March 7, 2004

Look behind the bottom line of the revenues to the way in which they were achieved. Pharmaceuticals giant Teva enjoyed high praise last week from the leaders of the business world for its remarkable accomplishments in 2003. Despite the general condition of the local economy, and unlike its competitors in the same sector, the company managed to enlarge its profits by almost 70%(!): from a profit of $410 million in 2002 to a profit of $691 million in 2003.

Even investment houses in Israel and the US were issuing loud calls of encouragement to buy into the most expensive company in Israel, whose net worth is estimated at some NIS 90 billion today. The company’s shares have increased to almost six times their value in the last five years.

But the pride actually grows when you look beyond the bottom line of the profits margins and revenues to the way in which they were achieved. There you will see that Teva actually achieved those results in a way that should, in itself be a business model to all employers, and a source of jealousy to all employees. I’m referring to the method of employment that Teva has stuck to since its inception.

The company employs some 3,000 employees in eight factories throughout Israel. From Kiryat Shmona in the north, to Ramat Hovav in the south. All employees, (with the exception of senior staff) are unionized in labor unions affiliated with the Histadrut Labor Federation, and the rights of all employees are protected and secured in collective agreements.

Under these agreements, employees enjoy excellent employment conditions, relative to what is the norm in that sector. Children of all employees enjoy free day care centers, and when they grow up, Teva offers them free university education. Furthermore, employees receive other many other benefits, like superior health insurance and one month’s bonus salary each year. The farthest you can get from the minimum employment conditions that are set out in labor protection laws. The results can be seen in the company’s reports throughout its years of activity.

These conditions are outstanding when viewed against the background of pillaging that takes place in the Israeli labor market today. It’s a market where scores of employers and managers see the worker as a resource to be exploited to the maximum, at the lowest cost, to reach the highest profits in the shortest amount of time. Within the context of this method of management, called ‘pressure management’, managers push their employees to maximum yield, but at the cost of quickly wearing them down.

As such, there are many places of work where striking is prohibited, because there is always ‘so much to do’ (even if their job can be done sitting down), or factories in which there are no longer cafeterias, because ‘there’s no time to eat on the job’, and many other disgusting examples. This way the amount of workers can be cut, and they can be paid less, and profits will purportedly rise.

Why ‘purportedly’? Because those are just short-term profits. By their very nature, these businesses are marked by high employee turnover, which ultimately affects long-term profits.

Teva not only proves that things can be done differently, but that for the long run, things must be done differently. A company that wants to succeed in the long term, rather than just have a one time ‘big hit’, must see the worker as a partner in the business, who must be nurtured, and to see the unions as a valuable business and management asset of the first order. The tributes consistently hailed upon Teva year after year prove it.

In the public discourse today, labor unions are perceived as the enemy of business and as obstacles to prosperity and growth. This widely accepted demagoguery is a way of blaming organized labor for losses and bankruptcy, for factory closings and for all that ails the Israeli economy. The logic then follows that crushing employee rights (not even considered to be basic, but rather as ‘awarded’ rights), and taking apart the union federations are absolutely necessary in order to succeed in the global business market. Teva disproves them all in every single quarter, year after year.

(Originally appeared in Ma’ariv)

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Jason Harris

Jason Harris

Executive Director

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