E M P L O Y M E N T R E L AT I O N S INTO THE 21st CENTURY an IPD position paper

EMPLOYMENT RELATIONS INTO THE 21st CENTURY

Introduction All employers should now be undertaking an in-depth review of their approach to employment relations. Organisations which out-perform their competitors do so because they apply a coherent set of people management and development practices appropriate to their needs. IPD research has demonstrated the positive link between managerial strategies on employment relations and employees’ identification with, and support for, performance improvement and organisational change. Successful organisations are increasingly those which have a constructive relationship with employees and a management approach which enables them to develop and draw on the full potential of their people. Considerable improvements have been made to the practice of employment relations in recent years. People are working hard and enjoy going to work. They want to learn. However, while the damaging effects of poor relations have been radically reduced, many organisations are failing to secure the positive benefits that are available from improving them. Neither management nor trade unions are arguing for a return to ‘management propose/unions oppose’ industrial relations, but a coherent approach to the further development and understanding of new forms of relationship is missing. The heart of the challenge facing employers is not acceptance or rejection of trade union recognition, nor the risk of turning back the clock on the important achievements of the 1980s, including the new emphasis on individual relations. The key task on which managers need to focus in order to improve performance is the way in which people are managed.

Economic pressures dictate that organisations will change more frequently than in the past. Technology and the demand for customised services are shifting managerial focus towards knowledge management and people as their key differentiators. This will require substantial changes in the understanding and behaviour of the people who work in organisations. Employees will need to extend their skills and use them more effectively. But change initiatives often fail to deliver the results expected of them, largely because people issues have been neglected or not fully thought through. The test of employment relationships in the future will be their effect on managing change and eliciting employees’ willing contribution. Drawing on empirical research evidence and the views and experience of IPD members in all sectors of the economy, this position paper suggests a framework for organisations to review their employment relations. It also considers the way in which individual and collective relationships are changing, and the role of legislation in this process. Old relationships and new agendas The relative freedom of employers and employees to determine their own relationships has been a characteristic of British industrial life. Even within the bounds of contractual relationships, the tendency has been for both sides to see what might be done to squeeze more out of the other. These patterns of behaviour are now being questioned, for instance in the debate about ‘inclusivity’, in which co-operation is seen as the means of creating long-term benefit for both sides. Until the end of the 1970s, the acceptance of adversarial industrial relations, and therefore the need to resolve conflict, as

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being the natural order led both management and unions to develop collective bargaining to a fine art. Trade unions had become both workplace adversaries, negotiating with employers, and also social partners expressing an ‘employee view’ on economic and social matters, particularly through the Trades Union Congress.

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Collective bargaining developed at several levels: at national level, at company level, at workplace level and in some cases job by job. The idea that on each and every management issue there should be a trade union counterview, and a trade union-based representative body to pursue it, was widely accepted. From time to time, initiatives were undertaken aimed at bringing trade unions and employers together but they were supported by a relatively small proportion of employers. Similarly the trade unions walked warily in this area, some being supportive and others suspicious. The Bullock report on industrial democracy showed both the vehement objections of employers to a governance role for employee representatives and the doubts of many trade unions about such an approach because it could compromise their bargaining position. Paradoxically, while adversarial industrial relations lay at the heart of the conventional picture of employment relations in the British Isles, relatively few organisations experienced industrial action. Many were sheltered from serious competitive pressures and adopted employment relations strategies aimed at buying off trouble and maintaining output. In relatively few instances did managers feel the need to grasp the nettle of improving performance and seek employee support for organisational change. The

