NorskeCanada’s Powell River plant sheds ‘worst’ labour relations rep
In the 1990s, the British Columbia pulp and paper industry had a well-earned reputation for some of the most bitter labour-management relations in Canada. Following a bitter strike in 1997, Fletcher Challenge’s labour relations on the West Coast were among the worst in the forest industry.
But when Norwegian paper giant Norske Skog bought Fletcher Challenge in 2000, which in turn bought Pacifica Papers, the merged entity known as NorskeCanada — which has since been renamed Catalyst Paper — encouraged a strong, values-driven management and co-operative relationships with workers and unions.
So the new senior management team at NorskeCanada knew they needed fresh leadership at their Powell River plant. Between 1980 and 2000, Powell River’s fortunes had declined dramatically. The plant went from 10 paper-making machines to three and from 2,100 employees to 1,000. Layoffs, combined with an autocratic, command-and-control style of mill management gave Powell River, then owned by Pacifica Papers, a reputation among unionized workers as the worst mill in the worst company in the worst industry in British Columbia.
“All that was bad about pulp and paper industrial relations was encompassed in Powell River,” said Brian Johnston, who was promoted to site vice-president at Powell River.
Ed Doherty, who was relocated to become the director of HR, recalled the confrontational relationship with the union was such that they “had to resort to third parties to resolve almost everything.” The union leaders at Powell River were long-time employees Mike Verdiel and Gary Thorsell.
In September 2001 CEO Russ Horner made a trip to Powell River to announce that the kraft pulp mill, which was part of the Powell River complex, was closing because it was no longer competitive. Of the 1,000 employees at Powell River, 300 would be laid off, all from Local 76 of the Communications, Energy and Paperworkers Union of Canada (CEP).
Union workers had become resigned to similar messages, but what they didn’t expect was what Horner said next: “Every employee of the mill will have a job or will have a package that they accept.”
There would be no involuntary layoffs. The options included: relocating to one of the other three NorskeCanada mills on Vancouver Island, which had not been filling vacancies for six months to accommodate the Powell River workers; early retirement packages; severance packages; apprenticeship programs (the first such programs in 14 years); and re-training packages in forestry or other industries.
“NorskeCanada had done their homework. They did it as painlessly as possible,” said Thorsell. But the Local 76 union executive proposed another idea to management to further reduce the pain. If members throughout the entire plant went to a 37.3-hour workweek, they could save another 18 jobs.
Management and Local 76 president Verdiel worked together and agreed to implement the change. The result was that Local 76 day workers received every third Friday off as a designated averaging day (DAD) to average 37.3 hours.
Ironically, the closure of the Powell River kraft mill represented a real turning point in labour relations with NorskeCanada.
“The union was waiting to see the true colours of the company, but with the way the downsizing was handled, involving the union and demonstrating a different philosophy, members were convinced,” said Thorsell.
The goodwill would be further strengthened as the company turned its attention to safety issues, an initiative that stated, as its first and second value, that “all injuries can be prevented” and “safety has overriding priority.”
As a result of this initiative, lost-time injuries dropped from 36 in 2001 to eight in 2002. In July 2004, Powell River achieved a new record of six months without a lost-time injury and finished the year with only four lost-time injuries — another site record.
The union now had concrete results of real change that were driven by management’s new vision. This opened the way for co-operation in the upcoming round of collective bargaining. As the collective bargaining agreement was set to expire in 2003, some major customers began warning NorskeCanada they would not renew their contracts because of the risk of a strike.
NorskeCanada management took the problem to union local presidents and to Dave Coles, western region vice-president of CEP, now national president.
Ron Buchhorn, responsible for industrial relations at NorskeCanada, recalled: “Our relationship with both our employees and our unions wasn’t solid enough that they would just trust us with that. So we engaged in a number of customer visits and we brought customers into our mills…Over a year, I think both parties came to the conclusion that we had to do something about bargaining early.”
The concept of early negotiation was unprecedented in the industry for several reasons. First, the antagonistic relationship between companies and unions in the pulp and paper industry in B.C. not only didn’t provide opportunity for early settlement but would often end in a strike or lockout.
Second, negotiations had traditionally followed a patterned bargaining approach where the union chose the company with whom it wanted to negotiate. When agreement was reached with that company, the union would use the collective bargaining agreement to set a pattern for similar agreements with all the other pulp and paper firms in B.C. Early negotiation would reverse tradition by having NorskeCanada and the union jointly deciding to bargain first.
Third, NorskeCanada would break away from the other firms in the industry and negotiate a deal solely based on its own interests.
In the minds of management and union leaders, the risk of breaking industry tradition was far outweighed by the crippling effects the loss of orders would have on NorskeCanada’s operations and workers. Management offered a guarantee they would not ask for concessions from the union during the bargaining process, but that it was “now or never” for negotiations.
With management’s commitment to “no clawbacks,” the union leadership was prepared to bargain early, but only if all 125 union local pulp and paper representatives from across the province were in the room to ensure a transparent bargaining process. The company agreed to this condition.
