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An ex-BUSINESS WEEK staffer's adventures in manufacturing

Silence. I have just finished a presentation outlining our company's new wage and profit-sharing plan, revealed our sales and operating-income numbers to the workforce for the first time in the history of our family business, and asked for questions. Now a horrible silence roars back. I labored over this presentation for weeks, but the employees seem unimpressed. Finally, a hand goes up. I nod. A longtime employee asks: ``The meeting is over, no?''

For a moment, the lunchroom--a stuffy lounge that reeks of burnt coffee--erupts with laughter and noise. But then the stifling silence returns, broken only by two or three questions. What went wrong? I have just unveiled a program that could give 10% of the company's operating profits to the employees, yet no one seemed interested. Sure, the average wage hike is only around 2.4%, but most people's raises were better than anything they got under the last two union contracts.

HARD LESSONS. But the union is gone. The employees had voted to leave it last April because they had grown disenchanted with its level of service. Now, after several years of relatively small raises, many employees expected 10% raises, well over $1 an hour. Most didn't know they were already among our industry's best-paid employees, or that such a raise would add more than $200,000 to our costs. Here I was on Aug. 1, pulling out fancy wage surveys, explaining our costs, going over charts describing future capital projects. But instead of nodding in enthusiastic agreement, it looked like the employees were bored--or worse.

Another day, another lesson. As a BUSINESS WEEK correspondent for nearly nine years, I had often heard executives say that change never comes easy. Since leaving the magazine on Feb. 1 and joining Emerald Packaging Inc., the company my father helped found 33 years ago, I've learned just how tough change really is. Sometimes I feel like rushing back to journalism--especially after days like that one, Aug. 1. Then one or two employees, older and wiser than myself, usually remind me that change is never simple--not for me and not for the workers.

Running a small business is as hard as--no, harder than--I ever imagined. Based in Union City, Calif., our 95-employee company, which makes printed plastic bags for the produce and vegetable industry, is being rocked by all the forces I wrote about. Technology has radically reshaped our markets, making produce a branded consumer product like diapers or toothpaste. Once we pumped out bags for pallid heads of iceberg lettuce and gnarled carrots. Today we make jazzy-looking plastic packages for fresh salads and finely polished baby peeled carrots, whose prices producers constantly cut in search of market share. Our customers demand better print quality, lower prices, and faster deliveries.

And that's not all. Our employees, like most these days, want a chance to develop new skills, opportunities for advancement, and more money. Our multicultural workforce--employees come from North Korea, Mexico, Guatemala, the Philippines, and Cambodia--also demands sensitivities that managers didn't need in the past. Legal pitfalls such as sexual harassment and wrongful-termination charges seem to abound. Regulations limiting chemicals used in printing create more problems.

NO WISECRACKS. I confront each of these issues with my own baggage, too. I'm used to mixing it up with colleagues in the newsroom. Journalism breeds a certain irreverence. But in business, you just can't turn to your customer and say: ``What the heck do you need six colors on a potato bag for?'' They feel they need it, and we have to deliver. Wisecracks don't cut it with employees, either. I must listen and patiently explain, even if it's something I've already explained 10 or 15 times. My most common refrain: ``No, we aren't cutting your wages.''

Sometimes I can hear executives I have criticized in print taunting: ``Now you're learning what it's really like.'' But I also know I feel more personal growth than I have in years. Each of the hurdles facing the business could trip us up. Getting past them requires a creativity those not in business often underestimate. One of the executives I admired most as a reporter, former Cummins Engine Co. Chairman Henry Schacht, now the chairman of AT&T spin-off Lucent Technologies, once said he chose a life in manufacturing because he ``couldn't imagine a greater intellectual challenge.'' That remark used to mystify me. It doesn't anymore.

I came into the business at a propitious time. My father, Jim, 66, has begun moving toward retirement. Our sales are healthy, but the family knew we needed to start managing differently if the business was to survive into the second generation. So with my sister, Maura, 33, handling administration, and my brother, Jim, 36, holding down sales, I was to help with operations, drawing on insights I'd gleaned covering top manufacturers such as Motorola, Deere, and Harley-Davidson.

It didn't take long to learn just how tough business can be. Soon after I arrived, we had a quality foul-up, thanks to a wayward ink supplier: The bags we sent to one of our largest customers were sealed shut. That's tantamount to Ford Motor Co. shipping out cars that don't start. To make matters worse, we were smack in the middle of contract talks with the customer. Despite years of mistake-free work, those talks suddenly had to be put on hold. We knew our grip on the account was tenuous at best.

I was frightened. Losing this account would mean deep financial pain for the company and layoffs for our employees. So we did what we had to. My father ordered half our bag lines shut down so employees could inspect the millions of bags we held in stock for the customer. People pulled piles of overtime to get the job done. So far, it looks like the problem is behind us; we dumped the bad bags and switched ink suppliers. But we'll only know for sure when the customer recommits.

