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Towards more productive industrial relations
Long Range Planning, Vol. 16, No. 6, pp. 35 to 41, 1983 Printed in Great Britain
0024-6301/83/$3.00+ .OO Pergamon Press Ltd.
35
Towards More Productive Industrial Relations Brian Wilson,
Professor of Organization
The author suggests that a critical factor in bringing about an overall improvement in the UK’s economic performance is an improvement in Industrial Relations-with the aim of achieving levels of productivity which match the best in the world. The article asks how this is to be done; what has gone wrong; and, more importantly, what can be done to improve the situation in the future.
Introduction On practically every dimension, the U.K.‘s economic performance is greatly inferior to that of its industrial competitors. Our GNP per ca@a is little above 50 per cent of that of our European rivals and, though our capital investment, in terms of percentage of GNP, does not look widely different at 10 per cent, 10 per cent of half as much means that we are continuing to drop behind in the race. But even that is not the end of the gloom. In a 1982 NED0 comparison it was shown that, even when we do invest, we use our investment very much less effectively. Taking the U.K. as 100 (net output per unit of investment), the U.S. comes out at 132, West Germany at 181 and France at 230! At the individual company level, where straight comparisons can be made, e.g. in car manufacture, where there are strictly comparable facilities, we can only achieve half the output per worker. We can make excuses about the adverse effect of the over-strong L (now becoming less) but, in the final analysis, unless we can improve our productivity, stem the flow of imports and increase our exports, our standard of living as a nation can only continue to decline. It is suggested that a critical factor in bringing about an overall improvement is an improvement in The author is Professor of Organization and Human Resources at Cranfield Institute of Technology and Director of Cranfield Business Development Centre, INTERWORK, his address is Orchard End, The Paddock, Emberton, Olney, Bucks, U.K.
and Human Resources,
Cranjeld
Industrial Relations, to the end of achieving levels of productivity, which match the best in the world. The question is how? This paper explores where we have gone wrong and, more importantly, what might be done to improve the situation in the future.
An Historical Development
Perspective on the of IR in the U.K.
Whilst there had been craft unions long before the industrial revolution, their interest was largely in maintaining craft skills and standards. However, with the industrial revolution and the exploitation of the new workforce, drawn from the land to work in the mills, there was a need for a countervailing force to match the power of the mill-owners. The craft unions were a natural basis for such a development but, because craft skills tended to cut UC~OSS the new industries, we have ended up with a union structure which is not industry based. Representing the best interests of their members with such a structure has led almost inevitably to an emphasis on take-home pay, with little concern about whether a particular sector or company could really afford to pay the increases negotiated. There is a significant difference between the stance of our unions and those of the industry-based German and American unions, in that the latter have a much wider economic perspective and tend to have a longer time horizon in their negotiations. They recognize that a healthy industry, one which has a sufficient investment of capital, is more likely to remain competitive and thus be able to pay well in future and provide longer-term security for its employees. In Japan, where, in the larger companies, lifetime employment is guaranteed, the identification between workforce and company is complete. They have none of the battles which we experience in the U.K. and know that, if the company does well, so will they. The mismatch from interests-managements’
the start in economic with profitability and the
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unions with ever higher levels of pay and other benefits-has almost inevitably led to the current ‘them and us’ with management attitudes, endeavouring to get its pound of flesh for every wage increase negotiated. This in turn has led to tight control of shop floor activities and the use of wages structures to reinforce this control. We have seen a succession of pay structures, all ostensibly aimed at improving productivity-piece rates, work study measurement and ‘payment by results’ schemes, productivity deals and so on. They have done little to give the necessary improvements and have usually led to game playing, with the shopfloor’s aim, quite clearly, being to improve earnings levels as much as possible for the same or less effort. Management, on the other hand, has endeavoured to bribe the shopfloor, and control their activities with ever greater sophistication, in order to ensure that output was sufficiently high and costs sufficiently low to maintain overall viable operation. This game playing has only reinforced the negative ‘them and us’ feelings. Even in the United States, where things were not nearly so bad, Douglas MacGregor was moved to comment on the quite different beliefs which had developed about people who worked side by side in organizations. The shopfloor people were ‘basically lazy, untrustworthy and needed to be bribed, coerced or controlled to get work out of them’ (Theory X). On the other hand, staff were perceived as ‘basically trustworthy with work for them being as natural as sleep or play; given challenging jobs and the resources and freedom to get on with them, they would be productive’ (Theory Y). Most of the shopfloor rewards structures have tended to embody Theory X thinking with their main purpose being the subdivision and control of there was a reaction against such jobs. However, approaches in the introduction of Measured Day work-no bonus element; a fixed wage for an agreed level of output from the whole shop. Whilst the intention to move from a ‘no trust’ to a ‘trust’ situation-such a rewards structure could only work on the basis of trust-was admirable, sadly the belief that it could be done in one step was naive in the extreme. Generations of workers, reared on game playing, could only see such a pay structure as being a pushover. With no controls, other than reliance, yet again, on the poor supervisor, the meat in the proverbial sandwich, it was inevitable that such schemes could not maintain existing levels of output.
1983
involving tight control, yet again. One constantly hears IR managers talking about the need to go back to piece rate systems or such like, now that everything else has failed. What a catastrophe this would be, particularly when other quite different approaches have been tried with great success. They have aimed at developing trust over a period of time, through quite different approaches. They have not worked on the assumption that it could be conjured up overnight. A clear pattern emerges when one examines more progressive approaches, they all have:
the
for
1. A Contract Sharing One of the problems about pay is that it has always been at the heart of shopfloor negotiations. On the union side, the aim has been to get the maximum settlement with the minimum of concessions and, on the management side, it has been to arrive at levels of pay which do not lead to a loss of competitive edge. Higher levels of pay could only be justified if productivity increases could be obtained, which would at least match the extra payments made. The progressive companies have broken this pattern. They, without exception have hammered out ‘contracts’ for sharing in the extra wealth created through more effective performance by the company as a whole, or a cohesive part of it, in the market place. These have varied from partnership/profit sharing schemes, such as in the John Lewis Partnership, through co-ownership experiments, such as the Scott-Bader Commonwealth, to the increasing of Added Value schemes number operated successfully by small companies. In the last, a ratio, Payroll/Added Value is agreed-usually as a result of historic analysis of performance. By working more effectively together, leading to a greater competitive edge, to higher sales and, therefore, to more Added Value, the rewards for employees increase pro rata-automatically without further negotiations.