problem was not just damaging relations in a minority of organisations, it was relations in the majority which were not conducive to rapid performance improvement. But, like it or not, change was on the way. At the end of the 1970s, the UK entered a new era. Disorderly collective bargaining played its part in bringing down the elected government and marked the start of a new era during which much of the legislation underpinning trade union influence was removed and replaced by new legislation limiting the scope for damaging industrial action. In Ireland relationships had not reached quite such a low ebb. Since the 1960s they had been enjoying relatively strong economic growth and the equivalent of the ‘social contract’ between Government, employers and trade unions grew stronger over time. Ireland, like the UK, experienced the pressures of global competition but managed to contain dissatisfaction within a system which strengthened national collective agreements. Instead, a growing coalition of interests aimed at the maintenance of industrial peace and price stability in the context of substantial inward investment resulted in their making social partnership work at the national level. Similarly, in other major countries in Europe, social partnership at national level did not break down in the way in which it did in the UK. Although now under cost pressures, their employment relations systems were seen as contributing to the social consensus on which competitive achievement was based. One consequence of this is that the UK has been increasingly influenced by employment relations changes introduced by European Union directives. The ending of the UK’s

opt-out will further open this gateway, although current developments are limited to requirements to set up European Works Councils and introduce parental leave arrangements. There is no doubt that attitudes to work and relationships at work have changed in the UK since the 1970s. The driving force for much change has been economic and the agenda has been framed by managers. Working patterns and practices have become more flexible and managers are using people more effectively. But productivity growth has not made the breakthrough which might have been expected given the substantial changes in skills, organisational structures and work intensity which have been achieved. IPD research shows that most British employees enjoy going to work. They are hard workers who put in extra hours out of choice and do not adopt a ‘do my job and no more’ attitude, but those who work hard are not necessarily committed to their organisation’s strategic objectives and change programmes. Taking stock and considering what more might be done to improve employment relations, in 1996 the IPD called for an impartial high level review of employment relations. There is still a strong case for such a review to move public debate away from the obsession with the structural aspect of relationships at work and re-focus on purposes, values, processes and the added value which good employment relations can deliver. The acceptance of the reality of competitive pressures, and the fact that no employer can guarantee a ‘job for life’, have no doubt

contributed to reducing substantially the numbers of days lost due to industrial action. Whilst improvements in attitudes to work and the temperature of employment relations have occurred, it is not clear that the underlying culture and relationships have moved on. In an ever changing environment for both business and public services, there needs to be a focused and positive approach to employment relations. What is the new focus for employment relations? Customers have become more demanding. They want increasingly high quality service and they want to know that the latest technology at the lowest price is available. Fast moving markets, which include large parts of retail distribution and the leisure industries as well as manufacturing, require a speed of change within supplying organisations which is beyond anything which could have been anticipated a decade ago. In fact, many people have accepted change and managers’ explanations of the reasons why hard decisions had to be taken. But despite this, change is still not happening quickly enough. Change initiatives tend to run into the ground and repeatedly research shows that people management problems lie at the root of this. Employers comment that employees do not own the objectives, and too often want to stand aside from the processes of change. This in turn leads those same employers to have unrealistically low expectations of the potential of their employees. Recent research on behalf of the IPD into the lean or responsive organisation is

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illuminating.1 Companies have rightly given more responsibility for people management to line managers. In many instances however, these people do not have well-developed people management skills. Some personnel management functions have been reduced in size, or outsourced. Training and support for line managers in their people management role is often limited or non-existent, and the role itself not clearly specified.

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For some time the IPD has taken the view that performance improvement cannot be based primarily on cost-cutting but has to build on higher skills, better use of skills, greater co-operation within the workplace and the use of initiative to develop higher added value through differentiated goods and services. Central to this is the idea of a willing contribution from employees and the argument that a willing contribution is unlikely to be forthcoming except in the context of a positive employment relationship. Competition, technology and increased customer demands have combined to place the future of many organisations effectively in the hands of their employees. But the implications for management need to be fully thought through. The traditional ‘command and control’ model is no longer appropriate. Managers need to be at least as strong on the management of people as they are on the management of money. Ideas about how to motivate employees and secure their commitment need to be more sophisticated and based on systematic learning.

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Another vision of employment relations is needed – one in which organisations succeed by raising skills, using these to differentiate products and services, and earning by excellent customer service high profits, high earnings and as secure a future for employees as can be managed. In practical terms this vision embraces effective performance and the organisational learning on which this is based; a knowledge and understanding of employees’ aspirations; and attention to ‘employee voice’. Managing for performance Personnel and development practitioners have always known that the way in which people are managed within organisations has a major influence on the bottom line. There is no doubt what employers want of their employees: •

willingness to change



business orientation



individual responsibility



strong teamworking



the use of initiative



commitment to organisational objectives, processes and programmes



the giving of discretionary effort – a willing contribution



learning continuously.

