International aspects of employee involvement HR Management

In many countries in Europe and the rest of the world, trade unions still act as one of the most important communication channels, despite indications that there has been a decline in membership worldwide over the past ten years (ILO, 1993). Their importance is central in Scandinavian countries, especially Sweden, and they still carry considerable weight in Germany and Britain, though the rise in long-term unemployment and the decline in the old staple industries such as shipbuilding, coal, iron and steel, and engineering, where unionism had a strong traditional base, have tended to erode their power.

Employee involvement rooted in industrial democratic processes has witnessed a surer growth over the past 30 years in legislatively supported systems such as co-determination in Germany and Sweden. The operation of these two contrasting styles of industrial democracy is also reflected by the relative union strength in each country – 85 per cent in Sweden and 35 percent in Germany in 1988 (OECD, 1991).

  • Swedish co-determination

In many respects Sweden has the most advanced forms of participation in the world, at both organisational and workplace levels (Wilczynski, 1983). The basis of industrial democracy in the country stretches back to 1948 with the setting up of the National Labour Market Board. This was composed of representatives from labour, employers and government, and participated in economic planning.

In the economic and political climate of the 1970s, demands were made for the extension of industrial democracy, which led to the passage of a body of legislation, most notable of which was the Co-determination at Work Act (MBL) passed in 1977. The aim of the Act was to extend the scope of collective bargaining to areas of management policy, including organisational and technical change. It required all employers to allow consultation with employees and the participation of their representatives in decision- making at both board and shopfloor levels.

For example, one of the central provisions of the Act requires that, when employers are contemplating making major changes in their operations or working conditions of employment, they are required to negotiate with employee representatives before the final decisions are taken and changes are introduced (Edlund and Nyström, 1988). In reality, employee representatives in the co-determination system tend to be union representatives, and it was the unions in Sweden that gave the impetus for much of the drive towards industrial democracy.

The union strategy was to focus on issues of health and safety, and ‘this created a political climate in which new laws and regulations in support of industrial democracy could be introduced . . . these laws were supplemented by financial support for training and research which to a large extent was channeled through the unions’ (Hammarström, 1987). The crucial role of unions, not only in bargaining structures but in the co-determination system, meant that they would always be an important element in Swedish employee relations.

Companies have also enhanced the reputation of Swedish employee involvement. Volvo in particular introduced job enlargement and job enrichment, ‘quality of working life’ techniques to its Kalmar plant in the 1970s, and became the focus of much attention worldwide as an alternative to the mass-assembly Fordist systems of production (Sell, 1988). While these systems have been admired, they have also received criticism.

The neoliberalists have seen the corporatist state pay too heavy a price in terms of high wages and high taxes for a regulated labour market that is seen as being heavily influenced by the ability of the workforce to impede management prerogatives in policy creation. Conversely, left-wing critics have attacked the system for not addressing the real needs of the workforce, which have been emasculated by the unions in collusion with the Social Democratic Party in attempts to maintain the corporatist status quo.

Co-determination: not a drag but a motive force

Co-determination: not a drag but a motive force

‘Kalmarism’, as one French observer has dubbed the EI initiatives in Volvo (Lipietz, 1992), has also been attacked for being no more than a public relations exercise. Many of the EI initiatives are seen as untypical, and many were dropped as being uneconomic and inappropriate. A recent trend in Sweden has been seen to be bound up with managerial HRM initiatives, which have shifted from formal to more informal models of participation and decentralised practices. Some observers suggest that these trends might eventually undermine the formal system of participation (Cressey, 1992).

What is certain is that the change in the economic climate in the early 1990s as a result of recession, raising unemployment from 1.5 percent in 1990 to 8.5 per cent in 1993, had an enormous impact on the Swedish collective psyche, challenging many of the assumptions that were generally acceptable in the agreeable economic environment of the 1980s (Holden, 1996). The balance of power between state, unions and employers changes continually with each economic phase, but there is no reason to believe that the essence of the system will not survive.

Despite the fact that management prerogatives in Sweden still outweigh those of the employee, the culture of involvement is still very well developed compared with most other countries.

