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A labor perspective on fair pay: High-Performance work at Corning, Inc.

Article  in  Employee Responsibilities and Rights Journal · March 1996

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 1

A Labor Perspective on Fair Pay: High-Performance

Work at Corning, Inc.
The final publication is available at Springer via http://dx.doi.org/10.1007/BF02622441 .

Carol Kates (1) and Timothy J. Tuttle (2)

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1) Department of Philosophy, Ithaca College, Ithaca, New York 14850.

2) National Representative, American Flint Glass Workers Union, AFL-CIO, Corning, New York 14830.
Former Shop Steward, Executive Board member, President of AFGWU Local 1000, Corrning, New
York. (Organizational affiliation given for identification purposes only. The opinions exressed in this
article are solely those of the authors and in no manner, whether written or implied, represent a view
that is endorsed or sanctioned by the AFGWU.)

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INTRODUCTION

Competitiveness through workplace teamwork has become a mantra for a growing number of industrial
relations experts. In the business press, the focus is on winners of the Baldridge, Deming, and New York State
Excelsior awards, illustrating the techniques of "high-performance" work and the considerable gain to be had
from quality improvements. Management wants to reduce the cost of manufacturing, increase quality, improve
customer service, and above all increase earnings by capturing a larger share of the global market. Labor unions,
on the other hand, may accept a partnership agreement to improve their memberships' quality of work life. This
includes job security, opportunity for personal growth within a company, a voice in the daily operations of the
business, and increased earnings.
Although both labor and management stand to benefit from high-performance work systems, such
partnerships cannot flourish unless both sides agree that some division of increased earnings is fair. Partnership
demands mutual trust between management and labor. The delicate relationships between unions and companies
may become strained over "the division of the pie," once labor has taken on a greater responsibilify for the long-
term financial health of a business. Thus, workers may believe they should be paid at management rates for
performing the tasks of the middle managers who have been eliminated as a result of employee involvement.
Management may insist that the elimination of salaried employees is a cost reduction that should improve
company earnings. This article will argue that a conflict over fair compensation for high-performance work
could become a major barrier to the realization of the full potential for mutual gain in new work relationships.
Academic research on the subject of such putatively ethical questions as whether organizational rewards
are "fair" or distributionally just has generally taken a management perspective. For management, the central
issue in compensation is whether a pay policy enhances employee contributions to a firm (Gerhart & Bretz,
1992). Thus, considerations of fair pay for high-performance work may be reduced to questions about which
employee perceptions of fairness facilitate employee commitment or mutual monitoring of work performance,
thus supporting an indirect "control system" within firms (Sweeney & McFarlin, 1993; Welbourne, Balkin, &
Gomez-Mejia, 1993; Welbourne, 1994). It goes without saying that control remains firmly in the hands of
managers, who are normally charged with the goal of maximizing company earnings.
However, support for workplace partnership has also come from many representatives and supporters
of labor who believe in the prospect of a more egalitarian industrial system (Appelbaum & Batt, 1994). The
chance that such a prospect will materialize arguably depends on the ability of labor to articulate and project a
set of demands that new work and pay structures meet a requirement of "social efficiency," or efficiency in
promoting democratic social values (Kates, 1994). On its face, socially efficient firms would be obligated to
continuously look for ways to redesign jobs in order to maximize the skill, creativity, and responsibility of
employees, while minimizing productivity and pay differences among all employees within a firm. From this
perspective, pay would be considered fair when it represented a maximum, rather than a minimum, return for all
of the contributions that an employee might make to a business.
One way of measuring the distance between real world and socially efficient firms is to focus on the
highly regarded partnership agreement between Corning, Inc. and the American Flint Glass Workers Union (the
"Flints"). Corning provides an excellent case study illustrating the need for some new thinking about fair pay
for high-performance work and partnership.
 2