Research conducted on behalf of the Institute has made it possible for the first time to demonstrate in a detailed and convincing way

Unpublished research into the people management implications of the ‘lean’ organisation by John Purcell and Mike Terry report due for publication by IPD in 1998.

how employment relations impacts on business performance. 2, 3 The studies have shown that: •

key elements of good people management practice are job design, skills development and a climate of regular, systematic involvement



good people management practices are associated with a positive psychological contract based on trust, fairness and delivery of the deal



an organisation culture in which employees believe their employer will look after their interests has positive outcomes for work performance.

The findings of IPD research are echoed by academics and business leaders who propose

that, in the information age, people have replaced capital and even technology as the key competitive resource. Increasingly knowledge-intensive products and services require new approaches for managing the people responsible for them. Good people management practices, a positive psychological contract and a supportive organisational culture lead to commitment, job satisfaction and a willing contribution from employees. These characteristics positively feed through to higher productivity and profitability. These findings are summarised in the diagram below. They provide a conceptual framework for a review of employment relations within organisations. The next step is to consider the needs of employees – what they are looking for from employment.

People management practices • job design • skills development • involvement climate Organisation culture

Positive psychological contract • trust • fairness • delivery of the deal

Commitment Productivity Motivation Profitability Willing contribution Agility Satisfaction

supportive to employees

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Employee Motivation and the Psychological Contract (Issues in People Management no 21) by David Guest and Neil Conway (IPD 1997).

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Impact of People Management Practices on Business Performance (Issues in People Management no 22) by Malcolm G Patterson, Michael A West, Rebecca Lawthom and Stephen Nickell (IPD 1997).

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What employees are looking for The ‘psychological contract’ is a convenient way to describe the relationship between an employee and an employer. It is a developing concept and more research will be needed before it is possible to use it as a detailed focus for policy and practice. Putting together the results of current research and the observations of practitioners, however, the psychological contract appears to depend on:

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employee trust



perceptions of fairness



delivery of the deal.

It clearly reflects all aspects of the relationship with employees but some grouping of points of contact may be seen: •

reward, the fairness of the process within which it is determined and the outcome in relation to other employees



job satisfaction, in relation to the intrinsic interest of the job, its design and the degree of control, empowerment and relationships with customers and fellow employees



skill development and technology upgrading add significantly to a sense of self worth



relationships with managers, directly and in cross-functional structures are particularly important



well being relates to a sense of employment security with the same or another employer, involvement and trust that management decisions are being taken in ways which reflect, as far as possible, the best interests of employees.

All of this adds up to a total employment experience. It may be consistent or it may be full of contradictions. Obviously, there will always be some contradictions but the destructive effect of failure to match rhetoric and perceived reality cannot be overstated. Fences can be mended between those who work closely together but top management find it difficult to re-establish trust when it has been damaged. Therefore the psychological contract needs to be considered at a number of levels within organisations. IPD research shows that trust levels for top management are consistently lower than between employees and direct managers and while there may be some inevitability in this – top management has to take tough decisions – this is an area of particular weakness in the psychological contract. Some people are more likely to trust management and some are likely to be more positive in their contribution to the organisation, so the state of the psychological contract is essentially individual in nature. Nevertheless, there will also be work group, departmental, office and company-wide aspects to the contract. The history and culture of organisations and parts of them mean that, while structures and relationships can be changed quickly, the legacy of the past cannot so easily be wiped away. For many people – many more than is generally recognised – work is a good experience. They do feel that their contributions are treated seriously and that involvement is more than simply symbolic. Over four out of every five employees are very, or quite, loyal to the company they work for or are very, or fairly, motivated by their job. The picture emerging from employee attitude surveys undertaken on

