Observations on Industrial Relations

As you may know I am a Dutchman who is living and working in Ireland for the last 20 years. I have also worked in HR in the Netherlands for 12 years. Recently an Irish company was having difficulties in the Netherlands with some employment regulations and they asked me for advice. In their industry they had to comply with Dutch labour laws and one thing in particular a CAO for their industry. A CAO is a Collective Labour Agreement similar to a JLC the big difference was that the Dutch CAO ran into over 100 pages and the comparative JLC for the same industry in Ireland was around 10 pages. The Dutch CAO dealt with compulsive pay agreements, pension arrangements, Sick pay, and other issues applicable to this industry. It struck me that the Irish unions have achieved very little over the years due to their single focus on pay.

Furthermore looking at recent industrial disputes at the various CIE companies; Dublin Bus, Bus Eireann and Irish Rail, it was the militant unions who were setting the pace of change and they were delaying it as much as possible. In Ireland the more militant unions set the agenda and can delay any agreement between company and employees. In the Netherlands this would be impossible as when one union accepts the proposal of the company it applies to all workers of the company and the discussion is over.

You would expect that militant unions who are willing to go on strike would achieve more. However my analysis was that Dutch unions had achieved more than the Irish unions. How is this possible? There are many differences in industrial relations between the Netherlands and Ireland. The Netherlands has fewer unions. In Ireland there are over 50 unions which limit their effectiveness. The labour law that if one union agrees a deal with a company it applies to all unions and all workers doesn’t encourages having too many unions. Unions need to agree with each other an approach on how to handle any dispute and if one union is too militant other unions will not accept this and will make an agreement with the company which then applies to all. So there is already a mechanism which makes unions look at reasonable deals.

Another big difference is that there are unions in Ireland which only represent their profession compared to the Netherlands where unions represent a sector; like education. A deal would apply to all employees working in the education sector. In Ireland teachers’ unions do not represent education workers they only represent teachers. In the recent Haddington Agreement the INTO represented primary school teachers and were not interested in Special Needs Assistants or school secretaries. As a result SNAs and other school staff got a rough deal at the expense of teachers.

The nurses and midwives also have a union which only represent them. However as nurses don’t have such a predominate position as teachers in their sector and they find it harder to get concessions. There are other professions who have their own unions.

The biggest surprise to me as a Dutchman was that in such a Catholic country as Ireland an event such as the Lockout in 1913 could happen where employers exploited workers to such an extent that poverty was widespread. This goes completely against the philosophy of the Catholic Church as explained in Pope Leo XIII’s encyclical Rerum Novarum on the rights and duties of Capital and Labour, which supported the rights of Labour to form unions but also wanted to restrict Socialism.  Following the teachings of Rerum Novarum conditions which led to the Lockout should never have prevailed. But then during my Masters in HRM in Ireland philosophy to understand the different labour movements was never addressed. In the Netherlands where you would have had Christian, Catholic and Socialist unions and Christian, Catholic and Liberal employer organisations you have to understand their background to be able to deal with them.       

My observation is that in Ireland unions are too fragmented and that militant unions dominate the agenda too much.  This has not led to more concessions but in fact to fewer concessions from employers. The actions of some unions at CIE were not effective and this will hurt the workers in the long term more than the CIE Organisation.

Furthermore the non involvement of Christian or Catholic employers and workers has led to a more polarised industrial relations landscape which has proven to be less effective and as a result workers, employers and the whole country have been affected by this.

In my opinion a review and reform of Industrial Relations would be welcome. 

Irish Water Bonus

Irish Water paid bonuses to their employees even if they had a ’Needs Improvement’ rating on their performance Review. You might ask what is so unusual about paying bonuses in a company, don’t all companies do this and isn’t this the way to stimulate performance in a company and from what we have seen of Irish Water so far their performance definitely merits improvements.

Paying bonuses to employees for their performance is counterproductive and doesn’t do anything to increase the performance of employees, the opposite is true.

Repeated research by highly regarded institutes over the last 30 years has proven without doubt that paying bonuses for performance doesn’t work and is counterproductive. Keep in mind the banking crisis; the collapse of a complete sector which paid itself the highest bonuses. If bonuses worked the banking sector should be thriving! 