Where Next?
The interesting thing about such schemes is that, though, as one might imagine, they work well during the good times, because of the greater identification with the company’s progress which they tend to generate and the recognition that working well together is good for everyone, they also enable companies to face unpleasant issues and to take the necessary, and sometimes unpleasant, actions, which are essential to survival. Involvement leads to responsible behaviour.
The danger at this point is that, Measured Day Work schemes having failed, the baby could so easily be thrown out with the bath water and that management could so easily revert to schemes
2. A Scheme Which Embraces Everyone Most productivity schemes in the past have been aimed at the ‘directs’, as though they were the only
Towards More Productive productive workers. Usually their ‘indirect’ shopfloor colleagues have been linked in by some formula to maintain reasonable harmony in both pay and relationships. In such schemes, differentials between those on bonus and those not are a real problem. The resulting pay anomalies cause many jealousies and much ill feeling. Progressive rewards structures avoid these nonsenses; they all embrace everyone from bottom to top. This immediately creates a much greater feeling of teamship, a sense of identification with the whole organization and much more collaborative working relationships. 3. A Progressive Style of Management This is the most important of all the ingredients. Many is the Added Value, or similar scheme, which has been introduced and failed, simply because it was seen as no more than yet another, though potentially rather better, pay structure. The more progressive pay structures have only worked where they have been installed within a progressive culture, one in which management is committed to openness, to the stimulation of new ideas and thinking and to using people’s potentials to the full. The main ingredients of a progressive style are outlined in the following table: Senior
Example:
management
practises
what
it
Industrial Relations
37
to see the benefits of operating in different ways. Training programmes can be useful as can pilot experiments, if the results are publicized and rewards are given to those who have performed in ways consistent with the new style and so on. The senior managers introducing such changes need three attributes in large measure:
(1) Vision-a
view of a different set of relationships and behaviour in their company and a belief that this can be brought about.
(2) Sensitivity
to people’s feelings of threat allied to the sensitivity not to push through change at such a pace that people are unable to absorb it.
(3) Persistence-not
being demoralized by the setbacks which inevitably do occur and being able to pick themselves off the floor, dust themselves down and tackle the latest roadblock in a different way.
There is no doubt that it is easier to bring about such change in the smaller companies. Added Value schemes are also ideal in such situations. It is believed that success is possible, nonetheless, in the larger companies once they start to decentralize their operations and give their decentralized units the freedom to experiment with new ways of running and organizing themselves, without too many constraints from the centre.
preaches. Ideas are received as proposals rather than as criticisms. Openness
:
Control: Encouragement imposed control. Rewards:
of self-control
Related to contribution
constructive rather than
and performance.
Development: Concern to ‘grow’ people at all levels. Risk:
Accepted as part of the development
process.
Two-way and based on ‘What may we not say’ rather than on ‘What should we say’. Communication:
satisfaction: Concern to give people meaningful jobs in which they have some discretion.
Job
There is no magic formula for introducing such a style and the open, problem-solving culture which it stimulates. It is the result of commitment at the top and a lot of hard and often, in the early stages, unrewarding work in changing attitudes down the line. It often starts from a recognition that ‘to survive, we cannot go on in the way we have in the past’ and the conscious development of a change strategy for the next few years, which will lead to the necessary changes in attitudes and in patterns of behaviour. The road blocks to progress are not all at shopfloor level. Middle managers and Supervisors will often feel extremely threatened at the prospect of losing their authority and control. They need to be helped
It is also worth saying that there was never a better time than the present. Sweeping change of the kind described usually takes a decade or more to introduce. However, when a company is fighting for survival, provided that the fight is undertaken as a team effort, management and shop stewards working together, the time scale can be greatly condensed, as outlined in the case described in the next section. How One Company Used its Pain as an Opportunity: The Babcock Story Babcock Power is the boiler making subsidiary of Babcock International In the 6Os, there were constant industrial relations battles. Payment was on a mixture of piece rates and work study incentive schemes and these led to constant disagreements, strikes and even a sit-in. Management recognized the need to change the whole managerial approach and initiated joint management/ supervisor/shop steward training sessions in the early 1970s. They began to be much more open in their communications and the previous reward structures were abandoned for a much simpler Measured Day Work Scheme (which, incidentally, did not sustain previous levels of productivity!). Because of the fuel crisis in 1973 and the CEGB’s previous over-ordering of power stations, it became clear that the CEGB had placed its last order with Babcock for a central power station (1972) for some time to come, they were talking about no more orders until the 1980s and quite clearly, dependent as Babcock were for 80 per cent plus of their business in the U.K., neither they nor the rest of the
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U.K. power engineering industry could survive, unless the CEGB, and behind them the Government, changed their minds,. It was clear that management would be unable to achieve this by themselves; they needed the support of their unions and sponsored MPs if they were to exert sufficient political leverage. This initiated an exciting period of collaborative working, in which the management/union team were not only able to persuade the Government, but also the Opposition (whose support was also needed since the Labour Government had by this time lost its majority) of the need to order Drax B if the power engineering industry were to survive. During the period, lobbies, hire hotel behave in ways experience. Their responsible.