behalf of the Institute is not one in which managers rule by fear, or the threat of dismissal. But the fact that large proportions are only fairly loyal or motivated, and the presence of a significant minority who are not convinced their employer will take decisions which are in their interests, show that there is plenty of room for improvement. Further progress could be made on two fronts: making sure that people management and development practices in individual organisations add up to a coherent system designed to achieve what the organisation needs, taking account of the framework set out in the diagram on page 5, and thinking through the feedback routes by which the views of employees are gathered together – listening to the voice of employees. Employee voice Employee voice can be expressed in a number of ways and through a variety of channels. Management structures ought to provide the most direct route by which messages move up as well as cascading down through organisations. Attitude surveys provide another commonly used channel, although one which is inherently inflexible and not interactive. Two other broad forms of ‘employee voice’ can be distinguished: •

direct involvement in the job, and the way in which work is organised



indirect influence on decisions affecting the wider organisation.

Influence on the job and work organisation is generally described as involvement and includes job design, quality circles and team

working but it ought also to form part of the iteration of management thinking and policy and process development. ‘Participation’ in decisions affecting the wider organisation usually takes place in indirect consultation systems such as works councils or joint consultation committees. A recent report by the European Foundation for the Improvement of Living and Working Conditions finds that four out of five workplaces in the countries studied have some form of direct participation. The UK is about average in terms of the incidence and intensity of direct participation. Research into companies in the car components industry concludes that there are clear business benefits from employee voice. Companies that combine direct involvement with indirect consultation perform best, but those relying on involvement alone perform much better than those relying on consultation. A number of UK-based traditional organisations report a more effective practice of direct employee involvement in their UK factories than in many of the countries where they operate. Most people would agree that employees should have a say in what happens in the workplace. This offers a channel through which employees contribute their knowledge and experience, and so leads to better decisions and an improved quality of product or service. It can also give employees confidence that their interests and point of view will not be overlooked when important decisions are taken about the business, particularly when this is likely to affect their future employment prospects. The decision about how to involve, communicate or negotiate with, employees individually or

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collectively is best taken entirely pragmatically, at the lowest level at which such decisions need to be taken. Research shows that employers who develop a ‘high involvement’ organisational climate and progressive people management practices such as performance pay, internal promotion and an explicit policy of avoiding compulsory redundancies have better relationships with their staff.

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The recognition that involvement and dialogue bring significant benefits for both organisations and employees requires attention to the specific frameworks within which they can best be achieved. Partnership In parallel with practice in supplier relationships, progressive employment relationships are often described as ‘partnerships’. There is no agreed definition of ‘partnership’ at work but it implies, as the TUC has suggested, ‘a sense of common action and purpose’. It also suggests the development of a longer term relationship in which the partners will be more concerned with maximising growth than with short-term negotiations over shares of the results. In good partnership arrangements each has regard to the needs of the other, and to the needs of customers and investors, and in this sense a partnership with employees seems to contain elements of the ‘balanced scorecard’ approach. However, the partnership concept is gaining influence at a time in which high levels of competition also make it more difficult to balance customer, employee and investor interests. IPD believes it is entirely sensible that, where a majority of employees in a relevant business

unit want to have a trade union recognised to represent their interests, the employer should reach such an agreement. However, it seems to IPD that ‘partnership’ has more to do with an approach to the relationship between employers and employees, individually and in groups, than it has to do with trade unions as such. An increasing number of companies have developed partnership arrangements with trade unions and the elements of good practice which are emerging match up to the requirements of good employment relations. In general, the employer recognises that employee security is an issue and offers some reassurance, for example by undertaking that there will be no compulsory redundancies. Trade unions for their part commit themselves to working with management to improve business performance. These commitments are supported by mechanisms for communication and involvement. Partnership is essentially about particular processes of management, rather than about structures. The partnership approach can be applied in both public and private sectors. However partnership is not a soft option. It needs to be worked at to bear results and, while partnership can be a general objective, it is probably more meaningful when expressed in the form of values and specific measurable aims and organisational changes. Employee representation With the decline of collective bargaining, many organisations now concentrate on communication with employees individually, rather than on a collective basis. Communication and involvement are generally more meaningful at the level of the job or team than at higher levels. But most people like to feel that their interests are being taken into account when

