This Instructor's Manual, to accompany

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TO: D. G. Barnhouse III

FROM: Walt Dickens
RE: Newton Wage Structure
Here are the data on the wage rates and job classifications at Newton. We've kept the number of classifications down to a bare minimum so we can maintain maximal flexibility. We could sure "up" productivity if we could do the same at Grandville, especially if we use the new equipment there and can introduce this kind of flexibility.

1. General Mechanic $12.19 - 16.06
2. Operators/Technicians/Setup 10.55 - 12.19
3. Testing/Inspection 10.23 - 12.19
4. Material Handlers 10.23 - 11.88
5. Assemblers 8.94 - 11.00
6. House and Groundskeeping 8.30 - 10.55
Note: Currently all but 30 percent of the Newton employees are paid in the lower quartile of each wage range.

Company V


Mr. Walter L. Dickens, Jr.

Personnel Manager

D. G. Barnhouse Co., Inc.

13 Industry Row

Grandville, Illinois

Dear Walt,
I am enclosing a table I think may help you, taken from the wage survey data we're still putting together. I think I'll have more for you within the week, and I'll send you what I get as I get it.
I am still involved in trying to get the information you asked for on vacations, holidays, and so on. I'll be in touch soon.
Cordially yours,

Peter Brecke

Secretary, Chamber of Commerce

Company V (cont'd)




Product Hoists Controls Electronics Structural Pumps Truck

Steel Bodies
Union Steelworkers Machinists International Bridge, Iron, Machinists Allied

Union etc., Industrial

Reopening 8/16/07 6/17/07 7/1/07 9/15/07 8/15/07 6/30/07

Rates for:

Highest $17.88 $17.11 $18.43 $17.60 $17.88 $17.80



Punch $11.59 to $12.39 $13.03 ---- $12.75 $12.98

Press $14.16 (incent.

Operator (range) base)

Janitor $10.08 to $11.61 $10.75 $11.79 $11.46 $11.46


Average $ .33 $ .55 $ .50 $ .44 $ .44 $ .50


in 1990

Company VI



TO: Donald Barnhouse
FROM: Anne Follett
RE: UMP Negotiations

I finally have the figures you wanted the other day.

The cash flow information is attached, as per our revised projections. Unfortunately, the people making these predictions are being very reticent this year, so it's hard to see what could happen in the long run. But as you can see, things look bleak for the next few months.
On the other hand, it looks like our debt service is going to fall to $180,000 six months later, which will help some. In the fall we should also start to reap some of the benefits of our increased capacity, assuming Sales gets off its rear and starts getting us some orders.
You should be aware that, given the debt and production costs we currently face, a strike could really lead to serious cash difficulties.

Company VI



(all amounts $000)



2 Months


3 Months


4 Months


5 Months


6 Months


Cash Receipts

Starting Cash Bal.


$ 839

$ 30

$ 231

$ 259

$ 113








Misc. Receipts














Cash Disbursements

Operating Exp.







Mat’l Purchases





































Bank Loans



$ (625)

$ (626)

$ (625)

$ (625)

$ (625)



$ (625)

$ (625)

$ (625)

$ (625)

$ (625)

Ending Cash Bal.

$ 831

$ 30





Union I

"A Great Hotel in a Great Town"

Roland L. French

International Vice President

United Metal Products Union

580 Mezzo Plaza

Chicago, Illinois

Dear Roland,
Things are really heating up around here -- I just wanted to update you quickly on some specifics.
The recent membership meeting left us with quite a few partly contradictory proposals, though there were no really heated disputes at the meeting itself. But there's an atmosphere I can't quite read. My guess is that the Machinists would just love to get hold of the older workers at Grandville -- the skilled workers. They may even try to get the whole unit.
But there is a lot of ambivalence among the workers, I think. The older people think the union is the only way they can get improvements in the pension plan, but they don't seem like the way younger members are driving the union to take such a hard line. My guess is that they are not too happy about the possibility of a strike.
Bill White, our new president here, is getting pressured by some of the younger members to deliver on some of his hard line campaign proposals, and will probably feel like he has a lot to prove in these negotiations.
Things are complicated even further by the fact that everyone seems to expect big concession demands from DGB, since other firms in the area and industry have been getting lots of concessions recently.
It's obvious that DGB is going to have to take a new position in these negotiations, if for no other reason that they have to make some choices about the Grandville and Newton plants. The Newton plant -- in Indiana -- is a lot newer, and labor costs are probably lower there. Some people think Grandville will definitely be closed, because of its age. But others say old Barnhouse is too attached to the plant to close it. I don't know quite what to think.
Should we ask the company for more specific information on their plans for new technology investments, and where they are going to put the new stuff? Or should we wait to see what happens in the negotiations? Please give us your input on this dilemma, since we are meeting soon to figure out what line to take in the negotiations.
We took a strike vote -- very close results -- to keep the company on its toes and get us unified before the negotiations. We need you to get the International authorization for us on this.
Fraternally yours,
P.S. Can you also look into the rates by comparable firms with which we negotiate? And can you send us some information on what tends to happen when this kind of automation takes place?