shop stewards were trusted to organize rooms for the purpose and generally to which were entirely new to their behaviour at all times was consistently
It became clear that, even though Drax B was to be built, the company was overmanned and management and unions jointly managed a one-third redundancy (1500 people left on one day) without one day’s industrial action. It also became clear that for longer-term survival, the percentage of overseas work had to be greatly increased and the only way in which to do this, with any hope of Even more success, was to increase productivity. significantly, there was agreement that the joint working should continue. Two critical contributions to increased productivity were the decisions to modernize the machine and fabrication shops and to introduce a new bonus scheme. The modernization, which involved the investment of A23m, did not go ahead until the implications had been fully worked out and the unions had signed an agreement, which committed them to the necessary changes in working practices. On the bonus scheme, though an Added Value based scheme was attractive, the product cycle time of 3 years plus made it impossible and a ‘contract’ was agreed on the basis of a 5 per cent increase in the ‘tonnes of finished product despatched per L of wages and salaries’. The style was right; everyone was incorporated in the scheme and it has been an outstanding success in stimulating increased collaborative working and productivity, with the targets being ‘upped’ in successive years to 10 per cent and 13 per cent-and being achieved. Between them, the two courses of action have led to productivity increases of over 25 per cent, quotations now are almost invariably first or second lowest, and the proportion of overseas work has increased to 65 per cent from a low of only 5 per cent. One target still remains to be achieved-to increase levels of productivity to those of the Japanese, so that the Babcock quotation will always come number one! To this end, a deputation of managers and shop stewards has visited Japan and plans to achieve the further increase in productivity are being implemented. I believe the case drives home that fact that fundamental changes in approach are possible if management both adopts a different approach and uses the pain of a difficult situation to advantage in increasing the level of awareness of the need for changes and involving employees in their planning and implementation.
1983
The Fragmentation Specialists
of the ‘People’
Before discussing the implications of a changed approach, there is a need, first of all, to look at one of the major roadblocks to such a change and that lies within the ‘people area’ itself. As mentioned, whilst shopfloor workers have been looked upon largely as untrustworthy and needing to be bribed, or coerced, and controlled, this has not been the perception of staff, who, on the whole, have been regarded as being self generating, much more trustworthy and needing far less supervision. In many organizations, the two views of people have led to a fragmentation of the people specialists into two main areas-‘shopfloor’ and ‘staff related. The shopfloor specialisms have tended to be centred on Industrial Relations Departments, which have been mainly concerned with negotiations and achieving as much control as possible over shopfloor behaviour, using pay structures, and any other such means available. Training Schools, whilst not so overtly negative in their stance have, nevertheless, tended to be guided by similar beliefs and have, therefore, tended to reinforce the ‘them’ and ‘us’ attitudes prevalent at shopfloor level, by their methods of teaching. On the ‘staff side, Personnel Departments have been much more concerned with helping managers ‘grow’ their people and with helping establish rewards structures which will reinforce good performance. Management Training Units have tended to concentrate on improving managers’ joint problem-solving capabilities and their interpersonal skills-much more experiential, openended kinds of teaching than the didactic, ‘do it this way’, kinds to which shopfloor workers, apprentices and, often, supervisors have been exposed. Where Organization Development Units have been established, these have often been even more progressive than their sister management training departments, concentrating on team b u1‘Id’m g a ct’ivi t‘ies and the design of organizational structures which will allow decision taking at ever lower management levels. The fragmentation often continues right up the line, with the different departments and units responding to different members of the board. Typically the IR Department will respond to the Production Director and the Personnel Department to the Personnel Director. Other units have been known to repond to yet other Board members, further increasing the fragmentation. It is hardly surprising that such fragmentation of two cultures, the propagation encourages theories ‘X’ and ‘Y’ based, for shopfloor and staff, respectively. It is suggested that, if the kinds of changes which going to be necessary to improve productivity
are are
Towards
More Productive
Industrial Relations
39
to take place, a starting point must be in establishing a philosophy which sees all employees as being equally trustworthy and capable of development and which leads to the harmonization of conditions, to a common sense of identification with the business and to concern for its commercial success.
warts and all, and to then develop a strategy and tactics for moving towards the goal, on a sensible timescale. In normal circumstances this could take l&15 years. However, when survival is at stake, this presents a good opportunity to reduce this to many fewer years as illustrated earlier in the Babcock case.
It is a nonsense to characterize people by the colour of their collars. Many is the shopfloor worker who carries considerable responsibility in the local community-councillor, church elder, organizer of a local charity etc.-who, in the work environment has his every move controlled. And these are the people who set standards in their homes which influence the values and behaviours of their sons and daughters, the same people who, having had the opportunity of a better education, then join our companies as trustworthy ‘staff.
One thing is clear; such sweeping changes cannot be done in a piecemeal way. It is no good trying a bit of change here and a bit more there. A change anywhere within the total system has an impact on other parts. It is no good, for example, to train managers in a more open, involving style of management and then to reward them purely for achieving quantitative targets. If their behaviour is to change in line with their training, the appraisal of performance must assess such behavioural changes and rewards should reflect the progress made.
Whilst the development of a cohesive and progressive set of people values presents few problems to those personnel specialists working in the more developmental areas, it is a traumatic change for those who have been playing the traditional IR game. Their kudos and power springs from their expertise in its niceties, the fact their excellent lines of that they, through communication-with top management, the union hierarchy and the local branches-know more about what is going on than anyone else. This puts them in a very strong position, almost executive, in which their advice on how to deal with situations is seldom challenged.
A thoroughgoing change programme will look at all aspects of organizational life, starting with basic values and beliefs about people. Not only will that lead to new objectives but, even more importantly, to a concern with how they will be achieved. The structure will be examined, to see if it leads to collaborative working between units, rather than in-fighting; systems will evolve from control systems to ones which will provide the information required for decision-taking; rewards, generally, will be related to the achievement of standards of excellence and will reinforce the behavioural patterns needed; people’s roles will be defined more widely; there will be greater reliance on self control rather than external controls and there will be a concern to give people whole, meaningful jobs and to develop their potentials.
To ask them to be party to the development of an entirely different game, with different rules, is often too much for them to stomach. Loyal servants though they may be, if they cannot change, they need to be moved away from their power base. Unless this is done, they will undoubtedly sabotage any new initiative.
