reliability and costs and so forth. So how would you deal with existing situations versus new opportunities for the private sector?

Mr. Pollard. Most of the privatization that we’re involved in today would be existing situations. Public schools, for example, and the maintenance and janitorial areas. Actually, in our program we don’t replace the people. Our contract with the public sector is we offer to bring our management and training expertise to the process with the public employees and not to replace the public employees.

Mrs. Mink. So there’s no disturbance of jobs or lowering or downsizing of…

Mr. Pollard. There are standards of productivity, obviously and improved productivity. But that's self-selecting by the individual. That's right.

Mrs. Mink. Now, when…

Mr. Pollard. Most of our programs are based on managing the employees, not replacing the employees and using training and motivation tools to help those employees be more effective and productive in their work.

Mrs. Mink. I assume you got most of your work opportunities through bids?

Mr. Pollard. Yes, always.

Mrs. Mink. Now did you ever bid against a public employee union that was already in place?

Mr. Pollard. In one or two cases, we have been asked to do that, yes. We haven’t experienced anything like they described here today, which I most interested in. I mean, we’re here to hear innovation. That’s great innovation.

Mrs. Mink. Great.

Mr. Pollard. The city and the union work together. That is a very healthy result, which is great to look at.

Mrs. Mink. Well, my time is up. Do I have a third round?

Chairman Hoekstra. With just the two of us are here, we can have as many rounds and questions as we like.

[Laughter.]

Mr. Pollard, we’re taking a look at the legal framework under which you operate your business today. I think about a social contract and what elements might that include. Participation, for one. I don’t know if you’d include contingent employment guarantees? I don’t know whether you were Chainsaw Al or Hacksaw Bill? I don't know whether you've gone through something like that or not?

Mr. Pollard. Mr. Chairman, first of all, I think we ought to recognize for the public record that Chainsaw Al lost his job.

Chairman Hoekstra. I noticed that, yes.

[Laughter.]

It might also include health benefits and family medical leave. Now the question gets to be how much of that becomes the legal framework under which you are then required to operate. Rather than going to your employees and coming up with some of these solutions that would best work for your company, you end up going to the rule books and the regulations questioning how Washington interprets our actions. How much of a social contract becomes a matter of law and how much of it becomes an area of flexibility that you actually operate in?

Mr. Pollard. Of course, that obviously has been the tension and will continue to be the tension. It certainly doesn’t help defining the social contract to pass a law with ambiguous definitions as to who it includes. The whole issue of whether the person is included or whether it's taking advantage is critical. Administering the family leave act and a variety of the health concerns is very confusing. The definitions of who is a disabled person are very confusing and ambiguous. From a political standpoint, I can understand how the definition is broad and ambiguous. That's how you get your consensus. But when it’s dumped on us to administer, then it becomes increasingly difficult.

Chairman Hoekstra. Excuse me.

Mr. Pollard. As I’ve said, there is a fine balance between government and business in the marketplace. There needs to be standards and restrictions or people can be taken advantage of. We have a history of where that has happened. But there doesn't have to be the presumption either that businesses automatically do that.

Chairman Hoekstra. Yes. I'm wondering how you sort it out. Doesn’t France have a high rate of unemployment? As a result, didn’t France decide to reduce the workweek to 34 hours as a way dealing with the unemployment situation? How do you sort through a decision like that and determine that maybe this is an area where it’s just going too far?

Mr. Pollard. To the extent that government imposes nonproductive standards in producing the product or producing the service, government can reach a point where it is no longer competitive. That, I’m afraid is a reality. Of course, the issue that often is discussed is the minimum wage issue. There’s a role for minimum wage. There's a role for government setting the minimum wage. Government could set the minimum wage in such a way that business would be non-competitive.

Chairman Hoekstra. Yes.

Mr. Pollard. So I’m not giving you any simple answers.

Chairman Hoekstra. I know there aren’t any simple answers. I was hoping you would. Have you ever laid-off employees?

Mr. Pollard. Yes, we have laid off employees. In fact, it’s the question that I ask when I interview someone who says they have management experience. The simple question is have you ever fired anybody. The person’s response to that question tells me whether that person is going to be hired, at least by me, at ServiceMaster.

Chairman Hoekstra. Yes.

Mr. Pollard. If they say they have fired a lot of people, that tells me something about them. If they express some pain in that whole process, that tells me also something about them. If they’ve never fired anyone, then they haven’t managed.

Chairman Hoekstra. Firing is different, then, because of economic factors?

Mr. Pollard. Layoffs, termination, firing. I’m lumping them into one broad category.

Chairman Hoekstra. So ServiceMaster at that particular point and time may have gone through its own downsizing?

Mr. Pollard. We’ve gone through restructuring with changes. 75 percent of what we’re doing today, we weren’t doing 10 years ago. I can tell you some of the things we were doing were irrelevant to serve the marketplace. If people weren’t ready to be trained, we had to lay them off. The most painful thing we’ve faced is having to lay-off more people than we have actually required. We could find other places for them, but the job initially might be perceived as a lesser job.

Chairman Hoekstra. All right.

Mr. Pollard. That’s the dilemma.

Chairman Hoekstra. Right. That’s not a violation of what you perceive as your social contract. Your employees were guaranteed employment or not?

Mr. Pollard. Part of our social contract is to be a market vehicle.

Chairman Hoekstra. Pardon?

Mr. Pollard. A big part of my social contract is to be a market vehicle. I’m owned by shareholders.

Chairman Hoekstra. Yes.

Mr. Pollard. That is all part of the social contract.

Chairman Hoekstra. Okay.

Mr. Pollard. I think any company that offers lifetime employment is unrealistic. It is not an economic reality. It is not even an economic reality in the Federal Government. Two years ago, I was asked to speak to 5,000 Federal employees here in Washington when one-third of them had received pink slips as part of the re-engineering of government. I had a least 50 of them come up to me and tell me in effect: I came to work for the Federal Government because I thought I could always work here. The fact of the matter is that is not reality.

Chairman Hoekstra. Thank you. Ms. Mink.

Mrs. Mink. Thank you very much. I guess we have the bells and will have to run to the floor to vote, but I wanted to ask at least one question to Mr. Sawicky.