THE EVOLUTION OF PARTNERSHIP AT CORNING

The partnership between Coming and the Flints was negotiated in the 1989 agreement, "A Partnership
in the Workplace," which formally sanctioned the employee involvement process. But that process had started
much earlier, as management and labor attempted to improve quality and earnings by modifying some job
and pay structures, at times without the use of benchmarks in the company's job evaluation (JE) system. (3)
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3) Bargaining unit jobs are rated through a 27-grade system composed of 11 job factors defining skill (44%), responsibility (31%), working
condition (12%), and effort (13%). Seventy-two benchmark jobs, most of which were defined in the mid-1960s, are used in evaluations.
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In 1984, the company began to implement job combinations, initially without the participation of the
union, at the Erwin Automotive plant in the Corning Valley. The new, grade 13 job of Extrusion Operator
combined four jobs ranging from grade 7 to 12. As a result, the lowest-paid worker, a grade 7 Quality Control
person, received a six-grade increase, bringing hourly pay up about 10%.
The job combination at Erwin initiated a series of similar combinations throughout the corporation in
every one of its major business sectors. Since 1989, there have been approximately 28 job combinations, which
have improved pay for about one-third of the Flint workers in the Corning Valley. Additional job redesigns
have increased pay for about three-quarters of the local union members.
In 1989, Corning transferred what had been an experimental department in the (renamed) Erwin
Manufacturing Complex to a newly constructed Specialty Cellular Ceramics (SCC) plant, built to manufacture
molten metal filters. The decision to build a new factory in the Corning Valley, something few employees had
predicted, was a major breakthrough in labor relations, as the Flints and management came to an agreement about
restrictive work rules which had been in place for nearly 50 years.
The landmark SCC agreement eliminated many of the old work practices and created an environment
that embraced the concept of employee involvement and partnership. It also included new job classifications and
rates set outside of the job evaluation system. Three jobs, Ceramic Associate, Mechanical Technician, and
Electrical Technician, were the nucleus of the autonomous work force. The basic production job, Ceramic
Associate, was redesigned and upgraded from a grade 6 job at Erwin to eventually equal grade 16 for a worker at
the top of a four-level skill matrix in the new environment at SCC. This was done without the use of benchmarks.
The pay increase, which incorporated a shift differential and a skill adjustment, (4) is just under 24% in 1993
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4) At Corning Valley plants, jobs at or above grade 16, and all apprenticable crafts, get an extra $0.40
per hour.
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rates. In addition to the new approach for establishing hourly pay rates, workers received their pay as a weekly
salary. Flextime, and salary continuation for workers on compensation and disability were also part of the
negotiated agreement. The new work structure made the SCC plant profitable even in its first year of operation.
Production at SCC, which originally occupied only one third of the available space, expanded by 1994 to
fill the entire building, opening new jobs at the factory and increasing the local union's membership. In late 1994
the company announced a further $11 million expansion at SCC, to be completed in early 1996. That investment
is the company's largest in the Corning area in recent years.
About the same time SCC was becoming a reality, the Fallbrook plant, which had manufactured glass
tubing in the Corning Valley for over 40 years, was slated to be shut down. Before this was to happen. Corning
and the Flints agreed to establish a joint team with the objective of cutting $4 million from the plant's operating
costs. That team, called the Navigators, met for 16 hours a week over a nine-month period, and produced a plan
for the radical redesign of the entire plant. The plan, which was implemented, called for job combinations,
consolidations of departments, and increases in hourly pay. For example, a grade 14 job of Forming Specialist
was created by combining four jobs, the highest of which was a grade 8. The pay increase between grade 8 and 14
was about 12%. As a result of the redesign, the plant saw an 18% productivity gain, the number of jobs at that
facility increased, and 1991 eamings also increased by approximately $10 million.
In 1993 the Big Flats facility, which manufactures laboratory glass in the Corning Valley, went through a
major redesign in response to a decade of tremendous pressure from low-cost foreign competition. The changes,
which were recommended by a joint union-management committee, included the combination of 56 active job
classifications into seven. After the redesign, over 90% of the work force got an hourly pay increase. One job
category, Hand Skill Operators, received a four-level skill matrix beginning at grade 9 and progressing to grade
24. In 1993, that represented a base pay increase of just under 29%. Another job redesign at the Erwin
Manufacturing Complex in 1993 combined 21 jobs into just two.
 3

