Employee Involvement and Participation

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					    Employee Involvement and
• Overview
• Consultation and the law
• Employee participation and trade unions
• Employer choice and employee consultation
• Consultation in the UK
• The challenge ahead
• Proposed EU directive on on informing and
  consulting employees
• Pressures of globalisation have intensified
• Decline of trade unions - representation gap
• Employee involvement and participation
  encompassing a range of mechanisms
• Direct or indirect participation
• Information and consultation                 2
• Direct and indirect participation
• Mutual reinforcement and interaction
• Structured approach - high involvement
• managerial attitudes
• Freeman and Pendleton - information/
  consultation and profit-sharing and share
  option plans
• ‘This robust relationship fits well with
  economic logic. If an employer pays workers
  in ways that depend on business performance,
  it should benefit from communicating about
  that performance and should offer workers
  ways to contribute to improving performance.
  Conversely, firms that give workers greater
  decision-making authority at their workplace
  should also want to give them incentives to
  make decisions in the interests of the business’
  (Freeman, 2000)                                    4
      Consultation and the law
• Current legal obligations
• certain transfer of undertakings
• over collective redundancies
• on issues of health and safety at the
• as part of the information and consultation
  requirements for European works councils
  in large multinational companies operating
  across Europe                                 5
     Consultation and the law
• Proposed legal initiatives
• European Company Statute
• European National information and
• Depend on how UK government transpose the
  directive into UK law

  General framework for informing
     and consulting employees
• Formally adopted and came into force on 23 March
• This Directive will eventually apply to undertakings
  or businesses in Member States with at least 50
  employees (or establishments with 20 employees or
  more), and will require them to inform and consult
  their employees in good time about issues directly
  affecting work organisation, job security and
  employment contracts regarding terms and conditions
• Firms with more than 150 employees have until 23
  March 2005 to set up information and consultation
  procedures; more than 100 employees have until 23
  March 2007; more than 50 employees until 23 March
  General framework for informing
     and consulting employees
• The Directive draft regulations set out processes that
  force employers to establish an information and
  consultation framework when a valid request has been
  initiated by 10 per cent of employees in a firm.
• If there are existing arrangements, 40 per cent or more
  must endorse the request in a ballot.
• If existing arrangements do not satisfy the Directive’s
  requirements, the employer must seek to reach a
  negotiated agreement with ‘genuine employee
  representatives’ (Draft Regulations 7-9).

  General framework for informing
     and consulting employees
• Significantly, the issues on which management
  must provide information and consult under the
  draft regulations also have implications. They
  include the economic situation of the enterprise,
  the structure of and potential threat to
  employment, and most significantly, ‘decisions
  likely to lead to substantial changes in work
  organisation or in contractual relations’ (Draft
  Regulations 18(1)), on which consultation must
  take place.
   General framework for informing
      and consulting employees
• The authority of trade union representation may also be
  diminishing due to the scope of issues
• Issues concerning ‘contractual relations’ may include
  rewards, such as performance-related pay or career
• ‘Changes in work organisation’ may also affect workplace
  restructuring such as teamwork systems (Draft Regulations
• Consultation ‘with a view to reaching agreement on
  decisions within the scope of the management’s powers’
  may be little different to traditional trade union activities of
  collective bargaining thus potentially undermine the role of
  trade unions (Draft Regulations 18(4)).
       Consultation and the law
• Employers will be obliged to inform and consult
  employee representatives on major developments
  in the business, its economic and financial
  situation; the structure of, and prospects for,
  employment; and substantial changes to work
  organisation or contractual relations
• Information will have to be given early enough for
  employee representatives to prepare adequately
  for consultation
• However, employers won’t have to inform or
  consult where this would seriously harm or
  prejudice the enterprise                         11
       Employee participation
         and trade unions
• Management choice over appropriate level
  of involvement
• For example, strategic issues may be
  regarded as matters for consultation or
  information-sharing (European directive)
  while substantive issues such as pay may be
  seen as more suited to negotiation with
  representative bodies
        Employee participation
          and trade unions
• The choice of forms of employee participation is
  also related to the style and nature of workplace
• Positive aspects of union voice may be
  counterbalanced by union’s ability to extract a
  disproportionate share of total income, decreasing
  an organisation’s ability to raise or maintain
• Management perception that an outside influence
  can distort internal processes and structures,
  impacting negatively on employee behaviour and
  firm performance
        Employee participation
          and trade unions
• Trade union structures and other forms of
  employee representation complement each
  other - dovetailing in terms of form and
  function as in the case of German works
• Dual structure of interest representation - the
  separation of enterprise-level labour relations
  and collective bargaining at regional or
  industry level
• See table                                         14
              Employee participation
                and trade unions
          Strategies and approaches of non-union forms of representative participation