Union II

TO: Negotiation Team
FROM: Harold Maud, Secretary

Here is a list, which is much too long, of the demands we are thinking of. Since some of you have negotiated with DGB before, and since all of you are close to the action, we are leaving it up to you to figure out which of these points to drop, which to emphasize, etc.

We are letting the membership know that you are in the process of figuring this out, since these were their demands in the first place.


1. Wage Increase: $1.85 all grades; $.65 unskilled;

$.85 skilled grades, etc.

30% all grades, etc.

$.25 as a trade off for SUB

$.35 as a trade off for retirement benefits (some serious dissent on this)
2. SUB: full pay for 12 months after layoff (2

variations on this)

3. PLANT CLOSING: one year advance notice; union involvement in

new technology decisions

4. EXTRA HOLIDAYS: 2 weeks after death in family

Friday after Thanksgiving

Flag Day

Christmas week

Day before New Year's

Martin Luther King's birthday

5. NEW TECHNOLOGY: no layoffs as result of introduction of same
6. PAID VACATION: two weeks after one year, three weeks after five

years, additional week for each five years

8. PENSIONS: 75% of pay at highest rate, with company paying

total contribution


STANDARDS: employee control over same

11. JURY DUTY: full pay (do we already have this?)
12. ROTATION: rotation possible to different jobs, and

quality circle meetings

13. BIRTHDAYS: off with pay
14. WORK RULES: set by committee with 50% workers

SCHEDULES: by mutual consent

17. COFFEE BREAKS: four, fifteen minutes each
18. LATRINES: new ones
19. PHYSICAL EXAMS: paid by company
20. SEVERANCE PAY: four technological displacement, four weeks' pay for every year of service


22. OVERTIME: 1-1/2 time for over 35 hours; double time for over 40 hours; double time for Saturdays; triple time for Sundays

CLAUSE: full cost-of-living reimbursement

24. INSURANCE: company makes total contribution, including for dependents
25. CAFETERIA: improvements

Union III

Arthur Showe

Grandville Palace

Grandville, Illinois

Dear Art,
Here are some wage rates we have negotiated with companies similar to DGB, for unskilled, semiskilled, and skilled workers, as per your request.
Argent Trailer Body Co., Detroit (expires 5/15/07)
Electrician A $19.93

Electrician B $19.21

Lathe Hand $15.75

Sweeper $13.63

Geld Carburetor Co., Wheeling, WV (expires 6/1/07)
Skilled Machine Craft $15.63 to $19.00

Auto, Screw Machine Operator $14.75

Punch Press Operator $14.69

Janitor $13.25

Dinero's Foundry, Battle Creek, MI (expires 12/31/07)
Machine Repair Machinist $15.00 to $16.88

Electrician A $14.28 to 14.98

Carpenter $14.28 to 14.69

Machine Operator, Complex Lathe $14.38 (base for incentive)

Machine Operator, Simple Lathe $13.64 (base for incentive)

Drill Press Operator $13.50 (base for incentive)

Janitor $11.50 (base for incentive)
Mooney manufacturers, Hartford, CT (expires 10/15/07)
Skilled Maintenance Craft $15.13 to 18.13

Drill Press Operator A $13.25 to 15.94

Drill Press Operator B $12.94 to 15.38

Laborer $11.63 to 13.50

I am also enclosing a draft of a standard SUB package for next year's negotiations.

Fraternally yours,

Leonard Levin

Research Department, UMP


PURPOSE: This plan is instituted by agreement between Local _________ of the United Metal Product Workers Union of America, hereafter referred to as "the Union," and D. G. Barnhouse Co., Inc., hereafter referred to as "the Company," in order to set forth the conditions under which employees of the Company will be provided benefits in the event of involuntary partial or total unemployment.
ELIGIBLE EMPLOYERS: This plan shall apply to all full-time employees of the company who are part of the bargaining unit represented by the Union, and to all new employees as of completion of their probationary period with the Company or after three months of hiring, whichever comes first.
BENEFIT CREDITS: A benefit credit unit will be added to an employee's account for every week of service in the Company, and for every week of paid vacation, until an account reaches the maximum of one hundred four (104) such credits. One such credit will be subtracted from the account for each full week for which the employee receives unemployment benefits from the Company; one-fifth (1/5) of a credit will be subtracted from the account for every day in a partial week during which the employee receives such funds.
Further, on the date on which this agreement is made effective each employee will automatically accrue one benefit credit unit for each month of service to the Company, up to the above stated maximum. Employees with established seniority who are not working for the Company on the date on which this agreement becomes effective will have such credits added to their accounts on the day they begin work for the Company again.
If the employee willingly terminates employment with the Company, any credits in his/her account will be canceled.
LAYOFF BENEFITS: If an eligible employee is laid off for reasons beyond his/her control he/she will receive a weekly benefit from the company until his/her credits are depleted, and provided that employee is available to accept suitable employment with the Company.
Evidence of an employee's "availability for work" will be determined by the same standards applied by the state, in cases where the employee is eligible for state unemployment insurance. if the employee is not eligible for such state benefits, he/she must provide the Company with evidence of availability to work on a weekly basis, except in cases where he/she is not available to work. Employees will stop receiving such benefits if they do not respond to a bona fide Company offer to return to work within the prescribed time period.
The maximum amount of benefit an employee can receive from the Company in one week will be twenty-eight (28) hours' pay at his/her regular hourly base rate, minus any state unemployment benefit for which the employee is eligible, plus two dollars ($3) per dependent up to four dependents (as defined by the dependency exemption standards of the Internal Revenue Service). If the period of layoff is less than a week, the amount paid by the Company will be prorated accordingly.