We have heard about some examples of what is going on today with respect to employment situations. But what we’re trying to do in this committee is to look into the future. What role do you think there is for labor/management working it out for the market share, for the job opportunity that both Mr. McEntee and Mayor Goldsmith discussed. Is this a viable, realistic concept that we’re dealing with that has practical implications for…

Mr. Sawicky. Absolutely.

Mrs. Mink. …the majority of circumstances?

Mr. Sawicky. I think it’s going to be a basic question that’s going to be debated for years. The key qualification to this, though, is when you’re talking about labor/management cooperation, we have to be careful not to be deluded by the routine, or more or less routine, ways that management deals with workers as individuals. That's a normal feature of business organization. There's nothing new about that in and of itself. That's not cooperation.

To me, the right way to think about this is that in any business firm, you'd have basically two countries or two nations. You have the management and you have the workers. To have an amicable, productive relationship, both countries need their own government, in effect, their own resources. Of course, they need to deal with each other in a respectful manner. Imagine yourselves in the House having to deal with the Senate that thought uniformly different from yourself, and had the Senate set all the rules for how you would organize yourselves, what resources you had access to, et cetera. There's clearly an imbalance in a business firm or in a nonprofit for that matter.

There has to be balance in the sense that workers need to be able to exercise their voice collectively. So if labor/management cooperation recognizes that and I disagree just a little bit with Mr. Pollard that this does not work in Europe. It does work to a great extent. From the example you cited, it sounded like the problem with not working was on the management side, not the workers' side. Namely, they sequestered themselves to do the real deal outside the official meetings.

If labor-management cooperation entails recognition of the collective voice of workers, then it will mean something. If it's some kind of warmed-over version of routine labor-management relations, where workers are atomized individuals and there's only the barest pretense at some kind of counterpart to management, representing workers, then it will come to nothing.

Again, I go back to the example of the U.S. Government in World Wars I and II when it was recognized that for labor to be an effective partner in the war effort, when unity was more important than ever, it was necessary to recognize unrecognized groups of workers as legitimate, independent, free trade unions. Again, those two periods were periods of great advance for the union movement.

If we are going to advance in terms of allowing companies to restructure, to be competitive, allowing the economy to grow, that process has to continue. It's in a state of low ebb now because there are attempts to explicitly destroy trade unions or to cripple them and to prevent workers from exercising their collective voice.

If we go down that road then there's clearly a lot of impetus in that direction coming from some employers at the least, perhaps not including Mr. Pollard, then we are going to have problems later on. I would urge everybody on the committee to think about the description of the firm Mr. Pollard put forward. Apparently, a firm can do these things, which are traditional demands of the trade unions and of workers, and make money and thrive. There is a need for some flexibility without question, but apparently it can do these things and move forward.

The vehicle for that to continue in other companies I think is this partnership where both partners have the means to cooperate effectively and that means in a collective bargaining context with trade unions as well as management. Thank you.

Chairman Hoekstra. Thanks. We have held 26 roundtables around the country in order to be open to a wide range of solutions. We will see that in the second panel today how companies and workers have done it. Some have outperformed in organized situations and some in unorganized situations. Flexibility exists and I am happy to say it works.

We do have the bells. We’ll dimiss this panel, and we will move to the second panel after the second vote. Thank you very much.

Well, all right. I'll talk to Bobby when we get back.

[Recess.]

Thanks to this panel for being so patient, and let me introduce the second panel.

We’ll begin with Denny Harris. Mr. Harris is the first member of our second panel. He is the Executive Director of the Small Office Home Office Association in Reston, Virginia. Welcome.

We also have Mr. Robert Rzonca, Senior Vice President and Chief Personnel Officer accompanied by Mr. Scott Shortridge, who is the Maintenance Operator, both of IPSCO Inc. of Comanche, Iowa. Welcome to both of you.

Next we will hear from Mr. David Libby, who is the Human Resources Manager at Champion Paper, and Mr. Thomas Dougherty, who is the President of the United Paperworkers International Union, Local 274, both of Sartell, Minnesota.

And did you both fly Northwest in today? You have my sympathy.

[Laughter.]

Excuse me. Northwest is not on the panel today, are they? No. We have Mr. James Dowdall, who is the Vice President of Labor Relations from Bell Atlantic, who is here with Mr. Kenneth Canfield, who is the Telecommunications Technical Associate, participant in the Next Step Program of Bell Atlantic, both of New York.

And then finally we have Ms. Elizabeth Jarrett, who is a Principal, and Mr. Leroy Barr, who is a Math Teacher and chapter leader for the United Federation of Teachers, both of PS 154 in Manhattan. PS 154 is also known as the Harriet Tubman Learning Center of Central Harlem in New York City.

Welcome to this panel, and we will begin with Mr. Harris.

Mr. Harris. Thank you, Mr. Chairman.

Chairman Hoekstra. We are going to use the lights for you guys. All right?

Mr. Harris. I was tempted to demonstrate what we had learned and submit my report, as you did your remarks at the beginning, in the interest of time.

The title, "The American Worker at the Crossroads," describes far more than merely a project. It describes real people with practical concerns that face very real crossroads, and the stakes for many of them are unnecessarily high. The explosive growth of the small office and home office workforce, which was once described as a phenomenon, is a well-established fact today. We might argue over the exact number, but everyone would agree that it is a significant number. As many as 40 million people, with a higher estimates, work in their home or in an independent office without any physical signs of corporate support. And that number is likely to continue growing, driven by factors like continuing corporate downsizing and fueled by technology advances.

This element of the American economy is significant, not only because of its size, but because of its impact as well. The small business sector, of which self-employed people constitute the majority, is the segment most responsible for job creation.

The men and women who have chosen this route have done so knowing that it's an independent course and knowing that there are risks involved. But they also did so anticipating that in terms of public policy they would face a reasonably level playing field as far as their corporate counterparts go. Unfortunately, on several points of the public policy that is not the case.

Most small office and home office or home-based offices begin with a minimum of cash and a minimum of capital. The Small Business Administration reports that two out of three of those have less than $5,000 as they start up. From day one these entrepreneurs are making day-to-day decisions based on almost a hierarchy of needs.

Too many of them are running bare in terms of things like health insurance, in many cases because it boiled down to a choice between the monthly health insurance premium and having a second computer or a better, perhaps even color, printer. Even when they reach the stage where there is enough, they grow to the point where they're successful enough to say, "I can afford what I really need, which is some health insurance for myself and my family."' There’s likely not quite enough cash coming in to justify something as important as disability insurance.

