I.

Current Situation: Company Background: First National Bank (FNB) was the oldest and largest bank of Lake City. Founded in 1892, it had assets of approx. $ 300 mill., which was twice the next largest of the other six commercial banks. Since last ten years, merging and acquiring of other smaller banks meant FNB now had 16 branch offices.

A.

B.

Top Management:

President : Wynn Evans Vice President of Personnel : Paul Blanton Vice President of Consumer Loans : Frank Lockard Vice President of Branch Operations : Harold Newton Labor Attorney : Francis Grant Largest stockholder : Fred Savage C. Current Performance: Working at the First: Salary at FNB was 10% to 20% below comparable jobs at auto plant and some other banks. Some younger employees, who were trained in data processing moved to auto plant. Everyone at FNB was on salary except maintenance employees. There were ten classifications of salary; at the lowest level, the maximum was 13% more than the minimum and at the highest level, the maximum was 30% more than the minimum. Salary was increased yearly on merit with effect from 01 January of each year.

However, the negative side of lower salary was compensated by the positives of excellent working conditions, job security and liberal profit sharing plan. Excellent working conditions: Standard 38 working hours per five days but usually, 35 hours. For 38 to 40 hours, additional compensations at straight rate and for more than 40 hours, a rate of time-and-a-half was paid. Also, without college education one could rise to important positions. Many employees attended AIB courses at night financed by FNB. Job security: Rarely, employees were laid off due to poor work or offensive conduct. But in auto plant, good business in one year meant high overtime and bad business in another year meant high layoff. However, this problem was solved to a large extent as the union negotiated SUB in 1950s and 1960s. In 1967 GAI replaced SUB. At the plant, employee with 7 years service took 95% of pay for 52 weeks and those with less than 7 years also took 95% but for less than 52 weeks. If an employee was discharged at the plant, the union support was there for grievances as discharge was the capital punishment in labor relations. Benefit plans: Profit sharing plan: Effective for 20 years. Employees were eligible after 2 years of service. Bank gave 7.5% of net operating income after reserves and dividends. This amount was divided by combined yearly salaries of plan participant to get a percentage. This percentage was applied to an employees base annual salary to determine the amount. This amount was never less than10% and was approaching the limit of 15% as set by IRS. 100% of this benefit was given after quitting or retiring at 65. Whoever left early, did not get 100%. 50% after 5 years, with 10% increase for next 5 years. Withdrawal from the balance was possible which might exceed 2.5 times annual salary. Auto plant and other smaller industrial / commercial firms did not have any profit sharing plan. Death benefit plan: To supplement the amount receivables from profit sharing plan. If salary is 5000 or less, then DBP is 3000 and DBP goes down @ 500 for increase in salary @ 200. So, no DBP for salaries over 6200.

Pension plan: 15 years of service must. Retirement mandatory at 65. Early retirement at 55. In case of early retirement benefits were reduced unless the employee opted to have payments begin at 65. After 15 years of service, benefits for total and permanent disability were given. Pension plan was not as liberal as that of auto plant, but better than other banks. However, combinedly, the pension and profit sharing plan was considered to be as well as that of the auto plant. Salary continuation plan: Effective after 90 days of probationary period. One full week of sick pay during first year. Six full weeks of sick leave during next years which were noncumulative. However, weekly pay check decreased for absence not covered by the salary continuation plan. Vacation plan: 2 weeks paid vacation after 1 year of service. 3 weeks of paid vacation after 15 years of service. Even though identical with other banks not as well as that of auto plant. Also, six holidays are paid for by the bank, which is same as that of other banks but only about half of auto plant. Borrow plan: Bank provided reduced interest rate for mortgages, car loans and personal loans for its employees. Mortgage loans reduced by 0.25%. AIB courses: The bank financed its employee to get enrolled in night courses offered by AIB. Absence of employer paid hospital and medical care program: Fred Savage opposed the program. However, bank and Blue Cross-Blue Shield made group plans to be paid by employees at the rate of $25 to $48 per month. If desired by the employees, the bank deducted this from pay checks. Those who were not covered at bank were under other family coverages. Auto plant and other banks had full or partial employer paid medical plan.

D.

