With Toys “R” Us having descended into bankruptcy, a group of front-line employees found themselves last year fighting for lost compensation but also pressing for something more fundamental: a chance to be heard by those calling the shots.
The aim, one worker said at the time, was to “force them to have to listen to us.”
No longer. With the Toys “R” Us brand trying to position itself for a comeback, coercion has turned into cooperation thanks to the company realizing this: listening to workers is actually a smart way to run the business.
Today, a trio of former Toys “R” Us employees will meet formally for the first time with top executives as part of a “mirror board”—a body meant to have access to key corporate information and provide candid advice, just as the regular board of directors does. Labor advocates say that the model could prove to be an effective means of giving workers more voice and power during an era when unions don’t have nearly the membership and clout they once did.
“I think it’s a great idea,” says Thomas Kochan, a professor at MIT’s Sloan School of Management whose scholarship focuses on the need to modernize the institutions, policies, and practices that govern employment in America. “These are real people who come from the workforce and are in touch with the workforce.”
Starting small but with a “seat at the table”
To be sure, the testing ground is tiny. When Toys “R” Us went under, it liquidated some 800 stores nationwide and let go of 33,000 people. This month, under new ownership, it will open two stores—one at The Galleria in Houston and another at the Garden State Plaza in Paramus, New Jersey. With a much smaller footprint than before, each location will have just 20 or so employees. (In addition to these sites, which have been designed to be highly interactive for shoppers, new parent company Tru Kids Inc. has forged a partnership with Target to fulfill online toy sales.)
Still, even though Toys “R” Us stores in the United States are essentially being run at this point as a startup, the hope is that—with such a well-known name—larger employers will take notice of the extent to which the company is welcoming worker input.
“This is potentially a big deal,” says Eddie Iny, campaigns director at United for Respect, an organization that is seeking to improve working conditions in the retail industry throughout the country and helped to create the mirror board at Toys “R” Us.
What Toys “R” Us is doing “is right in line with the proclamation coming from the Business Roundtable,” Iny asserts—a reference to the 181 CEOs of giant corporations who in August vowed to meet the interests of all stakeholders and not always put those of shareholders first. “If they’re serious, employees should have a seat at the table.”
Perhaps the most striking thing about how the mirror board has taken shape is that the company made an initial overture to the workers, not the other way around.
“To their credit, they wanted to take a high-road approach,” says Iny, who was first contacted last spring about setting up a channel of communication between Tru Kids and former Toys “R” Us employees. United for Respect was an obvious go-between because it had been instrumental in negotiating a $20 million fund to bring relief to laid-off workers and their families after the private equity firms that controlled Toys “R” Us had eliminated employees’ severance packages before filing for bankruptcy.
“As a management team, we wanted to be proactive about this,” explains Tru Kids CEO Richard Barry.
From pushing shopping carts to occupying the C-suite
For him, it’s personal. Barry started with Toys “R” Us in 1985 in Cardiff, Wales, pushing carts and ringing up the cash register. He quickly ascended through the ranks, managing stores and eventually overseeing the entire U.K. operation. He came to U.S. headquarters in 2004 and served, ultimately, as the company’s global chief merchandising officer.
Along the way, Barry says, he never took for granted the valuable insights that workers in the stores possess. “Every minute of the day, they are receiving feedback from the customer about the experience, about the products, about the process,” he says. “That’s where I come from.”
At the outset, workers were skeptical that the company was genuinely interested in their involvement. Having been burned so badly by the private equity firms, “We were like, ‘Why do they want to talk to us?'” recalls Giovanna De La Rosa, a two-decade Toys “R” Us veteran from Southern California who was involved in the discussions. “We were all very doubtful.”
But the more the parties talked, the more trust they established. Barry and his senior colleagues asked the workers what, from their vantage, would be most crucial to make a reborn Toys “R” Us a success.