Developing
a Change
Strategy
Even given the development of a cohesive people philosophy, incorporating the beliefs outlined earlier under ‘progressive style of management’, a critical starting point, it would be naive to imagine that an antiprogressive industrial relations situation could be miraculously changed into one of light and joy overnight. Having accepted the nonsense of a ‘two culture organization’ the next step is to develop a view of the organization of the future, one which will be able to compete on equal terms with any similar organization anywhere in the world. It will outline the kinds of relationships and behaviours which will contribute to this. Having defined the goal, the next step is to take a completely honest look at the present situation,
Within such a movement, shop stewards will increasingly see their role as working with management to introduce the kinds of changes which will improve their members’ pay and security, longer term, through a more competitive and productive operation.
Implications
of a Changed
Approach
Clearly, there are profound implications for all levels of employee and, indeed, for unions in the changed approach outlined. Senior
Management
Changes needed along the lines already outlined in some depth. Middle
Management
Their job changes significantly from being day-today action men/decision-takers to one with a longer-time focus-clarifying targets and job boundaries, agreeing standards for performance, facilitating the performance of their subordinates and the growth of their potential, ensuring that rewards are consistent with contributions and
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generally acting in a problem-solving way to ensure the smooth working of their part of the organization and effective collaboration with other units. Supervisors As already mentioned, rather than having a role which is primarily supervisory and controlling, theirs becomes one which is in a way a microcosm of their manager’s. They are concerned to ensure that there are no hold-ups, because supplies of materials have not been properly planned; they are concerned to set standards of excellence, give feedback on and reward good performance, and they are all problem solvers, helping to resolve difficulties by using their wide experience to keep the output rolling. Shop Stewards Within the kind of organization culture which has been described, there is no longer a need for sharp confrontation. There will always be legitimate areas of difference where it is right and proper that shop stewards should represent their members’ interests, but there will also be recognition that there is 90 per cent of common ground. By acting, in effect, as extensions of the management team and helping to improve the wealth creation process, they will both ensure their members’ standards of living and longer-term security. Shop Floor Shop floor people will increasingly become selfgenerating, often work in autonomous groups, taking decisions on work organization and on who does what as they work to agreed output and quality standards. The jobs which they do will be more complete and meaningful, and opportunities for development and advancement will be considerably enhanced. Employee Relations Managers Too many ER managers currently get their kudos at the traditional game. from being experts Effective ER managers, in future, are more likely to come from the ranks of line managers who are committed to new approaches and have experience in applying them. For some time to come, ER departments are likely to produce reactionaries who will fear their loss of influence, if the traditional game is changed. Union Oficials Inevitably, as confrontational industrial relations becomes less relevant and as the role of the shop steward working within his company becomes enhanced, that of the union official will need to change. Rather than being the front line negotiator, his role will become more advisory and longerterm policy development than day-to-day action. There will be similar opposition to change on the officials as that experienced in part of union company from industrial relations experts.
1983
Summarizing We have already moved some way from traditional employee relations approach: Traditional IR Beliefs. Shopfloor able, management
Procedures,
Outcome. Information. Style
untrustworthy, conflict has right to manage.
of Operation. Win-lose, hard nosed decides and adjusts if necessary.
Mode ment
Kept
rules,
inevit-
manage-
agreements.
tight.
of Management.
Feelings
the more
Controlling. Negative.
Generated.
Use has been made of behavioural science insights in teaching managers how to negotiate with greater success; Herzberg’s insights have been used in a manipulative way to ‘enrich’ people’s jobs, not to involve them in the enrichment. Many behavioural scientists would claim that, in using their skills to sophisticate the traditional ‘game’, their colleagues have sold their souls to the devil! Manipulative IR Beliefs. People work better if theirjobs are enriched; managers have the right to manage and need help to do it better. Mode of Operation. Advising management on structures/systems/methods changes which will enrich people’s jobs. Doing it ‘to’ the shopfloor. Increasing management’s manipulative skills, e.g. negotiating skills. Outcomes. Short-term gains in productivity and harmony. Resentment at being conned/manipulated. Financial benefits largely to management. Information. Style
Kept
tight.
of Management.
Feelings
Generated.
Manipulative. Very
negative.
The challenge now is to use the behavioural and organizational development insights in a quite different way; to develop what I would call an ‘Open Systems/Developmental kind of Employee Relations’ : Developmental/Open Systems IR Belie$. There are legitimate differences, but a lot of common ground (same boat; no wealth creationno jobs or security). Shopfloor can be trusted, need management by consent. Mode
of Operation.
Facing
realities,
creating
space
Towards within which self-control possible and contracting around agreements which take account of differand interdependence manageences : boundary ment, situational management. Outcomes. Realistic
plans, sharing in gains, genuine increases in productivity/competitiveness, trust, harmonization. Information.
Complete
openness.
Generated. Positive;
Feel&s respect.
Style ofManagement.
consistently
Mature,
mutual
confidence
situational,
Poor Falling
varied but
Productive
Industrial
Relations
41
I believe that this is what has been outlined in this paper. However, it is not going to be easy. Though logic dictates that such changes need to be made, apart from the feelings of threat and sensitivity, simply because of the changes which are likely to be required, there is also a lot of vested interest in the status quo amongst the prime actors in the traditional ‘IR Game’. They perceive any attempt to change it in a fundamental way as a strong attack on their status, power and influence. They might not be able to play a new game and even if they could, they might not be able to maintain their erstwhile dominant position.
so.
Forces ‘FOR’
Decline
and
More
I
in Economic
Performance
Vested
interest
of Individuals,
-in maintaining status quo and ‘our power/influence/status’-1R Managers, TU officials, Academics, Managers of a--Institutions (TUC, CBI, EEF etc.)
Productivity Standards
Forces ‘AGAINST
of Living Inertia-Institutions
Declining
Standards
of Public
Services Fear of Change-All
Rising
Unemployment
Fear of losing
Successful change will only come about if there is acute awareness of such feelings, a sensitivity planning the changes to reduce the feelings threat, in so far as possible and a ruthlessness
an in of in
Control-Managers
dealing with the ‘road blocks’, who threaten to inhibit or hinder the necessary changes. Such people need to be removed-in the nicest possible way.
