A Matter of Choice
International Best Practice in the Industrial Relations Context
When first discussing the prospect of giving a paper
to this conference I asked Ray Evans what he wanted
me to talk about, to which he replied; "you choose
the topic, the conference theme is 'A Matter of Choice'
so make up your mind!".
Having heard this typically blunt Evanism, the desire
immediately sprang to mind to attempt a paper based
on the well known first lady of arbitration called
"Flo", who was a superstar back in the days of endless
rounds of silly so-called "work value" cases in the
sixties and seventies. Flo was normally known to say
"yes" and rarely ever "no"! However, on balance I
chose "international best practice in the industrial
relations context" as a safer theme.
Almost thirty years ago, while attending my first
industrial relations conference, I was impressed by
a speaker's cute definition of industrial relations,
when he said "industrial relations is the art of not
making people happy but rather making them less unhappy,
which is a temporary condition until such time they
are unhappy again".
Today, of course, observations like this seem too
trite an analysis of industrial relationships as companies
struggle to survive and compete in an unforgiving global
market which cares nothing about the great Australian
political debate, our socio-economic subculture,
management style, industrial relations systems and
clubs, or union power. In the real world the market
only cares about price, reliability of supply, customer
focus and now perhaps, the Mabo factor.
The global expansion of the 1980s witnessed an out-of-control
growth surge in an orgy of development. When the world
economy stopped business ended up with too much capacity.
Globalisation increases the problem of excess capacity
as distribution systems give everyone access to everything
with capacity coming from anywhere in the world. This,
together with the fact that there is too much capacity
in most industries in most developed countries, has
created a global competitive environment such as the
world has not experienced before.
The chief executive of General Electric since 1981,
Jack Welch, in January last year summed up this global
competitive environment with riveting reality:
- This worldwide capacity overhang, coming at a time
when everybody feels poor, is forcing ferocious price
competition. As it intensifies, the margin pressure
on all corporations is going to be enormous. Only the
most productive companies are going to win. If you
can't sell a top quality product at the world's lowest
price, you are going to be out of the game. In that
environment, 6% annual improvement in productivity
may not be good enough any more; you may need 8% to
9%, and while the bar keeps getting raised higher,
higher, higher, we are all going to be experiencing
slow revenue growth. It's brutal!"
His view on what constitutes do or die international
best practice is pretty easy to understand.
Back in Australia, we have been gradually moving towards
a "best practice" focus. However, the trend has been
to reform companies within the present structure rather
than by changing the structure. This is a bit like
keeping the same old shackles around your wrist and
ankles but making them a little looser so they do not
hurt so much.
The Australian government-sponsored "best practice
project" indicates my point, as it is the same old
soil in the garden but with different plants growing
in it from time to time.
Australia is, in my opinion, the dinosaur of English
speaking countries in relation to labour market reform
and deregulation. The United Kingdom went through
a dramatic change under Thatcherism when the coal miners'
strike and Arthur Scargill provided the perfect opportunity
for the empire to strike back.
One example of dramatic change is the North Sea oil
and gas fields which started out totally union controlled
but after some historic battles, particularly attempts
to fabricate off-shore modules out of Aberdeen,
the off shore former "wages staff" are now almost totally
non-union and on salaried staff conditions, including
annualised merit-based packages.
The United States have been in labour reform mode
for almost twenty years since the "right to work" legislative
movement got under way across the country, to the point
now where union membership is around 15%. The coal
industry, for example, in the United States is now
almost totally non-union on a mine by mine enterprise
Canada has traditionally followed United States trends,
particularly with the so-called "international union"
structure between the two countries. However, now
it is commonplace in the resource sector (which is
their economic backbone) to see totally non-union
plants in operation across the country.
Closer to home, New Zealand has, of course, gone through
a dramatic reform process since 1987, firstly with
the introduction of the Labour Relations Act of 1987
(in the Roger Douglas era) and in 1991 with the Employment
Contracts Act. Specific examples of case studies and
trends in New Zealand will be discussed later in this
In returning to our "dinosaur" situation back here
in Australia, I can't help making some observations
on the current legislative environment and offer some
comments on the Industrial Relations Reform Act:
- 1. The Act appears to be complex and will increase
litigation; it's good for the lawyers.