SHORT WORKWEEK BENEFITS: If an employee is unable to work a full workweek because of the occurrence of a scheduled or unscheduled short workweek, he/she will receive a maximum benefit of the difference between his/her actual gross pay and the equivalent of thirty-two (32) hours' pay at his/her regular hourly base rate.
TERMINATION BENEFITS: If the Company permanently terminates an eligible employee from the employment he/she will be eligible to receive a maximum lump-sum benefit of the equivalent of forty (40) hours' regular hourly wage for each year of credited service, except if the termination is voluntary on the employee's part or for cause on the Company's part.
This benefit will be payable by the company whether or not the employee has unused benefit credits to his/her account.
BENEFIT TRUST FUND: All benefits under this plan will be paid from a trust fund established for that purpose only, administered by a Company, appointed trustee, who will receive periodic contributions from the Company, invest them in cash or U.S. government obligations, and reimburse the Company for any benefits paid to eligible employees. Any income earned by these assets will be reinvested in the fund. The trustee must report monthly on all fund transactions to the Company and the Union, and may be paid for reasonable expenses from the fund.
ADMINISTRATION OF THE PLAN: The Company will maintain records for each eligible employee, showing how many credit units are in his/her account, and recording all transactions covered under this plan. Each eligible employee will receive a copy of this record of his/her status with respect to the fund within thirty-one (31) days after the end of each year. The Company shall also provide copies of all these records to the Union at the same time.
The Company shall be responsible for determining benefits and making payments in accordance with this agreement. If an employee wishes to appeal the Company's administration of this plan, he/she must submit a written statement to that effect and containing the facts on which the appeal is based to a committee comprised of four members, two Company-appointed and two Union-appointed. The matter will be referred to the normal grievance procedure if the committee cannot resolve the matter through a simple majority or if the employee is dissatisfied with the committee's resolution.
The Company is responsible for determining whether federal, state, or local taxes are payable on benefits received by employees or on income earned by the fund, and for withdrawing such taxes from employee benefits in the first case, and for paying such taxes out of assets from the fund in the second case.

TERMINATION OF THE PLAN: Only by mutual agreement between the Company and the Union can this plan be terminated or amended. If the agreement is terminated and a balance remains in the fund, this balance will be used in accordance with the plan until the fund is liquidated.

Union IV
Arthur Showe

Grandville Palace

Grandville, Illinois
Dear Sir and Brother:
Here is some information I got from the Grandville Labor Council about the terms of other agreements in the area, with respect to holidays, SUB, etc., as per your request. I hope you will find these data useful.
Marshall Co. (USW): one week after one year, two after five years, three after 15 years, and four after 20 years; pay based on average hours worked, but is no more than 40 hours per week.
Senger Pumps Co. (IAM): same as above, but paid on the basis of 2% gross earnings for each week of vacation.
Miltonico (IUE): one week's vacation after one year, two after three, three after ten, and four after 20. (Pay basis uncertain.)
Charing Cross Parts (UAW): same as Marshall.
Rendington Building (Iron Workers): don't have many details since the Iron Workers don't belong to the council, but Pete Josephson from the UAW said they also give a fourth week after 20 years.
HOLIDAYS: There are three companies with 9 paid holidays, two with 11, and two with 8. (In fact, without it being written in the contract, these latter get a half day off before Christmas or New Year's, so it amounts to 8 1/2 days.) The organized bakery also has 11 days.
SUB: There are only two that I know of in the area; the IAM had to strike to get it at Charing Cross Parts, and the Mundie Co. gave it to the Allied Industrial Workers last year. (They're not part of our Council.)
SEVERANCE: Only thing I know here is that Mundie Co. gives one week's pay per year of service.
Fraternally yours,

Robbin Masters


Grandville Council

Union V

Union Wage Survey
The Grandville Labor Council last quarter conducted an informal wage survey, getting the estimates of local union wages in certain key jobs. The D.G.B. wages are factored in here:
Approx. Average Hourly

Earnings in Unionized

Job Grandville Companies
Tool and Die Maker $19.15

Plant Electrician 19.00

Tool Grinder 18.65

All-around Machinist 18.50

Drill Press Operator 17.15

Punch Press Operator 16.00

Power Room Engineer 15.80

Bench Assembly Worker 15.75

First Class Firefighter 15.75

Oiler 15.60

Power Truck Operator 15.50

Janitor 15.00

Instructions to Instructors Concerning CBG Computerized Contract Costing Disk Start-up and Exercise Preparation

1. You can acquire the PC compatible instructors CBG contract costing disk for use with the D.G. Barnhouse mock bargaining exercise by contacting your local McGraw-Hill representative.