  • German co-determination

Given the embodiment of the concept of consultation and participation in the EU Social Charter and the draft European Works Council Directive, it is not surprising that the German system of co-determination and works councils has been seen by some observers to be a model for the rest of the Union:

Co-determination is legally embodied in the work system by four key Acts: the Montan Co-determination Act 1951, the Workplace Labour Relations Act 1952, the Workplace Labour Relations Act 1972, and the Co-determination law of 1976. Co-determination operates basically at company and plant levels, although there are three methods by which workers can participate: works councils, supervisory boards and management boards. In places of work that have five or more employees the workforce elects a works council, consisting of workers’ representatives only. The works council has a right to information concerning:

  • health and safety;
  • the organisation of work;
  • the working environment and jobs;
  • the hiring of executives;
  • planned changes in the company that could result in considerable disadvantages to employees.

In addition, the works council has the right to make suggestions (Gaugler and Wiltz, 1992):

  • during the formulation and implementation of personnel planning;
  • regarding vocational training (apprenticeships, etc.);
  • about other training and development measures.

The views of the works council must be considered by the employer, although there is no compulsion to accept them. For larger companies (not family owned) employing more than 500 people, representatives elected by the workers sit on the supervisory board, where they make up one-third to a half (depending on size) of the policy-making body. Other board members are elected by the shareholders, and a neutral chairperson is appointed.

In companies over 2000 employees in size, trade union representatives are guaranteed places on the board. German workers tend to believe that in general the works councils and codetermination system represent them adequately, and there has been a reluctance to join unions (35 per cent as opposed to Sweden’s union density of 85 per cent), although the recession in the early 1990s witnessed a revival of trade union militancy.

The supervisory board meets four times a year, and also appoints members to the management board, a full-time executive body that oversees company policy in its day to- day operations. (For a fuller explanation of the history and detailed operation of the co-determination system, see Lawrence, 1980; Lane, 1989; Gaugler and Wiltz, 1992.)

  • Co-determination: an evaluation

In evaluating co-determination one must be aware of the diversity of positions from which views emanate. These are of course influenced by political ideology, position in the organisation (whether management or worker etc.), whether one is a shareholder, and the type of organisation. Lane (1989), in her survey of research analysing the influence of co-determination in Germany, points to the diversity of findings depending on the level (whether workplace or enterprise), company size, sector and managerial style.

Not surprisingly, co-determination at enterprise level has had relatively little impact on the everyday work of employees, but, it can be argued, has had the long-term positive effect of engendering a spirit of cooperation between management and labour. Labour representatives perceive more clearly the reasons for managerial policy initiatives, and conversely the management have more understanding of the concerns of the workforce.

At workplace level there has been a wide variety of research. For example, Wilpert and Rayley (1983) showed that there was a large discrepancy between formal rights and actual rights of participation. They also state that, while participation rights in Germany are high compared with most other European countries, so too is formal and actual managerial control.Lane (1989) posits the view that ‘faced with a strong and control-oriented management and forced to prove themselves vis-à-vis their electors by concrete achievements, works councillors may decide to pursue only those issues on which they are confident to get concessions’.

Thus the degree of participatory influence could also vary with each issue. Not surprisingly, there are German employers who share the view of past British Conservative governments that the co-determination system undermines the employer’s right to manage. Survey evidence suggests, however, that works councils are supported by the overwhelming majority of employers, except in the smallest of firms (Mauritz, 1972, quoted in Lane, 1989: 233).

Works councils bolstered by legislation also exist in Belgium, France, Italy, Luxembourg, Spain and the Netherlands, but the range of issues and decisions submitted for employee approval is smaller than in Germany. The operation of the councils is also affected by employee and management attitudes bound up with the institutions and culture of the country. For example, the Auroux Laws 1982 extended workers’ participation rights in French companies, but research reveals that the consultation process has been ignored or undermined by management accustomed to the hierarchical and often autocratic ways strongly emphasised (although changing) in many French organisations (Lane, 1989: 240).

