A New Province for Law and Order
I.R. Lessons from Recent Mining Industry History
My direct involvement with the mining industry is
currently limited to one company, which operates through
contractors. That constitutes a most important I.R.
lesson in itself, that goes beyond the realm of enterprise
agreements. That company, and most of my other interests,
have significant employee share schemes---another
important aspect of I.R. reform for the future.
It is relevant to mention the two other mining companies
with which I have had brief nonexecutive directorships
recently. In the first company I was described by
the Chairman as a potential serious cause of industrial
trouble. Not long after my departure the mine went
on strike and has been seriously disrupted on and off
In the second company the changes to management that
were critically needed, and which would give the necessary
impact to the whole organisation, were not implemented
to my satisfaction.
These experiences, quite unpleasant at the time, illustrate
for me repeatedly the old saying that "There are no
bad soldiers---only bad generals."
The H R Nicholls Society has made a great contribution
to the industrial relations debate in Australia largely
through chronicling many industrial relations incidents
of recent years, and through pointing to the legal
and institutional remedies available to avoid and mitigate
industrial conflict. There has, however, been the
strong emphasis that management has been wearing the
white hats, and unions the black hats.
Another way of looking at these industrial relations
incidents is to view those that have had successful
outcomes as management successes in an ocean of management
The "generals" have sometimes created good soldiers,
and sometimes they have not.
My theme today is "management's responsibility
to manage." An industrial commissioner recently
used the phrase "management's obligation to
manage", which has overtones of "noblesse oblige,"
a phrase which could be confused with "droit de
seigneur"! I prefer the word "responsibility".
Management includes in this context boards of directors,
company chairmen, governments, industrial relations
commissions and officials of unions and officers of
employer organisations. They are good generals if
there are minimal disruptions and the enterprises are
President Truman's office sign "The buck stops here"
referred to ultimate responsibility---not to dollars,
as some appear to have understood the phrase in Australia
To introduce my theme "management's responsibility
to manage" let me remind you briefly of some of the
salient facts about Robe River.
The previous management at Robe River constantly warned
the new controlling joint venture participant---Peko-Wallsend---in the strongest terms---that site visits by Peko management were most likely
to worsen the highly-sensitive industrial relations
situation. In Peko we concluded that the only way
to signal to all concerned---staff, award employees,
unions, joint venture participants, customers, governments,
industrial commissions---that we were seriously
intent on reform of the operation, was to replace the
senior management team with people from Peko who had
already proven their ability to salvage viability from
operations which were apparently doomed by the combination
of rising costs and falling selling prices.
No award employee at Robe River was to be dismissed,
except for reasons endorsed by the Industrial Relations
Commission, or not contested.
After ten days assessment, we sought voluntary redundancies,
promising that beyond a certain number, attrition would
take care of further changes. No one ever received
the generous voluntary redundancy payments because
of union threats that they would never get jobs again
in Australia in those unions. As it happened, in the
first three months nearly three times as many left
of their own accord without any extra benefits.
When the I.R. Commissioner issued an Order to return
to the status quo which we knew to be beyond his jurisdiction
(as was subsequently confirmed on appeal) there was
anarchy and chaos in the workplaces resulting from
that Order. Management's responsibility for safety
under the Mining Act left us with no alternative but
to dismiss the entire award workforce temporarily,
thereby maintaining management's initiative.
The unions then ensured that the workforce stayed
out for as long as possible, and were subsequently
paid for the time lost, by Order of the Commission.
We were determined to practise the "no bad soldiers---only bad generals" precept. Many of the union
convenors were either dismissed for publicly-justifiable
reasons, or they left through frustration by concerted
I believe that a very large part of the lasting success
of the changes at Robe River has come from the understanding
by all concerned on site that we never set out to blame
the workforce for the poor performance of what is intrinsically
a very competitive operation.
On the other hand I have no doubt that much of the
sustained political attack on Peko, myself and others
arose out of the dismissal of the management team.
Having been censured several times by the Coal Mine
Managers' Association for management changes in the
coal industry, there are few surprises left for me.
