Group 6 - Case 2 - Union

De La Salle University - Manila
Master of Business Administration

A Case Study on SGA Industries
In Partial Fulfilment of the Requirements
in Human Resource Management with Organizational Behavior (HRM535M)

Submitted By:
Austria, Kristofferson
Cua, Raymond Gerald
Reyes, Bernadette
Vital, Jhona Jane

Submitted To:
Dr. Mary Margaret Que
A Case Study on SGA Industries 2

Summary / Synthesis
SGA Industries is a big player in the hosiery business that employed approximately 6,500
people. It reached its peak under the management of the Anderson family with the help of its
dedicated and loyal employees. After the death of the last member of the Anderson family, the
company was purchased by Jack Philips, an entrepreneur and business leader and was headed by
Ted White. During their time, the hosiery industry experienced challenges such as foreign
competition and advancement of technology. These led the company to cut its labor costs, which
eventually resulted to a tension between the employees and the management.
The tension gave birth to union organizing efforts of the employees with the help of the
Amalgamated Clothing and Textile Workers Union (ACTWU). To counter this move, SGA
Industries created an anti-union campaign headed by President White. Both parties made
extensive efforts to appeal to the employees and even to the members of the community. This
brings about the division of employees on which party to join that will give them enough
protection.
Point of View
The group will take the point of view of President White and the top management team as
they are the ones who are key in turning the tide of SGA Industries.
Statement of the Problem
What should the top management of SGA Industries do to protect the interests of the
organization and its employees?
Statement of Objectives
The context and purpose of this study aims to elaborate the following:


Protect rights of the employees
Protecting rights of the employees will show how companies practice good
governance in terms of fair and just treatment. With this, the workers will be able to feel
their importance in the organization and their part in a successful future for the company.
An employee who feels that he/she is being protected of his/her rights will have sense of
job security that will eventually be a motivating tool to perform and serve better.
Ensure profitability of the company
Profit is one of the main reasons of an individual to venture into business. In
order to achieve this, the management must be well equipped with the knowledge and
expertise in handling and controlling finances in all parts of the organization. However,
the business operation cannot focus on this alone as other areas might be sacrificed.
Profit must come side by side with good governance.
Establish unity among all members of the organization
Unity is one of the key factors to create a harmonious relationship among all
members of an organization. This can start in the introduction of goals wherein
individual goals must be aligned with the firms mission, vision and goals. With this, all
can expect that every move in the business operation is directed towards one path, the
path to a successful today and tomorrow.
Avoid labor issues/charges due to unethical/illegal practices
An organization is expected to be aware of the laws and regulations of the labor
code. With awareness and understanding on this, there will be a high possibility for firms
to not be connected with any labor cases. Avoiding labor cases can bring sound business
operation.


Maintain good reputation of the company
Perception of the customers and other members of the community is very
important in the success of a firm. Their understanding on the products and services will
decide the future. In order to avoid failure, members of the top management down to the
rank and file employees must be oriented of the importance of unity to produce and offer
only the finest. With these, good status and reputation will follow and will have a huge
impact on the companys longevity in the market.
Create a business environment that promotes welfare for both the management and
employees
A firm does not exist for the benefit of the stockholders and top management
alone, it also exist for the benefit of the employees. Both parties working hand in hand
will surely post a strong relationship that can surpass problems within and outside the
organization. A business environment that promotes welfare for both parties will lessen
the possibility of union efforts.
Areas of Consideration
In order to understand the various moving elements in the case, the group used three
frameworks - the Labor Relations Framework, Porters Five Forces, and the SWOT Analysis.
Labor Relations Framework
Dunlops Industrial Relations Systems stated that in order to have a successful
industrial relations system, there needs to be institutions and a web of rules in resolving
issues between the management, employees, and society (Noe, Hollenbeck, Gerhart, &
Wright, 2012B).

