Productivity Challenges and the Employee Relations Specialist

Hello. I’m Alan Wild and welcome to the Wild side podcast Managing employee relations in global and millennial times … 10 minutes at a time.  Today’s episode is a brand new one that discusses where the next major productivity gains will come from. Over the last 30 years major productivity surges have come from challenging the power of organized labour; outsourcing of non-core activities; and then wholesale offshoring of manufacturing and service provision abroad, in the main to China, Central and eastern Europe and India.  The demand for companies to produce year on year productivity gains continues, even as operating costs have increased in the offshore destinations. Companies are taking cost cutting initiatives in countries that have previously only experienced growth and replacing people with technology at an increasing pace.  I will suggest that this brings new challenges into old markets and old challenges into new markets.  What on earth does that mean … listen on … that is what this episode is all about …

More of all that in a moment …  … as you know, I’m Alan Wild, senior adviser on global employee relations for the HR policy Association … the leading voice of CHRO’s today. 
One of my old CEOs told me there are only three ways to make money in business … “Charge More; Sell More; or Cost Less”. The function of Employee Relations is most commonly associated with the third challenge … costing less. The function has for many years played a key role in the relentless drive for continuous improvements in productivity.  

As I suggested earlier, looking back over time, the “low hanging fruit” on the productivity tree has shifted from battles with unions on decision making power; the outsourcing of non- core activities; the massive offshoring of manufacturing and services; and most recently … doing more with what you have, or doing the same with less.  Each phase, power shifts; outsourcing; offshoring; and “more with less”, called for the employee relations specialist to evolve. Whilst the productivity imperative has remained constant, the skills that worked in the past are unsuited to the challenges of the future.

As I’ve explained before, the world of employee relations in multinational companies in the 1970’s, 1980’s and early 90’s was far from global. It was a series of local and national strategies to shift the balance of decision-making power in the workplace away from labor and toward management. There were two main approaches, and both changed the shape of employee relations for ever. The first was most associated with the Ronald Reagan and Margaret Thatcher era, with head on battles for power, sometimes successful, sometimes less so, in the motor industry, the mines, newspapers, airlines and air traffic controllers.  The second was softer but more pervasive.  Companies outsourced non-core work to supplier companies, arguing that specialist companies could provide more efficient services leaving them to focus on their core activity.  More significantly for the employee relations function, outsourcing effectively segmented labour markets and the costs of labour in favour of management.  Cleaners, security staff, cafeterias and many more were no longer negotiated for in company bargaining units dominated by powerful unions, but were transferred out into labour markets where the skills they used were paid significantly less.  In Europe this massive shift resulted in the passing in 1977 of the Acquired Rights Directive designed to protect worker pay and conditions in the face of wholesale outsourcing.

Moving into the 1990’s the world simply got bigger.  The Fall of the Soviet Union in 1989; the engagement of China as a player in the global economy; and the rapid development of technology opened the world to a massive new and skilled labor force in China, India and Central and Eastern Europe. Companies flocked from West to Eastern Europe, and from everywhere to India for services and to China for manufacturing. The world of the international employee relations specialist was born. In Europe, a response to labor arbitrage within the EU was the passing of the European Works Council Directive in 1994, but that did not touch the massive flows of work to Eastern Europe, China and India.  In the last 20 years the world of Er management has changed. International trade unions have attempted to reinvent themselves through Global Union Federations, replacing the largely ineffective International Trade Secretariats. The escalation of global union corporate campaigns spiced the atmosphere. The EWC Directive brought the skills of the international employee relations professional to the fore. Finally, the massive scale of outsourcing took the function to another level, dealing simultaneously with closures in familiar parts of the world and openings in unfamiliar places.

So where are we today?  Of course power struggles in certain industries, and particularly in the public sector, continue as trade unions seek to  demonstrate relevance in the face of falling membership. Some argue the tide is turning.  Outsourcing within nations continues, but at a much slower pace. International transfers of operations continue in both ditections. So-called “jobless re-shoring” is emerging as work comes back from China in the face of higher costs and political instability, but into high technology/low labor facilities. New offshoring projects are often support services, and increasingly to countries like Malaysia, the Philippines and Costa Rica.  For all companies, the productivity challenge has shifted from “finding cheaper places” to “doing more with less” with the existing workforce. 

The employee relations context has also changed.  The age of trade union monopoly as the sole agents of “worker voice” is over and the socially networked world has enabled new forms of disruption.  #MeToo, started in 2006, was propelled into the headlines in 2017 with the Harvey Weinstein scandal and other “leaders behaving badly” stories.  Employee populations that had never been at risk of unionization or militancy have found collective voice, resulting in high tech and “non-union” companies hiring employee relations professionals for the first time. If you have not already, listen to my podcasts on social networks and activist capture. The challenge for all companies is doing more with what you have; doing the same with less; and for some, dealing with collective voice and action for the first time.    

There is a long list of new challenges;

First, having moved to new countries to take advantage of cheaper labour … companies now need to improve productivity in the very same markets where costs are increasing. Companies moving to places where it was easy to hire are finding that it is not so easy to fire.
Second, firms must deal with new and powerful groups of workers with different perspectives but also with essential and scarse skills.  These workers don’t need to protect jobs and fight the class war but demand a “say” in company decisions on issues like the environment, management behaviours, leadership quality, areas of research, who the company buys from and supplies to, and post COVID, the extent to which they can work remotely etc. These people are not easily replaceable and use their influence on public opinion as a weapon.
Three. Companies must listen and respond to employee voice in a world where trade unions are less relevant and where being union-free is not a “get out of jail free” card or a permit to act with impunity.
Four. Delivering the introduction of new technology, particularly in Europe, with consent and at speed does not sit easily with adversarial relationships with representatives of employees. 
Five. Assuring human rights (what used to be labour rights) in supply chains where the treatment of workers who are not employees impacts company reputation, and increasingly brings new legal risks. 
Six. Challenges by Shareholder groups on company behaviours. I cannot count the number of hours I have spent recently talking with proxy submitting organizations on human rights issues. Most recently on allegations of union avoidance in the United States.
Seven. Creating a renewable workforce that does not rely for increased productivity on successive rounds of redundancies that are increasingly expensive and too often results in the separation of the wrong people.
Eight. Challenging trade union strategies that are built on pressuring regulators to shift power-based countries to a more rights based approach.  That is replacing the requirement for “member power” with “legal” and “social” pressures for influence using legislative change, court challenges and corporate campaigns.
Nine. I could continue, but I’ll pause here for breath.  In short, the role of employee relations and the skills and tools needed are changing … in fact have changed.

All of these issues and skills are addressed in our HR Policy Global notes, webcasts, courses and consulting offerings in 2024. I hope you enjoyed an episode that was more reflective and forward looking than many ... and that it has given you food for thought.  If you want to learn more about what we do, participate in one of our formal programs or have a question on an issue we have, or have not yet, covered … you can get me on awild@chro.org or on Linked In.

I’m Alan Wild and you have been listening to “a walk on the wild side”.