And as far as setting aside anything for retirement, "Well, that’s something we’ll think about when the business really turns the corner and takes off."

What does that have to do with your hearing and the subject of them today? Simply this: These independent and highly-motivated workers are not asking anyone to provide those benefits for them, but they do ask you not to make it more difficult for them, on their own, to be able to afford them.

What can you do? The Small Office Home Office Association suggests four things they would like the committee to consider. First, move up the schedule for 100 percent deductibility for health insurance premiums from the year 2007. You took a big step last year, but large corporations can deduct 100 percent of their share of employee health care costs while the self-employed person at this time can deduct only 40 percent.

It’s no surprise then that as many as 5 million self-employed individuals have no health care coverage. It’s a choice they’re making every day. The fact that you’ve adopted the 100 percent level as a target is commendable, but waiting almost 10 years to make it a reality continues to penalize the small office and the home office worker.

Second, make disability insurance deductible. Today it is deductible only for a C corporation. Most small businesses start out as sole proprietorships and they don’t qualify as a result for a deduction that's on the books for those who can use it. Without such coverage for a small business, a disability of any kind can spell the end of that business.

Third, picking up on some of the things that Mr. Pollard was saying earlier in terms of definition. It’s important to clarify the independent contractor definition. As small offices and home offices grow, they normally use independent contractors until they are confident they are at the point where it would justify and where they could afford hiring full-time people. When the IRS reclassifies such contractors as employers, the small business suddenly, and often after the fact, finds that they are responsible for payroll taxes that were not withheld and often are subject to penalties and interests that simply compound the error.

In 1995 the President convened a Small Business White House Conference, and 2,000 of those delegates told the President and Congress that their No. 1 priority was establishing clarification on that point, so that they had more of a sense of certainty and more of a sense of predictability.

Several workable options were presented last year which were blocked. In some cases labor’s interests blocked them and while there are legitimate labor concerns, there is no reason that those can’t be addressed. The clarification can be accomplished so that the small and home office businesses can know and predict what's going to happen and what they can expect from the IRS and State tax agencies.

The fourth and last point is to make the entire employer half of the contribution to Social Security deductible. Currently half of it is. Or allow the self-employed to use this amount to fund a retirement account. While most people appreciate the size and the significance of this sector of the work force, few have recognized that it is an aging work force.

It includes a significant number of people who are aging and who are doing so largely without the benefit of the kind of insurance and pension programs that are available through corporations. Your policies can either encourage or serve to discourage people from quality planning for retirement in this vital sector of the work force. Actions on these issues will eliminate problems that are at the crossroads that these workers face today, and particularly in terms of the last point, eliminate problems at a crossroad that is not too far in the distance.

Thank you.

Chairman Hoekstra. Thank you.

Mr. Rzonca and Mr. Shortridge.

Mr. Rzonca. Thank you. Scott and I have made this a joint presentation. I will be making the statement. Scott, then, will get his chance to answer questions if you so choose, sir.

Scott and I work for a company called IPSCO, which is steel pipe-producing company with about 2,000 employees. We have facilities located in 5 States and in 4 provinces in Canada. Our new mini-mill, where Scott works, produces about a million to a million and a half tons of plate and coils per year at less than half a man-hour per ton.

Our work force there is made of employees who for the most part have associate degrees or bachelors degrees. The uniqueness of this work force is that there’s only one level between them and the President or Vice President level, and that’s the one superintendent.

I would like to make reference to the comments made by the earlier panel about how important it is to not only have employee involvement, but also to use the mind of our employees. While there is such an importance, there is a real lack of interest from people who make decisions under our Labor Management Relations Act as to whether or not people who do not belong to the union should have this same right to participate in the decision-making process.

We at IPSCO would like to suggest that one of the areas you may want to look at to improve the plight of the non-union worker is to support and pass the H.R. 634, the Team Act. This act will give these individuals the same right to participate as a non-union employee, especially when you consider the fact that 85 to 90 percent of our work force is not organized.

We’d also echo one of the earlier comments at the earlier panel that the old, outdated Fair Labor Standards Act, which, as you know, is 60 years old now, needs to be reviewed. We have a situation at our facility where our employees choose to work 12 hour schedules. That provides them with more days off, gives them more ease in coming and going, and it gives them more time with their family.

In order to do that we may have someone work less than 80 hours in a 2-week period and still have to pay the penalty of overtime. Today we may be able to do that. Tomorrow for competitive reasons we may not be able to afford that penalty, and that may be the first cost-cutting exercise that we go through, which then again starts to engender some problems. We are suggesting to you that today’s work force wants to work. It is a 21^st century work force. They want to work a 21^st century schedule.

Also, we would like to suggest to you, sir, that you should look into the profit sharing aspects of the legislation that currently is found on the books. More precisely, a problem area that has come up for us is in the 401(K) plan. We try to share our profits with our employees, only to be limited by Section 415, the 25 percent limitation. This Section says that workers who are earning less than $30,000 a year are not allowed to share profits to the same extent as someone like myself, who makes a few dollars more.

Lastly, a lot of our problems stem from the fact that if you were to look at the labor legislation that governs our workforce today, it’s about so big. If you look at the regulations that governs those regulations, I doubt you could put it in this room.

That’s the biggest problem we have right now. We ask you that you review or develop a process for controlling the proliferation of administrative law. Administrative law is imposed by the regulators, so that someone can put these people to task that we start to work together and that there’s a friendly working between government and the employer, rather than this kind of adversary role that seems to proliferate the relationship.

I apologize. I tried to make sure I hit the right button to get through by the red light flash. I would ask you, sir, that you take some time or that the committee spend some time going over our more detailed presentation. Thank you.

Chairman Hoekstra. For all the panel members, your entire testimony will be placed into the record. I can guarantee that as we write the final report and consider the direction that we as a subcommittee will make, your testimony will be reviewed and studied both by members and by staff. I think that's true for both the majority and the minority.

All right. Mr. Dougherty and Mr. Libby.

Mr. Dougherty. Thank you, Chairman Hoekstra and the committee, for having us here to speak today. I am excited to be here. We’re not going to read the testimony that we have sent for you to read in print. I do want to hit some of the highlights following along with it, and I am going to start out a little bit on a personal note.