As shown in the diagram above, one important factor in the labor relations
framework is the competitive challenges faced by the firm. It is the company's
responsibility to proactively counter the negative effects of these challenges while still
promoting the interests of all its stakeholders (management, employees, and owners,
among others). The Porter's Five Forces Model addresses, in detail, the internal and
external drivers of the competitiveness of the hosiery industry during that period.
The framework also addresses the concerns and goals of the participants in a labor
relations system including the management, employees, union members, and even the
society, in general. When the employees of SGA felt the effects of the challenges that the
company were facing, there wasnt any formal means for them to voice their opinions
out. As a result, they resorted to forming a union. Then again, there are other ways to
accomplish this without a union, which would be part of what President White has to put
in place.

The objective of the company is to come up with terms which are beneficial to the
management, employees, and external stakeholders while ensuring that the competitive
challenges are legally and sufficiently addressed.
Porters Five Forces Model
Porters Five Forces model, an analytical framework which describes the internal
and external factors that drive the competitiveness of an industry and determines its
strengths and weaknesses, can be used to explain the reason why SGA Industries
vehemently opposes unionization.

In the diagram above, the impact of labor unions folds under the power of
suppliers. In a tough market such as what SGA is experiencing, it makes a lot of sense to
block unionization because collective bargaining agreements often focus on higher
employee wages and increased benefits which will raise the companys operating cost.
With higher costs, the tendency of a company is to transfer some of the burden over to
their buyers by means of a more expensive product. In an industry where there are a lot of
suppliers, the capability of a firm to raise their prices is limited (Guide to Business

Planning, 2013). Unless a firm can clearly differentiate its product from the rest of the
market, merchants will tend to favor cheaper products.
SWOT Analysis
Strengths
SGA is the market leader in production and marketing of men's and women's
hosiery and undergarments.
Sam Gerome Anderson and his family, the former owners of SGA, exhibited
social responsibility and generosity during their time of ownership, thus SGA
originally gained a reputation of being a "steady job provider in an unstable
industry"
The value of "family heritage" is prevailing among some of its 'loyal' employees.
SGA's new owner, Jack Phillips, has the business skills, being a well-known
Atlanta business man and leader. He placed significance on employee
performance and productivity.
Weaknesses
The management fails to recognize (any) significant contribution of a labor union
in the company.
The owner, Jack Phillips, does not entertain the insights raised by the union. He
has explicitly negated the union organizing efforts led by the Amalgamated
Clothing and Textile Workers (ACTWU) which brings in heated talks among the
members of the organization and in the community, affecting not only the costs of
the company but its reputation as well.
Jack Phillips was regarded as "greedy and ruthless." He has a tendency to bank
on the job security and threaten the employees that the management has the sole
right on how to operate (or not operate at all) the company.
There is a lack of "job security" in the company. Amidst the strong competition in
the industry, the management opted to lay off workers and reduce wage rates in

order to keep its costs low and be able to compete with foreign manufacturers and
imports.
The top officials are deemed "insensitive", receiving bonuses and hefty salary
increases while many employees in the plant lost their jobs or received lower
wages.
Opportunities
The modernization of the manufacturing processes in the hosiery and
undergarments industry can be adapted by the company to improve efficiency in
operations. Technological advancement, capital investments, and employee
training programs can be utilized by the company to be able to compete both
domestically and globally.
Mergers between companies can be considered to strengthen its balance sheet and
increase its existing resources.
The entrance of labor union in the company may provide job security for the
employees since the labor union officials will act as their representative in
management meeting, "leveling the playing field" between employees and
management.
Threats
The advancement of technology and modernization of production process requires
more skilled workers, resulting to higher turnover, and higher investments in
machineries and equipment, consequentially increasing costs for the companies.
The potential entrance of labor union in the company brings in paradigm shift in
the current management of the company. Disputes and disagreements between the
management and labor union may negatively impact the operations. In an extreme
condition, the dispute may result to strike which may disrupt the operations
resulting to losses for the company.