Under the terms of the 1989 partnership agreement, elements of the advanced form of employee
participation implemented at SCC were to be spread throughout Corning. At SCC, autonomous, self-directed
teams of multiskilled workers effectively run the plant without managerial shift supervision. Under this model, as
teams mature they are to be "empowered" to do such things as deal directly with customers and suppliers, (5)
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5) Corning management is aware that direct interaction between plants and customers opens the prospect
of eliminating sales personnel (Teresko, 1991, p. 46).
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review performance information and take corrective action, track costs, profits and losses, and run production
schedules.
The results of partnership for Corning have been entirely positive: cost reductions from eliminating
layers of management, dramatic quality improvements, and increased productivity (Fuld, 1992; McConville,
1993; Appelbaum & Batt, 1994). Led by CEO James Houghton, Corning managers have embraced the idea of
teamwork and employee "empowerment" as the key to reaching the company's goal of "total customer
satisfaction" (Shrednick, Shutt, & Weiss, 1992; Luther, 1992/3).
However, despite all the improvements made over the last decade, if Corning employees were asked if
they were making enough money for their participation in the new workplace, the answer would probably be a
resounding no. Thus, for example. Local 1000 members in the Corning Valley initially tumed down a three year
contract in 1990 largely because they felt they deserved a higher hourly wage for their increased participation in
high-performance work. The same sentiment surfaced again in 1994, when members of the Flints Local 1022 at
Corning's Blacksburg, Virginia plant twice turned down a new contract proposal. Both contracts were eventually
ratified without any changes in the company's offer, but the membership has put increasing pressure on union
leadership to win a significant improvement both in pay and job securify in return for high-performance work.
Thus, the question of what constitutes fair compensation looms over the future of the partnership.

JOB EVALUATION AND FLEXIBLE PAY AT CORNING

The Corning job evduation system is viewed by many in the union as an obstacle to partnership and as a
source of inequity in pay. The system, using benchmarks that generally reflect 1950s technology, is increasingly
out of touch with the value of multiskilled jobs in a high-performance environment. Job combinations at Corning
since 1984 have used the JE system in a selective and, many would say, arbitrary fashion and, both at SCC and at
a comparable high-perfonnance greenfield plant in Blacksburg, Virginia, rates were set outside of the system.
Each time jobs are redesigned, the system moves farther from its benchmarks, and some resentment is created
among workers who must learn several new jobs for unequal pay increments. Moreover, an intricate
superstructure of skill adjustments and matrices, on top of a pay line that changes its slope at grade 12 (i.e.,
paying more for job points above grade 11), makes it impossible to believe in the consistency of the JE system.
Why, then, has it not been modified?
From the union perspective, there is some hesitation to renegotiate job rates at a national level, given
inconsistencies among Corning plants both in the nature of the work environment and in local market rates. It is
possible that some jobs would lose value in a new JE system. At the same time, however, there is a growing
sentiment that JE is a device that limits the gains workers can expect as they move into new work systems.
Precisely because the rating system uses old benchmarks, job consolidations require a kind of ad hoc
negotiation, with outcomes reflecting the balance of power in the bargaining relationship. Before Local 1000
members in the Corning Valley received a 4% pay increase in 1993, retroactive to November 30,1992, the
average hourly wage rate in 1992 was $11.30 (Monthly Labor Review, April, 1993). There are voices within
Corning management that argue that profits could increase if jobs were shifted to lower-cost areas. Thus, reduced
labor costs at greenfield sites in right-to-work states or maquiladoras along the Rio Grande are a lure to the
company, and that reality presents a major challenge to the union when competing for new business or bargaining
for higher wages in retum for agreements that workers will accept additional responsibility.
The wage agreement at SCC illustrates the union's bargaining dilemma. The pay for those Ceramic
Associates who reach the top of their skill matrix is equivalent to a grade 16 rate added to a shift differential and
the standard skill adjustment. The pay increase between the old, grade 6 job of Molten Metal Filter Operator at
Erwin and the expanded Ceramic Associate job at SCC is almost 24%. But even with that improvement, the top
SCC rate in 1992 was still less than 20% above the 1992 average hourly wage rate. Furthermore, it is troubling to
many in the union that pay for the most skilled manufacturing workers at a highly profitable plant cited as a model
"future workplace" is not even in the upper third of the contractual pay scale. In short, though an upgrade from
grade 6 to the equivalent of grade 16 may appear quite large, it can be argued that the amount of pay for such a
 4