0024-6301/83/$3.00+ .OO Pergamon Press Ltd.
35
Towards More Productive Industrial Relations Brian Wilson,
Professor of Organization
The author suggests that a critical factor in bringing about an overall improvement in the UK’s economic performance is an improvement in Industrial Relations-with the aim of achieving levels of productivity which match the best in the world. The article asks how this is to be done; what has gone wrong; and, more importantly, what can be done to improve the situation in the future.
Introduction On practically every dimension, the U.K.‘s economic performance is greatly inferior to that of its industrial competitors. Our GNP per ca@a is little above 50 per cent of that of our European rivals and, though our capital investment, in terms of percentage of GNP, does not look widely different at 10 per cent, 10 per cent of half as much means that we are continuing to drop behind in the race. But even that is not the end of the gloom. In a 1982 NED0 comparison it was shown that, even when we do invest, we use our investment very much less effectively. Taking the U.K. as 100 (net output per unit of investment), the U.S. comes out at 132, West Germany at 181 and France at 230! At the individual company level, where straight comparisons can be made, e.g. in car manufacture, where there are strictly comparable facilities, we can only achieve half the output per worker. We can make excuses about the adverse effect of the over-strong L (now becoming less) but, in the final analysis, unless we can improve our productivity, stem the flow of imports and increase our exports, our standard of living as a nation can only continue to decline. It is suggested that a critical factor in bringing about an overall improvement is an improvement in The author is Professor of Organization and Human Resources at Cranfield Institute of Technology and Director of Cranfield Business Development Centre, INTERWORK, his address is Orchard End, The Paddock, Emberton, Olney, Bucks, U.K.
and Human Resources,
Cranjeld
Industrial Relations, to the end of achieving levels of productivity, which match the best in the world. The question is how? This paper explores where we have gone wrong and, more importantly, what might be done to improve the situation in the future.
An Historical Development
Perspective on the of IR in the U.K.
Whilst there had been craft unions long before the industrial revolution, their interest was largely in maintaining craft skills and standards. However, with the industrial revolution and the exploitation of the new workforce, drawn from the land to work in the mills, there was a need for a countervailing force to match the power of the mill-owners. The craft unions were a natural basis for such a development but, because craft skills tended to cut UC~OSS the new industries, we have ended up with a union structure which is not industry based. Representing the best interests of their members with such a structure has led almost inevitably to an emphasis on take-home pay, with little concern about whether a particular sector or company could really afford to pay the increases negotiated. There is a significant difference between the stance of our unions and those of the industry-based German and American unions, in that the latter have a much wider economic perspective and tend to have a longer time horizon in their negotiations. They recognize that a healthy industry, one which has a sufficient investment of capital, is more likely to remain competitive and thus be able to pay well in future and provide longer-term security for its employees. In Japan, where, in the larger companies, lifetime employment is guaranteed, the identification between workforce and company is complete. They have none of the battles which we experience in the U.K. and know that, if the company does well, so will they. The mismatch from interests-managements’
the start in economic with profitability and the
36
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Planning
Vol.
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December
unions with ever higher levels of pay and other benefits-has almost inevitably led to the current ‘them and us’ with management attitudes, endeavouring to get its pound of flesh for every wage increase negotiated. This in turn has led to tight control of shop floor activities and the use of wages structures to reinforce this control. We have seen a succession of pay structures, all ostensibly aimed at improving productivity-piece rates, work study measurement and ‘payment by results’ schemes, productivity deals and so on. They have done little to give the necessary improvements and have usually led to game playing, with the shopfloor’s aim, quite clearly, being to improve earnings levels as much as possible for the same or less effort. Management, on the other hand, has endeavoured to bribe the shopfloor, and control their activities with ever greater sophistication, in order to ensure that output was sufficiently high and costs sufficiently low to maintain overall viable operation. This game playing has only reinforced the negative ‘them and us’ feelings. Even in the United States, where things were not nearly so bad, Douglas MacGregor was moved to comment on the quite different beliefs which had developed about people who worked side by side in organizations. The shopfloor people were ‘basically lazy, untrustworthy and needed to be bribed, coerced or controlled to get work out of them’ (Theory X). On the other hand, staff were perceived as ‘basically trustworthy with work for them being as natural as sleep or play; given challenging jobs and the resources and freedom to get on with them, they would be productive’ (Theory Y). Most of the shopfloor rewards structures have tended to embody Theory X thinking with their main purpose being the subdivision and control of there was a reaction against such jobs. However, approaches in the introduction of Measured Day work-no bonus element; a fixed wage for an agreed level of output from the whole shop. Whilst the intention to move from a ‘no trust’ to a ‘trust’ situation-such a rewards structure could only work on the basis of trust-was admirable, sadly the belief that it could be done in one step was naive in the extreme. Generations of workers, reared on game playing, could only see such a pay structure as being a pushover. With no controls, other than reliance, yet again, on the poor supervisor, the meat in the proverbial sandwich, it was inevitable that such schemes could not maintain existing levels of output.
1983
involving tight control, yet again. One constantly hears IR managers talking about the need to go back to piece rate systems or such like, now that everything else has failed. What a catastrophe this would be, particularly when other quite different approaches have been tried with great success. They have aimed at developing trust over a period of time, through quite different approaches. They have not worked on the assumption that it could be conjured up overnight. A clear pattern emerges when one examines more progressive approaches, they all have:
the
for
1. A Contract Sharing One of the problems about pay is that it has always been at the heart of shopfloor negotiations. On the union side, the aim has been to get the maximum settlement with the minimum of concessions and, on the management side, it has been to arrive at levels of pay which do not lead to a loss of competitive edge. Higher levels of pay could only be justified if productivity increases could be obtained, which would at least match the extra payments made. The progressive companies have broken this pattern. They, without exception have hammered out ‘contracts’ for sharing in the extra wealth created through more effective performance by the company as a whole, or a cohesive part of it, in the market place. These have varied from partnership/profit sharing schemes, such as in the John Lewis Partnership, through co-ownership experiments, such as the Scott-Bader Commonwealth, to the increasing of Added Value schemes number operated successfully by small companies. In the last, a ratio, Payroll/Added Value is agreed-usually as a result of historic analysis of performance. By working more effectively together, leading to a greater competitive edge, to higher sales and, therefore, to more Added Value, the rewards for employees increase pro rata-automatically without further negotiations.
