Archive for the 'Industrial Relations' Category
Thursday, February 18th, 2010
Hoots No. 14 – 18 February 2010: Advocacy: Grasp the Political
Downsizing: another silly idea promoted by advocates for small government and “New Public Management” and should be resisted.
(The next hoot will deal with global climate change and the fact that evidence for change includes evidence for increasing instability, not only warming: museum scientists should be actively promoting the evidence and not leave it to others.)
Twenty years ago Daniel Thomas, then Director of the Art Gallery of South Australia and President of the Art Museums Association of Australia, wrote an article entitled “Grasp the Political” (Adelaide Review March 1990)
He wrote, “What art museums most need in the 1990s is to become politically and economically conscious. They must not only equip themselves with arguments as to why they should exist, but also with hard statistical data about their costs and their benefits.
“At the same time they must be very cautious about positioning themselves within the entertainment industry. There the user-pay principal reigns; the showbiz needs of popular exhibitions can displace special-interest exhibitions, such as scholarly art-history exhibitions or difficult, adventurous contemporary art exhibitions.”
I just wonder how many people took any notice of these important statements.
This hoot comes from sunny San Francisco – well it was when I started to write this – with its many museums including the wonderfully redeveloped green California Academy of Sciences and De Young Museum of Art, currently showing the truly astounding exhibition of Tutankhamun (see recent articles on the ABC Science site on this Egyptian Pharaoh who died mysteriously when 19 – younger even than John Keats and Giovanni Battista Pergolesi who both died aged 25) and the always marvellous San Francisco Museum of Contemporary Art.
It is also time to again recommend the Global Museum site managed by Roger Smith, now Director – Online Operations (East Asia) at the British Council. Like the Arts Journal Global Museum gathers together interesting articles focusing on museums all over the world; the site also has sections on travel, jobs, resources and links to various documents as well as links to podcasts, which can be downloaded, from many museums.
I have argued for years if not decades that museum people need to do a number of things to advance the goals of their museum:
- find how the benefits of their activities link with the benefits of other similar organisations and enterprises and seek to make common cause with them: it is relatively easy for the enemy to undermine the strategies of people or organisation acting alone, it is quite a different matter with many people pursuing a common goal;
- recognise that there are many lessons to be learned from other organisations, indeed from some which do not immediately seem relevant: leadership in a museum can benefit from understanding leadership practice in a hospital or even an airline; and
- understand that the goals of museums are not simply to put knowledge out “in the ether” but to have that knowledge make a difference for the common good; as Steve Weil said, museums are for somebody, not about something.
There are a few museums where staff have taken the argument up to the frontlines and tried to convince those in government and the community that a certain approach to a situation is appropriate and that some others are not.
“Layoff the Layoffs” is the title of an article in Newsweek for Februrary 5, 2010
Pfeffer’s recent article is a good summary of why the downsizing of organisations, which has been quite a fad for some decades and has been popular in the last couple of years as a device for coping with the GFC, is anything but economically positive quite apart from its often devastating effects on the people involved. Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications!
Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University where he has taught since 1979. He is the author or co-author of thirteen books including The Human Equation: Building Profits by Putting People First, Managing with Power: Politics and Influence in Organizations, and Unconventional Wisdom About Management, a collection of 27 essays about management topics, as well as more than 120 articles and book chapters. Pfeffer’s latest book, tentatively entitled Power: An Organizational Survival Guide is to be published early 2010 by HarperCollins.
These quotes give a sense of where Pfeffer is coming from:
Power centres around scarce and critical resources and in times of uncertainty those with established credibility tend to be favoured as the enlightened. Those in power tend to define problems in ways which institutionalise their power. The more institutionalised the power is the more likely it is that the organization will be out of phase with its environment (from a 1977 paper with Gerald R. Salancik)
Organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming lean and mean through downsizing – which, after all, puts many of your most important assets on the street for the competition to employ.