Present Status at FNB:

Located in an industrial state, Lake City had a population of 70,000. There was one big automotive parts plant. When production was high, economy of Lake City was good and vice versa. However, in 1930 there was labor strife at the plant as IMU tried to organize the employees at the plant. In late 1930s, an agreement between the automobile company (including the Lake City plant) and the IMU was signed. Since 1956, all workers must be members of the IMU. IMU was influential in organizing machine shops and plants. So, Lake City was known as union town. Employees of bank had relatives at plant who were members of IMU. IMU was unsuccessful in organizing white collar workers at auto plant. Though four years ago, IMU was successful in organizing maintenance workers at smaller banks, it was not very widespread. Teachers of grade school / high school were members of NEA. In late 1960s NEA decided to support collective bargaining under the protection of SPERA. The teachers secured economic gains as a result of unionization and bargaining of NEA. The president of First National Bank of Lake City received a formal notice from NLRB that an election would be held at the banks offices in 30 days to determine whether employees wanted to be represented by IMU. Meeting between president, labor attorney, vice president (personnel) and other executives held to determine the course of action within 30 days.

E.

The organizing campaign by IMU: On a Sunday, John Mason discovered some IMU membership cards distributed at various departments of the bank. On Monday meeting was held between Evans, Blanton and Grant. The president was submissive of the fact that one day they had to deal with the union. Union letters sent to employees:

Four months later all employees received letter (exhibit 2-1: explaining the benefits of joining an union) from IMU at home. At a meeting Grant said that 30% of employees had to sign membership cards of IMU before NLRB would hold election. But IMU would not ask for election unless it had 60% to 70% employees signature. Some at the meeting showed surprise that IMU felt that they could generate so much interest among the employees to send out letters. Others felt that IMU would not get 30% signed cards. One month later, a second letter from IMU to employees was sent regarding the holding of a meeting at a local hotel. Out of 350 employees, 75 to 100 attended the meeting, mainly from bookkeeping, personal loan and main office tellers. The topics of discussion were salaries, grievances and others. But the major areas of discussion were about pension, profit sharing plan and employer paid hospital and medical care plan. The employers said that they were happy with the pension and profit sharing plan but were fearful that the benefits might decrease if union became involved. However, the employees were mainly concerned with the absence of employer paid hospital and medical care plan.

II.

SWOT analysis: External Environment (Opportunities and Threats):

A.

Opportunities:

Auto plant and other smaller industrial / commercial firms do not have any profit sharing plan.

B.

Threats:

Auto plant and other banks have full or partial employer paid medical plan. Auto plant employees are represented by IMU.

Teachers of grade school / high school are members of NEA.

C.

Summary of External Forces:

FNB is under the threat of unionization as other business organizations of the locality such as the automotive plants employees are members of the IMU. Many of the employees (nearly 80%) of FNB are in favor of unionization as mentioned by IMUs international representative Rob Marple to labor attorney Francis Grant of FNB.

Internal Environment (Strengths and Weaknesses): A. Strengths:

Good working conditions, job security. Profit sharing plan, death benefit plan, salary continuation plan, borrow plans are excellent at FNB. Combinedly, the pension and profit sharing plan was considered to be as well as that of the auto plant. The bank financed its employee to get enrolled in night courses offered by AIB. B. Weaknesses: Salary for comparable jobs at auto plant and some other banks are more than 10% to 20% higher than at FNB. Pension plan was not as liberal as that of auto plant, but better than other banks Vacation plan, even though identical with other banks not as well as that of auto plant. Absence of employer paid hospital and medical care program.

C.

Summary of Internal Factors:

The major issues are regarding the absence of an employer paid hospital and medical care plan at FNB. In addition to this the profit sharing plan, pension plans are also the focus of IMUs letters to the employees of FNB. IMU is trying to convince the employees that unionization will bring better bargaining power to the employees in achieving their goals through unity.
III.

FNBs response: Blanton, the VP of personnel, had been appointed at that post only ten months earlier and had no prior experience or training in that area. In a meeting, it was decided to prepare a series of questions and answers (exhibit 2-2: describing the pros and cons and effects of unionization from the banks perspective) to discuss with the employees. Grant told Blanton not to promise anything to the employees or not to threaten them in not joining the union in which case the NLRB might order the bank to bargain with IMU. During the discussion with the employees, Blanton discovered that many of the employees were unaware of the wage and benefit policies of the bank as there were no handbooks or pamphlets. Also, a sizable group of employees wanted to join the union. Employees of data processing center, which was established 6 years earlier, were more towards a union. They were more loyal to other data processing people at auto plant and other banks than to FNB. The turnover is highest in data processing center other than the consumer loans area as they learn their job and leave the bank. Employees of consumer loans area were not satisfied with VP consumer loans for 10 years, Frank Lockard about many of his unfair and autocratic decisions. Turnover in this area of the bank was highest. But Lockards was very successful in his job and the consumer loans area was highly successful in its operations. Newton told Blanton that internal auditors were engaged in discussing union activities with employees.