2. You will be supplied with the instructor's version of the CBG contract costing disk. You need to generate separate union and management versions of the disk and provide these to each respective student bargaining team in advance of the start of mock bargaining. Load the instructor’s disk and follow the menu to produce the union and management versions of the CBG disk.
3. I hand out the Memorandum to Mock Bargaining Students --D.G. Barnhouse, CBG Contract Costing and discuss it with students two weeks before the start of face-to-face mock bargaining. Along with this memo, student bargaining teams should be provided with copies of the respective union and management CBG disks. At this time students also should receive the respective union and management supplementary memos. Students should be reminded that the basic D.G. Barnhouse mock bargaining material is provided in Appendix A of the text.
4. I put three students on each bargaining team (i.e., three union and three management team members). I give the students the opportunity to submit to me their preferred bargaining team members and their opposition team if the other side agrees in advance of when I hand out the materials described above. I have in the past occasionally assigned all teams on a random basis. But, I have found that students enjoy and tend to get more out of the exercise if they can bargain with or against students they know. Knowing other team members makes it easier for the students to meet before class and prepare for the mock bargaining exercise (see below). I do assign students who do not have a strong preference to a bargaining team and try to avoid the impression that students are expected to know people in the class and have a bargaining team preference.
5. Attached are samples of contract proposals and income statements. The attached memorandum tells students to turn versions of these in prior to the start of actual mock bargaining. These can be generated through the reports and projections option on the CBG disk. (Note: Only the instructor and management disks have the capability to produce income statements.)
6. I find it useful to have someone available to provide consultation assistance to respond to student questions that arise concerning the CBG disk. I have found that even students with no prior familiarity with computers can readily use the CBG disk. Nevertheless, some students do periodically raise questions or need advice. This advice could be provided by a teaching assistant or student who used the CBG disk in prior semesters.

7. When and for how long should the union and management teams bargain face-to-face? I have used two different schedules. In some classes face-to-face mock bargaining occurs on one day (usually a Saturday). In this case, students are told to show up to previously assigned bargaining rooms at 10:00 a.m. and are told that they must reach a settlement or announce impasse by 2:00 p.m. that day. I also have had classes that meet and bargain during two successive normally scheduled class sessions (when these class sessions each are at least 1 hour and 15 minutes long). In the latter case, students must reach settlement or announce impasse by the end of the second class session.
8. While students are engaged in face-to-face bargaining I (and my teaching assistant) observe them and move across the various bargaining groups. I use these observations and the requirements described in the attached memo as the basis for student grades.

CBG 2.0
A Fancy Calculator for Collective Bargaining
Benjamin C. Whipple

MIT Sloan School

Copyright 1990
CBG is a software program that converts PC into a fancy calculator to help collective bargaining teams "do the numbers." It accepts contract terms and assumptions as input and generates a variety of mostly financial projections as output. This edition of CBG is configured for the D.G. Barnhouse case in Appendix A of Harry C. Katz and Thomas A. Kochan, An Introduction to Collective Bargaining and Industrial Relations (New York, Irwin-McGraw-Hill Inc., 2003).
There are three separate versions of CBG, one each for managers, unions, and instructors. The manager version includes company financial data, reports, and methods for modeling the effects of unilateral change in employment policies. As in real life, the union version has less information about the company. The instructor version has all the capabilities of the others, can reproduce them, and can change the model's equations. The title on the opening menu indicates the version with an I, M, or U appended to the release number.
All documentation also is available "on line" from within the program.


CBG is a menu-driven, graphically oriented program that can be operated almost entirely by moving the cursor and striking a few letter keys. It has four basic elements (the status line, menus, input windows, and output windows), and can save and retrieve data files and send reports to the screen or printer.
The status line, always present at the bottom of the screen and constantly updated, tells you what keystrokes are needed to operate CBG at any given time. When in doubt, consult the status line.
There are three ways to operate CBG's menus:
1) Use the cursor keys to highlight the item and hit ENTER.
2) Hit the first letter of the item you want. If there is only one selection starting with that letter, it will be selected. If there is more than one, the cursor moves to the next one and you must hit ENTER to select.
3) Although the items are not visibly numbered, you may also select by hitting the number key that corresponds to their position in the list. This is the fastest way, because you never have to hit ENTER, but it doesn't work if there are more than 9 items.
Users manipulate CBG's input variables by sliding graphic "levers" presented in windows. When such an input window has been selected from a menu, the following keystrokes can be used to control it:
Up and down arrows: Select variable within the window
Left/right and plus/minus: Change variable by 1 increment
Ctrl-arrows: Change variable by 5 increments
Home/end: Set to minimum/maximum value
1 to 0 at top of keyboard: Set numeric values 1 to 10
1 to 0 with shift key: Set numeric values -1 to -10
The letter C: Center value between min and max
ESC key: Exit window and return to menu