Failure to change a demonstrably failed management
is of course itself an even greater failure of management.
That is the harsh reality of management responsibility.
Once the decision has been made to change, it is less
compassionate to everyone to delay its implementation.
No board of directors or management can afford to
pretend that no one knows. It is wiser to assume that
everyone guesses, and that delay will only compound
Forty days into the Robe dispute the Peko board held
a special meeting to order me, the Chief Executive,
to cancel all public speaking commitments (at the time,
eleven) and cease any contact with politicians, including
Sir Charles Court, and the media, indefinitely.
I responded immediately rather than risk the possible
public setback to our Robe initiative. I would rather
have dared them, because I understood the depth of
real public support we had. However, I was also aware
of the views in the senior business community, strongly
influenced by politicians and the media, that we would
not win---even to this day, should not
It is now time to tell you that immediately after
I left Peko, when it was taken over eighteen months
later, a very senior member of the Western Australian
cabinet told the new controlling joint venturer in
Robe River that "now it will be different". I am pleased
to say that he was told that it would not be
These very personal examples have been given partly
because I now want them in the public record, but also
because I do believe that management irresponsibility
and management failure have been the largely unspoken
aspects of industrial relations in Australia.
(It is ironic that one of our strategies at Robe River
was to apply to transfer from State awards to Federal.
We were opposed by everyone---employers, unions
and State and Federal governments. Today the Federal
government proposes to transfer Victorians in the same
way. I too favour another Australian flag so that
we can demonstrate our double standards.)
Management failure in Australia starts from the assumption
that management can largely leave to employers' associations
the responsibility for dealing with most of the details
of employment-starting with rates of pay. It has
been "convenient to belong" in a perverse sense of
mateship, to associations which are so easily dominated
by the most powerful of a group of enterprises which
are essentially competitors, and which are therefore
only too happy to send their competitors to the wall
in order to drive them out or to pick up the pieces
more cheaply. After all each enterprise has its own
responsibility to its owners to find its best way to
prosper. If you don't have an obvious advantage, you
have to try harder to maximise whatever strengths you
have. Small size often facilitates the greater strengths
that come from flexibility. Economies of scale are
often only part of the management equation.
The mistake is to be lured into that pretence of uniformity
that larger, more dominant competitors delight in imposing.
The old lament goes that "if only the employers would
act together" against organised labour, or against
over-bearing government, or against evidently-united
customers. I just don't believe that we can expect
it to happen.
Adam Smith had only part of the story about the consequences
of competitors meeting together.
Any attempt to cause competitors to act in unison
distracts individual management from its focus on its
own individual and often unique array of opportunities,
and generally weakens its resolve by suggesting, if
not demanding, that someone else is capable of minding
all the shops at once, on behalf of all competitors,
and is doing it better than any one of us could expect
to do. In real life, circumstances are always so diverse
that this could never be true.
Let us be frank about it, the most valid purpose served
by belonging to an employer's association is to find
out from your competitors how to outsmart them. Or,
in other words, to try to glean what is the truth behind
the stories being told!
The worst consequence of employers' associations has
been the partial or total abandonment by individual
management of responsibility for the wages and conditions
of work of the individual enterprise's employees.
That abandonment is a breach of the essential relationship
which should be developed between each employee and
A resolute management, working constructively with
its own employees, will always enhance its right to
manage with those employees because all concerned know---deep down---that that is simply what employment
The history of industrial relations in Australia,
particularly within larger enterprises and in some
industries, has been largely the history of managements'
failure, increasingly, to act in accordance with these
simple truths. Moreover, managements have failed to
try to convince boards of directors that resolute actions
can reverse this adverse trend. Whatever may be feared
to be the adverse consequences of this resolute action,
the alternative of not doing so, leads down the path
of increasing disaster. Management cannot look to boards
of directors for direction about industrial relations.
Management's responsibility is to convince the board
that management is managing. Boards of directors are
transient or intermittent in their involvement. They
are usually intimidated by and inexperienced in industrial
relations. Industrial relations is full-time or nothing.
