Jeans Therapy: Levi's Factory Workers Are Assigned to Teams, And Morale Takes a Hit --- Infighting Rises,Productivity Falls as Employees Miss The Piecework System --- `It's Not the Same Company'By Ralph T. King Jr.Staff Reporter of The Wall Street Journal05/20/1998The Wall Street JournalA1(Copyright (c) 1998, Dow Jones & Company, Inc.)KNOXVILLE, Tenn. -- One morning last November, a message over the intercom interrupted Gail Montgomery as shewas toiling in one of the world's biggest blue-jeans plants. Levi Strauss & Co. announced to its workers that it was closing the Knoxville factory and 10 others in the U.S., layingoff more than 6,000 employees, or a third of its domestic work force. That meant unemployment for both Ms.Montgomery, a Levi's seamstress for 21 years, and her husband, a plant mechanic.For a few moments, she was stunned, as she wondered how her family would get by. And then an odd feeling cameover her: relief. "It was like a burden lifted," she says. "The stress of working at Levi's had gotten so bad." In an industry notorious for low wages and lousy working conditions, Levi's has prided itself on being a grandexception. It offered generous pay, plus plenty of charity support in factory towns -- all of it financed by thephenomenal profitability of its brilliantly marketed brand name. It clung to a large U.S. manufacturing base long afterother apparel firms began moving offshore, and it often was ranked among the best companies to work for, bymanagement gurus and by magazines like Working Mother. Indeed, the night of the layoff announcement, Levi'schairman and chief executive officer, Robert Haas, a descendant of Levi Strauss, collected an award at the UnitedNations in New York for improving global workplace standards. But to many Levi's workers, the company's image hasn't fit for some time. In 1992, the company directed its U.S.plants to abandon the old piecework system, under which a worker repeatedly performed a single, specialized task(like sewing zippers or attaching belt loops) and was paid according to the amount of work he or she completed. Inthe new system, groups of 10 to 35 workers would share the tasks, and would be paid according to the total numberof trousers the group completed. Levi's figured that this would cut down on the monotony of the old system, and that itwould enable stitchers to do different tasks, thus reducing repetitive-stress injuries. At the time, the team concept was a much-touted movement designed to empower factory workers in manyindustries, and Levi's unions signed on to the effort. But there was more to it than that for Levi's. Faced with low-costcompetitors manufacturing overseas, the San Francisco-based company didn't feel it could keep as many of its U.S.plants open unless it could raise productivity and reduce costs, particularly those incurred by injured workers pushingto make piecework goals. Teamwork, Levi's felt, would be more humane, safe and profitable. "This change," Max Cowan, Levi's operations vice president, wrote to workers in September 1992, "will lead to aself-managed work environment that will reduce stress and help employees become more productive." Instead, it led to a quagmire in which skilled workers like Ms. Montgomery found themselves pitted against slowercolleagues, damaging morale and triggering corrosive infighting, according to more than three dozen employees andmanagers from several Levi's plants. Threats and insults became more common. Longtime friendships dissolved asfaster workers tried to banish slower ones. "You hear so much shouting, lots of times you don't even look up from your work," recalls Knoxville seamstress MaryFarmer. Adds Deborah Mulvaney, a former team coach at a Dockers plant in nearby Powell, Tenn.: "My girls weregetting into it every day of the week." Beyond the contention, the team concept simply didn't help Levi's accomplish key business objectives. What thecompany calls "efficiency," or the quantity of pants produced per hour worked, plunged in 1993 to 77% of pre-team1 of 5 2/2/2001 5:33 PMDow Jones Interactive http://ptg.djnr.com/ccroot/asp/publib/story_cl...XAAAAAAAAMjAwMTAyMDIxODA1MDEAAAAM&referer=truelevels, says John Ermatinger, the head of Levi's North and South American division. He calls the decline "a calamity."Productivity has gradually improved, but is still at only 93% of the piecework level, Mr. Ermatinger says in aninterview. Meanwhile, labor and overhead costs, measured per pair of pants, surged the first few years after the transition toteams-by up to 25%, Levi's says. Costs have since come down, but how much is unclear. The company says that by1997, they were slightly below where they were before teams began. But Larry Garland, who recently retired as one ofLevi's two manufacturing controllers, disputes those figures. He says the costs are calculated differently now, andcomparable costs are actually about 10% higher than in the pre-team era. At the same time, the wages of many top performers have fallen. Ms. Montgomery, for example, says her hourly paydropped to $7 from $8.75 because of slow teammates. Yet, those lower-skilled workers often saw their pay increase,eliminating savings for Levi's. "We created a lot of anxiety and pain and suffering in our people, and for what?" asks Ralph Pollard, a former Levi'smanufacturing manager who retired last fall. Adds Herb Etheridge, a former regional production manager who alsotook early retirement last year: "It's just not the same company anymore. The perceived value of the individual and theconcern for people just is not there." Mr. Haas says Levi's is far superior to other apparel makers in its treatment of workers and is as committed as ever totheir welfare. Teams freed workers from having to "park their brains at the factory gate," he says, enabling them tomanage themselves and to devise better, safer sewing practices. Moreover, he says, the benefit of retaining a largermanufacturing base in the U.S. as a result of teams outweighs the costs. A less enlightened company might have tried to "produce more for less by closing U.S. plants and shifting allproduction offshore," Mr. Haas says. "But there are humans involved, and we have the opportunity to be different. Wewant to exhaust all our options before we throw up our hands and exit." Mr. Haas is particularly sensitive to Levi's image, and the team approach was seen as a way to protect it. Four yearsago, he wrote in a management publication that "in today's world, an