My own work history, I’ve been with Champion International for the last 16 years. I am an industrial maintenance mechanic, repair the machinery in the plant. Previous to this I lived in Iowa, and I was in the meat packing industry for several years. I saw very, very adversarial relationships where workers were treated pretty much like robots.

I went then to the Agricultural Equipment. They came under foreign competition, cut their work forces in half in the early 1980's, and I have wandered around Iowa and Illinois and finally settled down with Champion in Sartell, Minnesota. In 1991 the paper industry began to come under increasing foreign competition, which we had not experienced, and it continues to this day. At that point union and management recognized that we had to change, and we recognized that we needed to empower our work force.

We recognized that we needed to get everybody’s ideas and get them involved in running the business. And the company actually approached the union in this case and said, "We want your help. We need you to get involved. We’d like you to become a part of the business."

The first thing we did was form the Joint Leadership Team. The Joint Leadership Team consists of the middle manager, his staff management, and the Union Executive Board. We went out, and we did a lot of benchmarking to find out what the best in the world were doing, much like your committee has been doing, and we came up with a lot of different things that we needed to do.

The first thing we did was develop a partnership philosophy and called it the Joint Statement of Commitment and Cooperation. It has served us so well. It is an empowerment philosophy and a philosophy of how we are going to work together as partners, from the front office to the shop floor. It served us so well that in 1995 we incorporated it as part of our labor agreement so that the philosophy would never be lost and would be binding on both parties, no matter whether union or management leadership changed at the mill.

The Joint Leadership Team leads at Sartell. We develop and lead the efforts to improve our business, our social and our work processes. We also jointly hired together for all salaried and hourly positions our mill’s 5-year business plan, which is called Targeting, and we go to our corporate headquarters every year, and we present it together, management and union. The Joint Leadership Team has fostered such a cooperative culture in our mill. The mutual respect that has come about because of that and the win-win solutions to problems that have come about have made a tremendous difference in our work force, and we’ve really changed.

We also had to figure out a way to reward people for their innovation, for their ideas and for their willingness to work with us. So in 1995 we implemented a gain-sharing program to help recognize people and to help up their compensation for producing both productivity gains and cost savings.

Key learning from our early benchmarking visits was that you have to build in quality. You can’t expect it. One of the first things that we did was to get rid of quality control inspectors. We spent a year and a half training our whole work force. That’s 650 people trained in Total Quality tools and concepts over a year and a half period in groups of 20 to 25. We trained them in some of the following tools: statistical process control, supplier quality assurance, Pareto charting, flowcharting, and problem-solving processes. We then went out and started a supplier quality assurance program with our suppliers which both hourly and management people are involved in. We developed operating specifications for each major process in our mill so we could institute statistical process control.

We then developed standard operating procedures for critical operations; and then, because of that, the workers began to find more things that needed to be looked at and measured. Since then the company has installed new technology, more online measuring devices to give operators more up-to-date information that’s coming more continuously.

I want to turn it over to Dave Libby at this time.

Mr. Libby. Thanks, Tom. Changing the workplace to the degree we have has required millions of dollars to be spent on training and development of our employees. We believe that’s an investment that has paid big dividends in annual operating profits and performance.

The cornerstones of our training efforts are to competency-based technical training, interpersonal skill building, and skills assessment processes. Today the Sartell Mill invests $3,000 per employee per year, and that equates to about a little over 100 hours of training per year per employee.

Another key initiative started by our Joint Leadership Team in the early 1990’s was an effort called Redesign. The Redesign effort was a structured approach to identifying performance gaps and creating joint solutions to implement. The JLT identified several criteria: one, that redesigns must be jointly sponsored, developed and implemented; they must involve those who do the work; they must examine and improve both the technical side and the social side of the business; and they must install self-directed work teams.

Throughout the process ideas were solicited from all employees and large group meetings. Redesigns at the Sartell Mill have saved and/or generated millions of dollars of revenue while also improving the social needs of our employees.

As we began these initiatives, one of the key gaps identified was the lack of communication. Several methods, more fully described in the written testimony, have been established, have improved the mill performance. We’ve seen tremendous improvement in the financial and operating performance of our facility in the past few years. These are due to improvements and implementation of innovative work practices and a focus on the needs of our employees.

We view our employees as a human asset, as opposed to a fixed cost; and that has provided us a new paradigm for future investments. It is this new perspective that has resulted in several safety, quality and production records to be achieved. It’s these results to us that have proven that value of the union and management partnership.

Our changes over the past eight years were the main reason we recently received the coveted Shingo Prize for excellence in manufacturing. We were the first to receive this prize. It is this partnership that will ensure our future success in the global economy. Lately we have a philosophical slogan that kind of describes our current reality, and that is "Change is not necessary because survival is not mandatory." It is this attitude that will enable our employees to contribute to the future success of the company and therefore our own job security.

It has been a pleasure testifying and we’ll wait to answer questions.

Chairman Hoekstra. Thank you. Mr. Dowdall and Mr. Canfield.

Mr. Dowdall. My name is Jim Dowdall and I am the Vice President of Labor Relations for Bell Atlantic. I have been in labor-management relationships for about 40 years, 32 with AT&T, and the remaining 8 with NYNEX and then Bell Atlantic. Bell Atlantic is the second-largest telecommunications company in the United States, offering voice, data, wireless, and video network services.

We have $29 billion of operating revenue. We have 141,000 employees, 95,000 of which are represented by the IBW or the CWA. As my union friends like to remind me often, 7 out of 10 of our employees have a shop steward. What we’d like to talk to you about today is first of all, our vision of the 21^st century work force is a work force that is competent, that is versatile and that is motivated. We’d like to talk about the competency piece, and one of the major elements of it is a program that we have which we call Next Step.

Next Step is a joint labor-management effort, which we got into and really came out of collective bargaining in April of 1994. Essentially what it amounts to, it’s a program that leads to a 2-year associate degree. The degrees are given by 25 community colleges. In New York they’re given by SUNYNET and CUNY Network. In New England it’s given by a combination of various community colleges.

The degree is accredited in each of these community colleges, and it now is offered in many of them to general admission. One of the unique features of it is that the folks that have become students in the program go to school one full day a week, fully paid.

So your five-day schedule, one day you go to the community college. It takes four years to complete the program. It’s a two year’s associate degree. It’s over eight semesters. It is designed by a combination of the community colleges, our education and training folks, and the union folks, CWA and IBW. And it’s geared exclusively to telecommunications. It’s an associate degree in Applied Science. It’s based on telecommunications.