IV.

Identification of Strategic Issues: Employees sign up with union: Two weeks following the meeting with employees, Rob Marple informed Grant that 80% of the employees had signed the membership cards. One week later the union sent another letter (exhibit 2-3: further elaborating the benefits of unionization) to the employees. President Evans sent a letter (exhibit 2-4: countering the logics given by IMU in favor of unionization) to the employees in response to the above. The Firsts hospital-medical plan: Two weeks after sending the first letter to the employees, the bank took initiative with the IRS to institute a fully employer paid hospital-medical plan. The major opponent of such proposal Fred Savage had died 8 months earlier. Two weeks after the bank announced their initiatives of establishing a hospitalmedical plan, IMU requested NLRB for a representation election. Also, IMU filed a ULP charge against the bank claiming the initiative of the bank to establish a employer paid hospital-medical plan was to prevent unionization. Four weeks later, a hearing on the ULP charges were held. Grant argued that the banks plan to hospital-medical plan was before the organizing of employees to unionize. Final bank-union negotiations: One month later, NLRB reported to bank that IMU had dropped ULP charges. Evans told the employees in a letter (exhibit 2-5 : regarding the implementation of hospitalmedical plan) that the bank was going to establish a fully employer paid hospitalmedical plan within 2 months.

At about the same time, 3 employees were found handing over union cards to others. One of them was Esther Douglas (29 years with the bank), who joined as a clerk upon recommendation of Evans; 8 years ago was put in charge of general ledger bookkeeping which required daily delivery of data to president; 2 years ago as general ledger was computerized, she was place in the savings departments where she was not required to be called upon everyday by the president; 2 months ago as the savings department was computerized, she was moved to the job of collection clerk where there was no need for interaction with the president. However, there was no decrease in salary. Esther felt herself unimportant and unwanted. Two VPs talked with Esther and she admitted her fault. Even though Grant wanted the three employees to be discharged, Evans was of the opinion that no disciplinary actions to be taken other than a warning. Two weeks after the withdrawal of ULP charges, the NLRB informed the bank that it was proceeding with the IMUs request for a representation election. But FNB instead requested for a formal hearing. One month later, the hearing was held and after several discussions between IMU and Bank it where it was decided to include three branch managers, three assistant branch managers, three assistant auditors and purchasing agent in the bargaining unit. It was decided to exclude supervisors (exhibit 2-6: Provisions of NLRA relating to Supervisors and Professionals) and watchman, building and maintenance employees, secretaries of the president and VP personnel. The election was, however, delayed as the bank challenged the validity of the signature cards and moved that the election petition be dismissed. Following the hearing IMU sent another Letter (exhibit 2-7: explaining the delay and assuring the employees about the profit sharing plan) to the employees. Two weeks later, the hearing officer denied the banks motion to dismiss and it was approved by the regional director of NLRB. The bank filed a petition for review which was denied two weeks later. NLRB set a date for election one month later

which was almost exactly five months after the union filed for election. It was also a few days after the new hospital-medical plan became effective. The president told VP personnel to chalk out an action plan for the next 30 days remaining for the election.

V.

Strategic Alternatives and Recommendations: The top executives of the bank can chalk out a plan considering the following strategic issues before the election takes place in a month;

The FNB is not in a position to ignore the possibility of unionization at the bank. IMU has strong grounds to be the representatives of the employees as a bargaining agent. The establishment of the employer paid hospital medical care plan may tilt the mindset of the employees before election considering the fact that FNB has in fact started to materialize their employer paid hospital medical care plan prior to the involvement of IMU. Re-evaluating the salaries and other benefit plans is also another alternative to improve the image of the bank to its employees.
VI.

Conclusion:

Since its establishment in 1892, FNB is doing business in the banking sector without much trouble, either from its competitor banks of the locality and other business organizations or from its employees regarding industrial relations. It is quite apparent from its longevity in the banking sector as well as its expansion by establishing 16 branch offices. However, recent successful activities of unions (IMU, NEA) in organizing employees in auto plants, smaller banks and the teachers of the locality have brought about the harsh truth of unionization to the bank. The unions are very much methodical in their approach to the

employees to convince them about the benefits of being represented by an union for bargaining with the employer. The absence of the employer paid hospital-medical plan at the bank is of foremost concern of the employees and the union has grabbed this issue to raise their issue regarding unionization. Even though FNB has tried its best to convince the employees of not selecting an union as their representative, it appears that it will not be possible for the bank to prevent IMU to get elected as the bargaining agent of the employees.