The whole industry experienced fierce competition. Increasing foreign
competitors and imports drastically affected the domestic manufacturers of
hosiery including SGA. International sales declined by 160% to $10 million.
Alternative Courses of Action
The alternative courses of action are formulated in consideration of the objectives of the
case to solve the problem statement. Each ACA is verified using the pros and cons to check its
viability and the likely result of its implementation.
ACA 1 SGAs top management team to accept the unionization and work
cooperatively with the union leaders to protect the welfare of the employees, and to
come up with terms which are beneficial to both the employees and the whole
organization.
Pros
The employees will be well-represented and their collective voices will be
effectively heard by the management through the union leaders-management
dialogue. Their welfare will be protected and job security will not be an issue.
The management will be able to easily convey their message to all their
employees through the union representatives.
This ACA avoids the possible unfair treatment of the management to the
employees (either intentional or unintentional) since the union leaders will be able
to voice out the concerns of the workers.
SGA's reputation will improve because it will accept a significant change in the
organization by allowing the union to "penetrate" in its system
SGA will avoid possible legal actions and lawsuits which will be filed against it
because of its blatant effort to stop the unionization in the company.
The industry will experience further modernization and technological
advancement. It is only appropriate that the management will listen to the
concerns of the employees in the light of these changes. Thus, through the union,

the management might be able to come up with better decisions, both for the
employees and the whole organization.
Cons
The company will incur additional costs (by increasing wages and avoiding job
cuts) because of the bargaining power that the union might be able to exercise.
This might be a disadvantage for the company, especially now that it needs to cut
on costs due to the fierce competition in the industry.
Some employees may still value "family heritage" and will not cooperate with
other employees who might want to join the union. This will result to rift among
the ranks of the workers.
Instead of focusing on improving its operating efficiency, the company will
dedicate their time and resources in coming up with a collective bargaining
agreement to ensure that both the employees and the management will have "fair
treatment and fair share".
Depending on the outcome of the collective bargaining agreement, current and
incoming employees, regardless of whether or not they are interested in joining
the union, might be forced to pay for membership/union fees.
Management will find it difficult to introduce changes to the process that they
may deem necessary for their employees welfare if it does not get the support of
the union.
Unions have a tendency to be too focused on the concerns of the employees. Their
disregard for the welfare and financial stability of the organization as a whole
may result to loss of competitive advantage on the part of the organization which
could ultimately lead to its downfall.
The added cost brought by having a union will ultimately be transferred to the
consumers which will result to less patronage.


ACA 2 SGAs top management team to continue to resist the union and prepare
for any legal implications to protect the interests of the organization and its
employees.
Pros
The company will not incur additional costs and it can continue with its current
practice of decreasing its expenses by laying off workers and reducing wages.
The company will be able to maintain the values of the original owner that it does
not need a union to be able to work well.
The cost that the organization has to settle with union activist is usually lower
than the cost that would be incurred if the union managed to get most of its
demands during the contract negotiations. (Noe et al., 2012B)
Employers generally have more financial resources than their employees and the
union. This gives employers a much better chance of surviving a union initiated
work stoppage as workers will eventually need to earn their wages to support their
families. SGA also has other plants outside of Georgia which may take on a
heavier load to compensate for the work stoppage. This advantage would allow
the SGA to get its way in most contract negotiation conflicts between the union
and the employer.
Cons
The employees welfare and job security are at risk. The company can, at any
time, lay off workers or cut wages, without considering the damages these
initiatives can cause.
The company might face legal charges because of the outright campaign against
union which are also costly and risky for its reputation.
Employees and their performances are important to the organization's success. If
the employee's job security is at risk, he or she might exhibit poor performance,
thereby, affecting the company's output.

According to the Equity Theory, theft could rise as an effect of the pay cuts (Noe
et al., 2012B).
This will be an unending saga between the management and the union. There will
be no consensus and the company will just waste their efforts in stopping the
union from having their way.
ACA 3 SGAs top management team to accept the unionization providing minimal
support and cooperation with the union. The focus will instead be on enhancing its
relationship with the employees with an end goal of successfully decertifying the
union.
Pros
The management will improve its treatment on its workers, proving that it can
work well with its employees directly, not needing a third-party intervention to
address their concerns.
The union, for the time being, will stop their negative campaign towards the
owners, because the management has already accepted unionization.
The company will avoid lawsuits and potential unfair labor practice charges.
The employees' relationship with management will improve. The management
will be able to show that it is listening to the concerns of the employees.
Company reputation will improve as they will be known as a company that is
more concerned about the welfare of their employees than satisfying the financial
expectations of investors and stockholders.
The organization still has a lot of anti-union supporters. If they can improve their
relationship with union supporters and manage to win them over by making them
realize how much better their compensation and benefits and job security will be
without a union, management has a strong chance of decertifying the union.
Research indicates that when decertification elections are held, unions lose
majority of the time. (Noe et al., 2012B)