dramatic increase in job responsibilities would not have been acceptable to the union members, had they been
able to bargain on a more even playing field.
As Corning and the Flints have moved in the direction of greater employee involvement, stresses in the
JE system have become more severe. Since 1989, workers have increasingly been asked to enter areas that for
years had been considered management turf. High-performance work systems require teams of multiskilled
workers with the ability to take on such job requirements as customer interfacing, process improvement, conflict
resolution, technical and nontechnical problem-solving, communications, scheduling, and meeting facilitation.
These functions have never been addressed by JE. In an effort to remedy this problem, the Company and the
AFGWU are negotiating a supplemental set of job evaluation points for skills required when jobs are redesigned
for a high-performance environment. Two job factors, Problem Solving and Job Knowledge, are being proposed
to measure and reward the area of team skills without the use or identification of benchmark jobs.
Corning has proposed three degrees of business and social skills, which could add a total of 60-100
points at the highest degree. To illustrate what the proposal could mean to an SCC Ceramic Associate, assuming a
rating of grade 16 for the most highly skilled individual and a maximum 100-point increase for team functions,
the company's proposal could possibly add three pay grades, or about a 4% pay increase. Since the point spread
between grades increases from 20 points at the bottom to 50 at the top, it is increasingly difficult to reach a higher
grade by adding points as one moves up the job ladder. So, for example, a grade 25 gaffer might only get a two-
grade increase, approximately a 2.5% pay increase, for team functions.
The attempt to graft points for new team functions onto a system designed for traditional, individual jobs
illustrates how the job evaluation system preserves a hierarchical pay structure even as more egalitarian job
structures are being created. The pay structure is predicated on the notion of a labor-management hierarchy,
which precludes the possibility of paying production workers at management rates even when they are given the
job of "autonomously" running plant operations. And the factor weights in the JE system impose prior limits on
the number of points that can be given for new job duties, no matter how much knowledge or responsibility those
may require. The job evaluation system thus allows the company to shift higher-paid job factors onto lower-paid
jobs, in effect downgrading the functions of traditional middle management and redefining the tasks of managers.
Of course the job evaluation standard could be equalized by calculating the value of the team functions
as they were paid at managerial rates, and then translating that into appropriate point and dollar values for team
positions. Or workers could simply receive a "management fee" for the portion of time spent exercising the new
powers. But when the union proposed a study that would try to quantify the dollar value of the savings that
accrued from shifting management work to the bargaining unit and subsequently laying off or reassigning middle
managers, savings that the union believes could run as high as $280 million annually once the entire company
shifts to a participative system, Corning management ignored the request.
It is not clear whether the company's proposal to pay for high-performance functions will be accepted by
the union. There are unresolved issues concerning the reduction of all expanded team responsibilities to the two
factors of problem solving and job knowledge. For example, some jobs may "top out" on point values under the
factor weighting system, and there is no credit in the proposal for the work of supervising plant personnel when
that responsibility is shifted to teams. More generally, there is a widespread perception within the union that the
company's proposal does not provide fair compensation for partnership.
Corning and the AFGWU have also negotiated a goal-sharing plan, which pays an annual bonus ranging
from zero to 10% of the previous year's gross pay (minus vacation) for hours worked. Seventy-five percent of the
bonus is based on achieving plant- or unit-wide performance goals. Twenty-five percent is based on a blended
measure of return on equity for corporate and products company earnings. The company uses a system of "key
results indicators" to measure quality improvements which are used to set the business and gain-sharing goals
(Luther, 1992/93).
Although goalsharing increases workers' total earnings and rewards productivity, it remains tied to the JE
system, since the bonus is a percent of base pay. Thus, questions about the fairness of that base carry over to goal
sharing. Moreover, the gain-sharing plan has a cap of 10% for exceeding all goals by 200%,(6) which restricts
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6) Five percent is assumed to be a reasonable expectation. In 1993, the average bonus was 6%. The SCC bonus was 5.4%, despite a major
increase in sales volume.
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the opportunities workers have to receive a share of increased earnings that is proportional to their contribution.
What, then, would constitute a "fair" return to labor under a more egalitarian model of partnership?