Where Next?
The interesting thing about such schemes is that, though, as one might imagine, they work well during the good times, because of the greater identification with the company’s progress which they tend to generate and the recognition that working well together is good for everyone, they also enable companies to face unpleasant issues and to take the necessary, and sometimes unpleasant, actions, which are essential to survival. Involvement leads to responsible behaviour.
The danger at this point is that, Measured Day Work schemes having failed, the baby could so easily be thrown out with the bath water and that management could so easily revert to schemes
2. A Scheme Which Embraces Everyone Most productivity schemes in the past have been aimed at the ‘directs’, as though they were the only
Towards More Productive productive workers. Usually their ‘indirect’ shopfloor colleagues have been linked in by some formula to maintain reasonable harmony in both pay and relationships. In such schemes, differentials between those on bonus and those not are a real problem. The resulting pay anomalies cause many jealousies and much ill feeling. Progressive rewards structures avoid these nonsenses; they all embrace everyone from bottom to top. This immediately creates a much greater feeling of teamship, a sense of identification with the whole organization and much more collaborative working relationships. 3. A Progressive Style of Management This is the most important of all the ingredients. Many is the Added Value, or similar scheme, which has been introduced and failed, simply because it was seen as no more than yet another, though potentially rather better, pay structure. The more progressive pay structures have only worked where they have been installed within a progressive culture, one in which management is committed to openness, to the stimulation of new ideas and thinking and to using people’s potentials to the full. The main ingredients of a progressive style are outlined in the following table: Senior
Example:
management
practises
what
it
Industrial Relations
37
to see the benefits of operating in different ways. Training programmes can be useful as can pilot experiments, if the results are publicized and rewards are given to those who have performed in ways consistent with the new style and so on. The senior managers introducing such changes need three attributes in large measure:
(1) Vision-a
view of a different set of relationships and behaviour in their company and a belief that this can be brought about.
(2) Sensitivity
to people’s feelings of threat allied to the sensitivity not to push through change at such a pace that people are unable to absorb it.
(3) Persistence-not
being demoralized by the setbacks which inevitably do occur and being able to pick themselves off the floor, dust themselves down and tackle the latest roadblock in a different way.
There is no doubt that it is easier to bring about such change in the smaller companies. Added Value schemes are also ideal in such situations. It is believed that success is possible, nonetheless, in the larger companies once they start to decentralize their operations and give their decentralized units the freedom to experiment with new ways of running and organizing themselves, without too many constraints from the centre.
preaches. Ideas are received as proposals rather than as criticisms. Openness
:
Control: Encouragement imposed control. Rewards:
of self-control
Related to contribution
constructive rather than
and performance.
Development: Concern to ‘grow’ people at all levels. Risk:
Accepted as part of the development
process.
Two-way and based on ‘What may we not say’ rather than on ‘What should we say’. Communication:
satisfaction: Concern to give people meaningful jobs in which they have some discretion.
Job
There is no magic formula for introducing such a style and the open, problem-solving culture which it stimulates. It is the result of commitment at the top and a lot of hard and often, in the early stages, unrewarding work in changing attitudes down the line. It often starts from a recognition that ‘to survive, we cannot go on in the way we have in the past’ and the conscious development of a change strategy for the next few years, which will lead to the necessary changes in attitudes and in patterns of behaviour. The road blocks to progress are not all at shopfloor level. Middle managers and Supervisors will often feel extremely threatened at the prospect of losing their authority and control. They need to be helped
It is also worth saying that there was never a better time than the present. Sweeping change of the kind described usually takes a decade or more to introduce. However, when a company is fighting for survival, provided that the fight is undertaken as a team effort, management and shop stewards working together, the time scale can be greatly condensed, as outlined in the case described in the next section. How One Company Used its Pain as an Opportunity: The Babcock Story Babcock Power is the boiler making subsidiary of Babcock International In the 6Os, there were constant industrial relations battles. Payment was on a mixture of piece rates and work study incentive schemes and these led to constant disagreements, strikes and even a sit-in. Management recognized the need to change the whole managerial approach and initiated joint management/ supervisor/shop steward training sessions in the early 1970s. They began to be much more open in their communications and the previous reward structures were abandoned for a much simpler Measured Day Work Scheme (which, incidentally, did not sustain previous levels of productivity!). Because of the fuel crisis in 1973 and the CEGB’s previous over-ordering of power stations, it became clear that the CEGB had placed its last order with Babcock for a central power station (1972) for some time to come, they were talking about no more orders until the 1980s and quite clearly, dependent as Babcock were for 80 per cent plus of their business in the U.K., neither they nor the rest of the
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Range
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U.K. power engineering industry could survive, unless the CEGB, and behind them the Government, changed their minds,. It was clear that management would be unable to achieve this by themselves; they needed the support of their unions and sponsored MPs if they were to exert sufficient political leverage. This initiated an exciting period of collaborative working, in which the management/union team were not only able to persuade the Government, but also the Opposition (whose support was also needed since the Labour Government had by this time lost its majority) of the need to order Drax B if the power engineering industry were to survive. During the period, lobbies, hire hotel behave in ways experience. Their responsible.