Cons
Management does not have complete control over employee-related decisions due
to the presence of a union.
The union leaders might demand, in the future, additional voice in the
organization, thereby, repeating the union campaigns that it has already
encountered in the past.
The added cost brought by having a union will ultimately be transferred to the
consumers which will result to less patronage, at least for the time being.
ACA 4 - SGAs top management team to move its operations to a different location
where theres less possibility of being unionized.
Pros
The company can avoid the union organizing efforts of their Georgia-based
employees.
Management will continue to have complete autonomy to make decisions they
deem good for the company.
Cons
SGA could face legal sanctions with the move.
This ACA does not address the concerns of the employees (job security,
employee welfare) and will only avoid the union's interference in its operations.
Given the weakening sales and tough competition, moving to a different location
will be very costly to the organization.
Most employees of SGA reside in Anderson (location of the plant). The transfer
of the location might be problematic because of the resistance of the employees to
transfer and the cost of hiring new employees if the transfer commences.
Many union organizations have national membership. They can still go after SGA
even if it has transferred its location.

Recommendation
The decision criteria and weights provide the important areas to consider in choosing the
best solution for the case. Each criterion is assigned weights depending on the level of its
importance to the organization.
1. Employee Welfare
Weight: 25%
Definition: This criterion focuses on the overall welfare, which pertains to the
compensation, benefits, personal and professional development, health and
security, of employees.
Rationale: People are one of the most important assets especially for a company
like SGA which operates in an industry that is labor intensive. An organization
can have all the resources available at its disposal but without qualified people to
utilize those resources, it will be hard pressed to achieve profitability. Treating
employees well is critical to a business because a demotivated workforce will
likely result to lower productivity.
2. Cost Implication
Weight: 15%
Definition: This criterion represents the importance that cost plays in a highly
competitive industry where the slightest difference in pricing could affect the
decision of buyers.
Rationale: Cost is a strong driving force in any decision because financial success
can never be attained unless an organization can generate revenue that outweighs
its costs. It is therefore crucial for SGA to minimize the added costs that a
decision will bring into their operations.
3. Alignment with organization's goals
Weight: 15%
Definition: This criterion focuses on the ability of the organization to stay on
track in achieving its vision.

Rationale: It is important for every business decision to be aligned or at least be
geared towards achievement of the organizations overarching goal. Having
autonomy in decision making is crucial to an organizations ability to move
forward with their strategy.
4. Legality
Weight: 10%
Definition: This criterion highlights the importance of an organizations degree of
compliance with the law.
Rationale: The legal environment has tremendous influence over an
organizations ability to operate. Any action that is deemed illegal in the eyes of
the court has both financial and operational consequences. The government has a
duty to uphold the law even if it results to the demise of an organization.
5. Company Reputation
Weight: 10%
Definition: This criterion focuses on the overall image of a certain unit/company
to the people.
Rationale: Reputation plays a very important role in the success of a business - it
can either make or break a unit/organization. In SGAs case, it is important for
them to maintain a reputation of being a steady job provider in an unstable
industry and a maker of high-quality hosiery and undergarments. Good reputation
has been key to SGAs longevity.
6. Sustainability of the business operations
Weight: 25%
Definition: This criterion focuses on the ability of a company to maintain its
profitability amidst the internal and external challenges that it faces, and a highly
competitive market.
Rationale: SGA is facing stiff competition from foreign firms and the increasing
inflow of imports. The result is a significant drop in their sales. Any major
decision on the part of SGA to improve their position in the market should be
sustainable enough to withstand the continuous pressure from their competitors
and the union.