WHAT IS FAIR?
 5

In his classic study. Contested Terrain, Richard Edwards (1979) described a system of "bureaucratic
control" through which large firms used job categories, job evaluation hierarchies, promotion procedures, and
other "company rules and policies" to control work and to persuade individual workers to identify with the goals
of the firm. Bureaucratic control rewards behaviors that facilitate the firm's control, and thus it intensifies work.
Typically, workers in low-level jobs are rewarded for a sustained propensity to follow rules, while those in
midlevel jobs are rewarded for consistently getting the job done even when the rules need to be bent. Employees
in upper-level jobs are rewarded for loyal, committed, self-directed active promotion of company goals. Edwards
suggests that bureaucratic control weakens the solidarity of workers, and thus undermines the possibility of
autonomous decision making and workplace democracy.
Many firms that are now seeking partnership with their workers may be searching for new "control
systems" designed to engage the loyalty and commitment of the entire work force without offering the rewards
traditionally given to justify that expectation. Employee effort is elicited through a combination of economic
pressure (especially the threat of plant closings), fiexible pay schemes, peer pressure from team members, and
various rhetorical and behavioral strategies intended to break down the "perception" of hierarchy and
authoritarian power. At the same time, bureaucratic control is maintained under a strict hierarchy of decision-
making authority. One element in the hierarchy, the traditional gradations in job values and pay, plays a key role
in justifying the expectation that workers will take on expanded responsibilities without receiving management
pay.
If fairness is to be understood as a value rather than a perception, and if it is defined in terms of a
democratic, that is, egalitarian, model of social relations, then "fair pay" would refiect an effort to maximize the
possibilities for employee contributions and to minimize the pay hierarchy. A "socially efficient" company would
enlist the trust and commitment of its work force by dismantling authoritarian control systems and negotiating in
good faith to create a partnership with a goal of minimizing job and pay inequality throughout the firm.
On its face, the 1989 Corning/AFGWU agreement supports an egalitarian model of partnership. That
agreement states that "human values and ethics are absolutely essential to [the] mutual effort to improve the
quality of work life for all employees and promote a true partnership." And one of the "essential values" that the
agreement lists is "encouragement for individual creativity and participation to maximize the human potential,"
language that echoes the 1988 SCC agreement's intent to allow individuals "to develop their skill, knowledge, and
capabilities to the fullest extent possible." If the traditional hierarchy embedded in the old JE system stands in the
path of that goal, is there an alternative model of fair pay which would advance workplace partnership?
One could begin with the idea of a management fee for team business and interpersonal functions, to
mitigate, though not end, the inequality between management and labor. Beyond that step, a standard of "social
efficiency" might be translated into negotiations to reduce the 27-grade JE hierarchy to, for example, three
job classes: entiy level jobs (such as cleaners, inspector/operators, utilities, and laborers), manufacturing jobs, and
skilled craft jobs, with apprenticeships paid at a separate rate. Negotiated base rates, which could include a skill
matrix, would take account of job knowledge, responsibility, and working conditions outside of a high-
performance team environment. A second, negotiated component of wages would pay an equal dollar amount for
all jobs in a high-performance team. Finally, a third pay component would include some negotiated gain-
sharing/profit-sharing plan.
The basic idea underlying the pay proposal is to translate statements about "maximizing human
potential" into a flexible plan to facilitate the periodic redesign and upgrading of jobs as needed by the business,
while minimizing the job and pay hierarchy, which has been a source of increasing conflict and unhappiness. The
task for management is to implement the theory of maximizing potential by structuring work so the jobs are worth
the money.
There may be some limits on what can be done to upgrade or promote teamwork for entry level jobs, but
there are also possible trade-offs that might be considered equitable. For example, it might be possible for the
company to hire unionized part-time or temporary workers, or to contract out work to unionized or worker-owned
enterprises, if those jobs were replaced by higher-level positions in the bargaining unit. And some workers might
choose a phased transition to retirement by trading higher pay for a lower-stress work environment.(7)
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7) Senior workers often bid for the jobs of cleaner and laborer, as a substitute for more demanding and
stressful production jobs and swing shifts.
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It might also be possible to negotiate business-level agreements within the various enterprises of the
corporation, which would allow managers in less profitable, start-up businesses to bid for workers at rates below
those negotiated for their job class and skill level, by offering stock options or other inducements.
With respect to the flexible pay component, there is no obvious reason other than cost-saving for a 10%
 6