The conversations were tricky because, under labor law, the workers weren’t—and couldn’t been seen as—attempting to bargain collectively as a union would. In the end, the company agreed to hire back as many past Toys “R” Us workers as possible and use as a guide United for Respect’s general “principles for quality jobs,” which include paying a living wage of at least $15 an hour; maintaining predictable and stable schedules; offering severance protection, affordable health coverage, and paid family leave; and putting one or more employee on the board.
So far, the workers say, the company has made good on its word. It has held job fairs aimed specifically at attracting ex-employees—”formers,” as they’re being called. The workers themselves helped out by reaching folks through their Facebook group, the Dead Giraffe Society (a nod to the famed Toys “R” Us mascot, Geoffrey the Giraffe).
Out of the shadows
Originally, the workers had hoped to land seats on the seven-member board of Toy Retail Showrooms, the arm of Tru Kids that is operating the U.S. brick-and-mortar stores. But the company didn’t want to expand too quickly at this early stage, and so the two sides settled on forming a separate panel. The company proposed labeling it a “shadow board.” The workers, making clear that they had no intention of stepping into anyone’s shadow and expect to receive the same kinds of reports and updates afforded full board members, suggested the term “mirror” instead.
The developments at Toys “R” Us come as several Democratic politicians are urging worker participation on boards, as is common in Europe. Last summer, at the request of United for Respect, Senator Bernie Sanders of Vermont implored Walmart to take such a step. And, as part of his presidential campaign, he has proposed that workers elect 45% of directors at big companies. The Accountable Capitalism Act, authored by Senator Elizabeth Warren of Massachusetts, includes a provision for employees to select 40% of a company’s directors. The Reward Work Act, introduced by Senator Tammy Baldwin of Wisconsin, would mandate that workers elect a third of the board of any publicly traded corporation.
Last month, De La Rosa and the two other former Toys “R” Us workers who will be on the mirror board went for a day of training at MIT. “We wanted to give them a sense of how boards work—that you don’t go in and demand things,” says Kochan, who put together the program.
“The moral case is certainly compelling”
Among those who spoke to the workers was Robert McKersie, a retired MIT professor who served as a Teamsters union representative on a trucking company board in the 1980s and as a Steelworkers representative on the Inland Steel board in the 1990s. He underscored the importance of not charging into the boardroom with all the answers but, rather, of “asking lots of questions.” One example: “Do we have a regular safety audit in addition to a financial audit?” That type of inquiry, he told the workers, can alert management to the fact that a particular issue is being watched closely by the rank and file without being belligerent.
“You don’t want to be a rubber stamp,” McKersie says, but at the same time “you’re not going to win in an adversarial way.”
The workers also heard from Sarah Kalloch, executive director of the Good Jobs Institute. Her message: Those on the board have a wonderful opportunity to advance the notion that there is a strong return on investment when companies increase wages and benefits, bolster work schedules, build systems to develop and promote employees, and give more decision-making authority to those in the trenches.
“The moral case is certainly compelling,” Kalloch says. “But there’s also a financial case for providing good jobs.”
For now, those on the mirror board say they’re trying to establish open lines of contact between themselves and the workers just joining (or rejoining) Toys “R” Us. Meanwhile, they’ve already had an impact. Even before today’s meeting, executives have sought their counsel on the layout of the new stores, and they’ve helped to persuade the company to have the $15 minimum wage apply to part-timers. “We’re not being brushed off,” says De La Rosa.
“We’re building a relationship,” adds Madelyn Garcia, another mirror board member who joined Toys “R” Us in 1988 and held a variety of in-store roles at the company, mostly in Florida, over the past 30 years. “Hopefully, it can be long-term.”
Toys “R” Us plans to have up to 10 U.S. stores open by the end of 2020. As new workers come on, they will replace those currently on the mirror board.
Before their terms end, though, the founders are intent on leaving a major mark. “I hope this opens up the gates for other companies to do something like this,” Garcia says.
That would be most welcome. The Toys “R” Us theme song begins, “I don’t wanna grow up.” It’s time, though, that American capitalism did.