Saturday, July 19, 2014

How to reform industrial relations

Tony Abbott's strategy for getting back into government was to make himself a small target by adopting few controversial policies. He mollified his big business backers by promising to hold many inquiries and take any proposals for controversial reform to the 2016 election.

But once in government Abbott couldn't avoid announcing many unpopular measures to get the budget back on track. These have hit his standing in the polls, while causing difficulty and delay in getting budget measures through the Senate.

It's likely a lot of them won't pass, implying the government will have to put a lot of effort into finding more palatable savings. Even then, some of this year's unpopular measures - particularly the age-pension changes - will have to be defended at the election.

Meanwhile, most of a year has passed without the government getting on with its promised inquiries into controversial issues such as industrial relations, tax reform and federal-state relations (think three letters: GST).

Not a lot of time is left for the various inquiry processes to report, for the government to consider the reports, decide what reforms it proposes and then explain and justify them to voters before the election.

Does Abbott's unexpected radicalism on budget measures presage equally radical proposals in these other issues? If so, the next election campaign will be a lot more exciting than the last one.

Or does all the hostility he has aroused just with his budget measures make it more likely Abbott won't want to bite off a lot more trouble on other fronts?

On the question of industrial relations reform, Abbott and his minister, Eric Abetz - not to mention the Productivity Commission, which will be conducting the inquiry - would do well to ponder a recent speech by Geoff McGill, a long-experienced industrial practitioner and now a visiting scholar at Sydney University's Workplace Relations Centre.

McGill observes that the history of federal industrial relations legislation "has been punctuated by swings in the IR pendulum across the political cycle". First the Howard government's Work Choices swung the pendulum in favour of employers, then the Labor government's Fair Work swung it back towards the unions.

Now big business and its cheer squad in the national dailies want the restored Coalition government to give the IR pendulum another shove back in the direction to the employers. Isn't this the way the political game is played?

It is. But McGill questions whether continuing to play that way is the best way to get where we want to go. The advocates of yet another round of industrial relations "reform" justified it mainly by arguing the need for faster improvement in the productivity of labour.

That's something all sides can agree is a desirable objective. But McGill shoots down some wishful thinking on the topic. "Productivity growth is a complex process and usually described in simplistic terms," he says. "It can never be assumed and is only evident after the event.

"There is little evidence to support claims that particular changes in industrial relations legislation will boost national labour productivity."

It's the substance of the employment relationship, not its legal form, which determines whether people are engaged and productive, he says. Productive workplaces are not the outcome of legislation, but of the quality of leadership and culture at the workplace.

Surely there must be a law against someone speaking such obvious sense.

McGill brings to mind another point. Much of the thinking behind "the end of entitlement" and the unpopular budget measures is about saying governments can't solve all your problems for you (just the opposite of the message all politicians spread during election campaigns). It's not possible and, in any case, it's not healthy for people to be so dependent on the authorities.

True enough. But if that's what the government is telling everyone from the young unemployed to uni students to age pensioners, why is it allowing big business to imagine its industrial relations problems should - or even could - be solved by the government changing the law?

Actually, my guess is most of business isn't silly enough to think that. The push is probably coming from lobbyists trying to justify their fee, journos trying to sell newspapers and a relative handful of belligerent employers facing equally belligerent unions and hoping the government will give them some new stick to beat over the heads of their opponents.

Another point of McGill's: if we want better industrial relations leading to greater productivity improvement and the main way for employers to bring this about lies in the workplace, maybe a better way to encourage them to focus on the domestic challenge is to give them a period of legislative stability rather than more changes in the rules of the game.

Most successful managers understand that getting along with people - winning their regard, respect, support, trust, loyalty and co-operation - works better than getting heavy and legalistic. That's how you get better industrial relations - by, as McGill says, putting more emphasis on the relations and less on the industrial.

Managers like to be kept in the loop. Guess what? So do workers. Smart managers keep their staff well informed about the company's performance and the challenges it faces, and give early warnings - even to the union - about any need for nasties like redundancies. They never risk a breakdown in relations by telling workers things they subsequently discover to be untrue.

You engender co-operation by treating people well, consulting them, giving them a degree of autonomy, rewarding loyalty and sharing the business's proceeds fairly between shareholders, managers and staff. Workers accept a hierarchical pay structure, but you don't cause envy and disaffection by rewarding some equals more than others.

And if you don't like outside union officials coming into your workplace, you keep your workers so happy they never need to call them in.