How did this come about? It came about in 1994, essentially from leadership. We have a unique situation coming from the direction of the Communication Workers of America President, Morton Barr. Morty has been in trade unions for many, many years and in that time has acquired two degrees. The prior chairman of NYNEX and now the CEO of the new Bell Atlantic is Ivan Seidenburg. Ivan started as a telephone cable splicer and through evening courses has two degrees. So you start at the root. The very top of this enterprise, coupled with Jack Barry of the IVW, with a strong interest on how do we make it available to people so they can grow and we as a business can grow.

What are the business reasons for us to represent what approaches about $50,000 per employee over the four-year period? The reasons for such cost is counting the time that is spent off the job as well as the academic cost, and the use of computers that are given to employees.

We are in a high-tech business. To give an example, training is not new to us. We have spent for many years from $125 to $150 million a year in training and raising employee skills. So it’s something that we know from experience that pays dividends to us.

We look at our competitors as they’re been three differentiated: technology, capital and people. The folks with whom we compete have deep pockets. The capital is there. The technology is there. So the differential for us has to be the folks. We look at it as an investment. We invest $2 billion a year in capital every year. So when you look at investing and growing the skills of these folks, it really pales by comparison, and it is an easy decision for us to make.

It pays off big time in productivity because it’s education as opposed to training. So if we take these folks and they work through the school program, and they understand the technical theory, and we continually have waves of new technology, because they understand the theory the training time from the point that they're exposed to it to when they can apply it on their job is shortened dramatically; and all of that pays off in terms of productivity and increased dollars.

As I mentioned, a little about the folks in the program, when we opened up the program in 1994 we wondered if there would be an interest. We had 10,000 folks call with an interest. We enrolled 1,500. There are about 1,100 in the program. They are given, as I mentioned, in 25 community colleges. The first group of 93 students will graduate this December. Of this group whose average age is 50-plus and their average years of service with us is 20 to 25 fives years, 25 percent of all those enrolled are on the Dean’s List. If you look at the honor roll and Dean’s List combined, you have 60 percent. One sterling example that we have in the quality of the student is my friend Ken Canfield who is enrolled in a college in Poughkeepsie, New York.

Chairman Hoekstra. Mr. Canfield.

Mr. Canfield. Thank you very much, Jim. That was a lot more than I expected.

[Laughter.]

Good afternoon, Mr. Chairman, and members. As you probably know, I have never testified before in any congressional hearings, so I am extremely nervous. So please forgive me if I blunder through my testimony.

My name is Kenneth Canfield. I have been employed by Bell Atlantic for approximately 30 years. I have been a member of Local No. 1110 CWA, Communications Workers of America, housed in Poughkeepsie, New York. Currently I am in my seventh semester of an eight-semester associates program at Duchess Community College in Poughkeepsie, New York. My duties and daily assignments involve displacing and maintaining copper and fiber cables, from switches in the offices to the end user, incorporated with elaborate test sets to test our highly technical circuits.

What are the merits of the program? The Next Step program involves enhancing our scholastic abilities, while at the same time, concentrating on establishing what is known as the Umbrella Competencies. These competencies are teamwork, quality, leadership, problem-solving, peer tutoring, and critical thinking.

The academic curriculum itself involves many core-based college courses, such as 2 English courses, 2 technical math courses, 1 physics course, 2 digital electronics courses, 2 linear electronics courses, 1 computer applications class, 4 telecommunications classes, and 1 social sciences which deals in labor relations.

All of this coupled together will broaden our responsibilities and afford us a clearer vision centered on customer focus and satisfaction. That is what the program is geared to. This program has given us that opportunity, as members of organized labor, to excel.

My personal goals happen to run parallel with the program and the union corporate vision of maintain a high level of integrity and pride in our endeavors and be able to provide the right solutions for a highly technological communications business. The thrust of the program is truly geared toward projecting a strong team image.

In conclusion, this program is a win-win situation for both management and union. I would like to quote from Ivan Seidenburg, the CEO of Bell Atlantic in a book, "The Codes We Work By." Under the subcategory of Under Continuous Learning, "We embrace chance positively and use communications and training to meet the evolving requirements of the markets we serve," and to add to that, "in meeting the challenges of future communications needs, it is incumbent upon us to make education in the workplace paramount to all the workers." Thank you.

Chairman Hoekstra. Thank you very much.

Mr. Barr or Elizabeth. I am not sure who is going first. You are going first? Great. Welcome.

Ms. Jarrett. Good afternoon. It’s a pleasure to be here to give testimony this afternoon, and unlike the other panelists, our business is school, our employees are teachers and administrators, and our clients are students.

I’d just like to give a brief history about us. I am Elizabeth Jarrett. I am currently serving as the principal of an elementary school in central Harlem.

We have approximately 625 students, ranging from pre-K to grade 5; 4 years old to 10 and 11 years old. Our students, 95 percent of them are Title I eligible. They come from a housing project across the street. Most of our children come from that housing project. Some come from shelters. 85 percent of our student population are African-Americans, 12 percent Hispanic.

90 percent of our teachers have their Masters degrees. 45 percent of our teachers have been teaching for more than five years. P.S. 154, as it was formally called, which we now call it the Harriet Tubman Learning Center, was a school that had been identified by the State Education Department as a school that was failing.

P.S. 154 is a school that had declining scores in third grade reading, and over the years children were not performing. Parents were displeased with what was going on in the school. The school in essence became what was called a dumping ground. Other schools who wanted to rid of children that they deemed problem children were placed in that school. The work environment appeared to be hostile, was stigmatized as being hostile. The leadership in the building, both union and administrative – I speak to both of them as leadership because I think both factors are leaders and they have to be strong – the leadership in that building had been deemed hostile and week. So, in order for things to work, they were already at a disadvantage because both leaders could not see eye to eye.

In 1995 the school went through a redesign process, and some of the other panelists talked about redesign. Mr. Barr and I happened to be on the committee, and basically we had several universities and business communities that helped facilitate the redesign process. We were asked to envision what the ideal school would look like. Parents, teachers, and the union all talked; having a discussion, engaged in that discussion, and talked about what the ideal school would be like. The result is the Harriet Tubman Learning Center.