In Sweden there has been much criticism of the relatively weak position of unions in the co-determinational process, particularly in time of recession (Korpi, 1981; Kjellberg, 1992). Unions often do not receive adequate information, and in the recent bank crisis had much less influence than management on the restructuring and downsizing exercises (Holden, 1996).

  • Works councils and consultation in the European Union

The Works Council Directive was embodied in the Social Charter and was formally adopted by the European Union (EU) in 1994. This requires any company with over 1000 employees in the EU and with at least 150 employees in two different countries to set up a council for the purpose of informing and consulting employees. In December 1999 the UK government embodied this in British legislation.

In previous years UK Conservative governments and employer organisations had strongly resisted any attempts by the EU to impose a works council directive, but the Blair Labour government has signed up to the Social Charter and consequently fully subscribes to the principle of works councils. In December 2001 the EU also passed a directive which requires employers to give proper information to, and allow consultation with, employees. This will come into effect in March 2005 and will apply to all organisations with 150 or more employees. In 2007 it will apply to all businesses of more than 100 employees and in 2008 to those with 50 or more. It will include the following provisions:

  • Employees have a right to be informed of a company’s economic situation and employment prospects, decisions that may lead to substantial changes in how work is organised and contractual relations.
  • Information and consultation must take place at the appropriate time, and at the relevant level of management. This will be done using employee representatives (defined according to national law and practice).
  • Employers and employees can meet their obligations through existing agreements in conformance with the directive.
  • Employers may withhold information if its disclosure would seriously harm the business.

They can also require employee representatives to keep information confidential. There are also proposals to force companies to consult with employees at national level. This has received continued opposition from the UK government and employer associations, a stand supported by their German counterparts. The European Social Partners failed to agree on this issue in 1998, and Dirk Hudig, secretary-general of the employers’ confederation in Europe (UNICE), ‘predicts that any definite movement on the proposals, which would force companies to set up works councils at national level, is unlikely’ (Rana, 1999: 13).

Employers fear that national and pan-European works councils could interfere with their national and international policies, such as downsizing or closing company subsidiaries in other European countries. Nevertheless, recent evidence shows that the number of works councils (and similar bodies) is on the increase in Britain. More than half are in French and German-owned subsidiaries such as Renault, Crédit Lyonnais, Grundig and Bayer, although increasing numbers are coming from Scandinavia (such as Electrolux and Norsk Hydro).

British companies are also creating their own works councils, most notably BP, Coats Viyella and United Biscuits (Carley,1995). The presence of a works council does not, however, guarantee employee consultation or indeed a voice in managerial policy, as the experience of job losses at Coats Viyella in 1996 clearly displayed. This lack of consultation has outraged unions and employees throughout the company’s British and European concerns (Littlefield, 1996). Another British firm, Marks and Spencer, closed stores in France in 2001 with virtually no consultation with the workforce, a decision that led to protests by employees and the media.

Such behaviour is not confined to British-owned companies. In 1998 Renault closed its Vilvoorde plant in Belgium without adequately consulting or informing its employees. Union protests led to a French court ruling that Renault did not act in accordance with the European Works Council (EWC) Directive about the proposed plant closure. Obviously this retrospective censure has not returned those Renault jobs to Belgian workers, and the European trade union movement (ETUC) has demanded amendments tightening the EWC legislation, so far without success.Such incidents clearly indicate that social dialogue progress remains limited.

Nevertheless, research by Marginson et al. (1998) shows that companies in France, Germany, the UK and even the USA found a widespread preference for joint employer–employee bodies, be it only at plant level.

  • Japanese employee involvement

Japan is often cited as an exemplar of employee participation practices, particularly giant corporations such as Komatsu, Hitachi, Nissan, Honda, Mitsubishi and Toyota. The most commonly emulated participation technique has been quality circles, which we have already noted were conceived in the USA by Deming and Juran, and were implanted in Japanese organisations in the 1950s.

