Enterprise Industrial Relations

Todd (2012) has interviewed employer association representatives and examined their public statements and submissions. From her research, she questions whether the changes to the industrial relations system that employer associations advocate would enhance productivity. With regard to issues such as penalty rates and job security, there is evidence that these relate to cost cutting and enhanced managerial prerogative rather than productivity. Discuss

Introduction During 2011 employer associations in Australia conducted an active lobbying campaign to introduce legislative changes with respect to industrial relations. Predominantly they were seeking to diminish the power of collective bargaining and increase managerial control under the pretext of enhancing productivity and organisational agility (Todd, 2012:344). This discussion paper critically examines the case for and against changing existing legislature with reference to contemporary research and practitioner evidence.

The Case for Changing Industrial Relations 2011 was a period of particularly active discussion amongst Australian businesses with regard to interpretation of the Fair Work Act (FWA) a relatively new piece of legislation introduced against the context of a difficult economic environment and continued challenges with workforce management (Todd, 2012:334).

Whilst organisational and union negotiations have continued throughout this period Todd (2012) observes that many businesses are resorting to alternative mechanisms to reach agreement over aspects such as pay, working conditions, and enterprise agreements.

Against this contextual background a number of individual employers and employer associations lobbied for a campaign to change significant aspects of the FWA, particularly focusing on removing the opportunity for collective bargaining and proposing mechanisms to curb the power of unions within organisations (Todd, 2012).

Fundamental drivers of this lobbying campaign related to economic and political actors within Australia, including worsening economic conditions in the manufacturing sector as a result of outsourcing, and ongoing political challenge between the Labour Party and their opposition (O'Brien, 2011).

Increasing levels of uncertainty in an economic and political context created tension and nervousness within the employment arena meaning that several employers considered how they could consolidate their position in the marketplace and increase their power with regard to working agreements and employee contracts (Thornwaite and Sheldon, 2011). Key issues identified by the Australian Bureau of Statistics (ABS, 2011) related to changing demographics within the Australian workforce and the realistic probability of a skills shortage in the near future.

This was also a matter of concern to employers who were increasingly recruiting overseas employees with the necessary skill sets to support ongoing organisational development and growth. One of the fundamental issues with the FWA is the option for collective bargaining in order to secure a fair minimum wage. Todd (2012) establishes that perceptions of fair pay are a particularly difficult point in union negotiations. She notes that those people most in need of minimum wages fixations are already on a low-wage, and the minimum wage requirements will merely bring their pay in line with inflation.

In real terms they will receive barely any benefit. Employers argue that because of rising costs and external economic pressures, all the stakeholders involved in the organisation must share the pain and in order to increase efficiency it is necessary to demonstrate either increased organisational performance or cost saving initiatives (Currie and Hill, 2012).

Employers also assert that in order to increase productivity and organisational agility it is imperative that they are able to operate on a flexible basis to meet fluctuations in supply and demand (Thornwaite and Sheldon, 2011).

In real terms they are arguing that employees must be prepared to adapt to new working conditions in order to ensure that organisations remain profitable. Ultimately employers indicate that unless businesses can become more flexible then in the long-term there will be no work available at all (Pye, 2012).

Statistical research by Eslake (2011) has established that for the last decade Australia has been experiencing a decline in overall productivity. This supports the main thrust of the lobbyists, who argue that rigid organisational pay and working conditions create an inflexible organisation which is not able to compete in the international environment.

They argue that there is a direct correlation between increased organisational flexibility and productivity, and a number of large organisations in Australia have suggested that barriers to productivity include a lack of flexibility, increasing penalty rates, and restrictions on the use of contractors (Todd, 2012:350). They believe that these inhibitors should be addressed in amendments to the FWA in order to secure a productive future for Australia and the workforce in general.

Challenges Todd (2012) questions the validity of these sweeping arguments made by employers seeking to challenge the FWA. She draws upon wider research which demonstrates that generalisations linking flexibility and organisational productivity should be treated with caution as the specifics of this within organisations are also correlated to aspects of leadership and organisational culture (Abernathy, 2011).

In essence, small flexible businesses with an adaptive organisational culture almost inevitably become more productive but this is not as a result of flexibility but instead as a result of organisational leadership commitment to employee development. Further research by Holland et al (2011) establishes that organisational flexibility typically leads to employee engagement and it is this which in fact drives improved organisational productivity. Kotey et al (2011) assert that it is only possible to create a flexible organisational culture with good leadership and open channels of communication.

