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The new deal in employment
The New Deal in Employment A Conference Held at City University Business School in December 1995 Romy Jenkins and Chris Hendry
The Issue Organizations are changing rapidly in how they are configured: they are flattening, shrinking, using more team working and replacing full-time employees with people on short- or fixed-term contracts. It is happening in almost every sector: banking, manufacturing, health care, local government and utilities. There is no one simple cause but several drivers which reinforce each other and intensify the pressure on businesses and services to change how they operate: the explosion in computer-based applications which accelerate and simplify work processes; the reduction of market restrictions worldwide and the resulting intensification of competition; the strengthening competition from countries of the Pacific rim. At City University Business School we ran a conference in December 1995 to bring together Human Resource practitioners and academics to present their experiences and research findings to answer two questions: t3 What is the impact on the working relationship between employer and employee? U What are the implications for future Human Resource strategies? We heard 32 papers from universities in the UK, from ESSEC in France and from HR practitioners and consultants. We will attempt to synthesize some of the key findings of the conference.
Impact of the Changes The working relationship between employer and employee can be regarded as a contract covering not
only conditions of employment but also a whole range of mutual expectations--a kind of'psychological contract'. There is a contractual continuum ranging from 'relational' contracts (which involve a high degree of mutual investment and interdependence) to 'transactional' contracts (which focus on short-term exchanges of money and skills). The traditional contract in many sectors was the 'relational', which is rapidly disappearing. Organizations such as BT and the retail banks have shed significant numbers of employees during the last 5 years. The numbers of part-time and self-employed people in the UK and across Europe are increasing rapidly. In place of 'careers', people are offered development moves to increase skills and 'employability'. The security of long-term and stable employment is being replaced by the constant threat of job loss and assessment of contribution of value. The reaction of employees who are left in full-time jobs is mixed. There is a hankering after the old security combined with a belief that it is gone forever. The banking sector has been hit hard and studies show that employees have revised their side of the contract in a number of ways: some aggressively look for new opportunities, some seek revenge on the organization for their discomfort, some accept the change passively but do little to support it. The morale and stress problems of those left behind have become known as 'survivors' syndrome'. These are the people who are first hit by the triple blows of loss of colleagues, threat of future redundancy, increased work load, and are then required to promote dynamic new working practices which demand increased levels of commitment and creativity. In tandem with trimming their organizations, managements are implementing other changes: jobs are more loosely defined as sets of responsibilities, perLong Range Planning Vol. 29
April 1996
formance is controlled via contribution not behaviour; rewards are increasingly based on contribution rather than service; development and training are increasingly seen as the employee's responsibility-even among the high-flyers.
Implications for Future Human Resource Strategies This picture looks bleak and, indeed, m u c h of the research revealed the problems and pain of the transition through which we are going. However, even at this stage there are glimmers of successful coping strategies. There are two broad HR issues: "what will be the role of HR specialists in the future?" and, " h o w will organizations manage relationships with employees to ensure the quality of input they need to remain competitive?" HR specialists were the advocates in the mid-1980s of a strategic approach to resource planning: matching the long-term needs of the organization with the skills and development wishes of its people. It was essentially a strategy of control based on predicting future requirements: current resource needs are for flexibility, adaptability and responding to unpredictability. Additionally, research suggested that HRM had promised more than it had delivered and that organizations quickly resorted to short-termism in the early nineties. HRM's credibility may now be in question. Many organizations appear to have moved from 'relational' towards 'transactional' contracts pri-
Strategy at the Leading Edge
marily to cut costs. They are now discovering that the increased operating flexibility gained does not necessarily deliver higher quality input from employees. The freedom to hire desired skills and expertise at will does not guarantee high levels of motivation and innovativeness. The problem is that flexibility has been viewed in too narrow a light: the ability to change employees with ease has been gained at the expense of organizational learning, which requires a community of committed and relatively stable members whose increasing competence can be retained within the organization to contribute to future growth in innovativeness and problem-solving effectiveness. As they emerge from the frantic scramble for survival, organizations need to consider ways to retain their 'knowledge workers' by offering a psychological contract which stimulates commitment and trust while avoiding the complacency of the old stable contract. This is uncharted territory. One case study of effective quality circles in the car manufacturing industry revealed their capacity to deliver all the promises of 'empowerment': effective problem-solving, collaborative working regardless of management level, commitment to and ownership of the quality of the outcome. These are all essential to the success of refocusing businesses away from functional specialisms and towards customers and markets. But, they depend on a real relaxation of 'command and control management', which is only possible if there are committed, full-time members of the organization who can exercise real power over the kind of product and service development which can ensure long-term survival and success.