Since then, employee involvement techniques such as QCs and teamworking have been part and parcel of the working practices of Japanese companies in the UK, such as Nissan in Sunderland and Toyota in Derby. Many studies have been made of Japanese organisations in order to discover the secrets of their economic success, and teamworking techniques have received much attention as a perceived key to efficient work practices.

Pascale and Athos (1982) emphasise that the work group is the basic building block of Japanese organisations: ‘Owing to the central importance of group efforts in their thinking, the Japanese are extremely sensitive to and concerned about group interactions and relationships’. They liken the Japanese worker’s view of the group to that of a marriage that rests on commitment, trust, sharing and loyalty, and while power ultimately rests with management, the group leader handles the interaction within the group carefully.

This ‘participation assumption’ is also related to a lifetime employment assumption, which ensures that the worker has a strong stake in the firm and its success. Finally, and perhaps most importantly, participation is backed up by training of both group leaders and workers in the skills of group participation (Dore and Sako, 1989). Employee involvement, like training, is thus embedded in Japanese organisations. A number of observers (including Klaus and Bass, 1974) have pointed out that employee involvement should not be confused with decision-making, particularly at the higher levels within the organisation:

‘The reality is that not all employees wield real power . . . [and] when it comes to making the decision, workers feel under great pressure to agree with supervisors and unpopular decisions are simply ignored’ (Naoi and Schooler, 1985, quoted in Briggs, 1991: 40). Briggs sees this paradox of employee involvement and emasculation of power as being explained by the split between opinion and behaviour. In a number of surveys Japanese workers have rated themselves low on job satisfaction and yet they work far more hours for less reward than their US and British counterparts.

This cannot be explained by coercive methods alone; Briggs points to the extent of unionisation, albeit organised around large corporations, and finds this view untenable. Her explanation is based on cultural factors in that the Japanese have ‘a deep felt desire to keep the realm of duty separate from the realm of personal feeling . . . duty must come first and must exist totally separate from the domain of personal feelings’ (Briggs, 1991: 41).

If this is the case, it has ramifications for the export of such EI practices to other countries, most notably Britain, which has received enormous amounts of Japanese investment. Wickens (1987), in his exposition of how Nissan implanted Japanese practices into its Sunderland factory, strongly believes that people are capable of change and that the institution of Japanese-style working practices was partly effected by a watering-down process to meet British attitudes, combined with a process of education and training to enable newly hired (often novice) workers in car manufacturing to be imbued with Japanese-style practices.

This was reinforced by a greenfield culture with workers who had predominantly been recruited from regions where high unemployment meant an eagerness to gain and retain employment.A number of observers have pointed out that control and the mechanisms of employee involvement in Japanese-owned British organisations still reside firmly in the hands of management. Lewis (1989), in his study of employee participation in a Japanese-owned electronics factory, found that, while a board was set up (a kind of JCC) to represent employee interests, employees were not quite sure what was meant by involvement.

Most of the issues raised were not about the overall running of the operation but more parochial shopfloor concerns, and the real aim in setting up the board was to introduce unitarist principles in the company such as single-status terms and conditions, no-strike arrangements and flexible work practices. All were reinforced with powerful symbols of unitarism such as the brightly coloured jackets that everyone wore, replete with the owner’s forename.

This sent messages of egalitarianism and that the organisation was one happy family. The single-status restaurants and toilets were also part of this symbolic reinforcement of unitarism. Oliver and Lowe (1991) endorse this unitarist view of Japanese-style management. In comparing styles of HRM in Japanese, US and British computer companies based in the UK, they found that the Japanese emphasised consensus and collectivism with ‘a thin dividing line between the public and the private and a strong sense of mutual support and awareness’.

In essence, the implementation of EI, even in Japanese organisations that have strong commitments to such systems, is not as a decision-making instrument per se or even as a conduit of employee criticism, but as a mechanism that reinforces common aims and goals within the unitarist organisational context. Ramsay (1992b) has also pointed out that few non-Japanese-owned British organizations have adopted Japanese EI measures in the long term. The use of quality circles, after an initial flurry of interest, dropped from 63 per cent in 1980 to 10 per cent in 1989 in British organisations.