Whenever an input window is open, the user can also open an output window and see the effect that changes in input have on output. Different output windows present the different estimates discussed in INPUT/OUTPUT SUMMARY. They are updated continuously. Output windows are managed with the following keystrokes:
The letter W:
If no output window has been selected, W lists those available. After a window has been selected, W toggles it open and closed.
When output window is open
The letter L: List available windows

The letters N/P: Next/previous window in list

Some output windows have job or period variables (for example, paychecks can be for skilled or unskilled workers, and covering a week, a month, or a year).
When open window has job or period variable
Ctl-N / Ctl-P: Next/previous job

Alt-N / Alt-P: Next/previous period

The letters J / Y: Next job/next period
The ESC key
Note that when a window is open, the software does up to 120,000 or so calculations between each input adjustment, and is slow if you have a 3-year contract, no math coprocessor, or an 8088 machine. You can speed things up by toggling the window off and on between multiple inputs.
Any time an input window is open, users can save and retrieve the current settings of CBG in named data files. Striking the F key opens a menu with the choice of saving or retrieving. If you select retrieve, you will be presented with a list of all current data files: point at the one you want and strike ENTER. If you select save, you will be presented with the same list of files except that the first item will be "NEW." To save the file under a new name, select NEW and then type an 8-character file name (letters and numbers only).
Management and labor teams can swap proposals by swapping data files.
Job classification data is kept in two separate files, one ending in .CJD and the other in .JCD. Be sure to copy both if swapping data, and see CBG REFERENCE for more information.

All versions of CBG allow the input of CONTRACT PROPOSALS and ASSUMPTIONS and the output of estimated wages, benefits, and overall labor costs.
The manager version also allows the input of MANAGEMENT OPTIONS and the output of estimates of various company performance measures.
CBG's outputs are available either in OUTPUT WINDOWS that can be viewed while changing input or as OUTPUT REPORTS that can be viewed either full-screen or printed.
The following sections summarize all inputs and outputs.


Note: At start-up, all contract proposal variables are set to reflect the current agreement.
LENGTH OF CONTRACT Sets length of the proposed agreement at 1, 2, or 3 years.
WAGE CHANGES Specify change in wages, in either percentage or dollar terms, for skilled and unskilled workers for each year of the agreement.
COLA Specify cost-of-living adjustment in cents per point rise in the Consumer Price Index for each year of the agreement.
GAIN-SHARING Specify gain-sharing arrangements; either regular profit sharing as some percentage of profits above a threshold level or a percentage bonus tied to productivity improvement (IMPROSHARE). If the IMPROSHARE GIVEBACK variable were set to 50%, for example, and the user assumed a 10% increase in productivity (see ASSUMPTIONS below), all workers would receive a 5% bonus.
BREAKS & HOLIDAYS Specify the number of paid holidays, sick days, and personal days during the year, and the number of paid rest breaks (in minutes) during the workday.
OVERTIME POLICY Specify the length of the straight-time workweek in hours, and pay multipliers for regular OT and for time worked on Saturday and Sunday. CBG currently assumes that about 20% of OT is worked on Saturday, 5% on Sunday.

VACATION POLICY Specify weeks of paid vacation per year for different lengths of service.
HEALTH PLAN Specify the percent of health insurance costs for employees and dependents paid by the company, as well as the scope of coverage (miserly through generous).
PENSION PLAN Specify the portion of pension costs paid by the company, the method used to figure the monthly benefit, and the amount of life insurance coverage.
SEVERANCE & SUB Specify the weeks of severance pay per year of service for laid-off workers, for those laid off due to automation, and the company' contribution to the union's supplemental unemployment benefits fund, in cents per hour worked.
JOB CLASSIFICATION Rearrange the number of wage-rate job classes and the assignment of individual jobs to these classes. See REFERENCE.
Include up to five new contract items in the model, with descriptions and costs. See REFERENCE.

MARKET Specify assumed future state of the market for the company's production: growing, not growing, or declining. See REFERENCE.
INFLATION Specify assumed future level of inflation in consumer prices, producer prices, and the cost of health care.
PRODUCTIVITY Specify assumed future changes in labor productivity resulting from factors other than new equipment.
ABSENTEEISM Specify assumed future level of employee absenteeism, in percent.
ATTRITION Specify assumed annual rate of voluntary attrition among workers.
ATTITUDE Specify assumed level of employee willingness to accept an early retirement/voluntary severance offer.


ANNUAL LABOR COSTS The Annual Labor Cost window estimates total annual labor costs for the Grandville plant during each year of the proposed agreement. It includes details, percent change from previous years, overhead, and cost per hour worked.
EMPLOYEE PAYSTUB The Employee Paystub window shows gross pay, all deductions, net pay, and real net pay (year 0 = 100). It can be configured for an average worker, skilled or unskilled, or for any of the fifty separate job descriptions at the Grandville plant. It can also be configured for a pay period of a week, a month, or a full year.
BENEFIT SUMMARY The Benefit Summary window estimates the value of company-funded benefits to an individual employee. It can also be set for any employee or period.

