Case study

Organized labor has been a major force to reckon with since the emergence of the industrial economy. Unions have been using corporate campaigns and neutrality agreements effectively to support their cause in addition to the powers wielded by the National Labor Relations Board or through the National Labor Relations Act. This is evident in the case study of Sprint La Conexion wherein the parent company did not pay heed to the brewing corporate campaign organized by labor in conjunction with Communications Workers of America (CWA) at a time when it was planning to close its operations due to financial non viability. Overlooking these and other environmental factors such as sound financial viability before acquisition, a faulty growth and pricing strategy contributed to the problems at La Conexion.

Environmental Factors

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LCF Inc (LCF) was a wholly owned subsidiary of Sprint which was created to acquire La Conexion Familiar Company (La Conexion) specializing in selling long distance services to the Latino market in residential areas. (Case Study, 1997). The focus of La Conexion had primarily been Spanish speaking callers. The base dependency of La Conexion having been identified, the company competed in the market on the basis of language and culture bonding. The environmental factors affecting growth are discussed in succeeding paragraphs.

Pricing. Pricing is a primary survival strategy in the telecommunications market in the USA particularly with reference to the Latino residential customer. In an evenly priced market, an ethnically attractive strategy would have worked well, as a majority of operators in the US shifted to a lower price structure, there were limited hopes for La Conexion to survive and add customers to its base figure. This not only affected its profitability but also its long term viability as flexibility in pricing was not possible.

Financial Viability. To sustain itself in a growing market La Conexion needed financial stability. However after fully taking over the company Sprint realized that it was not financially viable. Additional infusion of funds would have probably sustained the company but given the poor state of the company initially this option was also foreclosed. After examining these issues the top management of Sprint seems to have taken a decision in advance to close the business without exercising other options.

Union Organizing. After LCF had been taken over, in February 1994, Union organizing activity was noticed by the company’s on site managers, who injudiciously threatened the labor with plant closure in case they joined unions. This considerably vitiated the labor atmosphere in the company. While the Group’s labor relations manager did not support the activity of threatening employees, he did ask the subordinate managers to talk with them against it.  Subsequently though the management worked with the Union to schedule representation elections in conjunction with the Communications Workers of America (CWA) this was too late.

Handling Labor Relations. Handling of labor relations by the Sprint Management at Le Conexion was poor. While it attempted to stop union organizing activity, it also did not provide any indication to the workers that it was likely to terminate its operations. By continuing to schedule representation elections it gave an impression to the workers that their jobs were secure. It was only eight days before the elections that closure was announced to the workers.

Corporate Campaigns by Unions and Worker Termination. As per the Worker Adjustment and Retraining Act, (WARA) <=2> 29 U.S.C. @@ 2101-2109 (1994), employees are required to be given sixty days advance notice and required to work during this period while closing a company, a practice which Sprint was following. However in the case of Le Conexion, Sprint terminated the LCF employees immediately providing them sixty days of wages and benefits by rerouting calls through its customer service centre in Dallas. With unions adopting confrontational attitudes through a corporate campaign strategy, even minor deviations are likely to be troublesome. The company seems to have ignored this facet.

Possible Policy Options

The Sprint management had made a decision to close La Conexion as early as in February 1994. This was on the basis of poor financial viability of the company and its long term prospects. There were possibly two options available to the company. The first one was  to declare its intention of a possible closure due to financial viability but attempt to rejuvenate the company and the second was that followed by the company of attempted up gradation without open declaration of its possible intent. Greater transparency in corporate policy towards company closure taking workers into confidence would have avoided the embarrassment faced by Sprint.

The Company had possibly feared a back lash from labor as well as the CWA over declaration of intent of closure immediately after taking over. However this would have benefited the company in the long term. Firstly there was no scope of litigation that arose with National Labor Relations Board (NLRB). This would have also possibly motivated the workers to enhance their efficiency facing prospects of losing their jobs thereby contributing to greater revenues and eventually avoiding closure altogether.

A policy of greater transparency which simultaneously protects the rights of the labor and company in such cases needs to be evolved. A stipulated time period could be laid down for declaration of closure by a company even when this is at the stage of approval by the board. Union representation elections in such cases should be deferred. Such a policy needs to be worked out jointly between the government, NLRB and representatives of corporate bodies.

Proposed Business Policy

The primary policy adopted by Le Conexion should have been to broad base its customers from Spanish speaking to the general masses. This would have enabled it to generate greater number of customers and also aligned this with the Sprint’s main area of business. This was one of the strategies recommended during the Board meeting in May 1994. This is also supported by the fact that the parent company’s Latino oriented program was generating healthy returns of 90 cents per dollar. A second related issue for consideration was to base its pricing strategy competitively in line with the telecommunications market. This would have enabled it to adapt to the changing circumstances on a long term basis.

An assimilative strategy wherein the company could have integrated the staff of Le Conexion with its Latino focused program would have avoided resistance from the Unions and would have protected the workers rights. Since Sprint had a separate Latino program which was ongoing, absorption of the additional staff in the same should have been feasible.