We had great flexibility with the union because, as part of the change process, we were all change agents. We talked and ironed out how things would be to make that community, that workplace, good for our clients because in order to make any kind of positive change we had to change the workplace. We had to make it one where collaboration and cooperation were one and the same. The teachers, parents, and students had to feel that this is the place they wanted to be, and I think we have worked towards that. In 1995 the reading scores was 34 percent of the students were reading on grade level. In 1996 both leaders were elected. Mr. Barr was elected as the Chapter Chairperson, representing the teachers, and I was appointed as the principal. In 1996 we had gains. Reading scores went up to 48 percent.

Last year, 1997, reading scores continued to grow to 68 percent, and there were several things that spoke to those gains. The workplace environment severely went though a dramatic change. Teachers, parents and students were all involved in this process. There was a commitment that everyone gave to the process, and professional development was quite key, and the UST supported that effort to make sure that some of the innovations and the dreams that we had for our ideal school were realized.

I see that the red light is on, and I am going to let my partner speak. I must say ours is a very unusual relationship because most people talk about the management and labor not getting along, but this is a good marriage. It really is because we are on the same page.

We know who our clients are. We know what’s important for them, and we speak to that. We know that we are there to support children so we sit together and talk things out. We don’t always agree, but we come to some compromise because we know that the workplace, in order for us to be productive and effective we need to have a common ground, and I think we have done that. So, labor and management does work. I think we have moved to the 21^st century already.

Chairman Hoekstra. Great. Thank you. Mr. Barr.

Mr. Barr. Good afternoon. It has been said that insanity is described as doing the same thing and expecting different outcomes. One has also said that if you change your beliefs, your paradigm will shift, your actions will be different, and your results will be different as well.

I am LeRoy T. Barr, and I am a Math instructional specialist and Chapter leader for the United Federation of Teachers at P.S. 154, a school in Manhattan known as the Harriet Tubman Learning Center. P.S. 154 was put onto the New York State SURR list in 1989 because of declining reading scores.

The school remained on this list until it came under the redesign process during the 1995-1996 school year. I sat on the redesign team which was composed of educators, parents, local university personnel, and administrators with an expertise in education. We were allowed to envision what an ideal school would look like and how it would operate. Before we could address the needs of our students, we first had to perform a self diagnostic, analyzing the strengths and the needs of the school itself.

As we worked on our school plan, we knew that an important element to the success of P.S. 154 was providing professional development for our staff. Each year, there were a considerable number of new teachers joining our staff that needed to be trained. The senior teachers also benefited from learning new and improved techniques on the delivery of instruction and classroom management.

An important element in our professional development was the Teacher Center placed in our school. This allowed educators to get assistance in a non-threatening manner. The Teacher Center Facilitator is seen as a vital member of the staff and not as part of administration. This allowed the teachers, new and experienced, to reveal their needs without the fear of reprisals. The Teacher Center, a collaboration between the UFT and the Board of Education, have provided resources and insights into developing thematic, integrated lesson plans that present the maximum opportunity for teachers to perfect their skills and children to comprehend information.

One of the innovations of the Chancellor’s District and the UFT, our union, was to have other staff developers in our school, such as a Literacy Instructional Specialist, a Technology Instructional Specialist, and a Math Instructional Specialist. Each staff developer was responsible for working with the educators in need of some type of assistance.

The intervention could have consisted of performing model lessons, team teaching, or helping a teacher evaluate what worked well or what could have worked better in a lesson that was presented. Our rule of thumb is, "assessment drives instruction." We help the teacher properly assess their students so that they will know whether to provide enrichment or remediation. These elements helped teachers to begin to raise the standards for themselves and thereby raise standards for their children.

The staff developers worked in collaboration with each other to better meet the needs of the individual teacher. The result of this constant intervention and support was higher test scores for the children. In addition, in order for us to effectively educate our children, administration, teachers, and parents had to work closely together. P.S. 154 entered the Chancellor’s District in the summer of 1996 in order to avert the State of New York Education Department taking over the school itself and revoking its registration. I was elected Chapter Leader and Ms. Jarrett was appointed the principal at this same time. Along with the PA President, we all sat and agreed we would do all in our power to begin the work for the good of children. Our battle cry became, "Children first."

I am going to read something quickly to you. I know that time is up, but this is important, and it’s entitled, "The Joint Intentions and Commitment." This comes straight out the contract between the Board of Education and the UFT: "Enhance student achievement based upon high standards and expectations must be the driving force behind every activity of New York City Public Schools. To accomplish this, we must reinvent schools so that decisions may be shared by those closest to students, including parents, teachers and other stakeholders.

"Layers of bureaucratic impediments must be peeled away so that flexibility, creativity, entrepreneurship, trust and risk-taking become the new reality of our schools. Before the millennium the factory model of schools of the 1900’s must make way for the child sent to school of the next century. To this end the union and the Board of Education mutually agree to join together with other partners in the redesign and improvement of our schools, including closing those that have failed and supporting their restructuring.

"We must challenge ourselves each day to improve student learning, based upon academic vigor, new found flexibility, meaningful assessment, and true accountability. Roles and responsibilities of parents, staff, and other partners must be defined. The standards to which we hold our students should never be lower than those we hold for our children.

"To accomplish this, we must focus both on the depth and breadth of each proposed instructional and operational change, each designed to support the children, their teachers, whom we expect to meet this rigorous standards."

That’s just a small quote from that piece, but it speaks to the fact that union and the Board must begin to work together so that we can to common grounds. We have realized at P.S. 154 that if we don’t do this together, it’s not going to happen for our children. In the last two or three years our scores has risen tremendously, and we are proud of those children. We are proud of our teachers.

We have the same kids since 1995 that has not changed. We have about 60 percent of the original staff from 1995 that has not changed. What has changed is the belief that we can do better, and those beliefs have begun to help us shift in our thinking. Thank you.

Chairman Hoekstra. Thank you very much. Thanks to all the panelists. Scott, just a question for you.

Mr. Shortridge. Yes, sir.

Chairman Hoekstra. What did you say? Sir? No. Oh, yes, sir. Have you been in the military?

Mr. Shortridge. No. I have not.

Chairman Hoekstra. Oh, all right. Well trained at home though.

Mr. Shortridge. Yes.

Chairman Hoekstra. Well, thank you. I am not sure I deserve that, but I was wondering, if cooperation was the primary motive? If you didn’t cooperate or if you didn’t improve, P.S. 154 would be closed? Did you face something like that at IPSCO? Where were you five or seven years ago in terms of management and employees? What really was the catalyst for change?