Evaluation of the Alternative Courses of Action
Table 1 below summarizes the scores that the group awarded for each alternative.
Table 1
Decision Criteria % ACA 1 ACA 2 ACA 3 ACA 4
Employee Welfare 25% 25% 10% 25% 3%
Cost Implication 15% 5% 8% 7% 3%
Alignment with organizations goals 15% 5% 12% 8% 10%
Legality 10% 10% 2% 8% 3%
Company Reputation 10% 8% 4% 10% 2%
Sustainability of the business operations 25% 12% 10% 18% 5%
TOTAL 100% 65% 46% 76% 26%
An effective industrial relations system does not eliminate conflict; rather, it provides
institutions a venue to resolve conflict in a way that minimizes the costs to management,
employees, and society (Noe et al., 2012B).
The President and top management of SGA should ensure that its labor relations address
the concerns of the three levels of the industrial relations model developed by Katz and Thomas
(as cited by Noe et al., 2012B). These three levels include the following: strategic level,
functional level, and workplace level.
At the strategic level, the management of SGA has to decide on whether to closely work
with a union or improve its relationship with its employees through development of non-union
facilities. By choosing ACA 3, the management strikes a balance between accepting unionization
and improving its relationship with its employees. This also exhibits that the company puts
importance on both the goals of the firm and the employees welfare as this will provide the
company cost efficiency in operations amidst the strong competition and will ensure that the
welfare of the employees will be protected as the management has acknowledged the fact that it
should also address this pressing concern (by improving its relationship with employees). The

choices at the strategic level affect the labor-management interaction at the second level, the
functional level (Katz and Thomas as cited by Noe et al., 2012B).
The functional level pertains to actual labor-management interaction where the
negotiations occur. As ACA 3 will only involve the union at a minimum, SGA may focus their
attention to the concerns of the employees, either union or nonunion member. By recognizing the
union, the company will avoid legal charges that may be filed against it and save on costs.
The third level or the workplace level is the actual level wherein the contract is
administered. Because of the minimal influence of union in the organization, the company may
find possible legal avenues to decertify the union. In this manner, the company has shown its
genuine concern on its employees and will even save on cost by eventually decertifying the
union in the organization. Given the stiff competition in the industry, this ACA is a win-win for
both the company and the employees.
Implementation
Showing minimal support for the union does not mean blatantly delaying progress on its
requests. It simply means prioritizing the companys own efforts of enhancing its relationship
with the employees. In order to do this, the implementation plan will revolve around these two
main tasks - improve the pay structure and benefits, and open communication lines with the
employees.
Improve the pay structure and benefits
1. HR will review all the job descriptions, and identify the key jobs - those that have
a stable set of responsibilities which is common to other organizations (Noe et al.,
2012A). They will then conduct market pay surveys in order to compare the
current salary range of these employees against competitors.
Potential Barrier: The acquisition of this data may be costly. The company
can opt to prioritize the JDs that have the highest volume in heads.
2. HR will use this information to revise or develop a new pay structure for these
key jobs to ensure that each skill is well accounted for. With this, they will be able

to create a pay policy line, which they can use to develop the pay structure for
nonkey jobs. They will also group similar jobs and develop pay grades to make
merit increases manageable.
Potential Barrier: Evaluating the nonkey jobs may be difficult due to the
lack of uniformity of their responsibilities. Nevertheless, HR should work
together with President White in making its best assumptions to
accomplish this task.
3. President White, together with the top management will calculate their labor cost
based on this new pay structure, and adjust as needed to keep the company
sustainable.
Potential Barrier 1: If there is a huge variance in the monthly revenue
levels, choosing a reliable basis may pose a difficulty, especially with the
unstable environment, both internal and external. With this, the company
can choose the worst case scenario as the basis for them to manage their
expectations better.
Potential Barrier 2: This may result to an even lower pay for some or all of
the employees. In this case, the management should not proceed with
revising the pay structure, at least for those who will be affected, because
this will only result to greater tensions, which the company cannot put to
chance.
4. The top management will also work with HR to revisit the cost needed to bring
back the benefits that were withheld. They will then determine the sales volume
needed for the company to be able to start affording these benefits again.
Potential Barrier: None.
5. The top management will communicate these plans first to the managers, then to
the employees, from the pay structure, merit increases, and benefits. The first two
will be implemented at the soonest time, while the benefits will be part of the
organizational goals for the next 6 to 12 months. For this task, it is critical to
highlight the market pay survey results and the situation of the other struggling
companies for the employees to realize that they are either at par or even better
off with the management of SGA Industries. The managers need to be fully