The Issue Organizations are changing rapidly in how they are configured: they are flattening, shrinking, using more team working and replacing full-time employees with people on short- or fixed-term contracts. It is happening in almost every sector: banking, manufacturing, health care, local government and utilities. There is no one simple cause but several drivers which reinforce each other and intensify the pressure on businesses and services to change how they operate: the explosion in computer-based applications which accelerate and simplify work processes; the reduction of market restrictions worldwide and the resulting intensification of competition; the strengthening competition from countries of the Pacific rim. At City University Business School we ran a conference in December 1995 to bring together Human Resource practitioners and academics to present their experiences and research findings to answer two questions: t3 What is the impact on the working relationship between employer and employee? U What are the implications for future Human Resource strategies? We heard 32 papers from universities in the UK, from ESSEC in France and from HR practitioners and consultants. We will attempt to synthesize some of the key findings of the conference.
Impact of the Changes The working relationship between employer and employee can be regarded as a contract covering not
only conditions of employment but also a whole range of mutual expectations--a kind of'psychological contract'. There is a contractual continuum ranging from 'relational' contracts (which involve a high degree of mutual investment and interdependence) to 'transactional' contracts (which focus on short-term exchanges of money and skills). The traditional contract in many sectors was the 'relational', which is rapidly disappearing. Organizations such as BT and the retail banks have shed significant numbers of employees during the last 5 years. The numbers of part-time and self-employed people in the UK and across Europe are increasing rapidly. In place of 'careers', people are offered development moves to increase skills and 'employability'. The security of long-term and stable employment is being replaced by the constant threat of job loss and assessment of contribution of value. The reaction of employees who are left in full-time jobs is mixed. There is a hankering after the old security combined with a belief that it is gone forever. The banking sector has been hit hard and studies show that employees have revised their side of the contract in a number of ways: some aggressively look for new opportunities, some seek revenge on the organization for their discomfort, some accept the change passively but do little to support it. The morale and stress problems of those left behind have become known as 'survivors' syndrome'. These are the people who are first hit by the triple blows of loss of colleagues, threat of future redundancy, increased work load, and are then required to promote dynamic new working practices which demand increased levels of commitment and creativity. In tandem with trimming their organizations, managements are implementing other changes: jobs are more loosely defined as sets of responsibilities, perLong Range Planning Vol. 29
April 1996
formance is controlled via contribution not behaviour; rewards are increasingly based on contribution rather than service; development and training are increasingly seen as the employee's responsibility-even among the high-flyers.
Implications for Future Human Resource Strategies This picture looks bleak and, indeed, m u c h of the research revealed the problems and pain of the transition through which we are going. However, even at this stage there are glimmers of successful coping strategies. There are two broad HR issues: "what will be the role of HR specialists in the future?" and, " h o w will organizations manage relationships with employees to ensure the quality of input they need to remain competitive?" HR specialists were the advocates in the mid-1980s of a strategic approach to resource planning: matching the long-term needs of the organization with the skills and development wishes of its people. It was essentially a strategy of control based on predicting future requirements: current resource needs are for flexibility, adaptability and responding to unpredictability. Additionally, research suggested that HRM had promised more than it had delivered and that organizations quickly resorted to short-termism in the early nineties. HRM's credibility may now be in question. Many organizations appear to have moved from 'relational' towards 'transactional' contracts pri-
Strategy at the Leading Edge
marily to cut costs. They are now discovering that the increased operating flexibility gained does not necessarily deliver higher quality input from employees. The freedom to hire desired skills and expertise at will does not guarantee high levels of motivation and innovativeness. The problem is that flexibility has been viewed in too narrow a light: the ability to change employees with ease has been gained at the expense of organizational learning, which requires a community of committed and relatively stable members whose increasing competence can be retained within the organization to contribute to future growth in innovativeness and problem-solving effectiveness. As they emerge from the frantic scramble for survival, organizations need to consider ways to retain their 'knowledge workers' by offering a psychological contract which stimulates commitment and trust while avoiding the complacency of the old stable contract. This is uncharted territory. One case study of effective quality circles in the car manufacturing industry revealed their capacity to deliver all the promises of 'empowerment': effective problem-solving, collaborative working regardless of management level, commitment to and ownership of the quality of the outcome. These are all essential to the success of refocusing businesses away from functional specialisms and towards customers and markets. But, they depend on a real relaxation of 'command and control management', which is only possible if there are committed, full-time members of the organization who can exercise real power over the kind of product and service development which can ensure long-term survival and success.