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And The Wolf Finally Came: The Decline of the American Steel Industry.

And the Wolf Finally Came: The Decline of the American Steel Industry After reporting on labor for twenty-seven years, John P. Hoerr, a senior writer at Business Week, became convinced that "the [competitive] problem in steel was rooted in forty years of poor management of people and misdirected union-management relations" (p. 20). With this conviction firmly in mind, Hoerr set out to document how the steel industry's "obsolute system of organizing and managing work" contributed to its demise (p. 14). The result--And the Wolf Finally Came: The Decline of the American Steel Industry--is a 620-page text that reads more like a personal memoir than a theoretical or practical analysis. Having himself grown up in a steel town--McKeesport in the Monongahela (Mon) Valley near Pittsburgh--and worked for National Tube during his college summers, Hoerr intertwines memories of his hometown with interviews and observations from his practiced journalist's eye to chronicle the "trail of industrial wreckage" that extinguished the Mon Valley economy and shattered the lives of millions of people (p. 567).

Most of And the Wolf Finally Came describes the labor-management relations between U.S. Steel, which later became USX, and the United Steel Workers of America (USW). Yet, despite the book's somewhat meandering organization and its plethora of detailed anecdotes, it has, at its core, a strong argument. Hoerr believes that steel is the best example of what has gone wrong with American union-management relations and why American companies have lost their competitive edge. According to Hoerr, USX managers clung to outdated views of workers as simplistic, narrowly self-interested economic agents who responded only to authoritarian management. When managers attempted to adopt new corporate strategies in response to foreign competition in the 1960s, their outdated beliefs regarding industrial relatioins prevented them from securing the cooperative, participatory contracts from the USW that were required to turn the industry around. The company's outdated system of managing workers produced instead a bitter and hostile union that evolved into a guarded bureaucracy whose primary objective was to out-negotiate its increasingly untrustworthy adversary. As Hoerr shows, in the end both USX and the USW were focused on narrow, legalistic problems--nonstrike agreements, job divisions, and cost-of-living wage increases--instead of on the critically important issues--such as increased productivity--that were the industry's only path to survival.

Hoerr repeatedly asserts that these problems, which he believes are representative of America's adversarial labor-management relationship, stem primarily from a severe lack of trust between employers and employees. Hoerr paints a disturbing but accurate picture of union-management relations replete with poor communication, bitterness, anger, betrayal, and, ultimately, an alienated rank and file. As one union leader, Joseph Odorcich, explains to Hoerr, "no union man would trust any of the companies . . . they're always crying wolf" (p. 23). Since this method of managing people resulted in disaster when the wolf finally came, Hoerr advises management to "bring labor into the game as a partner, sharing information and power . . . [so that workers will] commit their minds and hearts to the job, as well as their bodies" (p. 396).

Although few would disagree with Hoerr's presumption that trust is preferable to distrust in organizational relations, even the most sympathetic reader may find little in Hoerr's narrative to support his assertion that the abominable state of labor-management relations in American steel is responsible for the industry's becoming a second-rate competitor by the 1980s. The major deficiency in Hoerr's exhaustive account is that at the end of the day it remains unclear how important labor-management relations were to the industry's economic performance. Labor accounts for one-third of American steel's production costs, which is roughly equal to the cost advantage sustained by Japanese steel producers throughout the 1970s. It is doubtful that the most cooperative relationship betweenn management and labor could have reduced unit costs enough to compensate for this huge cost differential. Hoerr's own data reveal that even the steel companies that established relatively cooperative, participatory systems of management--such as Kaiser Steel and Jones and Laughlin--could not maintain their international competitiveness. Despite Hoerr's convictions, one is forced to conclude that other economic factors--inadequate investment, small plants, outmoded technology, high capital costs, and unfavorable exchange rates--contributed more to the steel industry's decline than did poor industrial relations.

Some readers may also have difficulty with Hoerr's conclusion that American industrial relations have worsened over time. When, one wonders, were industrial relations in steel anything but adversarial? Certainly not before the turn of the century, when inhuman conditions in the mills and twelve-hour days led to frequent confrontations and strikes, the most celebrated one of which occurred in 1892 at Carnegie's Homestead Works in Hoerr's own Mon Valley. And, compared to the industrial warfare that characterized labor-management relations throughout the 1920s and 1920s, the bureaucratic negotiations that resulted from unionization in the 1930s appear downright civilized. Yet despite this bitter and often tragic labor history, America became the preeminent steel-producing nation in the world.

On the other hand, since Hoerr leaves open the question of why there is so little trust between management and labor, one can imagine causation to run in the opposite direction from his hypothesis. That is, as international competition required U.S. steel companies to restructure and negotiate givebacks in the form of reduced wages and benefits, the USW members--whatever their previous relationship to management--felt embittered and betrayed. Recent events at National Steel Corporation confirm this interpretation. Despite a cooperative agreement signed by National Steel, its joint venture partner Nippon Kokan Steel, and the USW, in which workers were guaranteed job security and a voice in management, the USW rejected the tentative contract worked out by management and USW representatives and demanded higher wages or threatened to strike.

It is certainly plausible that the pressures of global competition combined with a relatively mature domestic economy are forcing changes in America's industrial relations system. Unfortunately, Hoerr leaves too much of this argument for his reader to make alone.

And the Wolf Finally Came tackles two important subjects: the decline of America's competitive edge and the American system of labor relations. But, in a capital-intensive industry like steel, it is unfair to both subjects to link them simply as cause-and-effect. The decline of the American steel industry is a complicated and probably over-determined problem of which poor labor-relations may be a part. This fact should not, however, discredit the movement toward better industrial relations--improved communication, more teamwork, and respect between employers and employees--that is afoot in American corporations. Hoerr's rich narrative makes the case for better industrial relations whether or not hey could have significantly changed the steel industry's economic trajectory.

Patricia A. O'Brien in assistant professor of business administration at the Harvard Business School. Her area of research is the history of competition in the Japanese and American steel industries.
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Author:O'Brien, Patricia A.
Publication:Business History Review
Article Type:Book Review
Date:Mar 22, 1990
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