The union, led by Coles, and management, led by Buchhorn, jointly and within their own caucuses, spent weeks narrowing down the agenda items that would be discussed in negotiations. When they sat down in September 2002, they reached a deal in nine days. The success left everyone involved, on both sides, amazed. The result was a five-year deal.
It was a welcome success by management and a union worn down by decades of the old, acrimonious negotiations. For the first time in memory, families of the plant workers could plan vacations and house purchases under the security of a labour agreement that would not expire for almost six years. In addition, customer concerns over security of supply were erased and orders were renewed.
The remarkable turnaround in labour-management relations at NorskeCanada can be attributed to three groups of practices: interdependence, involvement and operational excellence.
Labour and management understand their interdependence in attaining common objectives of plant profitability and job retention. Those common objectives drive the sharing of information. With increased involvement, union and management jointly raise operational productivity, which in turn justifies the interdependence. The cycle builds upon itself.
In moving from a highly directive organization with Fletcher Challenge and Pacifica Paper to a high involvement organization with NorskeCanada, the key was having a cross-section of managers, supervisors, union leaders and plant workers in meetings where they can share knowledge on plant operations and ideas for improvement. These meetings include quarterly executive group meetings, monthly business reviews, safety meetings, senior management team meetings, customer visits and morning updates.
Management does not hesitate to ask union workers to represent the mill with visits to customer sites to discover how to serve customers better. Reciprocally, workers expect management to honestly disclose profitability and operational problems and to involve hourly employees to find solutions to the challenges facing the mill’s operation and future.
Site vice-president Johnston takes trust and involvement to the next level.
“I’ve invited Gary (Thorsell) and Mike (Verdiel) to all the regular meetings I have with the senior management team. I consider Gary and Mike to be part of that team,” said Johnston.
Thorsell and Verdiel point out that this level of co-operation is not the co-opting of the union by management. The leaders continue to focus on their membership in all discussions.
For example, if a meeting were to turn to discussion on sensitive issues, such as employee discipline, Verdiel and Thorsell may excuse themselves. The union’s perspective is echoed by Coles.
“When you work co-operatively, you have to do it with respect for each other’s positions. That is what both sides are endorsing right now.… There is a significant difference between working through issues and being co-opted,” he said.
Darcy Shenfield was a PhD student in the Haskayne School of Business at the University of Calgary. Allen Ponak is a Calgary-based arbitrator, as well as professor emeritus and director of the Industrial Labour Relations Research Group at the university. For more information on the film, Beyond Collision: High Integrity Labour Relations, please contact Allen at [email protected].
But when Norwegian paper giant Norske Skog bought Fletcher Challenge in 2000, which in turn bought Pacifica Papers, the merged entity known as NorskeCanada — which has since been renamed Catalyst Paper — encouraged a strong, values-driven management and co-operative relationships with workers and unions.
So the new senior management team at NorskeCanada knew they needed fresh leadership at their Powell River plant. Between 1980 and 2000, Powell River’s fortunes had declined dramatically. The plant went from 10 paper-making machines to three and from 2,100 employees to 1,000. Layoffs, combined with an autocratic, command-and-control style of mill management gave Powell River, then owned by Pacifica Papers, a reputation among unionized workers as the worst mill in the worst company in the worst industry in British Columbia.
“All that was bad about pulp and paper industrial relations was encompassed in Powell River,” said Brian Johnston, who was promoted to site vice-president at Powell River.
Ed Doherty, who was relocated to become the director of HR, recalled the confrontational relationship with the union was such that they “had to resort to third parties to resolve almost everything.” The union leaders at Powell River were long-time employees Mike Verdiel and Gary Thorsell.
In September 2001 CEO Russ Horner made a trip to Powell River to announce that the kraft pulp mill, which was part of the Powell River complex, was closing because it was no longer competitive. Of the 1,000 employees at Powell River, 300 would be laid off, all from Local 76 of the Communications, Energy and Paperworkers Union of Canada (CEP).
Union workers had become resigned to similar messages, but what they didn’t expect was what Horner said next: “Every employee of the mill will have a job or will have a package that they accept.”
There would be no involuntary layoffs. The options included: relocating to one of the other three NorskeCanada mills on Vancouver Island, which had not been filling vacancies for six months to accommodate the Powell River workers; early retirement packages; severance packages; apprenticeship programs (the first such programs in 14 years); and re-training packages in forestry or other industries.
“NorskeCanada had done their homework. They did it as painlessly as possible,” said Thorsell. But the Local 76 union executive proposed another idea to management to further reduce the pain. If members throughout the entire plant went to a 37.3-hour workweek, they could save another 18 jobs.
Management and Local 76 president Verdiel worked together and agreed to implement the change. The result was that Local 76 day workers received every third Friday off as a designated averaging day (DAD) to average 37.3 hours.
Ironically, the closure of the Powell River kraft mill represented a real turning point in labour relations with NorskeCanada.