Operating decisions are less prickly. Three years ago, my father bought a new, Italian-built six-color press. These days, the industry is buzzing about eight-color presses, which cost around $2 million. I was all hyped up to buy one after attending a trade show, but my father cautioned me. Customers aren't really clamoring for eight-color designs yet. ``Wait to spend until you have to,'' he said. My father has a good track record in this department. A few of our machines may be older, but they run 24 hours a day. Some rivals have newer machines that have yet to earn a return.

Technology's long arm is also transforming our business. During my BUSINESS WEEK days, I thought technology meant computers. Now I'm learning otherwise. The biggest game in produce these days is the ``fresh-cut'' market--prewashed, ready-to-eat salads, vegetables, and fruit. For the existence of this fast-food market, Americans can thank chemists who have whipped up plastics that breathe at the same rate as produce. These ``breathable plastics'' allow oxygen to enter the bag--and carbon dioxide to escape. Fruits and vegetables stay fresher longer. And as growers rush new salads and vegetable concoctions onto supermarket shelves, they're demanding that our printing be sharper than ever to lure busy shoppers.

So suddenly I'm picking up a whole new set of interests. When I go to the store, I head to the produce section and find our bags. How does the print look? Has the inside fogged up? Does the produce in our bags look wilted? I use my interviewing skills to pump the department manager for information. Even my wife, Erin, has taken to searching through the vegetable aisles looking for potential customers.

I figured my first six months would be spent learning the business and discerning these industry trends. That's the way it started out. I shadowed my father on sales calls, listened in on every meeting I could, and peppered our top employees with questions. But my easygoing pace came to an abrupt end one sunny afternoon just six weeks after I arrived. Coming back from lunch, I noticed a group of employees signing something. ``What's that?'' I asked our plant manager. ``Oh,'' he said, ``that's a petition to decertify the union, you know, to get rid of it.''

I nearly collapsed. I had covered labor issues from Chicago for more than five years and had a lot of respect for unions. I had studied successful partnerships between companies and unions, and in the United Auto Workers fight with Caterpillar Inc., I chronicled what happens when a company pushes a union away. I had come to Emerald Packaging hoping to forge a partnership with our union. Now the employees had different plans. They resented how little service they received for their monthly dues. Angry, they wanted to see if they could do just as well without a union.

RUMOR MILL. It was gut-wrenching suddenly to be put in this position. We had always had a good relationship with the Bakery & Confectionery Local 119, so we hoped the campaign wouldn't get messy. Unfortunately, rumors began to swirl. Workers were stopping me in the aisles and asking whether the company would slash employee health care, gut pensions, and chop wages if the union left. One rumor had us closing the factory--even though we had just moved into the 40,000-square-foot building three years ago. Tensions began to rise, and production started to suffer.

We weren't gung ho about all the distractions. We had loads of work in front of us just grappling with my father's succession, not to mention the constant fight to boost sales. To try to limit the damage, I arranged for my brother Jim, myself, and the union leadership to meet over a meal.

The meeting was a disaster. We told the union guys they could help themselves if they admitted some mistakes and unveiled a reform agenda. They were more interested in driving a wedge between the front office and the rank and filers. I couldn't think of any story I'd written that might help get us out of this mess. The last thing I wanted was more strife.

But for some reason the union never got aggressive. The organizer tried to jawbone me into getting the election canceled. But that wasn't up to me--only the employees could do that. So on Apr. 18, in a stuffy storage room, the employees decided their own fate, and delivered me to mine. I would spend the next three months working out an entirely new benefits program to replace the one the union had run. In quick succession, I and our office manager, Jan McGrath, coordinated new health, dental, pension, and 401(k) plans. I turned my writing skills to an employee handbook and company newsletter, then to the wage plan and the first steps toward open-book management. Many nights I pondered different plans and remembered--wasn't it just a year ago that I was pressing my editor-in-chief for a raise?

GALLOWS HUMOR. The whole process has not been without its lighter moments. After I handed out the new employee handbook, one machine operator asked me whether the funeral-leave policy was for use when the employee died or when a family member died. ``Well,'' I replied, ``when you die you get a permanent leave.'' We both laughed when we realized that a language difference had created a misunderstanding. I resolved to begin learning Spanish, soon.

The most common question I get from customers these days is: ``Don't you miss journalism?'' Or there's the more declarative version: ``You gave up all that to become a bag man?'' I admit there are plenty of days I wonder myself. But I do know that tomorrow morning I'll walk into that office and I'll be tested in ways I wouldn't have expected. And I still have to conquer the doubts some employees harbor over the new wage plan. Perseverance is the hallmark of a good journalist. I think it's the hallmark of a good businessperson, too.

By Kevin Kelly in Union City, Calif.


Updated June 20, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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