important decisions are being considered. Particularly in larger organisations, in which it is not easy for all employees to meet informally, some form of machinery – whether procedural or structural – to represent employees collectively can offer useful reassurance on this score. However, need and purpose should be the criteria by which the desirability of representation arrangements should be determined. The UK has relatively little experience of models for representing employees, other than collective bargaining. The consultation provisions of existing UK legislation, for example on health and safety or transfer of undertakings, have had relatively little impact so far. The works council model has yet to prove its worth in a UK context. ‘What works’ is the only consideration; it is wrong to think that a single ‘one size suits all’ framework could ever be right. The issue of employee representation should not be confused with that of trade union recognition or the role of trade unions in the workplace. Some UK companies operate effective representation arrangements although they do not recognise trade unions. Many of the new European Works Councils include both union and non-union members. There is no basis for arguing that trade unions should have a monopoly on the representation of employees. Within the UK, an employee’s right to be represented at grievance or disciplinary hearings is already recognised by industrial tribunals. Employees also have rights to be consulted on health and safety, major redundancies or business transfers, but there 4

is no requirement that this should be through a trade union. Recent analysis based on the 1996 IPD Employee Attitude survey4 shows that management practices are much more important than trade union membership in determining whether employees feel fairly treated. There is nothing here that makes reliance on trade unions essential. In fact, new models of representation are obviously needed to deal with the wide range of situations in which trade unions are not in a position to offer effective representation. There are many employers who think that trade unions are irrelevant; some employers and their employees will have had no experience of trade union activity. Other employers recognise unions but where density of membership is low, or the union is itself weak at the workplace, the role can be as a convenient ‘stamp of approval’ for employer led change. Others feel no commitment to continuing recognition but are content to go along with the wishes of their employees. But there is no more sense in ‘principled’ opposition to trade unionism than in viewing collective relationships as essentially adversarial in nature. Similarly, there is good reason to look at what some organisations have achieved through partnership arrangements and pragmatically ask whether it would be possible to take these ideas as the basis for a new approach to employee involvement, particularly in larger organisations. Some organisations have gone far beyond representation as an extension of

Peering into the black hole: the downside of the new employment relations. A paper by David Guest and Neil Conway presented to the British Universities Industrial Relations Association Annual Conference, July 1997.

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collective bargaining and have effectively extended participation in decision-making, which occurs on a day-to-day basis, to higher strategic levels, benchmarking performance and providing another channel for exchanging know-how, stimulating innovation and enthusing employees.

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The IPD takes the view that trade union recognition is sensible when a significant proportion of employees want it. It should never supplant the relationship with individual employees. It has to be something with which the employer is comfortable to be viable as a relationship. For most organisations, it will seem increasingly important that new employee representation arrangements cover all employees. Trade unions The decline in trade union membership has continued throughout the 1990s. Some 6.9 million employees – fewer than one in three in all those employed – are now members of trade unions (Labour Force Survey, Autumn 1996). In the private sector as a whole, the proportion is 21per cent: in workplaces with fewer than 25 employees, only 9 per cent are union members. Trade union membership is highest in managerial and professional occupations and lowest in less skilled manual and clerical jobs and personal services. There is no reason to believe that statutory provision for trade union recognition, or employee representation, would reverse this trend significantly. Some 8 million employees, or 37 per cent of all employees, are covered by collective bargaining. In private sector workplaces with fewer than 25 employees, the proportion is as low as 7 per cent. The development of individually based performance and profit-related pay has substantially