“The union was waiting to see the true colours of the company, but with the way the downsizing was handled, involving the union and demonstrating a different philosophy, members were convinced,” said Thorsell.
The goodwill would be further strengthened as the company turned its attention to safety issues, an initiative that stated, as its first and second value, that “all injuries can be prevented” and “safety has overriding priority.”
As a result of this initiative, lost-time injuries dropped from 36 in 2001 to eight in 2002. In July 2004, Powell River achieved a new record of six months without a lost-time injury and finished the year with only four lost-time injuries — another site record.
The union now had concrete results of real change that were driven by management’s new vision. This opened the way for co-operation in the upcoming round of collective bargaining. As the collective bargaining agreement was set to expire in 2003, some major customers began warning NorskeCanada they would not renew their contracts because of the risk of a strike.
NorskeCanada management took the problem to union local presidents and to Dave Coles, western region vice-president of CEP, now national president.
Ron Buchhorn, responsible for industrial relations at NorskeCanada, recalled: “Our relationship with both our employees and our unions wasn’t solid enough that they would just trust us with that. So we engaged in a number of customer visits and we brought customers into our mills…Over a year, I think both parties came to the conclusion that we had to do something about bargaining early.”
The concept of early negotiation was unprecedented in the industry for several reasons. First, the antagonistic relationship between companies and unions in the pulp and paper industry in B.C. not only didn’t provide opportunity for early settlement but would often end in a strike or lockout.
Second, negotiations had traditionally followed a patterned bargaining approach where the union chose the company with whom it wanted to negotiate. When agreement was reached with that company, the union would use the collective bargaining agreement to set a pattern for similar agreements with all the other pulp and paper firms in B.C. Early negotiation would reverse tradition by having NorskeCanada and the union jointly deciding to bargain first.
Third, NorskeCanada would break away from the other firms in the industry and negotiate a deal solely based on its own interests.
In the minds of management and union leaders, the risk of breaking industry tradition was far outweighed by the crippling effects the loss of orders would have on NorskeCanada’s operations and workers. Management offered a guarantee they would not ask for concessions from the union during the bargaining process, but that it was “now or never” for negotiations.
With management’s commitment to “no clawbacks,” the union leadership was prepared to bargain early, but only if all 125 union local pulp and paper representatives from across the province were in the room to ensure a transparent bargaining process. The company agreed to this condition.
The union, led by Coles, and management, led by Buchhorn, jointly and within their own caucuses, spent weeks narrowing down the agenda items that would be discussed in negotiations. When they sat down in September 2002, they reached a deal in nine days. The success left everyone involved, on both sides, amazed. The result was a five-year deal.
It was a welcome success by management and a union worn down by decades of the old, acrimonious negotiations. For the first time in memory, families of the plant workers could plan vacations and house purchases under the security of a labour agreement that would not expire for almost six years. In addition, customer concerns over security of supply were erased and orders were renewed.
The remarkable turnaround in labour-management relations at NorskeCanada can be attributed to three groups of practices: interdependence, involvement and operational excellence.
Labour and management understand their interdependence in attaining common objectives of plant profitability and job retention. Those common objectives drive the sharing of information. With increased involvement, union and management jointly raise operational productivity, which in turn justifies the interdependence. The cycle builds upon itself.
In moving from a highly directive organization with Fletcher Challenge and Pacifica Paper to a high involvement organization with NorskeCanada, the key was having a cross-section of managers, supervisors, union leaders and plant workers in meetings where they can share knowledge on plant operations and ideas for improvement. These meetings include quarterly executive group meetings, monthly business reviews, safety meetings, senior management team meetings, customer visits and morning updates.
Management does not hesitate to ask union workers to represent the mill with visits to customer sites to discover how to serve customers better. Reciprocally, workers expect management to honestly disclose profitability and operational problems and to involve hourly employees to find solutions to the challenges facing the mill’s operation and future.
Site vice-president Johnston takes trust and involvement to the next level.
“I’ve invited Gary (Thorsell) and Mike (Verdiel) to all the regular meetings I have with the senior management team. I consider Gary and Mike to be part of that team,” said Johnston.
Thorsell and Verdiel point out that this level of co-operation is not the co-opting of the union by management. The leaders continue to focus on their membership in all discussions.
For example, if a meeting were to turn to discussion on sensitive issues, such as employee discipline, Verdiel and Thorsell may excuse themselves. The union’s perspective is echoed by Coles.
“When you work co-operatively, you have to do it with respect for each other’s positions. That is what both sides are endorsing right now.… There is a significant difference between working through issues and being co-opted,” he said.
Darcy Shenfield was a PhD student in the Haskayne School of Business at the University of Calgary. Allen Ponak is a Calgary-based arbitrator, as well as professor emeritus and director of the Industrial Labour Relations Research Group at the university. For more information on the film, Beyond Collision: High Integrity Labour Relations, please contact Allen at [email protected].