Management is simply the art of persuading people
to work as directed. Management that is distracted
by claims of "custom and practice" has already lost
sight of its responsibility to manage. This is where
the efforts in recent years to negotiate change
have been so misguided. Management is not about negotiating
change, it is about ensuring that each task to be done
is done in the best way possible at the time. The
appropriate system of rewards to employees is the opportunity
cost of employing the best people available, not the
incremental cost of negotiation of change. In recent
years most large employers fell for this two-card trick
and in particular, the coal industry from 1987 onwards.
Managements time and time again have found that after
protracted negotiations they have ended up with little
or no lasting benefit---on occasions they have
even lost on the deal. That this should happen, and
in our largest and most critical industries, should
be cause for the greatest concern. Instead, it is
largely shrugged off as "par for the course". "Somehow
it will all come right in the end, when the market
picks up, and our long-term resource monopoly is better
appreciated by our customers."
Macawberism is alive and well, and prospering in many
of Australia's resource management teams.
There is simply no substitute for management working
out the destiny of the enterprise, with the employees,
and with the market---both suppliers and customers.
Any other involvement with other parties, whether
with the pretext of "we're here to help you" or not,
distracts from the responsibility to investors to show
that the enterprise can attract the funds needed for
its future, in competition with other investment opportunities.
The fact that for long periods most of our largest
enterprises have failed dismally to meet that test,
shows how distorted our national economy has been.
When I started to protest publicly many years ago
I was told that my ideas were too theoretical for the
real world. In my view we have in consequence been
reaping the whirlwind---increasingly. What my
critics meant was that by trading in shares through
the ups and downs, the cleverest would do very well
thank you at the expense of the less clever. The clever
were quite satisfied, but the nation languished because
a creative return on investment was not achieved.
If we are seriously to debate industrial relations
in the face of the existence of our extraordinarily
complex (and unique) intrusive government system, we
must debate its success or failure in terms of the
national summation of individual outcomes. Relative
to those nations with which we would like to compare
ourselves we have declined---we have achieved
a negative sum game, not even a zero sum game. Therefore
the "complacency of the clever" is no substitute for
the general decrease in relative performance (and prosperity)
that other nations have shown us to have suffered.
No wonder some people still look to socialism to provide
a fairer, if not more prosperous, outcome.
The truly great contribution of the members of this
Society to the industrial relations debate warrants
some comment in this paper here today. Not only has
the Society provided a wealth of well-documented case
studies and philosophical and legal treatises, but
it has provided a unique forum of positive attitudes
towards a better resolution from the oppressive system
that has grown up in Australia. Through that forum
has come the clear message---management which
resolves to exercise its responsibility can prevail---despite the system. Every time we do, the next
time it is easier. It is such a simple message.
It is not a message of triumphant victory, or of a
licence to oppress, or of goodies and baddies, black
hats and white hats. It is simply confirmation that
responsibility must be exercised, resolutely, if we
are to get the best performance.
I know that for many managers, including myself, to
learn the lesson was not easy or quick. We were all
creatures of the Club culture. The temptation to avoid
this new found sense of responsibility can be very
strong, particularly when those senior to us are largely
unaware or scornful. For those who may even wonder
why I have pursued these directions in this paper,
they have my assurance that many if not most of our
major industries still show little sign of comprehension
of the opportunities available to them. There is even
a bizarre argument that for me to assert such a state
of affairs is to make it harder for the opportunities
for change to be realised. Because I am not following
the Club procedure, my method will be counter-productive.
That argument, which is still quite commonly put forward,
is the clearest evidence of the existence and depth
of the problem. Those who advance it will predictably
be the last to change. Those who are motivated by
the opportunities for change are far too busy bringing
about change to harbour such a negative view.
I would like now to talk about the role of governments
in industrial relations. There is a widespread view
that the large electoral majorities of the Fraser governments
in the 1970s gave mandates for change which were largely
wasted. Few changes were made, and so in a sense that
is true. After all, the Federal government has the
ultimate responsibility for the state of the nation.
However it is almost totally overlooked that during
that period there was very little public call for change,
even though there was widespread concern that the system
was not right. There was effectively no public call
for specific changes. Moreover there were very strong
objections from the business community, and from the
employer's wing of the Club in particular, that government
should leave well alone and not provoke disruption.
