By Stephen D. Bruce, PHR
Editor, HR Daily Advisor
It’s a sad day for me, says business and leadership blogger Dan Oswald. Hostess Brands, the maker of Twinkies®, Ho-Hos®, and Ding Dongs®, is going out of business. While my midsection may not look like it, I haven’t had a Twinkie—or any other Hostess product, for that matter—in more than 30 years. But I hate to see them go, he says.
Oswald, CEO of BLR, offered his thoughts on trust (and Twinkies) in a recent edition of The Oswald Letter.
Twinkies were a part of my childhood. Somehow, on occasion, we could convince my mother to pick up a box of those golden treats with absolutely zero nutritional value. That was no small feat! My mother refused to buy any form of sugared cereal, but every once in a while, we could coax her into buying a box of Twinkies.
But the demise of Hostess is sad to me for other reasons. First and foremost, more than 18,000 people will lose their jobs as a result of the shutting of the company. That’s 18,000 families who find themselves without the support of a good-paying job. In the current economy, with our roughly eight percent unemployment, finding new jobs to replace what was lost will be difficult for many.
It’s also sad that the company closed, in large part, as the result of a complete lack of trust between company management and many of the workers, especially the unionized workforce.
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There are many factors that contributed to this, including high turnover in the executive ranks. The company had six CEOs in the last 10 years. It’s difficult to build relationships and trust when the executive suite has a revolving door.
The company also has long had financial difficulties, including two bankruptcies, forcing tough decisions and concessions from all parties. Those types of negotiations often lead to hard feelings and erode trust.
Finally, the company was privately held by a group of hedge funds and private equity investors. These types of owners generally aren’t part of daily operations and are, for the most part, invisible to the employees. So when things go wrong, they are an easy scapegoat for the company’s problems.
On the other side, much of the Hostess workforce was unionized. The individuals who head the union aren’t employees of the company, either. They, too, are easy to blame when things get difficult. It comes down to a lack of trust.
You have a group of owners who aren’t working side by side with employees, represented by senior management, negotiating with a group of union representatives who aren’t working side by side with employees. How can there be any trust? Add to it a sordid past where negotiations have been strained and contentious, and you have the makings of a bomb that just exploded and destroyed a company.
One of the articles I read on the Hostess story had more than 600 comments posted to it within 48 hours of being published. Some were blaming the baker’s union for going on strike just when the company was most vulnerable and driving the final nail into the Hostess coffin. Others were blaming the demise of the company on the greedy hedge fund owners. Neither side was really informed of the inner workings of Hostess, but all were willing to place blame on one evil side or the other. Each group with its own ideological ideas twisting the story to make its point.
What’s sad about that is that this story is a microcosm of what is going on in our nation’s capital. Each side of the political aisle is villainizing the other, making the divide bigger and bigger. They no longer talk to one another. They no longer debate their ideas. They no longer compromise. Just like the Hostess management and unions, each side doesn’t trust the other, and the result is two factions pursuing their own agenda without regard to the other. We saw what it did to Hostess. I, for one, hope that’s not what happens to our country.
Trust. It’s a complicated thing. It’s very difficult to build but oh so easy to destroy. With trust you can accomplish so much. Without trust you’re on your own, and that’s a very lonely place to be. Unfortunately, more than 18,000 Hostess employees discovered what happens when you don’t have trust between employees and management. It’s not good for anyone.
I wonder if you’re aware that the final event that led to the shut-down was company management keeping the employees’ pension contributions (made by the employees themselves–typical in union plants) to their union pension fund to pay operational expenses. That’s not trust, that’s theft.
Interesting article. Trust is certainly required for any business to succeed long-term. Also agree that Hostess management should take a big share of the blame for the company’s financial problems. However, unions here could have taken a deal and then worked to improve their position. Unions lost 400,000 jobs in the private sector last year. Unions are obsolete and really are simply political actors now. The unions are driving jobs overseas and the ones that cannot be outsourced are moving to Right-to-Work states. They must take the direct blame for the unemployment that resulted.
Thank you for your thought-provoking insights on some possible reasons that, with other structural conditions, contributed to this bargaining’s failure.
An interesting follow-up might be about how both bargainers are constrained by external forces. In particular, a union can’t bind a collective-bargaining agreement that includes participation in a multiemployer pension or health plan, but would attempt to provide it on terms that the plan’s trustees disapprove. Each of those plans has interests different from those of a union and its members. A plan is a separate person, and an independent actor.