- 2. The Act, on the one hand, provides for non-union
deals or enterprise flexibility agreements, but does
not allow for erosion of wages and working conditions.
- 3. If the unions have members in the workplace they
get to represent them automatically. If they don't,
they can still try and "head the employer off at the
pass" at the Commission as a lender of the last objection.
- 4. The unfair dismissal provisions have literally "stolen
the show" in terms of creating national debate, to
the point of distracting attention away from the non-union
enterprise bargaining scenario.
- 5. The Industrial Relations Reform Act does not recognise
clearly enough the much revered International Labour
Organisation (ILO) principle of "freedom of association
in the workplace".
It is clear that the Act is weighted heavily in favour
of the unions in retaining the shackles of the past
and could be summarised as follows from the union perspective:
- you can have an enterprise agreement if we can't
convince the majority of employees not to.
- if that fails, you can have an enterprise agreement
negotiation but we will represent any membership we
- if we don't like the deal anyway we will try and
stop it when it gets to the Commission.
- if we miss out on blocking the deal there, we will
continue to campaign on the shop floor for membership
of the union.
- however, if all else fails you can't sack anyone
If the Federal Government's motivation in passing
this legislation is to enshrine the union in the process,
then I sincerely believe they have miscalculated badly,
on the following grounds:
- 1. If employees are to get no less than the union scale
for wages and working conditions then why stay a member
of the union.
- 2. If wages and conditions are to be no less than union
scale, employers will in time tend to pay more to
good employees, widen their job scope and have fewer
people employed overall in the enterprise.
- 3. This window of opportunity to negotiate an enterprise
agreement directly between the employer and the employee,
however complicated, will, in time, create a greater
sense of common purpose about company survival and
goals; also, it will erode union participation and,
in time, union control.
One has I suppose, to look on the lighter side of
the overall legislative debate in Australia when recently
the "mother of all industrial clubs", the ILO, allegedly
called on the New Zealand government to amend the Employment
Contracts Act to promote collective bargaining and
protect workers who are members of unions against acts
of discrimination and interference by employers.
Ironic isn't it, when anyone who knows anything about
New Zealand labour reform is bound to be aware that
their Employment Contracts Act recognised the fundamental
ILO convention of "freedom of association" in the workplace,
and outlawed duress being used by any party!
Back home again in dinosaur land and notwithstanding
a broadside from the OECD at the Industrial Relations
Reform Act, Industrial Relations Minister, Laurie Brereton,
said the ILO report was "a damning indictment" of New
Zealand's system and a vindication of the Keating government's
labour reforms. If you can work your way through that
reasoning, then I'll hire you as a consultant.
Our discussion so far has noted some international
legislative and best practice trends. I propose now
to change gear and inject some of my own opinions into
the subject based on personal experience. Real international
best practice, in my view, is managing the enterprise
in the most efficient and effective way to maximise
the performance of the enterprise.
Best practice can also be described simply as an "attitude".
Therefore, the adoption of best practice demands a
change of attitude across the enterprise. To demonstrate
my point, let us take workforce performance as an example.
In my view, motivating, encouraging and educating all
employees is the key to creating a winning attitude,
and is the only way of creating job security across
the enterprise and maximising profit opportunity for
Further, I believe that total focus must be placed
on the way people work, rather than what they get
paid to attend for work. How to work smarter, better,
more efficiently and more successfully should be the
objective. Your employees are your asset, so utilise
it, develop it, encourage it and get them involved
in the enterprise and productivity improvement will
However, management must show leadership, which starts
by reforming oneself first. Reform the organisation
from the Chief Executive Officer (CEO) down. Leadership
is not a popularity contest, so having taken the hard
decisions, be resolute in execution of the adopted
reform process, including cutting through organisational
bureaucracies, eliminating layers, and scraping off
the rust and the barnacles.
On the question of union involvement in the change
process, I believe strongly that where the unions are
currently involved in the enterprise and have a long
history of such involvement, then give them an opportunity
to be involved in the change process. However, the
employees of the enterprise are your assets and your
future, and should have the major participative role
in the change process.
This method of developing and adopting best practice
is usually referred to as the "partnering" approach.