Strategy                             Substitute                    Complement

Process               Representation of    Co-operation         Co-determination/
                      employee interests                        Consultation
Power Base            Legally imposed or   Management           Legally imposed or
                      management           initiative           management
                      initiative                                initiative
Channel of            Single               Dual                 Dual
Rights                Information,         Production line      Information,
                      consultation,        information,         consultation, co-
                      limited workplace    suggestions,         decision making,
                      decision-making      problem              limited veto powers
                                           identification and

        Employee participation
          and trade unions
• Also suggested employer-initiated structures
  cannot be effective in providing a true voice for
  employees’ concerns because they institutionalise
  worker cooperation, thus limiting scope for trade
  union action
• Alternatively, non-union structures may have the
  capacity to assist unionism in workplaces where
  these structures are given substantial
  responsibilities - development staff associations in
  finance industry 1950s and 1960s                   16
 Employer choice and employee
    consultation outcomes
• Management motivation to create
  participation and involvement structures -
  detection of problems and workers’
  participation could impact positively on
  productivity and quality
• evidence favourable associations with
  participation increase productivity and a
  positive employee relations climate
 Employer choice and employee
    consultation outcomes
• Sako - European car components industry -
  participative employee practices (incl.
  Representative participation) impact positive
  business performance - improvements in quality,
  communication and decision-making
• Patterson et al. - shows link people management
  strategy and business performance (more than
  strategy, quality, manufacturing technology and
  R&D put together
 Employer choice and employee
    consultation outcomes
• Guest and Peccei - high levels of direct and
  indirect participation in policy decisions,
  influence employee commitment to firm
  and positive state of the psychological
  contract (employee attitudes and behaviour)
• other studies show involvement and
  participation programmes can directly
  correlated to improve organisational change
  and performance                             19
       Consultation in the UK
• Limited growth in alternative collective
  mechanisms for employee voice (from TU and
  CB) 1990-1998 29 per cent (WERS98)
• only 11 per cent committee at workplace and
  higher level in firm
• 80 per cent of organisations with fewer than
  100 employees had no consultative body
• Fundamental change between 1984-1998 was
  the increase of employees without access to
  active consultative structures               20
       Consultation in the UK
• Only third of non-union workplaces had a joint
  consultative structure compared to around
  three-quarters of workplaces where a trade
  union was recognised
• During period 1984 to 1998 - incidence of
  representative-only structures halved, while
  direct voice channels increased threefold

             Consultation in the UK
Changes in employee voice arrangements from 1984 to 1998 (percentage)
      Type of voice arrangement             1984              1990             1998
Union only                                    24                14                  9
Union and non-union                           43                39                  33
Non-union only                                17                28                  40
No voice                                      16                19                  17

Representative voice only                     29                18                  14
Representative and direct voice               45                43                  39
Direct voice only                             11                20                  30
No voice                                      16                19                  17

Weighted base                               2,000             1,997            1,991
Unweighted base                             2,019             2,059            1,920

Source: Bryson (2000) adapted from Millward, Bryson and Forth (2000), Tables 4.13        22
(p122) and 4.15 (p127)
       Consultation in the UK
• Millward, Bryson and Forth - found a clear link
  between how often consultation occurs and its
  perceived value - with a lack of consultation
  contributing to perceptions of poor management
  among employees.
• ‘Employees with some type of non-union voice
  arrangement generally felt that managers were
  better at keeping them up-to-date with proposed
  changes at the establishment than did those
  employees in workplaces without any formal
  voice mechanism. This was true whether non-
  union arrangements were found in isolation or
  together with union channels of voice’        23
       Consultation in the UK
• Case study research into non-union structures
• Limited access to resources (training)
• Mixed representatives (some appointed
  delegates - chair)
• Management usually controls structure and
• Powers of recommendation only
• Few with negotiation/bargaining rights
• Few grievance handling or unfair dismissal 24
         The challenge ahead
• Greater employee participation and
  involvement increased
• research shows lack of employee voice help
  explain low levels of commitment among
  some workers
• So if employee consultation and
  participation is positive and worthwhile,
  why do more not embrace this more
  readily?                                  25
         The challenge ahead
• Difficult to link good employee
  involvement and consultation practices and
  organisational performance
• Time dimension - short term costs for
  achieving long term rewards
• Most difficult obstacle - requires change in
  culture for managers and employees -
  involve leadership skills, vision, time and