Unilateral amendments to employee working conditions are certainly not conducive to a flexible working culture. Todd (2012) also examines whether the narrow focus on economic conditions and the capacity for organisations to pay fixed rates and penalties proposed in the FWA should be the sole driver of changes to this legislation. She believes that this narrow approach fails to ignore wider social and cultural issues and instead is a thinly veiled attempt to increase managerial prerogative at the cost of open discussion and negotiation between the unions and organisations.

Instead she argues the case for collaborative workplace models which involved genuine communication and commitment from all stakeholders. She highlights the situation of Small and Medium Enterprises (SME's) that simply lack the resource or experience to negotiate effective enterprise agreements. Carroll and Australia (2010) share her view and provide evidence from case studies where large organisations have successfully negotiated such enterprise agreements to the mutual benefit of all parties concerned.

This demonstrates that it is entirely possible to create a unified and pragmatic agreement without unnecessarily shifting the boundaries of power. Indeed, Todd (2012) argues that whilst power and control appear to be the main guiding factors in criticism of the FWA, she believes that a power struggle will have no discernible benefit to any party concerned. She presents further evidence from a number of large employer bodies such as the AMMA (2011) and CCIWA (2011) who have called for a broader range of mechanisms for negotiating enterprise agreements.

Possible options include the reintroduction of individual agreements and the "reinstatement of non-union greenfield agreements" (Todd, 2012:352). However she also acknowledges that some non-legal mechanisms have been established in order to set wages and working conditions in a pragmatic and cost effective manner (Thornwaite and Sheldon, 2011). The aim of this is to reduce the time and resource wasted during protracted negotiations when it is possible to streamline the process and still reach a mutually beneficial outcome.

Conclusion On balance, the research identifies that a regression to past practices whereby the power of unions is diminished and that of managerial control is correspondingly increased would almost inevitably damage employee relations and cause no material increase in overall organisational productivity.

Todd (2012) has established that there are pragmatic and workable alternatives to undoing the FWA legislation, and instead she believes that the political and public noise surrounding discussions as to pay and conditions is in fact undermining the possibility of sensible discussions in this regard. She points to evidence from wider research demonstrating that increasing the power of organisations at the expense of negotiation is a short-term approach which does not deliver increased organisational productivity in the long-term.

References Abernathy, W.B., (2011) An analysis of the effects of selected management practices on organizational productivity and performance: Performance Improvement Volume 50, Issue 6, pages 39–47, July 2011

Australian Bureau of Statistics (ABS) (2011a) Labour Force, Australia, Detailed, Quarterly August 2011. Cat. No. 6291.0.55.003. Canberra: ABS.

Australian Mines and Metals Association (AMMA) (2011) AMMA workplace relations policy Available at: http://www.amma.org.au/images/stories/policystatements/policy_statement_ workplacerelations.pdf Accessed 16th May 2013

Carroll, D., and Australia, G. C. (2010) Unemployment Rates and Starting Salaries: Are Australian Graduates at the Whim of the Wage Curve?. Journal of Institutional Research, 15(2), 1-10.

Chamber of Commerce and Industry Western Australia (CCIWA) (2011) Industrial relations for modern enterprises. May, Perth

Currie, J., and Hill, B. (2012) Gendered Universities and the Wage Gap: Case Study of a Pay Equity Audit in an Australian University. Higher Education Policy, 26(1), 65-82.

Bray, M., Waring, P., Cooper, R., (2011) Employment Relations: Theory and Practice. 2nd ed. North Ryde: McGraw-Hill

Eslak, S., (2011) Productivity Paper presented to the annual policy conference of the Reserve Bank of Australia, Sydney, 15–16 August

Fair Work Australia (FWA) (2011) Decision: Annual Wage Review 2010–11. [2011] FWAFB 3400. Melbourne: Fair Work Australia.

Holland, P., Pyman, A., Cooper, B. K., and Teicher, J. (2011) Employee voice and job satisfaction in Australia: The centrality of direct voice. Human Resource Management, 50(1), 95-111.

Kotey, B., Saini, B., and While, L. (2011) Strategies for employee learning in professional service firms: A study of community pharmacies in Australia. International Journal of Training Research, 9(3), 234-255.

O’Brien J (2011) Employers response to the Fair Work system – Unions and collective bargaining: A National Australia Bank perspective. Presentation to the 19th Annual Labour Law Conference, 1 August, Sydney

Pye, E. (2012). GDP per capita and labour utilisation in Australia World, 2(2.5), 3-0

Thornthwaite, L., and Sheldon, P., (2011) Fair Work Australia: Employer association policies, industrial law and the changing role of the tribunal. Journal of Industrial Relations 53(5): 616–631

Todd, P. (2012). Employer and Employer Association Matters in 2011 Journal of Industrial Relations, 54(3), 344-360.