equipped with the relevant information for them to properly judge whether the
concerns of their reports need to be escalated to the top management (Noe et al.,
2012B). Putting the benefits as part of their goals would incentivize the
employees to be productive and be one with the company as they would see that
they will also benefit in the future.
Potential Barrier: The union may challenge this and impose a higher pay
structure. The company will have to stand its ground and show through the
numbers why this pay structure is their best solution in surviving the crisis
and keeping the company sustainable.
Open communication lines with the employees
1. HR will equip the first-level managers coaching skills so that they can
immediately have discussions with their reports regarding their concerns and
confidently represent the SGA management. They will also tap into those who
were anti-union since they would most likely be the most cooperative in helping
the management team. Through this, the employees will start to feel that they do
have a voice in the company, and the management is indeed listening to them.
Potential Barrier: If the managers are not trained well, the whole point of
making the employees feel that the management cares for them will go
down the drain. And so the audit function in the training is critical.
Additionally, the second task below can also be used to measure the
success of the first.
2. HR will create an employee feedback system, where employees can also submit
their concerns anonymously. This can be in the form of a suggestion box. HR will
review these and work together with the top management in creating action items
around them.
Potential Barrier: The employees may not believe that the company is
reading each submission since their submissions simply go into a box.
To handle this, HR should provide a report on what the top concerns are,
and what the management is doing about it, if there is a feasible solution.

All of these needs to be put in place within six months in order for the employees to
quickly realize that there will be no further value in continuing with the union. If things go
according to plan, this will move them to vote for decertifying the union.
Learning Points
An organization can survive the ever changing and sometimes unpredictable movement
in the business industry if there are enough resources, skills, technology and harmonious
relationship between the top level management and the rank and file employees. This is
especially true for labor intensive industries such as manufacturing. This harmonious relationship
can be achieved if the company together with all its members is aware of where the organization
wants to be in the future and both live by a set of values by heart to ensure unity in good and in
bad times. Furthermore, the goal of the organization and all its members must be aligned
towards one direction and that is to a successful future. A lot of unexpected events may occur
along the way and the management must be ready and equipped enough to handle it. Again, a
successful labor relation does not mean that conflicts are avoided, but rather both parties observe
a certain set of rules, and has the means to resolve their issues.
A company must exist not for the benefit of the stockholders and profit alone, but also for
all the employees of any position/rank. One must understand that behind the success of any
organization are the dedicated and productive employees that must be taken care of. Employees
should not be treated as individuals working only for money; they must be treated as members of
a family who is willing to exert best efforts and skills to achieve the goals and mission and vision
of the company. With this, they must be taken care of by hearing their voices and by giving
what is due and right. The equity theory states that when payment for the employees decreases, a
natural reaction is a decrease in performance as well. The biggest driver of motivation is pay for
services rendered, and benefits. That is why it is critical for companies to come up with a
convincing pay structure, and reward performers accordingly, and appropriately.


References
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2012A). Pay Structure Decisions. Human
resource management: Gaining competitive advantage (pp. 480-518). New York, NY:
McGraw-Hill.
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2012B). Collective Bargaining and Labor
Relations. Human resource management: Gaining competitive advantage (pp. 598-647).
New York, NY: McGraw-Hill.
Guide to Business Planning (2013). Porters Five Forces. Retrieved October 6, 2013, from
http://www.guidetobusinessplanning.com/minitutorials/portersfiveforces.html

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De La Salle University - Manila

Master of Business Administration

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