shop stewards were trusted to organize rooms for the purpose and generally to which were entirely new to their behaviour at all times was consistently
It became clear that, even though Drax B was to be built, the company was overmanned and management and unions jointly managed a one-third redundancy (1500 people left on one day) without one day’s industrial action. It also became clear that for longer-term survival, the percentage of overseas work had to be greatly increased and the only way in which to do this, with any hope of Even more success, was to increase productivity. significantly, there was agreement that the joint working should continue. Two critical contributions to increased productivity were the decisions to modernize the machine and fabrication shops and to introduce a new bonus scheme. The modernization, which involved the investment of A23m, did not go ahead until the implications had been fully worked out and the unions had signed an agreement, which committed them to the necessary changes in working practices. On the bonus scheme, though an Added Value based scheme was attractive, the product cycle time of 3 years plus made it impossible and a ‘contract’ was agreed on the basis of a 5 per cent increase in the ‘tonnes of finished product despatched per L of wages and salaries’. The style was right; everyone was incorporated in the scheme and it has been an outstanding success in stimulating increased collaborative working and productivity, with the targets being ‘upped’ in successive years to 10 per cent and 13 per cent-and being achieved. Between them, the two courses of action have led to productivity increases of over 25 per cent, quotations now are almost invariably first or second lowest, and the proportion of overseas work has increased to 65 per cent from a low of only 5 per cent. One target still remains to be achieved-to increase levels of productivity to those of the Japanese, so that the Babcock quotation will always come number one! To this end, a deputation of managers and shop stewards has visited Japan and plans to achieve the further increase in productivity are being implemented. I believe the case drives home that fact that fundamental changes in approach are possible if management both adopts a different approach and uses the pain of a difficult situation to advantage in increasing the level of awareness of the need for changes and involving employees in their planning and implementation.
1983
The Fragmentation Specialists
of the ‘People’
Before discussing the implications of a changed approach, there is a need, first of all, to look at one of the major roadblocks to such a change and that lies within the ‘people area’ itself. As mentioned, whilst shopfloor workers have been looked upon largely as untrustworthy and needing to be bribed, or coerced, and controlled, this has not been the perception of staff, who, on the whole, have been regarded as being self generating, much more trustworthy and needing far less supervision. In many organizations, the two views of people have led to a fragmentation of the people specialists into two main areas-‘shopfloor’ and ‘staff related. The shopfloor specialisms have tended to be centred on Industrial Relations Departments, which have been mainly concerned with negotiations and achieving as much control as possible over shopfloor behaviour, using pay structures, and any other such means available. Training Schools, whilst not so overtly negative in their stance have, nevertheless, tended to be guided by similar beliefs and have, therefore, tended to reinforce the ‘them’ and ‘us’ attitudes prevalent at shopfloor level, by their methods of teaching. On the ‘staff side, Personnel Departments have been much more concerned with helping managers ‘grow’ their people and with helping establish rewards structures which will reinforce good performance. Management Training Units have tended to concentrate on improving managers’ joint problem-solving capabilities and their interpersonal skills-much more experiential, openended kinds of teaching than the didactic, ‘do it this way’, kinds to which shopfloor workers, apprentices and, often, supervisors have been exposed. Where Organization Development Units have been established, these have often been even more progressive than their sister management training departments, concentrating on team b u1‘Id’m g a ct’ivi t‘ies and the design of organizational structures which will allow decision taking at ever lower management levels. The fragmentation often continues right up the line, with the different departments and units responding to different members of the board. Typically the IR Department will respond to the Production Director and the Personnel Department to the Personnel Director. Other units have been known to repond to yet other Board members, further increasing the fragmentation. It is hardly surprising that such fragmentation of two cultures, the propagation encourages theories ‘X’ and ‘Y’ based, for shopfloor and staff, respectively. It is suggested that, if the kinds of changes which going to be necessary to improve productivity
are are
Towards
More Productive
Industrial Relations
39
to take place, a starting point must be in establishing a philosophy which sees all employees as being equally trustworthy and capable of development and which leads to the harmonization of conditions, to a common sense of identification with the business and to concern for its commercial success.
warts and all, and to then develop a strategy and tactics for moving towards the goal, on a sensible timescale. In normal circumstances this could take l&15 years. However, when survival is at stake, this presents a good opportunity to reduce this to many fewer years as illustrated earlier in the Babcock case.
It is a nonsense to characterize people by the colour of their collars. Many is the shopfloor worker who carries considerable responsibility in the local community-councillor, church elder, organizer of a local charity etc.-who, in the work environment has his every move controlled. And these are the people who set standards in their homes which influence the values and behaviours of their sons and daughters, the same people who, having had the opportunity of a better education, then join our companies as trustworthy ‘staff.
One thing is clear; such sweeping changes cannot be done in a piecemeal way. It is no good trying a bit of change here and a bit more there. A change anywhere within the total system has an impact on other parts. It is no good, for example, to train managers in a more open, involving style of management and then to reward them purely for achieving quantitative targets. If their behaviour is to change in line with their training, the appraisal of performance must assess such behavioural changes and rewards should reflect the progress made.
Whilst the development of a cohesive and progressive set of people values presents few problems to those personnel specialists working in the more developmental areas, it is a traumatic change for those who have been playing the traditional IR game. Their kudos and power springs from their expertise in its niceties, the fact their excellent lines of that they, through communication-with top management, the union hierarchy and the local branches-know more about what is going on than anyone else. This puts them in a very strong position, almost executive, in which their advice on how to deal with situations is seldom challenged.
A thoroughgoing change programme will look at all aspects of organizational life, starting with basic values and beliefs about people. Not only will that lead to new objectives but, even more importantly, to a concern with how they will be achieved. The structure will be examined, to see if it leads to collaborative working between units, rather than in-fighting; systems will evolve from control systems to ones which will provide the information required for decision-taking; rewards, generally, will be related to the achievement of standards of excellence and will reinforce the behavioural patterns needed; people’s roles will be defined more widely; there will be greater reliance on self control rather than external controls and there will be a concern to give people whole, meaningful jobs and to develop their potentials.
To ask them to be party to the development of an entirely different game, with different rules, is often too much for them to stomach. Loyal servants though they may be, if they cannot change, they need to be moved away from their power base. Unless this is done, they will undoubtedly sabotage any new initiative.