reduced the importance of formal pay structures. The trade union role in determining actual pay and conditions has declined in many organisations. The opportunities for trade unions to negotiate detailed changes in working arrangements, and in some cases to exercise an effective veto, have largely gone. The pace of change, the need to respond to competitive pressures, the decentralisation of decision-making and the wider involvement of employees in operational decisions have helped to undermine workplace bargaining between managers and trade unions. It would clearly be unrealistic for the future to see collective bargaining as the main vehicle for communication between employer and employees. Collective bargaining was never as widespread – or as effective – as its supporters claimed. It continues to atrophy, even in many organisations where the procedures are still followed, although those who have introduced trade union-based partnership arrangements acknowledge the assistance of union representatives and existing representative structures. Trade unions are already developing new roles (or rediscovering old ones) beyond the workplace. Unions have devoted a good deal of effort to developing a range of benefits and services to attract new members, particularly in the area of insurance, banking and financial services. Some individual unions offer help with job-finding through an employment register or agency. The TUC has focused on the need for more information and advice about pension rights. Trade unions will also, no doubt, continue to provide services needed by their members including representation in grievance and

disciplinary procedures and bringing claims under employment protection or health and safety legislation. Their friendly society role is again becoming more important and, in a more mobile labour market in the future, could become of major importance, perhaps providing medical services and convalescent homes for sick members. Unions are also beginning to market their services to employers as consultants on training and employment matters. There is going to be a continuing and developing role for trade unions as ‘social partners’ with employers in developing national employment policies, building on their involvement at European level. Trade unions are well placed to contribute to discussions about issues including ‘fairness’, productivity and investment. Competitiveness provides the essential framework within which Government, employers and trade unions can engage in debate about developing employment relations. There is evidence that trade unions can contribute to a sense of confidence in workplaces where constructive relationships are in place, and thereby facilitate more rapid and effective adoption of necessary change. If trade unions are to flourish, however, their role will need to evolve so that they have something to offer which both managers and employees value. The debate about partnership provides evidence that union leaders are signalling a clear wish to change direction and get away from the role of permanent ‘opposition party’ at work. But this will take a major effort of will and imagination. Being clear about the component parts of the changing role of trade unions would help in making the transition to this ‘new realism’.

An explicit adjustment of aims away from dayto-day negotiations on operational management decisions could form the basis for new and positive relationships with trade unions in the workplace. A reciprocal acknowledgement by employer representative bodies of the importance of granting trade union recognition when a majority of employees wish it would provide a significant boost to the development of such relationships. These moves could be far more influential than the statutory underpinning of trade union recognition. The role of law Fairness at work is central to the health of the psychological contract. People need to believe that their interests are being taken into account, and that their employer will treat them reasonably. This cannot be achieved entirely, or even mainly, by legislation. The role of minimum standards in underpinning fairness is always going to be a secondary one in most workplaces. However, minimum standards are important as a signal to employers and employees. They also go some way to reducing the extent to which good employers can be under-cut by the bad, although this argument should not be pursued too far; bad employers often ignore or do not understand employment law. Neither is there any reason to believe that new employment rights would facilitate the acceptance of faster change at work. The speed of change is not affected by rights or entitlements but by attitudes. The best forms of encouragement to develop skills which can be used in developing a career with one employer, or to move if that is what is required, are a buoyant labour market and the training and development necessary to extend skills and knowledge.

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The number of claims referred to industrial tribunals exceeded 100, 000 for the first time in 1996. Many of these claims succeeded because of the ignorance of the employer, particularly in relation to the need for procedures, and an inability to see the issue through the eyes of the employee.

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The Government’s decision to repeal the requirement for repeated authorisation of ‘check-off’ deductions from pay for trade union members is welcome. Reduction of the existing two-year employment threshold for bringing claims of unfair dismissal to say 12 months – which the IPD urged in its statement on employment relations in July 1996 – would help to reassure some of those who might otherwise fear summary dismissal. Current legislation and case law on employment relations in the United Kingdom is extensive and seems likely to continue to grow in volume. Adoption of the Social Chapter will mean that employers in the UK will have to implement directives on European Works Councils and parental leave, shortly to be followed by protection for part-time workers. The Working Time Directive will also need to be implemented in the near future. There are proposals for further EU legislation on information and consultation. Within the UK, industrial tribunals and courts regularly add to the weight of case law, and advice to employers on employment law is a major growth industry. However, new obligations on employers to recognise trade unions would be likely to have negative rather than positive effects on relationships and trust in workplaces where recognition is enforced in this way. Most people agree that legislation has a role, for example to protect employee health and safety