It has been used successfully in parts of Australia
and New Zealand and has resulted in attitude change
(including unions) and has made companies much more
competitive in the market place.
However, some of you would be aware that this excruciating
process is also known to produce ulcers, nervous breakdowns,
hair loss and chronic rashes! However, in the long
term, benefits will by far outweigh these sacrifices.
Golden rules in this process include:
- reform the whole organisation from the CEO down,
not just sections of the enterprise.
- the level of commitment of the parties directly correlates
with the ability to achieve results.
- condition the whole workforce on the need to change.
- do not expect major changes overnight as attitude
and culture change takes time, average from two to
If the partnering approach cannot work, then the other
well-known method of achieving change is to adopt
the Rambo approach where you take the workforce "out
the back" and knee them all in the groin until they
know the words to the company song! This method can
be effective in the short term, however. I believe
that a workforce that wants to work for the enterprise
and identifies with the enterprise will be better for
the enterprise over the long term.
In cases where union attitude change is not achievable,
then the enterprise ought to be justified in executing
any strategy deemed to be in the best overall interest
of the enterprise. It would appear, for example, that
CRA has reached the decision to seek the exorcism of
union control from their enterprise, across the organisation.
Their own conditioning process no doubt included their
experience at Tiwai Point Aluminium Smelter in New
Zealand, where substantial gains in productivity were
made after a sweeping restructuring of the enterprise.
For other companies finding themselves in similar
situations, this may be the way to go. However, the
mere fact that the union may be out of the process
won't in itself achieve international best practice.
Managers must manage the way out with the whole workforce.
I will now briefly examine international best practice
in the United States and New Zealand. In the United
States, international best practice has been adopted
increasingly over the last five years and is mainly
referred to as the "re-engineering" of companies. The
United States is now definitely more competitive with
Japan and Germany than five years ago. They have gone
through the painful process of restructuring both in
the manufacturing and resource sectors.
The United States has refocussed on values, and employees
have learnt the value of their jobs and that job security
is best achieved by winning.
To demonstrate the point, take the United States coal
industry, which I have just visited with an Australian
coal client. My client has embarked on project to develop
and adopt international best practice across their
whole organisation. This educational tour was a real
eye opener for the visiting best practice project team
of twelve. The biggest concentration of mines visited
were in Wyoming, in and around the Powder River coal
mining province and, to a lesser extent, Utah.
Companies there such as Amax, Cyprus, and Kennecott
operate some of the most efficient coal mines in the
world. However, this was not always the case, as all
mines visited had been through the change process at
least once and re-organised their way of working across
the whole organisation.
To demonstrate the work culture difference: we were
at one of the Wyoming mines lunching with our host
when of our team members asked whether they had "RDOs",
to which the Mine Manager replied "yeah, we have always
had rodeos in Wyoming, this is the home of the American
The main themes relevant to international best practice
in the United States coal industry are summarised as
- all mines visited were described as "union free".
- overall workforce numbers had been dramatically reduced,
while production had increased.
- layers of management had been eliminated, lean structures
- supervisors and foremen had become facilitators,
trainers and planners and the workforce under them
were empowered with more responsibility and accountability.
- company key performance indicators and production
targets were shared with the whole workforce.
- employees, whether management or miner, identified
with their employer and the "winning attitude" was
- a communication policy of "open door" was evident
and communication cascaded throughout the organisation
on the basis of "honesty without fear".
- the workforce was trending towards being seamless
in relation to employee benefits such as pension funds,
sick leave, vacation and health coverage.
- absenteeism and turnover was extremely low.
- area offices had been eliminated and mines reported
direct to headquarters.
- management practices had dramatically changed.
- all mines had continuous improvement programs on
an ongoing basis.
At the last coal mine visited in Utah again one of
our team members asked a question of our host, "how
many miners' deputies do you have?". The reply was
deadly serious, "none ¾ we don't have deputies out
here at the minesite, we leave that to the sheriff
in town who organises deputies when we need them out
I will now briefly share some of my own experiences
with you from the New Zealand resource sector in relation
to international best practice.