Any self respecting HR practitioner knows this and would be very careful regarding implementing a bonus culture in a new company. That is the surprising thing about Irish Water, as it is a new company it has all the opportunities to establish a new culture and implement policies which would help it perform, yet Irish Water immediately returned to the failed old bonus culture. It tells me that top management is not focussed on creating a new efficient organisation based on new proven scientific methods but are very focussed on keeping things as they are. This is not very convincing for the executive of a newly formed company assigned with such an important task.

Dan Pink in his book: ‘Drive, the Surprising Truth About What Motivates Us’ reviews the new motivational theories developed over the last 30 years. He concludes that when it comes to motivation there is a gap between what science knows and what business does. Our current business operating system – which is built around external, carrot and stick motivators (performance bonuses) doesn’t work. Science has shown us that the new motivational approach which works has three essential elements 1) Autonomy, the desire to direct our own lives. 2) Mastery – the urge to get better and better at something that matters and 3) Purpose – the yearning to do what we do in the service of something larger than ourselves.

Up to the end of the last century motivation and bonuses were built around external rewards (performance bonuses) and punishments. That worked fine for routine 20^th century tasks. But in the twenty first century this old system is proving to be incompatible with how we organise what we do, how we think about what we do, and how we do what we do. When the carrot and stick approach used for more complicated management roles strange things begin to happen. 

Traditional ‘if-then’ rewards can give us less than what we want. They can extinguish intrinsic motivation, diminish performance, crush creativity and crowd out good behaviour. They can also give us more of what we don’t want; they encourage unethical behaviour, create addictions and foster short term thinking. And that is exactly what is happening at Irish Water at the moment.

The Carrot and Stick approach isn’t all bad. It can be effective for rule-based routine tasks, because there is little intrinsic motivation to undermine and not much creativity to crush. However, this doesn’t apply when you are setting up a new organisation. Then creativity, ethical behaviour and performance are very much in demand.

Modern motivational theory centres on three important elements for employees of a company: Autonomy, Mastery and Purpose. This is what Irish Water should have been focussing on instead of a quick performance bonus which is counterproductive.

If you want to see a youtube video from Dan Pink about this have a look below.

https://www.youtube.com/watch?v=u6XAPnuFjJc

The question of a living wage?

There is a lot of talk about raising the minimum wage in Ireland and bringing it up to a living wage of €11.45. Currently the minimum wage in Ireland is €8.65 and this is the fourth highest minimum wage in the European Union only lower than Luxemburg, France and Belgium and at a higher rate than Germany and the United Kingdom, the economic engine of the EU. The living wage of €11.45 would be higher than the minimum wages in Luxemburg, France and Belgium.

Unions maintain that the minimum wage is too low to make a decent living in Ireland and that is probably true and they propose to increase the minimum age and introduce a living wage which would make it possible for people to live from. A noble thought. 

Furthermore they say an increase of the minimum wage would boost the economy! However the socialist government in France increased their minimum wage to €9.43 in 2012 and the French economy is still in the doldrums.

Mark Fielding of the small and medium employers’ organisation ISME says that employers can’t afford to increase the minimum wage and that if there would be any increase this would have a detrimental effect on the Irish economy. Mark is right a further increase of the minimum wage would put many small and medium size companies to the pin of their collar and would stop any growth in employment. This is practical realism of ISME and Mark Fielding.

Now get me right I am not suggesting to decrease the minimum wage either I am making the point that an increase is now not opportune.

Is there a third option which could square these opposing views? In my opinion there is but it would mean a different approach to industrial relations than we have had in Ireland up to now. Up to now the focus on industrial relations has been very much on wage increases and very little else. Yes there was a broader approach in National Wage Program Towards 2016 however at the first difficulties the other ideas were quickly dropped and the focus was back on wage increases. Wage increase is a topic which is easy to sell for the unions. It is easily understood by their membership that is why it has been so popular.

However establishing the highest minimum wage in the EU, as a struggling economy is in my opinion not a smart move. The case is that with one of the highest minimum wages in the EU, Ireland is not underpaying their employees but the cost of living is too high.

To give a recent example in the last year the charge for peoples renting houses as gone up considerably and the same for house prices. It has increased in such a way that it puts an enormous pressure on the wages of people working with a result they are demanding higher salaries. In a modern society this topic needs to be resolved if an economy wants to thrive for all. Rent controls need to be introduced and social housing needs to be developed. To let the market organise this itself is an out of date approach in a modern European social democracy. Our recent economic problems proved that this approach doesn’t work in the 21^st century.