or to inhibit trade unions from taking secondary action. But the law needs to go with the grain of current attitudes if it is to be influential, and kept to a minimum if it is to be effective. IPD takes the view that, as far as possible, the role of law in the workplace should be minimised, so as to allow employers and employees to focus on meeting customers’ needs without constant checks on a multitude of regulations. It may be technically and politically difficult to unravel the current tangle of employment law, but the case for new law should be very carefully considered by the UK Government and by the European Union. Work and society: balancing interests Individuals and employers have expectations not only of each other, but of society as a whole. IPD psychological contract research has shown that employment relations are influenced by factors external to the organisation and personnel practitioners and managers see evidence of this in attitudes at work day-by-day. People want to live in a fair society that supports their proper aspirations and takes their interests into account. They accept that powerful economic forces are influencing their lives and that no organisation or individual can insulate themselves from the effect of those forces. But they look to society to set standards and make rules which help them manage their own lives. If these wider expectations are to be fulfilled, society has to have a sense of shared values. Relationships based on trust need to include at least a threshold of shared values or they will break down. Equally, the further employer actions depart from the standards employees

desire, for instance by discriminating against older workers, the more likely it is that employees will press for protection through legislation. ‘Employee voice’ at the level of society as a whole will remain important and at present it is difficult to see how this can be articulated other than through the trade unions and the Trades Union Congress. The TUC is a very able representative body in this regard. There is, however, no national mechanism other than public debate through which ‘employee voice’ can be heard and those representing employers and government can respond. Although it would be wrong to go back to the stilted debating forum provided by the National Economic Development Council, there needs to be some way in which discussion can take place on employment issues, including employment relations, in the context of the need to improve performance. It is important that living standards do continue to rise and that the long tail of under-performing organisations shrinks. Minimum standards in employment should be expected to rise in line with the ability of organisations to sustain this. The Advisory Group on Competitiveness set up by the Secretary of State for Trade and Industry could provide the nucleus around which public debates on these topics could be developed. Similarly, the ‘stakeholding’ debate reflected the fact that, while employees do not have formal property rights in the organisations in which they work, they desire some recognition that it is their efforts which build and sustain those organisations. The ending of collective bargaining, based on differences of interest, could result in demands for more formal and even statutory forms of stakeholding if

employers do not satisfy employees that they have their best interests in mind and their actions support this perception. Companies’ primary obligation in law is to their shareholders but they can only discharge this obligation effectively if they pay attention to the needs of other stakeholders too. The IPD called last year for companies to be required to publish detailed information about their people management and development policies and activities, either in their annual report or separately. The debate about corporate governance needs to show greater awareness of people issues, not least since it is the way in which people are managed that will powerfully influence the return which companies are able to make to shareholders. Directors need to show that the way in which employees are being managed is a board concern and build people issues more firmly into their decision-making process. But the fundamental duty on directors is to set a clear sense of direction for the organisation and promote an inclusive culture based on values, including trust and mutual respect, which is demonstrably more than simply rhetoric. This will not be easy in an ever more competitive world but it will be increasingly important. It is difficult to see how this can be achieved if investors and public debate fail to grasp the issue. Employees have largely come to terms with the fact of constant change in their working lives. They have adapted to the introduction of new technology and new working practices; they have experienced restructuring and redundancies. People feel that there is no ‘job for life’ even if, in practice, continuity of employment with single, or a few employers, remains the norm

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for most. They look to employers to offer them training and development opportunities to help them become more employable whether by their current or some future employer.

positive psychological contract. The employment relations agenda ought to form the basis for the improvement of business performance and thereby jobs and living standards.

Employers also need to show their commitment to the communities in which they do business. Employers who adopt diversity policies and recruit people from a range of backgrounds, including ethnic minorities and people with disabilities, will increase the pool of skills on which they can draw and so increase their competitiveness, as well as strengthening the local economic infrastructure. The Government’s ‘New Deal’ targeted on unemployed 18-24 year olds and older long-term unemployed people presents employers with further opportunities to apply imaginative thinking and practical solutions to many of the problems facing local communities.