Developing
a Change
Strategy
Even given the development of a cohesive people philosophy, incorporating the beliefs outlined earlier under ‘progressive style of management’, a critical starting point, it would be naive to imagine that an antiprogressive industrial relations situation could be miraculously changed into one of light and joy overnight. Having accepted the nonsense of a ‘two culture organization’ the next step is to develop a view of the organization of the future, one which will be able to compete on equal terms with any similar organization anywhere in the world. It will outline the kinds of relationships and behaviours which will contribute to this. Having defined the goal, the next step is to take a completely honest look at the present situation,
Within such a movement, shop stewards will increasingly see their role as working with management to introduce the kinds of changes which will improve their members’ pay and security, longer term, through a more competitive and productive operation.
Implications
of a Changed
Approach
Clearly, there are profound implications for all levels of employee and, indeed, for unions in the changed approach outlined. Senior
Management
Changes needed along the lines already outlined in some depth. Middle
Management
Their job changes significantly from being day-today action men/decision-takers to one with a longer-time focus-clarifying targets and job boundaries, agreeing standards for performance, facilitating the performance of their subordinates and the growth of their potential, ensuring that rewards are consistent with contributions and
40
Long
Range
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December
generally acting in a problem-solving way to ensure the smooth working of their part of the organization and effective collaboration with other units. Supervisors As already mentioned, rather than having a role which is primarily supervisory and controlling, theirs becomes one which is in a way a microcosm of their manager’s. They are concerned to ensure that there are no hold-ups, because supplies of materials have not been properly planned; they are concerned to set standards of excellence, give feedback on and reward good performance, and they are all problem solvers, helping to resolve difficulties by using their wide experience to keep the output rolling. Shop Stewards Within the kind of organization culture which has been described, there is no longer a need for sharp confrontation. There will always be legitimate areas of difference where it is right and proper that shop stewards should represent their members’ interests, but there will also be recognition that there is 90 per cent of common ground. By acting, in effect, as extensions of the management team and helping to improve the wealth creation process, they will both ensure their members’ standards of living and longer-term security. Shop Floor Shop floor people will increasingly become selfgenerating, often work in autonomous groups, taking decisions on work organization and on who does what as they work to agreed output and quality standards. The jobs which they do will be more complete and meaningful, and opportunities for development and advancement will be considerably enhanced. Employee Relations Managers Too many ER managers currently get their kudos at the traditional game. from being experts Effective ER managers, in future, are more likely to come from the ranks of line managers who are committed to new approaches and have experience in applying them. For some time to come, ER departments are likely to produce reactionaries who will fear their loss of influence, if the traditional game is changed. Union Oficials Inevitably, as confrontational industrial relations becomes less relevant and as the role of the shop steward working within his company becomes enhanced, that of the union official will need to change. Rather than being the front line negotiator, his role will become more advisory and longerterm policy development than day-to-day action. There will be similar opposition to change on the officials as that experienced in part of union company from industrial relations experts.
1983
Summarizing We have already moved some way from traditional employee relations approach: Traditional IR Beliefs. Shopfloor able, management
Procedures,
Outcome. Information. Style
untrustworthy, conflict has right to manage.
of Operation. Win-lose, hard nosed decides and adjusts if necessary.
Mode ment
Kept
rules,
inevit-
manage-
agreements.
tight.
of Management.
Feelings
the more
Controlling. Negative.
Generated.
Use has been made of behavioural science insights in teaching managers how to negotiate with greater success; Herzberg’s insights have been used in a manipulative way to ‘enrich’ people’s jobs, not to involve them in the enrichment. Many behavioural scientists would claim that, in using their skills to sophisticate the traditional ‘game’, their colleagues have sold their souls to the devil! Manipulative IR Beliefs. People work better if theirjobs are enriched; managers have the right to manage and need help to do it better. Mode of Operation. Advising management on structures/systems/methods changes which will enrich people’s jobs. Doing it ‘to’ the shopfloor. Increasing management’s manipulative skills, e.g. negotiating skills. Outcomes. Short-term gains in productivity and harmony. Resentment at being conned/manipulated. Financial benefits largely to management. Information. Style
Kept
tight.
of Management.
Feelings
Generated.
Manipulative. Very
negative.
The challenge now is to use the behavioural and organizational development insights in a quite different way; to develop what I would call an ‘Open Systems/Developmental kind of Employee Relations’ : Developmental/Open Systems IR Belie$. There are legitimate differences, but a lot of common ground (same boat; no wealth creationno jobs or security). Shopfloor can be trusted, need management by consent. Mode
of Operation.
Facing
realities,
creating
space
Towards within which self-control possible and contracting around agreements which take account of differand interdependence manageences : boundary ment, situational management. Outcomes. Realistic
plans, sharing in gains, genuine increases in productivity/competitiveness, trust, harmonization. Information.
Complete
openness.
Generated. Positive;
Feel&s respect.
Style ofManagement.
consistently
Mature,
mutual
confidence
situational,
Poor Falling
varied but
Productive
Industrial
Relations
41
I believe that this is what has been outlined in this paper. However, it is not going to be easy. Though logic dictates that such changes need to be made, apart from the feelings of threat and sensitivity, simply because of the changes which are likely to be required, there is also a lot of vested interest in the status quo amongst the prime actors in the traditional ‘IR Game’. They perceive any attempt to change it in a fundamental way as a strong attack on their status, power and influence. They might not be able to play a new game and even if they could, they might not be able to maintain their erstwhile dominant position.
so.
Forces ‘FOR’
Decline
and
More
I
in Economic
Performance
Vested
interest
of Individuals,
-in maintaining status quo and ‘our power/influence/status’-1R Managers, TU officials, Academics, Managers of a--Institutions (TUC, CBI, EEF etc.)
Productivity Standards
Forces ‘AGAINST
of Living Inertia-Institutions
Declining
Standards
of Public
Services Fear of Change-All
Rising
Unemployment
Fear of losing
Successful change will only come about if there is acute awareness of such feelings, a sensitivity planning the changes to reduce the feelings threat, in so far as possible and a ruthlessness
an in of in
Control-Managers
dealing with the ‘road blocks’, who threaten to inhibit or hinder the necessary changes. Such people need to be removed-in the nicest possible way.