The government and the social partners need to address this issue and other issues like affordable health care. A broader methodology to industrial relations than just a focus on wage increases would benefit the economy, employees and employers.

Government, unions and employers should take action on this and not drive wage cost up in order to get everybody a Living Wage of €11.45 while still nobody can afford to rent or have decent health care.  

How to Turn Strategy into Great Performance

You have devised a great strategy for your company and all the indicators show that you should get a big return on investment. Yet when the year comes to end the results have brought not what the strategy suggested. What has happened? You spent so much time in getting the strategy right and now there is little to show for it. Unfortunately, this scenario is more common then you would think.

Companies only realise about 60% of their strategies potential because of defects and breakdowns in planning and execution. If you review the most common causes for the failure of strategic plans the findings are revealing and troubling.

Research into the strategy to performance gap published by the Harvard Business Review shows that virtually all companies surveyed struggled to produce the financial performance forecast in their long-range plans. Furthermore, the processes they used to develop plans and monitor performance make it difficult to determine whether the strategy to performance gap stems from poor planning, poor execution, both or neither. The biggest problems are: -

v  Companies rarely track performance against long-term plans – the research shows that less than 15% of companies compare the business results with the performance forecast, drill down to analyse why the performance was not achieved and take this information into account when making new plans.

v  Multiyear results rarely meet projections – This is demonstrated by a dynamic common to many companies. The 4 – year plan projects modest performance for the first year and a high rate of performance thereafter. Management meet its modest target for the first year and is recommended and prepares a new plan with a modest growth for the first year and a high rate of performance thereafter. The process is continued over the next years with only modest results over the projected years.

v  A lot of value is lost in translation – Given the poor quality of financial forecast in most strategic plans it is probably not surprising that most companies fail to realise the strategic potential value. What emerges from the research is sequence of events that goes something like this: strategies are approved but poorly communicated. This makes the translation of strategy into specific actions and resource plans all but impossible. The lower end of the organisation doesn’t know what they need to do and when they need to do it and as result the expected results don’t materialise. If no one is held responsible for the shortfall the cycle of under performance gets repeated over and over again.

v  Performance bottlenecks are frequently invisible to top management – When plans are realistic and performance falls short, executives have few early warning signals. They have often no way of early detection whether actions were carried out as planned, resources were deployed on schedule, competitors responded as anticipated etc.  As result it is impossible to take corrective action on time.

v  The established gap fosters a culture of under performance – If the strategy underperformance becomes the norm over the years’ then commitment cease to be binding promises with real consequences. The organisation becomes less self – critical and less honest in its shortcomings. Consequently it loses its capacity to perform.

However, there is a way out as a number of high performance companies have dealt with above described problems. They have created clear links between planning and execution and raising the standards of both of them. There are seven rules to follow and these are: -

1. Keep it simple, make it concrete – Ensure that all staff member know the strategy and how it affects their day to day performance. Make certain that all employees know what they have to have delivered at the end of the year.

2. Debate assumptions not forecast – Strategies are often based on assumptions and to make them come true staff need to know what you are thinking in order to engage in the process. When they understand the fundamentals and performance drivers they understand what exactly is required and understand better how to deliver on the performance.

3. Use a rigorous framework, speak a common language – The specific framework a company uses to ground its strategic plans isn’t that important. What is critical is that the framework establishes a common language for dialogue between the management and employees one that strategy, marketing, finance and operations all understand and use!

4. Discuss resource deployment early – Companies can create more realistic forecast and more executable plans if they discuss up front the level and timing of critical resource deployments.

5. Clearly identify priorities – To deliver any strategy successfully managers must make thousands of tactical decisions and put them into action. Companies should agree on priorities, communicate relentlessly and hold managers accountable for executing against their commitments.

6. Continuously monitor performance – Continuous monitoring of performance is particularly important and proactively monitoring the primary drivers of performance. Putting the Key Performance Indicators on the agenda of every management meeting should ensure that all keep the eye on the ball.

7. Reward and develop execution capabilities – No list can be complete without a reminder that companies have to motivate and develop their staff, as at the end of the day no process can be any better than the people who have to make it work. This also includes development of staff members who have made it work.

The prize of closing the strategy to performance gap is huge – an increase of performance from 60% to 100%. However, the true benefit for companies who create tight links between their strategy, plans and performance is that will they experience a multiplier effect, as a result of their efforts they are willing and able to take on stretch commitments that inspire and transform companies.