He concludes: ‘No matter what the degree of genuine autonomy or control Swedish or Japanese work group experiments, the greater constraints on the prospect for worker influence came from the institutional settings and – even more critically – the broader social and cultural contexts’.

  • Comparative aspects of employee involvement

Comparative research of a statistical and analytical nature into EI is relatively sparse, although there have been numerous international surveys of institutional and legal aspects of employee involvement (Poole, 1986). Studies in the 1980s and 1990s revealed a diversity of trends influenced by a multiplicity of organisational, economic, political and technical factors. The Price Waterhouse Cranfield Survey into International Strategic HRM investigated trends in employee communications in five countries (the UK, Sweden, the then West Germany, Spain and France) in 1990, and ten countries in 1991 (the original five plus the Netherlands, Norway, Denmark, Italy and Switzerland), with subsequent surveys in 1995 and 1999.

These surveys reveal a marked increase in attempts at communicating with the workforce, both via staff representative bodies, such as trade unions, and by more direct methods associated with HRM initiatives (Holden, 1990; Price Waterhouse Cranfield, 1990 and 1991). Parallel to overall increases via staff representative bodies were even larger increases in verbal and written communication in all countries.

This obviously indicates a greater desire by employers to increase communication, probably inspired by HRM trends, which spread in the 1980s. France and the UK show particularly large increases in both verbal and written communication, which parallel the rise in team briefing and other teamwork methods, as well as increases in the more traditional written forms of communication.

It would seem that communication with and from the workforce is increasing at workplace level, but the more established forms of communication and EI such as unions, works councils and JCCs are still important in those organisations where they are established. The survey conducted by Marchington et al. (1992) in UK organizations would seem to confirm this.Nevertheless, these surveys do not indicate the degree of participation by employees in organisations.

Research by Fröhlich and Krieger (1990), Cressey and Williams (1990), Boreham (1992) and Gill (1993) has tried to address this issue in comparative contexts. Fröhlich and Krieger (1990) examined the extent of employee participation in technological change in five EC countries – the UK, France, Germany, Italy and Denmark. They discovered that of the four phases of introducing new technology (planning, selection implementation and subsequent evaluation) workers were more likely to be involved in the latter stages, and that full participation, particularly in decisionmaking, remained relatively low for all countries and for all stages.

Cressey and Williams (1990), in a similar survey but covering all of the then 12 EC countries, found comparable results and posed a ‘paradox of participation’. As the scope for influence by employees over the processes of technological change decreased, so the intensity of participation increased. In other words, there was more scope for participation in the implementation stage(the latter stage) when participative influence concerning fundamental decisions was reduced, and less participation in the crucial earlier planning stages in the introduction of new technology.Gill (1993), using the same 12-country EC data analysed by Cressey and Williams (1990), perceives differences in attitudes between Northern European and Mediterranean countries, which result in a wide diversity in levels of participation.

Denmark, Germany, the Netherlands and Belgium have much greater employee participation than do Portugal, Spain, Italy, Greece, France, Luxembourg and the UK. In France and the UK, however, Gill argues, ‘there is a dependence by management on the skills and problem solving abilities of the labour force'. Nevertheless, he claims that ‘in the United Kingdom there has been a shift away from negotiation towards more consultation during the last decade and management has become increasingly paternalistic in their style’. These differences are caused, he argues, by the diverse industrial relations practices in each country, shaped by historical and cultural factors.

In all three studies managers were of the view that increased participation was effective for the efficient implementation of new technology, but this may have the effect of compromising their prerogatives.Boreham (1992) investigated the degree of employee control over labour processes in seven countries (Australia, Britain, Canada, Germany, Japan, Sweden and the USA). He was particularly interested to know whether employee control was enhanced by the introduction of new practices associated with post-Fordist systems such as flexible working linked to quality improvement and greater response to market conditions.

