In the age of high profile risk management and shareholder accountability, it is critical to be protected against an ongoing labor dispute that could adversely affect the company’s bottom line. Revenue goals should be able to withstand a long term strike or even a short seven day walkout. If not, it’s possible that the company’s stock or enterprise value will drop as it struggles to stay profitable in the throes of a work stoppage. Most importantly, how long will your customers remain loyal if the company’s employees or major suppliers disrupt the customer’s ability to get what they need? When will the ‘cascade’ of your unavailability send them elsewhere?
When taking a look at a list of major issues that can affect shareholders, a labor dispute is towards the top of the list. It brings a company to a halt, which in all cases has a profound impact on profitability. Not being able to get products built, means there are no products to sell and inventory turnover will unavoidably be affected. In the manufacturing and retail industry, the number of times inventory is turned over is directly relevant to profitability.
When it comes to a work stoppage, expect little or no loyalty from your customers. They are not going to wait until the strike security is gone. Instead, if they can’t get the products or services they want, they will go to a more accessible competitor.
When companies plan poorly and the customer base starts to erode, there is panic and business owners may meet unreasonable demands by the union to get the labor dispute resolved. Then business owners have the worry of dealing with the unaffordable labor costs once the company is back up and running, adding additional and sometimes unsustainable burden on the business.
Shareholders want to see positive proof of the company’s ability to cope. The company must demonstrate how it can keep up operations while negotiating a strong deal with a union that best ensures the future at a price the company can easily afford – not what it can afford under duress. If a labor dispute is planned properly, shareholder and customer confidence can be maintained.