SEVERANCE PAYMENTS The Severance Payment window estimates the value of severance payments, SUB funding, pension benefits, and voluntary severance payments. It can be configured for any employee.

CONTRACT SUMMARY A summary report of all terms in the current contract proposal.

JOB CLASSIFICATION A report listing all rate classes at the Grandville plant, with a description, a wage range, and a list of jobs included in each class. Employment figures in this report are for Year 0; i.e., they do not reflect any changes in the size of the work-force brought about by management policies. See REFERENCE.

REAL NET PAY A report listing the real net pay for each job at Grandville for each year of the contract. Real net pay numbers are figured with Year 0 = 100: for example, an RNP figure of 95 for a particular job would reflect a 5% reduction in inflation-adjusted take-home pay, while RNP=105 would indicate a 5% increase.



AUTOMATED EQUIPMENT Specify whether to invest in new automated equipment, and if so, whether to install it at the Grandville or the Newton plant. CBG assumes that this equipment will boost productivity 10% at either plant. Costs $10 Mil @ Grandville, $12 Mil @ Newton.
LAYOFFS AT GRANDVILLE Specify the percentage of the work-force, by general job description, to be laid off from the unionized Grandville plant over the next 1-3 years.
EMPLOYMENT AT NEWTON Specify the level of employment at the nonunion Newton plant over the next 1-3 years. New jobs require investment in machinery; see REFERENCE.
VOLUNTARY SEVERANCE PLAN Specify a voluntary severance plan to be offered to the Grandville work-force: set the minimum years of service needed to qualify, the week's pay per year of service, the maximum week's pay, and the amount of time the plan is in effect, from 1-36 months. Managers should take note that a recent (7/90) court decision held that management cannot offer a VS Plan to a work-force covered by a collective bargaining agreement without first submitting it to the union.
HIRING V. ATTRITION Set the rate of hiring at the Grandville plant in relation to the attrition rate.
SCHEDULED WORKWEEK Specify the length of the regularly scheduled workweek at the Grandville plant, in hours.

WORK-FORCE The Work-force window shows the size of the work-force at both the Grandville and the Newton plants in all years of the contract, including the effects of attrition, hiring, layoffs, and voluntary severance.
OUTPUT & SALES The Output & Sales window estimates the effects on unit output of changes in the size and composition of the work-force, investment in the new equipment, and assumed changes in productivity. It also estimates unit demand and sales. See REFERENCE.
COST OF LAYOFFS Shows the number of layoffs forecast for each year and the estimated cost based upon severance pay specified in the proposed contract.

VOLUNTARY SEVERANCE This window estimates the number of workers eligible, the number of workers accepting, and the total cost by year of any voluntary severance pay.
INCOME STATEMENT SUMMARY This window presents a summary P&L forecast for each year of the contract. See REFERENCE.
INCOME STATEMENT A detailed P&L forecast for each year of the contract. See REFERENCE.
MANAGEMENT OPTIONS A detailed report of all currently specified management options and their estimated effects on employment and output at each plant over the life of the contract.
For more information about inputs, outputs, and the manner in which CBG derives the latter from the former, see CBG REFERENCE.


The design goal for CBG is to accept user input and generate output in ways that are as simple and self-explanatory as possible; hence the metaphor of a "fancy calculator" rather than a "model." It relies extensively on straightforward math, and most aspects of how it works become apparent after a few minutes of experimentation. Experience in past runs of the Collective Bargaining Game indicates that answers to many questions asked can be found in the case writeup. The documentation for CBG, and CBG itself, assume that users are familiar with this material.

Nonetheless, some aspects of CBG -- a few related to input but most related to output -- are complicated enough to require detailed explanation. The purpose of this section of the documentation is to provide a closer look at the less obvious parts of the program. These include job classification, new items, and the estimating procedures for output, sales, and the income statement.

Under CONTRACT PROPOSALS, CBG allows you to propose changes in the current rate classification of jobs, which is outlined in an appendix to the case and is subject to collective bargaining. Rate classification is the manner in which different job functions are aggregated into common wage groups. The company has 50 separate job functions, numbered from 1 to 50 in order of descending skill, that must be performed for its factory to operate properly. They cannot be changed. The 22 rate classes in which these 50 job functions are grouped, however, are purely bureaucratic and can be changed. Rearranging the rate classification of jobs within CBG becomes a two-step procedure: first, modify the rate classes, and second, assign the jobs to them.
The job classification menu has four choices:

║ Modify Classes ║

║ Assign Jobs ║

║ Save/Retrieve ║

║ View/Print ║


MODIFY CLASSES opens a window with a list of all current classes at the bottom and information about the currently highlighted class at the top. This information includes a description, the skill level, the number of employees assigned to it, the wage range, and the job numbers (1-50) of the employees assigned to it. On this screen you can change the description and the wage rates; the other information is automatically derived from the jobs assigned to the class. To change a class, put the cursor on it and hit ENTER, then edit the information in the upper window. To delete a class, position the cursor and hit D. Do not delete classes in the middle of the list; for CBG to work properly, the active classes must run sequentially from class 1 to class whatever. In fact, it stops looking for classes when it finds the first empty spot in the list.

