The end of the agonizing Chicago Teachers Union-led strike nearly 2 weeks ago appears to have only deepened the PR abyss into which teachers unions have sunk themselves, and dragged the many hard-working teachers with them.
And in a stunning display of academic ignorance of the lessons they should have learned in Business 101, the negotiating tactics of teachers unions seem to demonstrate to the American public that union bosses, and perhaps some teachers themselves, have no clue why they are losing the PR battle in 2012.
So why are the teachers unions taking it on the proverbial reputation chin?
Short answer: They don’t negotiate like they understand that their compensation needs to be tied to the employers’ revenue.
Slightly longer Business 101 answer: Every business which suffers a revenue downturn MUST find a way to convert as many employees with fixed salaries as possible, from fixed compensation to having compensation as a function of revenue, so that when revenue is higher, compensation is higher. When revenue is lower, the business is protected by not having to pay as much in labor costs.
The details: In business parlance, each company has revenue, and expenses. Some of their expenses are short-term expenses directly tied to the revenue. We call these expenses “costs of goods sold.” These expenses include materials used to produce whatever “widget” a company sells, and the labor used to produce said widget. A great example of a “cost-of-goods-sold” labor is a salesperson who is compensated on 100% commission. Also included are service people who are paid by the hour.
The rest of a company’s expenses are generally called “fixed expenses” (or operating expenses). These expenses stay with the company, no matter what. If times are good, or bad, these expenses stay generally the same. Because of this, these “fixed expenses” are always long-term investments.
You can imagine that a company needs to have a stable revenue stream to take on employees with fixed salaries.
And when a company’s revenue nosedives, with their very survival being threatened, the very first thing they must do is convert as many of the long-term operating-expense salaries into short-term costs of goods sold as possible. It doesn’t matter how great a long-term investment something might be, if you are facing extinction short-term. Imagine a group of people with a truck full of money, stuck on a mountain with freezing temperatures, and nothing to burn to keep warm enough to survive. You can bet your bottom dollar, so to speak, that they will most likely burn the cash to survive.
And this, lamentably, is the basic business lesson that the teachers unions just don’t seem to get. They certainly attempt to make an effective point about teachers’ long-term benefits, even resorting to using divisive communication laced with emotional ploys. Yet the fundamental problem of school districts with dwindling tax revenues escapes them.
Like any employees, teachers need to have compensation tied to revenue if they are to expect stability short and long term. This may mean that the better the students’ academic results, the more revenue they get, perhaps through more people moving into the district to take advantage of such competent teachers. Raises tied to tenure are as antithetical to the 2012 economy as lavish Las Vegas company-paid vacations.
But teachers unions appear to be more like the one or two people in the group of survivors in the mountains who will argue that no one should burn the paper money to stay warm. Period. They have no other plan for the group to survive the night.
Perhaps the saddest thing of all is that, unlike our mountain survivor scenario above, there is a win-win solution – a way of creating better academic opportunities for ourselves and our children, while stabilizing teachers’ income. And of any group of people, it should be the teachers, and their unions, who figure out what that solution is. At the risk of casting a rather harsh judgment of their collective competence, that they cannot proffer such a solution perhaps tells us something about how competent the group really is.
No doubt that there are many outstanding teachers. But as a group, the teachers unions have been horrifically ignorant negotiators.
So the PR of teachers unions will continue to be on the ropes until one of two things happen:
- The economy heals enough that school districts begin to feel confidence that their revenue stream is now steady, and not likely to go substantially down. Or,
- They figure out a way of making teachers a cost of goods sold.
Expect this to be one of a boatload of topics of the upcoming presidential debates.