bonus cap. A gain-sharing component could be some percentage of the increased value produced at unit level,
equally divided among all the workers in that unit. Berniker (1993) has proposed an innovative plan for
sharing such a sum, which, he argues, would create job security, capital formation, enhanced social roles for
workers, higher productivity, and a "new work ethic."
Using an anthropological perspective on the social function of moral exchanges in building cooperative
relationships, Berniker suggests that gains be divided into four parts: bonuses, profits, a capital investment fund,
and a serial investment fund. The capital fund would be jointly controlled by the work team and management,
to support the "future viability of the workplace," that is, for investments in training or other resources at the plant
level. In return for the "gift" of free capital, the firm would be obligated to maintain employment or provide
severance pay (Berniker, 1993, p. 166). The social investment fund would be controlled by teams, for allocations
to improve their community. Team members would increase their power and status as citizens and develop a
socially oriented work ethic by seeing a direct link between their own superproductivity and improved
educational, health, and other community services.
Berniker's suggestions are consistent with steps Corning has already taken to create a pool of money for
employee training and to invest in the load community to improve its quality of life and attract employees to the
area. The difference is that workers themselves would be given some control over (and credit for) those
investments. In that respect, the proposal is a step in the direction of workplace democracy.
The firm's obligation to provide employment could be met in some instances by supporting
entrepreneurial opportunities for workers. For example, in 1993 Corning closed its Fabrication Shop, claiming it
was not competitive and that Corning did not want to be in the construction business. About 30 workere were then
redistributed among the other Corning facilities. They were all highly skilled trades people who had demonstrated
their eagerness to operate under a new team structure, taking the initiative in eliminating the jurisdictional lines
that made other trades groups slow and ineffective, and gaining a reputation throughout the corporation for the
quality and speed of their work. But the Company dissolved the shop because, given company overhead costs, the
shop was too expensive.
A more creative alternative might have been for the company and possibly the local union to provide
some seed money to develop a profitable business separate from Corning Inc. That business could in tum have
supplied additional employment and tax revenue for the community.
A final element of fairness that is essential to a labor-management partnership is recognition of an
employee union in new plants, joint ventures, or subsidiaries. Workers have a right to create an autonomous union
that will protect their interests in a cooperative arrangement. Without the collective voice, and degree of power,
which a strong union provides, workers lack the means to win binding commitments to fair compensation and to
improvements in the quality of work life. A company that refuses to share power with its union, or threatens to
transfer work to nonunion shops, cannot win the trust, and thus, the best efforts, of its workers.
When management takes a hard line about pay, trying to reduce costs at the expense of workers, the
possibility of high-performance work is undermined. That realization was reflected in a 1993 survey of industrial
relations practitioners by the Cornell University Center for Advanced Human Resource Studies. In the words
of one analyst, the survey revealed a "fundamental quandary: the need to enhance the contribution of employees
on the one hand coupled with a need to control costs, especially labor costs, on the other" (Dyer, 1993, p. 29).
The resolution of that conflict might be found in the new kind of "ethical partnership" that Corning and
the Flints have been negotiating. But the partnership is incomplete. What is needed is a new pay structure that
would give both labor and management an incentive to improve their business and to make each job as
valuable to the company as possible. The concept of fair pay as a maximum rather than a minimum retum for
participation would seem to provide that incentive.

POSTSCRIPT

The authors would be remiss not to acknowledge the fact that the American Flint Glass Workers Union,
through the diligent efforts and tremendous courage of its leaders and members, has blazed a new path in labor-
management relationships, which points to a "new American workplace." The union's insightful and progressive
approach has become a model that, despite some areas of opportunity, has greatly improved the worklife of its
members and the financial stability of the businesses that employ them.
At the same time, it must be noted that the progress made thus far has resulted from a joint effort, and
thus would not have been possible without the support and enlightened leadership of Corning, Inc.
 7

ACKNOWLEDGMENT

The authors wish to thank Nancy L. Brown for her comments.

NOTE ADDED IN PROOF

Since 1995 there are signs that financial pressures may be undermining the company's commitment to the
Partnership Process.

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