The focus of Government attention needs to shift from legislation to encouraging positive management action by essentially voluntary means. Employment relations needs to be seen as the essential backdrop to successful training and innovation and as an essential element in the Government’s agenda for increasing competitiveness.

The development of trend improvements in performance, employment relationships, higher living standards and, in a general sense, the health of society hang together. The proposals for a more structured national debate on employment matters and the need to involve investors in discussion on the contribution of people management and development to organisational performance should be seriously considered. An agenda for action Employment relations needs to be seen as an integral part of the competitiveness agenda – for individual employers, and for the country as a whole. But going back to collective bargaining issues and institutions is the wrong starting point. It needs to be about fairness and individual and organisational growth too, since these are crucial elements in establishing a

There is already a plethora of bodies responsible for advice to organisations on employment issues. Apart from employers’ associations and sectoral organisations, which could help by encouraging employers to consider the state of employment relations in their field of activity, key players include Training and Enterprise Councils, industry training organisations and Business Links. These bodies should have it as a specific part of their remit to prompt organisations to review employment relations because poor relationships can undermine otherwise wellfounded organisational and skill improvements. Because they are not themselves dedicated to or widely experienced in employment relations, they should proceed in association with bodies which can help such as the Advisory, Conciliation and Arbitration Service (ACAS), which would need to be adequately resourced for the purpose. Above all, however, employment relations should be a vital element in organisational success. For many organisations better relations with employees could lead to performance improvements which have somehow always seemed to be beyond

management’s grasp. More and more employers need to be on the ‘front foot’, leading the way in generating employees’ willing contribution and enthusiasm to develop. IPD members will want to be ready to contribute to the achievement of these targets within their own organisations. This document has already set out a number of specific challenges for consideration by the social partners at national level. In particular, they need to decide whether it is possible to make progress toward the encouragement of trade union recognition without returning to bargaining on the whole range of operational management issues and without statutory support. The following lists add more challenges for individual employers, Government and trade unions.

Challenges for employers

1 To develop relationships with employees in ways which support and do not undermine the achievement of business objectives in the next five years. 2 To look at the alignment between employment relations policy and people management practices: how recently has an audit of employment relations practice been undertaken within the organisation, including involvement, communication, job design and representation? 3 To be able to identify how far current employment relations practices within the organisation fail to match up to ‘good practice’ standards, and to be able to explain why the gaps are not important. 4 To know how effective line managers are in motivating the people for whom they are responsible. 5 To make sure that all managers have the advice and support they need to achieve high levels of employee commitment throughout the organisation. 6 To demonstrate their commitment to values that support the health of society, and their local communities.

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Challenges for Government

Challenges for trade unions

1 To consider how the improvement of employment relations might better fit into the national competitiveness agenda and whether more could be done by agencies (including ACAS) to promote the adoption of good practice in employment.

1 To make clear long-term aspirations for developing workplace representation; and specifically the implications of partnership for collective bargaining and consultation.

2 To consider, given the Government’s commitment to statutory trade union recognition, whether a highlevel enquiry into employment relations would be helpful in securing a wider consensus on the direction in which employment relations should develop. 3 To provide a lead in employment practice within those organisations for which it has direct managerial or financial responsibility. 4 To make clear that the emphasis of Government policy will be placed on stimulating voluntary improvement in employment relations, and keeping legislation to a minimum. 5 To consider how investors can be more closely involved in discussion on the contribution of people management to organisational performance.

2 To demonstrate the ways in which trade unions can make a specific contribution to increasing the effectiveness of those organisations where they are recognised. 3 To work towards a shared understanding of ‘partnership’ principles at all levels within unions. 4 To consider, in employment relations bounded by law and extended minimum rights, ways in which a new agenda of member services will complement, support and encourage positive employer approaches to employment relations. 5 To reassess the balance of their efforts between workplace, sector and national levels, and the most effective methods available to them of promoting the long-term interests of employees generally.