Mr. Shortridge. Again, it’s an honor to be here, Mr. Chairman.

Chairman Hoekstra. Thank you.

Mr. Shortridge. I guess mine is a little bit different. I worked in Canada at IPSCO’s other mini-mill in Canada. It was a union shop. It was a good union, and it worked really hard. However, it came to the fact where I was young. It was my way of going through college. It really prevented me from moving up. It gave me a good job. It gave me a good wage. However, it really stuck me. I was 311th on the seniority list. I’ve made the remark before that I got a layoff notice every two weeks.

So, when the opportunity came for me to move to the new mill, I jumped. It was a mill that was not going to be a union mill, or the idea was not to be union, and it was going to be run by teams. I had the good fortune of becoming a team leader, so in that sense I guess it’s really been the freedom to do a lot more things.

Chairman Hoekstra. It’s now a union? Are you a union or not?

Mr. Shortridge. No, we are non-union.

As of this time we are non-union. The problem we have again is with the rule of the TMAC, of simply being able to negotiate, of having the problem of not being able to go to management and say, "These are the problems."

Bob raised the problem about the 12-hour shift. That became a huge issue with us. We started off only working eight hours just for startup, simply because there was so many hours put in to starting this mill up. It was a huge, huge effort, but after it ramped-up and once we got started up, we really wanted to go to 12 hours.

Getting everybody together, trying to get this towards management, there was freedom to discuss it, but it really hard to just put it all together to get it forward, and we were really lucky in that it actually worked out. It took a long time. So, I guess for me, for the committee, it would be great that if they can really examine that law.

I know everybody on the panel has discussed the worker, and it’s ambiguous sometimes, but I am the worker. I am 26 years old. I am a steel worker. I make a good wage, and I have a family, and this legislation does affect me and my family. Some of the laws do need to be changed. It would be for the betterment of the worker and myself. In that sense, I leave it in your hands.

Chairman Hoekstra. All right, thanks. Mr. Dougherty or Mr. Libby, was there a specific catalyst that changed the relationship at the company? What was the catalyst to bring about what I think you describe as pretty unique type situation.

Mr. Dougherty. Actually, going back, we had a fairly good but traditional relationship, and then in the mid-1980’s there was a lot of concessionary bargaining, and our whole industry wasn’t just within Champion. We had a labor dispute in 1989-1990 and I think basically what happened at the end of that labor dispute everybody looked at each other and said, "There has to be a better way." That really was the catalyst.

Chairman Hoekstra. With what, believing there needs to be a better way, because you want to work better or because you may lose your jobs?

Mr. Dougherty. No, we were not threatened with losing our jobs at all. We believe that this idea of being adversaries all the time and not working together was not going to help us in the long run. At that particular time we were still making a profit. It was a profitable mill. We could see that the industry was going this way.

I ran for union office during that particular time when we were in the labor dispute because of the fact that I had seen what had happened in the meat packing industry. I did not want to see it repeated. I did not believe that we could keep going the way we were going.

I also recognized foreign competition was here and here to stay. We could see it on the horizon in the paper industry, and we felt we had to deal with it. We couldn’t keep going. Too many people had their eyes closed to what was really going on all around them.

Chairman Hoekstra. How about over at Bell South? Was it Bell South?

Mr. Dowdall. Bell Atlantic.

Chairman Hoekstra. Bell Atlantic.

Mr. Dowdall. Be careful now. Bell Atlantic.

Chairman Hoekstra. Hey, Bell South, Bell Atlantic.

Mr. Dowdall. Keep making those calls from Washington D.C. We can use the revenue.

Chairman Hoekstra. All right.

[Laughter.]

Mr. Dowdall. At any rate, what happened in our case was we had got into the process reengineering thing, and we took some time before we went into collective bargaining with the unions to try to identify what does the 21^st century work force look like.

In addition to something like Next Step, we agreed to no layoffs. We have no layoff, no downgrade, and no forced transfers from your hometown. But, it has been coupled with it an attractive pension package that deals with when surpluses develop that people can volunteer. So, the route for leaving the company will be a volunteer on a pension basis as opposed to that. So that all together was put together as one package.

The piece of the pension and the no layoff was the motivated piece of competency, versatility and motivation. So that’s how we got to where we were. The other part of it is that we’ve always been in a very good business. In the history of the New York company in New England we’ve never laid anybody off.

So, as a result the folks that come to work with us come with a no guarantee expectation where most of their working life will be spent with the telephone company. So, we experience very little attrition and what have you. So, this came to us as a traumatic work where we were predicting that we would lose 16,000 to 17,000 people. Now how do you do that and balance the people needs and the business needs at the same time?

Chairman Hoekstra. Can the relationship that you have at the Harriet Tubman Learning Center survive a crisis? Scores next year come, and you are 20 percent down. You’re upward trend goes [making a sound to indicate spiraling down]. Can it withstand the crisis?

Mr. Barr. One of the things…

Ms. Jarrett. Most definitely.

Mr. Barr. Definitely so. Let me start there.

Mr. Jarrett. Most definitely. One of the things that we have going on in this workplace that had not been present prior to our being there was dialogue and communication, and there’s ongoing communication with all members of the school community, parents, teachers. The union leader and I have meetings, and there are meetings with all of us at once, and we have discussions going.

We’re all in classrooms so we don’t wait for the last minute to say, "Oh, what’s going to happen?" There is constant communication. So we try to keep our finger on the pulse of what is going on in that building on a daily basis.

As a support to the teacher, Mr. Barr, as a staff developer, he sees the teacher who needs some kinds of assistance. It’s not a matter of reporting to me, but we have that openness where provide support or help where it’s necessary. Teachers help each other.

Another thing that has developed out of this is that there is a commitment that the teachers have just readily accepted. You can go into the building at 7 o’clock on any given evening, and there are teachers there working together. No one rushes out at 3 o’clock. They sit and they talk. They plan, and say, "this worked in my class. Maybe you should try it."

Teachers have asked, "I’d like to visit Ms. so-and-so or Mr. so-and-so to observe." So, there’s the openness where people do not feel threatened, and we have the dialogue. I think the conversation helps. So, I don't see a crisis. If a crisis occurs, we just say, "Stop. Talk," It’s not going to destroy the relationship.