Select ASSIGN JOBS after you have set up the class structure that you want, and you will be presented with a similar window with information about the highlighted job at the top and a full list of all 50 jobs at the bottom. All you change here is the number of the class to which you want to assign the job. Make sure that all jobs are assigned to a class.
Rate classification of jobs must be saved and retrieved separately from other CBG data files; select SAVE/RETRIEVE to do this.
Select VIEW/PRINT for a summary of jobs by class.
If you can think of an easier and more intuitive way to restructure the rate classification of jobs, please let me know.

CBG accommodates up to five new items specified by the user, each with a description and estimated cost. These new items will appear on the CONTRACT PROPOSAL menu the next time it is called from the main menu.
When you select this item, a window will appear where you type in the description and specify the estimated cost in one of three ways: you may input the cost as a lump sum in thousands of dollars, as a per worker cost in dollars, or as a per hour cost in dollars. Regardless of what you have specified as the length of agreement, this screen always has room for three years.
To delete a new item, select it from the menu, space over the description, and blank out any costs you have specified.
New items will be saved along with the standard items on your proposal.

When the bargaining starts (Year 0), Barnhouse has 500 employees at Grandville and 150 at Newton. CBG measures the initial output of these plants at 100 and 30 physical units, respectively. Labor productivity is assumed to be the same at each plant. Working from this base of 130, the program then estimates changes in output over the life of the contract.

Estimated output at Grandville is driven by changes in the total number of hours worked and by changes in productivity. Total hours worked is determined by the size of the work-force, the length of the workweek, assumed absenteeism, and the amount of paid time not worked, whether for breaks, days off, or vacations. Changes in productivity are determined by investment in automated equipment (10% boost at the plant where it is installed), by user assumption, and by changes in the compositions of the work-force. This last effect, which shows up as the "effect of skill & tenure," occurs when layoffs or voluntary severance programs change the average level of skill and seniority at the plant: a less skilled work-force is less productive, and vice versa.

Estimating Newton output is a much simpler calculation: it is affected only by employment at the plant and by the installation of automated equipment which, as at Grandville, boosts productivity by 10%.

Changes in unit demand from a Year 0 value of 130 are driven by a single factor, the user's assumption about the machine tool market. Estimated demand changes up, down, or not at all by the same amount each year, currently set at 10%, depending on whether the user has selected growth, decline, or no growth.
Unit sales are whichever is less, total output plus inventory or demand. Unsold output is added to inventory, which starts at 0.
The translation of unit sales into dollar sales is explained in the following discussion of the income statement.

The manager version of CBG estimates an income statement for the company for each year of the contract. The full statement can be viewed full-screen or printed and a summary version can be viewed in an output window. This discussion explains where the numbers on the P&L originate.
NET SALES are determined by output, discussed above, and pricing. The general rule for pricing is that it depends upon the assumed state of the market, the producer price index, and, to a lesser extent, estimated changes in the firm's costs of production. In a growth market, the firm raises prices by the PPI, but can also pass through some fraction (currently 50%) of cost increases greater than the PPI: in short, real prices can rise to protect margins. In a no-growth market real prices remain constant, i.e., they change by whatever you have specified for the PPI. To maintain share in a declining market, though, the firm must cut real prices: CBG assumes they will drop by 5%, regardless of changes in the cost of production.
GRANDVILLE LABOR COSTS are figured by straight math from terms of the contract, the size of the labor force, and assumptions about the Consumer Price Index (if you have a COLA) and health care costs (if the firm continues to pay for some portion of it).
NEWTON LABOR COSTS are figured from the average wage specified in the case, the level of employment, and the CPI: CBG assumes that the Newton work-force will receive partial cost-of-living raises.
MATERIALS & OTHER costs are extrapolated from Year 0 by considering changes in output and the PPI.
NEW CONTRACT ITEMS is figured from the costs input for any new items.
INVENTORY CHANGE reflects any build-up or draw-down of unsold production, valued at cost. Be aware that an increase in inventory reduces COGS but consumes cash, and that an attractive bottom line based on increased inventory may mask a liquidity crisis.
DEPRECIATION EXPENSE increases from Year 0 if you invest in automated equipment and/or increase employment at Newton. Automation is a $10 million project at Grandville, $12 million at Newton. If you increase Newton employment but do not place the new equipment there, CBG assumes that you must invest $5K in machinery to support each new job. All investment is straight line depreciated over ten years, with no salvage value.
S&A EXPENSE increases proportionally with output and inflation, and also includes a small carrying cost for inventory.