The Fraser government was told many times that it
didn't understand industrial relations.
I have given this account from the past not simply
to score points in a debate, but to show how confused
the debate about the role of government in industrial
relations can be.
Naturally I am hopeful that the very coherent policy
set out by the Federal coalition parties on 20th October
will, in today's less complacent business climate,
gain more support from the business community. Some
members of this Society may take the view that the
Coalition policies still do not go far enough.
My greatest concern is that the process of reaching
enterprise agreements will still be more like that
which led to the negotiated agreements of recent years
to which I referred earlier. There will be too much
concern with incremental pay for partial changes, instead
of the assumption by management of full management
responsibility, with pay rates matching opportunity
costs of employment.
As we evolve towards true enterprise agreements between
managements and employees, but while we still have
the present Club culture and systems, I can see that
there will inevitably be many unsustainable agreements
reached, leading to calls from despairing employers
for a return to the security blanket of the previous
rigid awards system that has increasingly crippled
Among the many ironies of Robe River remains the fact
that with few exceptions the unions have consistently
frustrated the efforts of management to provide more
attractive pay packages. The changes to work practices
have been profound, but the unions have held their
members in inflexible pay structures simply because
they are so opposed to reaching any agreement with
the Robe management.
Let me assure you again that, as for Robe River, I
have specific examples in mind in the mineral industry
for each of my remarks in this paper. I feel a certain
reticence to name the mines or companies. In a very
real sense it is none of my business, and in another
sense I should confine my own thoughts and actions
to those enterprises where I have evident responsibility.
But that leads back to the remarks about the role
of government, which is so predominant, so pervasive,
and which is the concern of all of us.
Even under the Coalition policy that role will continue
to be significant, at least for some time. While it
continues we have reason to be concerned that enterprises
will not achieve optimal freedom and flexibility in
their arrangements with their employees, and that many
of the old rigidities will remain.
We must look towards an across-the-board lessening
of the intrusiveness of government on a scale still
barely thought of within the political policy arena
if we are to achieve a greater understanding in the
community of the nature of responsibility of management.
Governments will go on trying to usurp the role of
business management in so many ways, their pretexts
including the madness of the 1980s, or the banks in
the 1990s. There is always a pretext for interventionalist
government. Communism and socialism are characterised
by loss of individual responsibility. In the western
world we are not far behind!
The outcome of this usurpation is frustration of business
activity across the board because of inappropriate
and largely unnecessary regulation, and a continued
diminution of management responsibility because management
so readily believes that its responsibility ends with
compliance with government regulation. Government
would not be seen to have a case for intervention and
would be dissuaded from intervention, if resolute management
believed that it should be---and could be---more responsible.
This paper is concerned with management's responsibility
to manage. My criticisms of management today, as with
the actions of some of us in the industrial relations
field, do not always sit comfortably with the entrenched
conventional established received wisdom. They were
not meant to do so, because we are here examining management's
responsibility without regard to the clutter that has
held this nation back.
After speaking on industrial relations recently I
was asked about the role of the Business Council of
Australia. I replied that I had nothing against the
idea of the Business Council, but I had not joined
because of the cost and time involved when I had Peko
to run, Robe River to transform, and many mineral industry
involvements. When I then added that I didn't need
any more lunches and dinners listening to Bob Hawke
there was a spontaneous round of applause.
Let me assure you that wherever I go it is the young
people who want to know where "us oldies" got it so
wrong for Australia. Why did we let the Peter
Cooks and David Parkers and John Halfpennys ruin this
country? My own awakening came early---too early,
according to the received wisdom. The time for change
is always now if we are to transform our destiny.
Robe reduced the accident rate to one-tenth, quadrupled
productivity and trebled export sales and yet is still
locked into the relevant State and Federal awards and
Industrial Relations Commissions. There is another
generation of mining projects emerging much less encumbered
and even more productive.
The same must be true of most of our industries and
businesses if only we can concentrate simply on giving
management the clear responsibility to manage as best