The assumption here was that efficiency was improved by decentralisation and democratized decision-making practices. The findings clearly indicated that ‘the nearer one approaches the core of status and power in the enterprise the more likely it is that one be allowed discretion over one’s work arrangements’. He also found that there was little evidence ‘to support the view that management will cede its decision making prerogatives in the interests of more rational production methods’. This pattern was generally true of Japanese and Swedish organisations, which are associated with employee involvement styles of management.

These surveys clearly indicate a contradiction in managers’ perceptions that employee involvement is an effective way of increasing work efficiency, but is outweighed by the challenge to their prerogatives over decision-making. Thus employee involvement is very limited, and is more likely to take the form of information dissemination to, and consultation with, the workforce, which is not the same as the ‘empowerment’ to which many HRM textbooks allude.

Boreham (1992) also stresses the significance of flexible employment patterns and involvement. In a world where increases in part-time, fixed-contract and short-term working are becoming more pronounced, he shows that these employees have even less involvement in workplace decisions, and that core groups, particularly in management categories, still hold far greater sway over the organisation and control of work. Such evidence casts huge question marks over growing trends – for example, ‘zero hours contracts’ alongside involvement schemes aimed at motivating workers.

  • What can we learn from these studies?

The findings of these pieces of research are replicated to some degree by the findings in two studies by the Industrial Democracy in Europe research group (IDE) in 1981 and 1993. In essence, it seems that there is a contradiction in what employers and managers want from EI and what they are prepared to allow to the workforce in terms of empowerment and control. In ideological terms, the control of the organisation rests in the hands of the upper realms of the hierarchy, either the board or within the senior managemen teams, and there will be resistance to attempts to extend significant power to workers lower down the organisation.

Thus the concept of ‘industrial democracy’ per se is perceived as a power challenge, even in societies that allow considerable autonomy to the workforce and have in place sophisticated structures of co-determination, such as those that exist in Sweden and Germany. This power ‘balance’ will also shift with changing economic and political climates, and management will allow considerably more concessions in times of labour shortage than in times of recession, when worker power is much weaker.

The ideas of ‘empowerment’ and ‘employee influence’ at workplace level have greater justification for management in HRM terms, as the rationale for the introduction of EI policies is ultimately to increase the efficiency of the organisation. The perception of management poses a dilemma in terms of how much power to extend to the workforce while harnessing their creative energies, and at the same time not undermining managerial prerogatives.

This conundrum is in many ways a central one to the whole debate concerning HRM and modern organisational practices such as delayering of middle management structures, the introduction of new technology, TQM, the creation of flatter organisations, culture change and empowerment initiatives. Perhaps the working out of these power balances is a continuing part of the managerial process, until, that is, the structure of ownership in society radically changes.

Equally important is the relationship between middle management and senior management, which to some extent can be seen as similar to that between workforce and middle management, but overlaid with elements of status and role strain, i.e. squashed between senior management and the workforce. Another factor at both organisational and workplace levels is the influence of cultural values, to which many commentators on EI ultimately allude.

Writers such as Hofstede and Laurent have attempted to examine these influences, and concede that much research has still to be completed before our understanding of these complex issues is clearer. Even then, ‘culture’ is in a state of permanent flux, and our concept of it is everchanging, often in subtle ways. Yet observers would have us believe that British adaptations to Japanese work practices are possible despite the different cultural values of British workers.

Others have stated that the practices become palatable because of the environment into which they are introduced: greenfield sites with single-union deals and no-strike clauses, and a compliant workforce conscious of the lack of alternative employment in high-unemployment areas. Several factors emerge that make the proper working of EI mechanisms possible:

  • a willingness by management to concede some of their prerogatives;
  • the need to train managers in EI initiatives such as teamworking;
  • the need for a clear policy regarding the role and prerogatives of line managers in relation to senior management and the workforce under their supervision;
  • the need to train workers in group skills such as presentation, leadership, assertiveness and problem-solving;
  • the need for providing proper feedback mechanisms that clearly indicate that the workforce is being listened to, and not in a purely lip-service fashion;
  • the need for action to implement group decisions, which reinforces the view among the workforce that their contributions are well received;
  • the need for conflicting views to have a place in developing initiatives.

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