Pfeffer opens his Newsweek article by pointing out that when the tragedy of September 12 2001 struck there was vast uncertainty about the future of airline flights. Almost all US airlines, and many other corporations, immediately laid off staff. Southwest Airlines did not. (I have written about this company before in “Lessons from Southwest Airlines” and “A chat with Herb Kelleher“) Southwest, which in fact has never laid off staff in its entire history, is now the biggest domestic carrier with a market capitalisation bigger than all other domestic carriers combined. Southwest’s former head of human resources once told Pfeffer: “If people are your most important assets, why would you get rid of them?”
Layoffs, Pfeffer observes, have become an increasingly common part of corporate life, some firms seemingly in permanent downsizing mode. If an industry is declining downsizing would seem inevitable. But in industries where demand is fluctuating? When a company lays off staff in a downturn, staff Â have to be when the upturn comes and demand increases. In the process considerable costs have been incurred!
Here is a quote that will surprise some and anger others even more: “A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems – meaning they had more formal prohibitions against the letting go of workers.” So much for the notion of employment flexibility leading to economic growth!
Here are myths dispelled by studies of the effects of downsizing:
- Companies that announce layoffs enjoy higher stock prices than peers
- Layoffs increase individual company productivity
- Layoffs cut costs
The negative consequences of downsizing are particularly evident in R&D-intensive industries and in companies that experienced growth in sales.
Layoffs lead to lower morale leading to employees looking for another job at the first sign of better times, greater distrust of management and greater likelihood of stealing from the firm.
Layoffs also have a significant negative effect on the economy since laid off workers spend less, may demand social services payments from government, their houses may end up having to sold because of mortgage default and so on. The consequences to employees themselves can be devastating! Pfeffer says, “Layoffs literally kill people”.
(In the US those who lose their jobs also often lose their medical insurance which, as well as expected outcomes, can also lead to violent behaviour. Reviewing Michael Moore’s latest film “Capitalism: A Love Story ” Chris McGreal (The Guardian, 30 January 2010) writes, “Early on, Moore sets out the meaning of “Dead Peasants” insurance. It turns out that Wal-Mart, a company with revenue larger than any other in the world, bets on its workers dying, taking out life insurance policies on its 350,000 shop-floor workers without their knowledge or approval. When one of them dies, Wal-Mart claims on the policy. Not a cent of the payout, which sometimes runs to a $1m (£620,000) or more, goes to the family of the dead worker, often struggling with expensive funeral bills. Wal-Mart keeps the lot. If a worker dies, the company profits.)
Governments around the world have adopted the strategy of downsizing claiming this will lead to working smarter. The consequences of such downsizing have often led, as in business, to poorer service. At the same time as downsizing, outsourcing has also been promoted as allowing the organisation to fous on its core business. But as with downsizing it is now realised this seldom works to benefit the organisation as tasks and skills critical to the enterprise are realised as having to be in-house where they can be influenced appropriately by the culture and the staff involved interact with staff in the “business core”. One of the problems is that the downsized organisation seldom has the skills to develop an appropriate brief and project management regime for the outsourced contractor.
Most importantly, a downsizing operation seldom is accompanied by a clearly explained strategy for the future which will lead to a better company which is clearly explained to employees, those affected and those who are to remain. One of the critical jobs of leadership is not done!
For instance, Right Associates (“Lessons Learned: Dispelling the Myth of Downsizing”, Philadelphia, 1992) found that in 66% to 75% of companies which had downsized neither profitability or [productivity] had increased. They argued that companies must investigate alternatives, define the new organisation, plan the downsizing, develop a communication plan and nurture the survivors. Observing that outplacement assistance fosters positive career growth they emphasised that change has to be embraced: no person or organisation can escape the consequences of downsizing.
In the study of museums around the world it was found that the museum organisations that were perceived by staff to have achieved successful change outcomes, were also perceived to have managed the change process through a strategically linked vision of the future state and communicated in ways which enabled participants to know what would happen and how they would be affected by the change, provided appropriate financial, human resource and training in support of the change the change; executives were prepared to devote the time to meeting with people and created the energy to get the change initiated and sustained by leadership action which emphasised patience and support and leading by example through modelling the appropriate change behaviours. (See Morris Abraham, Des Griffin & John Crawford, “Organisation change and management decision in museums”, Management Decision 37/10, 736-751, 1999.)
Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications! (Note that the responsibility of boards and executives is in the first place to the future of the organisation.)
