Cube Dwellers Flex Their Muscle
By Eric Hellweg

(Business 2.0) – At first glance, the numbers don't look good for organized labor. In the 1960s, unions represented a third of U.S. workers. Today total involvement is about 17 million out of a workforce of 142 million. Finally, this summer, the Teamsters and the Service Employees International Union, led by Andy Stern, voted to split from the AFL-CIO. Many saw the rift as another nail in organized labor's coffin. But if all goes according to Stern's plan, July 2005 may be remembered as the beginning of a 21st-century revolution in worker organization. Watch out, management.

The SEIU's Stern understands growth. Under his stewardship the union has grown from 900,000 members in 1996 to 1.8 million today. Among the sectors he's targeting for future growth: the knowledge worker, an employee class that has previously resisted organization. In America's office parks and cubicle farms, Stern sees fertile ground for recruitment, and macroeconomic trends suggest he may be right.

Knowledge workers--white-collar employees such as designers, marketers, scientists, and engineers--make up 30 percent of all U.S. workers and receive 50 percent of U.S. wages. For all their heft, however, these workers rarely organize. Most say they find unions irrelevant and overly political. Yet a number of demographic trends that have benefited unions in the past--huge retirement waves, low unemployment, shrinkage in the talent pool for critical jobs--are converging. "There's no shortage of issues for unions to organize around in high-tech--job insecurity, the threat of outsourcing," says Kent Wong, director of the UCLA Center for Labor and Employment. "It's not an issue of whether there'd be responsiveness."

As that anxiety rises, ironically, management will begin to discover the limits of outsourcing. In the downturn of the early 2000s, turning rote programming and service jobs over to lower-cost nations was hailed as a major cost-saving innovation. But the bottom line has not lived up to the hype. Only 35 percent of firms surveyed by Forrester Research in 2004 had seen the kinds of cost savings that they expected from outsourcing. And 13 percent of firms surveyed were already planning to bring their IT operations back to American shores in 2005.

Meanwhile, the U.S. talent pool is growing shallower. The nation has fallen to 16th in the world in the percentage of students who graduate from high school. A 2005 study by the Business-Higher Education Forum (BHEF) found that to remain competitive, U.S. high schools will have to hire almost 300,000 new science and math teachers by 2008. Add in the baby-boomer retirement wave that will crest in three years and you have a powerful demographic time bomb waiting to explode.

Already businesses are struggling to address the issue. "By 2008 there are going to be 6 million unanswered jobs that require some technical background," says Bill Swanson, chairman and CEO of Raytheon, who coauthored the BHEF report. "That to me is a business imperative."

OK, so Stern has demographics and fear on his side. But in order to reach knowledge workers, he's also willing to rethink what it means to be a member of a labor organization. He knows he would have to use a different approach than the SEIU uses with janitorial workers, one of its core constituencies today.

His thinking goes something like this: Establish less of a union and more of a professional organization for knowledge workers--an AARP for white-collar professionals. Participation would be voluntary, unlike a mandatory-membership union. It would represent workplace causes in Washington and provide skills enhancement, pension support, and insurance information. "The largest response I've gotten since the [AFL-CIO] split is from white-collar workers who have said, 'If you can figure out something to do about health care or insurance or help me figure out how I get a pension, it would really be helpful,'" Stern says. "No one does that for creative workers."

So what can managers do to brace for the impending talent crunch and the threat of unionization? There's no getting around the need for higher wages. While workers as a whole saw an average pay increase last year that hardly kept up with inflation, skilled professionals in hot regions like the Washington, D.C., area enjoyed double-digit wage gains. "Someone who you were paying $50,000 one day, you have to pay $60,000 the next day because a competitor tried to raid them," complains Jeff Frank, president of Patton Harris Rust, a 350-person engineering firm in Chantilly, Va. "There's a ripple effect; if you do it for one person, everyone on staff wants a raise."

Yet salary is only part of the equation. For knowledge workers, job satisfaction is also very important, and staying happy means feeling challenged and learning new skills. Jim Harter, chief scientist of workplace management with the Gallup Organization, suggests that managers regularly test workers' engagement with a 12-question survey. Sample statements: "I know what is expected of me" and "I have the opportunity to do what I do best every day." Gallup says 27 percent of knowledge workers are engaged, 61 percent are not engaged, and 12 percent are actively disengaged. Companies that focus on increasing engagement for three years, Harter says, can reduce net turnover by 15 percent.

Don't bother trying to cut corners by beguiling workers with cheap distractions. Small perks help, but less than you might think. "It's not about having a rock-climbing wall or Jolt Cola in the fridge," says Richard Florida, author of Flight of the Creative Class. "It's about doing things that really matter to people"--such as helping with health care, insurance, and pensions. Because if management doesn't offer them, Stern will. -- ERIC HELLWEG