NONRECURRING EXPENSE includes all severance payments, voluntary or otherwise.
SHARED PROFITS is determined by any profit-sharing arrangements you have specified in the contract.
End of File

(For Use With CBG Computerized Contract Costing)

Memorandum to Mock Bargaining Students -- D.G. Barnhouse,

CBG Contract Costing

TO: Students

FROM: Professor __________
DATE: __________
SUBJ: Instructions Concerning the Mock Collective Bargaining Game
This memorandum provides important information concerning the D. G. Barnhouse mock collective bargaining exercise rules, procedures, and requirements.
1. In the period prior to the beginning of the formal bargaining session you should formulate demands and proposals, and consider your bargaining strategy. You should read the D.G. Barnhouse material including your company or union supplementary memos. You also should familiarize yourself with the CBG contract costing disk program. The disk runs on an IBM PC and is self-contained (it requires no other software). You start the CBG costing program by typing in cbg and then press the return key. (In Windows, go to Start, then run, type the drive letter: cbg and hit enter.) You are urged to spend at least two hours meeting with your team prior to the game as well.
2. Actual bargaining will take place on ____________ in various assigned rooms. You will start bargaining at __________.
3. The strike deadline is ________ on __________. Any group that has not reached settlement by that time will write a ten-page paper (each team member) explaining your strategy during the strike.
4. CBG contract summary and income statements signed by each union and management team member, describing the terms and cost of the settlement, are to be handed in to Professor __________ no later than ______ on __________. All students should be prepared to discuss the settlement, strategy, and tactics of their negotiations in class on __________.
5. Professor __________ will judge the agreements reached from the standpoints of rank-and-file members and the CEO of D.G. Barnhouse. If there is reason to believe that either the rank- and-file or the CEO would reject the agreement, it will be returned to the negotiating teams for reconsideration.
6. During bargaining do not manufacture self-serving facts about the case. This detracts from the realism of the exercise.
7. You are free to schedule meetings or to communicate to your opposing team in writing prior to the formal negotiating session if you so desire.

8. Please do not make a big issue out of any inconsistencies in the accounting. Complete and entirely accurate information is not always present, even in the most effective and well-run firms.
9. No later than ________ on ____________:
Each union team must submit to Professor __________ in a sealed envelope the following:
a. A CBG contract summary describing the least the union will be willing to accept rather than calling a strike;
b. A CBG contract summary describing the contract proposal the union

actually will make to management when the bargaining starts.

Each management team must submit to Professor __________ in a sealed envelope the following:
a. A CBG contract summary describing the most the management will be willing to accept rather than taking a strike and a CBG income statement costing this proposal;
b. A CBG contract summary describing the contract proposal the management actually will make to the union when the bargaining starts and a CBG income statement costing this proposal.
See the handout describing the CBG program for information on the contract proposal and income statement. Note: The information included in these handouts also is available on-line in the CBG program.
The contents of the envelope described above should be kept in strict confidence by the teams. What is contained in the envelopes is not binding on the teams. New considerations may arise during the negotiations which require a revision of the original estimates.
Your grade on this exercise will depend on how well you follow the above instructions and how well you engage in serious bargaining during the exercise.
10. Instructions on how to print contract proposals and other outputs with the CBG disk are provided below.
The following describes how to print from the CBG program. There are two options, use the first option with a printer that is directly connected to your computer and does not go through any sort of printer network. The second option provides a way to print while in windows using the windows paint program.
1. Print to a direct connect printer:

Check the printer setup to make sure that LPT1 is captured

Start-Settings-Printers-Right Click on Printer-Details Tab-Capture

Printer Port-LPT1

Make sure to run the software from a DOS Window and not to restart the computer in DOS mode.

All you need to do is put the disk in the computer.

Click on the "Start" button and select "Run".

Type in the box A:\CBG and hit the enter key.

When you want to print something, hit the "P" key to print.
2. Print screen from windows:

"Alt+Print Screen"

Open Paint

Paste from Edit Menu

Contract Proposal Year 1
6 Wages, Skilled Workers 0.0%

6 Wages, Unskilled Workers 0.0%
COLA (cents / CPI Point) 3
Avg Real Net Pay (Yr 0 = 100) 99
Profit-Sharing Threshold 0.0% pretax

% Shared Above Threshold 0.0% shared

ImproShare Giveback 0.0% of prod.
Paid Holidays 7 day (s) per year

Paid Sick Days 0 day (s) per year

Paid Personal Days 1 day (s) per year

Paid Rest Breaks 30 minutes per day
Straight Time Work Week 40.0 hours

Overtime Rate 1.50 x straight time

Saturday Rate 1.50 x straight time

Sunday Rate 2.00 x straight time
Paid Vacation, tenure < 1 yr 1.0 weeks

1 to 5 yrs tenure 2.0 weeks

6 to 10 yrs 2.0 weeks

11 to 15 yrs 3.0 weeks

16 to 20 yrs 3.0 weeks

21 to 25 yrs 4.0 weeks

Tenure > 25 yrs 4.0 weeks
Health Plan, Employee Coverage 50.0% paid by company
1   2   3   4   5   6   7   8   9   10

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