Monday, September 1st, 2008
Successful organisations support and develop their staff. That is one of the principal roles of executive leadership. Museum executives contemplating reorganisations might contemplate this seriously. So might media companies such as Fairfax (in Australia) and governments offering small wage increases to which the response is negative industrial action.
In much of what I have written over the last several years â€“ indeed since 1986 – I have banged on about how important it is that leaders at executive level focus on developing staff. I have promoted this as one of the principal requirements for success. Many others do the same. But many executives in their day to day work do not! Of course being clear about the goals and rationale of the organisation is another of the half dozen most significant contributors to success. Not efficiency though inefficiency is not appropriate, not rules and regulations though some rules are essential or we would end up in chaos. Not technology though technology allows considerable advances in many areas.
Numerous examples of success flowing from attention to staff are given in the pages of this web site, examples from hospitals to airlines to grocery stores to public broadcasters. And yes, there are examples from museums, though few museum executives or board members pay attention to them. Like other organisations many firms have become besotted with the mantra of market economics and its attendant managerialism.
Many organisations respond to perceived bad times by pulling back, by reducing staff numbers, by looking for ways to trim costs. Instead they should never let up on the important work of creating a climate for innovation and making a difference. One of the fundamentals of managing any entity, from nation states to the local grocery store or local museum is that in bad times some of the money saved during the good times should be used to reduce fluctuations in basic practices like marketing, training and development, product improvement and research and development. Once staff are let go in bad times, rehiring and retraining staff when good times return costs so much that making gains becomes much harder. Most of all, large scale layoffs means loss of corporate memory, of how things get done in the organisation.
The fact is that executives seldom look at other organisations to see why they are succeeding; they seldom accept that it is the way staff are treated that makes a great difference, that gives a competitive advantage. With the increasing number of museum and arts organisations putting people from the business world on their boards, the tendency to cut back in times of financial stress would seem to be increasing.
One of the things that worries me about the financial stresses of the last 12 months is that many firms, including nonprofits, are simply applying blanket approaches to problems, adopting blunt instruments. These don’t just include cutting back on staff numbers, often through natural attrition or voluntary redundancies. Some banks are simply cutting back on lending generally, as if they still have not worked out how to evaluate the credit worthiness of clients seeking loans. The result is likely to be that more powerful clients will continue whilst less powerful but perhaps more worthy clients will not. Some governments approach prospective budget overruns in the same way: cancel the contracts for indoor plants, delay filling of vacancies, and restrict travel. It all ends up causing more problems than it is worth. It is disruptive and, in the long term, destructive of managersâ€™ credibility!
To return to the main focus of this intervention. The latest story I have read which shows how good staff policies are linked to high firm performance is a story about Southwest Airlines in the USA. In a report by Joe Nocera entitled â€œA chat with Herb Kelleherâ€ (International Herald Tribune May 24, 2008) we witness the differences in the annual meetings of two of America’s major airlines. (I have previously reviewed a paper on Southwest and American Airlines by Judy Hoffer Gitell (in California Management Review in 2000 ) which compares the different approaches to management structure and behaviour in the two companies. (Southwest is a point to point operator whilst American Airlines is a spoke (or hub) operator and this does influence their approach, a point brought up in commentary on Southwestâ€™s success.)
Nocera begins by telling us â€œThe Dallas-Fort Worth area is home to two of the country’s biggest airlines, American and Southwest, and for years they’ve both held their annual meetings on the same day. This year was no exception: Wednesday was the big day. He goes on to outline the different responses of staff to the event.
Nocera concludes his article comparing the two airlines by quoting the opinions of some consultants to the reasons for Southwestâ€™s success. One of them pointed out â€œevery time the legacy airlines have run into trouble in the last two decades, Southwest has used the opportunity to steal away market share. Even though its own profits are down this year, it still has plenty of financial powder to make investments its competitors won’t be able to match. And as the old-line airlines try to raise prices to keep pace with fuel price increases, Southwest, with its fuel hedges and productivity advantages, will squeeze them all that much harder. One analyst, Ray Neidl of Calyon Securities, has gone so far as to predict in a report that after the dust settles, Southwest will be, as he put it, “the last man standing.”
