People who own the world outright for profit will have to be stopped by influence, by power, by us.
— Wendell Berry
Business is not war (apologies to Andy Bernard). Sure, devising strategies and tactics require linguistic parallels, but that’s where the similarities end.
The default state of a retail business is to grow. The default state for nations at conflict is a stalemate. Sure, hot wars break out from time to time, but cold war is the natural state of opposing nations.
When political negotiations break down, war erupts. When business negotiations break down, we have fewer Corn Flakes on the shelf. The stakes are lower, to be sure. For negotiations to succeed, leaders must be willing to walk away from negotiations, despite the consequences. This is a form of brinkmanship: taking large risks to further an agenda.
Brinkmanship is often overlooked as a necessary part of growing a business; especially one that depends on fair labor (last I checked, that’s every retail business.) Often, brinkmanship is employed by both employees and managers or corporations.
Here are two current examples where brinkmanship was employed, by either employees or management, and what we can learn from it.
Brinkmanship in Fair Labor
Labor negotiations at Kellogg have been in the news for months, as 1,400 Kellogg’s workers ended a 70+ day strike in Omaha, Nebraska. During the walkout, Kellogg exercised brinkmanship when suggesting that they fire and replace all picketing workers, in some cases hiring full-time replacements.
This drew the attention of news media and political figures from both sides of the aisle. President Biden condemned the act, as did Nebraska Governor Pete Ricketts. But it was the attention of Bernie Sanders and Elizabeth Warren, who have repeatedly blamed runaway inflation on “greedy companies” who are “price-gouging” customers and reaping benefits, blaming the current inflationary environment while expanding margins.
Eventually, Kellogg caved to demands and all workers returned with a $5 per hour increase, and many workers received negotiated title and seniority adjustments. They also returned to work alongside their newly-hired replacements.
In the end, Kellogg pays more for the same employees, while also increasing its total workforce size.
LESSON: Fair labor is a core tenet of what made America the center of global commerce in the 20th century. To be sure, things are not perfect. We have work to do. But workers’ rights, injury compensation, health and safety protection acts, the right to organize, and federal minimum wages are all examples of the protection that the Federal Government, at the behest of Congress, have extended to frontline workers in prior eras.
For the past three decades, organized labor hasn’t had many supporters, and has had waning success. From the Reagan-era firing of Air Traffic Controllers to Amazon union-busting, it’s the lack of political will that has caused an erosion in fair labor and workers’ rights in the United States.
Recent victories at Starbucks in two of their Buffalo, NY stores have created a domino effect: three more will vote this month to join the newly-formed union. The bravery of the workers who walked out of Kellogg should be commended. However, political grandstanding is not enough — we need citizen action to will lawmakers into action.
The “gig economy” has further disinter-mediated the ability to organize effectively. For instance, Amazon Flex allows part-time workforce on-demand as a 1099 contract employee. Labor reform will be sorely needed in the next decade as eCommerce eats into the larger retail pie. At the forefront of the brave new world of digital jobs and labor is the World Trade Organization, which began hearings and public forums in 2018 for eCommerce workers. The same WTO that the Trump administration threatened to leave in 2020.
When brinkmanship fails
Media companies, especially network and cable providers that own valuable sports licenses, often find themselves exercising brinkmanship. Following months of failed negotiations with the Disney corporation, YouTube TV subscribers logged in on December 19th to see that their subscription price had been reduced from $64.99 per month to $49.99. The reasoning? Failed negotiations meant that ESPN Plus was leaving the over-the-top streaming service, leaving millions of subscribers out in the cold.
After just one day without the service, news broke that YouTube returned to negotiations and brokered a deal to return access to ESPN Plus, and local ABC stations, to its subscriber base. While no official reasoning was given for the compromise, it stands to reason that the “unsubscribe” button is all-too-easy to hit for those on the receiving end of diminished service. Also back: the old subscription price. Customers affected received a one-time $15 credit for the inconvenience.
LESSON: Sometimes we have to learn the hard way. In this lesson, Alphabet, YouTube’s parent company, found out how valuable certain properties are to their subscriber base. Disney learned that YouTube will walk away from negotiations but will cave to demands if their customers have a negative response.
Proactive communication, surveying of existing customers, discussions with focus groups, and alternative peering agreements could have prevented disruption of service; allowing Google to save face. This puts the online streaming giant in a difficult position in negotiations with every other media org for the next two years.
I predict a tough road ahead at the negotiating table for the online streaming giant.
The tough road ahead
Negotiation is a part of business. Unfortunately, constant growth means that at some part of the value chain there will be corners that need to be cut. The bigger that a business gets, the more power it can exert on its suppliers, its labor, and even its customers. In the era of analytics, AI, and algorithms, it’s trivial to use tools and automation to find efficiencies that result in a substantial negative impact on the customer or the employee.
From the World Trade Organization’s 2018 public forum on eCommerce workers:
In particular, regulation should address various aspects related to workers’ data. For instance, algorithmic bias and data control makes hiring and firing less transparent.
Artificial Intelligence (AI) plays a key role in this regard. AI processes data automatically and decides whether someone is hired or fired, and it manages work processes and squeezes out middle managers in operations.
While Europe and California have created data privacy challenges for eCommerce operators, the coming decade could see labor laws around employee data collection and labor optimization.
As eCommerce becomes critical infrastructure and eats a larger piece of the overall retail pie, the need for strong labor laws around the workers that make eCommerce happen—particularly those in logistics and supply chain—will need to evolve to modern ideals.
And when that happens, brinkmanship will be employed by both the workers, and the corporate negotiators.