Historically, New Zealand labour and management practices
produced a far more volatile industrial climate than
Australia in the 1970s and early 1980s. Delays of literally
years in major project construction were common and
the resource sector productivity in mining and petrochemical
enterprises were also very poor.
My first visit in 1974 was to negotiate a labour agreement
for the construction of an underground coal mine and
my opposing negotiator was the notorious "Dingy Patterson".
His reputation was built at miners' stopwork meetings
when he used to throw his lunch box up into the air
and scream out "if it stays up in the air we work and
if it comes down and hits the ground we strike!". Great
start ¾ welcome to New Zealand.
However, it was in the mid-1980s that New Zealand
got its wake-up call. This era of reform was driven
by the Labor Government's "Rogernomics" program that
produced such a plethora of sweeping legislative and
administrative reforms in privatisation, corporatisation,
deregulation and the Labour Relations Act of 1987.
This Act introduced a fast track recourse to the Employment
Court to issue compliance orders against either unions,
employees or employers for any breach of awards or
agreements. This Act was the real start of the labour
reform program in New Zealand.
I have been working the New Zealand resource sector
since 1974, and more intensely in the last five years,
to observe their sweeping changes. In the few examples
to which I will now refer, the change in attitude and
performance included dramatic changes in management
performance, particularly in respect of involving the
workforce in the process of change
- 1989 Greymouth coal project in the heartland of the
old coal mining capital on the South Island's west
coast (Dingy Patterson used to work in Greymouth at
'Strongman' mine). No mine was allowed by the Miners'
Union to work more than 265 days per year. Despite
this 365 days of operation on a basis of twenty-four
hours per day availability was achieved on the understanding
that 'no deal---no mine' (mine still not approved).
If the project proceeds it will probably on a 'non-union'
- 1990 Eight months prior to the Employment Contracts
of 1991, Golden Cross gold mine negotiated a landmark
single union labour contract introducing 365 days of
operation on a basis of twenty-four hours availability,
twelve hour shifts at straight time and straight time
shifts on Saturdays, new methods of supervising and
other sweeping changes, and is now non-union by election.
This mine, with its unshackling of past featherbedding
was, and is, regarded in New Zealand as the first real
breakthrough in the resource sector in terms of mainstream
- 1991-93 Shell Todd Oil Services in the upstream
oil and gas industry: reform of the workforce onshore
and offshore, multi-skilling---all employees
classified as production technicians, demarcation gone,
new management style.
- 1991-1993 Synthetic Fuel Corporation (now Methanex);
the largest methanol producer in the work and the only
gas-to-gasoline conversion plant: total adoption
of international best practice and the merging of another
methonal company into one organization, a total new
way of working and of managing with customer focus
and now competing against other Methanex plants globally.
The above two change projects were carried out using
the partnering approach with employees, management
and unions. However, Methanex operators broke away
from partnering during the merger negotiations and
finished with less operators, individual contracts,
and a 90 per cent 'non-union' workforce.
Overall, New Zealanders have picked up their act dramatically
in terms of international best practice, but they started
from a long way behind. Some Australians even say the
sheep don't look as anxious as they once used to.
The next two-and-a-half years of the National Government's
term in office will see a continued momentum of labour
deregulation, including the reform of some of the historical
industrial dinosaurs who would not take the risk of
restructuring during the Government's first term in
Returning to the Australian scenario, I conclude with
a few parting shots:
- to the Federal Government: stop the 'bully boy tactics';
stop regarding the States as your enemies; give them
a go, even the so-called conservative States.
- to Australian companies: let us get our act together
at home and change Australia into a nation of winners.
It is critical that management lifts its game. We can't
afford to sit on past achievement and become legends
in our own crib time. Now is the time to get organised,
get going, get out there, motivate, brainstorm, share
the truth about the enterprise, involve the workforce
in the process and, above all, lead.
- to the conference theme of 'A Matter of Choice' in
the union membership context: it should be a non-issue
in the workplace; the principle of freedom of association
is sacrosanct. After all, it is the employees' union
and it should be their democratic decision whether
they are members or not.
- to the unions: change or be changed.
- to Australia generally: receive your wake-up call
or settle to become just a mega-tourist resort.
And to you all: may the wind of international best
practice be always at your back!
Why HR Nicholls?