Nocera observes, â€œThat may be an overstatement, but it’s not much of one.â€
Monday, February 5th, 2007
In 2006 the Howard Government in Australia passed the Workchoices Bill which significantly altered most of the provisions governing employment and not least the extent to which unions would be involved. In part this reflected the government’s paranoia about unions and their impact on all domains, including universities where even student unions have been banned. But principally the legislation determined the relations between employer and employee. To those supporting the legislation the changes were promoted as increasing employment and productivity. Those opposing the changes believed it significantly eroded rights established over more than a century and made possible disruption of family life through the ability of employers to require employees to report for work at almost any time at short notice.
The legislation was tested in the High Court in late 2006 by all the States and the ACTU. The Court found the Government was entitled to use the provisions of Corporations Law to effect the changes of the Workchoices legislation. The implication is that the Commonwealth is able to apply sweeping powers to almost every area of activity in the States, even to the conduct of school boards. Professor Greg Craven of Curtin University is amongst a number of people who have spoken strongly on several occasions about the implications of the High Court’s decision.
In the early stages of the debate about the changes, the two sides took issue about the existing situation in workplaces, the need for “flexibility” and the impact of unions through restrictive practices which were alleged to limit the employer in dismissing workers and forced the payment of wage rates which diminished the opportunity of the employer to hire more employees and so on.
The literature on this subject is vast. Three articles which I wrote dealt with some of the issues, starting with the unsubstantiated assertions derived from a consultants report commissioned by the Business Council of Australia. Links to the three articles together with the first several paragraphs are below.
On Line Opinion, 14 September 2004
â€œOlder people remember the Charlie Chaplin film, â€œModern Timesâ€, Chaplin emerging from a manhole with a red flag to unknowingly lead a march of striking workers. It is easy to think we are not much further advanced in our understanding of industrial relations, getting a productive and satisfying workplace and intersection of work with life.
â€œIn July the Business Council of Australia (BCA) released a report commissioned from Access Economics. It asserted that the ALP Industrial Relations Policy had negative economic consequences: the interventions proposed would mean significant losses of jobs. Access Economicsâ€™ Report assumes that present economic wellbeings are due to the application of recent workplace reforms including particularly individual agreements on wagesâ€¦â€
Workplace reform: inequity, more stress, less choice On Line Opinion Monday, 7 November 2005
The Howard Governmentâ€™s industrial relations-workplace reforms commenced their progress as legislation through the Federal Parliament on Wednesday, November 2. Among the benefits claimed for them are more jobs, greater choice for employees and higher wages. And a multitude of workplace arrangements in the various states will be brought together, tidied up. Up to $40 million of our money has been spent just in promoting these benefits and countering the seemingly effective union campaign against the changes.
But the evidence for benefits resulting from the changes is absent or at most weak and there is little doubt the costs will be high. Of most concern is that, in fact, investment in training and development, creative structuring of work, higher than average wages and opportunities for collective bargaining all produce higher productivity, attract business investment and generate employment: facts shown by two recent major reports.
Howardâ€™s changes have been attacked by labour economists, industrial relations experts and distinguished members of the judiciary. â€œMarketâ€ economists and analysts point out the changes do not address major workplace issues. Church leaders oppose the changes as having potentially deleterious impact on families. Economic and general commentators have pointed out errors in the claims and how the reforms will inevitably trade off less recreation and family life for what will turn out to be small gains in wages. All Andrews, Howard and their supporters have done is repeat the mantra.
â€œHow to Wreck a Working Nationâ€ New Matilda Tuesday 12 July 2005
â€œThe Howard Government â€˜reformsâ€™ to workplace relations will cost the community dearly and achieve next to nothing for employment or productivity. Genuine leadership and investment in people would. The Government should play a different role and address the complexity of the issues in the long-term.
â€œEmployer groups, especially the Australian Chamber of Commerce & Industry (â€™ACCIâ€™), in endorsing these reforms, talk of increased opportunities, greater flexibility, higher productivity and more jobs. The present system they say, particularly â€˜unfair dismissalâ€™ provisions, frustrates employers in their efforts to increase productivity.
Those opposing the changes are addressing different consequencesâ€¦â€