Mr. Barr. You also find that there is a constant assessment that’s always taking place. So, it’s not that we would see in May that our scores were dropped. We would know in December, about three to four to five months before that point, and maybe things aren’t quite on track in terms of where it should it be. So, if you are constantly assessing where you are at that point in time, you can adjust, modify, change, and try to correct that before it becomes a problem, and your scores go down.

We have a lot of folks in the building who are constantly providing support for our teachers, students, and parents so that children are always on task and doing what it is that they need to be doing to ensure their scores will go up.

Ms. Jarrett. I’d also like to add a point to that. Basically this spring we were doing an assessment drives instruction. We truly believe that, and that’s understood by all members of that school community. Third grade had been the targeted grade, and even though we were no longer identified, we met the benchmarks. We were no longer stigmatized, but third grade had been our targeted grade.

I had a conversation with the third teachers. I said, "Are there children in your class that need a little massage in terms of academic support?" I met with all the teachers, and they gave the list of names. What I did, all the specialist teachers met with all the teachers. I said, "This is the situation. What can we do? How can we support these children?"

I said, "I would like for us to provide additional tutoring services. It could be before school. It could be after school. Let's see what we can do together." And as I said to the teachers, "I am not asking you to do anything that I am not willing to do myself because I will take a group also."

The overwhelming response from all of the teachers in the building: "We’re in this together. I will give you my lunch period two days a week." Some said, "I will give you three o'clock," and we just rallied together because, again, we are there to support children.

Chairman Hoekstra. Right. Thank you. Mr. Harris. Thank you for your testimony on the work force that is working in non-traditional places and the small entrepreneurs.

Given my background, coming out of the office furniture industry, I should have been familiar with one of the major threats to the office furniture industry – the home office. What we have learned there is that office furniture was fully tax deductible as a business expense. They’re willing to buy the kinds of stuff I used to help make. But when you go to the home, it’s not tax deductible. People can’t take advantage of that liks a large corporation can. All of a sudden you find out they’re buying something else.

Mr. Dougherty. Or it’s the dining room table.

Chairman Hoekstra. Or it’s the dining room table, and it's got different aesthetics, and it's got different performance requirements and all of those type and multiple functions.

I appreciate you highlighting the needs of this new emerging workforce. It’s one of the things that I think we need to take a look at as we take a look at government policy. What I think we’re finding is that we used to move workers to work and with technology and all of those types of things now, it’s much more possible to move work to the workers.

I appreciate you identifying your priorities for us, and if you’ve got more, we’re willing to take a look at them, but it's good to get that input and get on the record. So, I appreciate that.

I am not going to hold you any longer. You guys have been a very patient group, having been here for well over close to four hours this afternoon. Thank you very much. You have wonderful success stories, talking about how management and employees have decided in your mutual benefit to work together, recognizing that it’s to the benefit of the employees. It’s to the benefit of the customers. That’s why I brought up Northwest.

[Laughter.]

Only because that has not been to the benefit of the customers, in my experience. It’s to the benefit of the management and the shareholders. I asked the question on a crisis because I think in a number of your industries, steel, for instance, the price of steel in the last 13 or 15 years has stayed absolutely constant. So, even in the last year you’ve faced dumping from Asia and Russia that in an environment like that you’ve come up with ways to compete, and the challenges are going to continue.

I don't know about in the products that you make whether you face the same kinds of challenges, and in the telecommunications you’ve got the rapid technological change, and you’ve probably got competitors popping up on a monthly basis, and you face all kinds of different challenges.

We know what the challenges are in education since we’ve also been doing an education at a crossroads project. All of you are wonderful examples of a shared commitment and a shared vision where everyone wins.

We’re not worried about you guys, okay. We want you to be successful. We’re worried about where these kinds of relationships don’t exist, where management doesn’t have a positive view of the workers. It doesn’t have the kind of view that perhaps Mr. Pollard has of their workers, and we’re also worried about unions and workers who don’t perhaps have the same kind of willingness to come together and to form new relationships.

It is hard for us to write a set of rules or regulations and say, "Okay, if we follow this, we know we’ve got a good management group." "If we do this, we know we got a good group of workers." "If you don’t meet these criteria, you’re bad people." Mr. Dougherty, do you have a suggestion?

Mr. Dougherty. Can I make one?

Chairman Hoekstra. Yes.

Mr. Dougherty. There is a common thread in a lot of what you heard today. In the first panel also. One of the things that I have thought about a lot is that I don’t think we get workers out of school – be it high school, college, community college, or business schools – that have training in things like quality principles and working together as teams.

We certainly could do more with our educational system, even down at the high school level by preparing people to work together when they go into the workplace. I think that would help a lot.

Chairman Hoekstra. Yes. That is interesting, because I made a note here, listening to their testimony and thinking because in parts of our education we’ve got such a difficulty now giving young people the basic skills of reading, writing and math.

Another note, we have to focus on teaching reading, writing and math and somewhere else along the line – whether it’s in a community college or in the higher educational years – you focus on the teamwork and the sharing and those kinds of things.

Somehow we have to have both sets of skills coming together. It’s going to be a process. We don’t have the answers.

Now with the AFL-CIO, where we have begun a dialogue is on how to change this framework in which you are required to operate. We want to design a framework so that it encourages cooperation and creates the kind of win-win that each of you are finding I think in the experiences that you have.

Because we know that to get to where we need to be, we’re going to have to have workers agreeing to it, whether they’re organized or not organized. We’ve got management to agree that this new framework, and then we've got and recognize that these workers that don't want to be employees and they don't want to be management. They just want to be their own boss, that somehow we've got factor all into the equation.

This is a great challenge. Thank you very much for your testimony and help us move forward. Hopefully and some of you have invited me to your facilities, and I've spent a lot of days on the road in the last year and a half, and it is not in the circular file, it is still in the file. We are going to continue this process of having hearings in Washington and doing field visits, but it just may not all happen this year.

But, thank you very much for your help.

Ms. Jarrett. Mr. Chairman, if you are ever in New York, you may stop by the Harriet Tubman Learning Center.

Chairman Hoekstra. I have been to a couple of schools in New York, and I would look forward to putting that on my list as well. Thank you very much, and the committee will be adjourned.

[Whereupon, at 5:53 p.m., the committee adjourned subject to the call of the Chair.]