Conference on Organized labour
Responses to the Conference Paper
Dr. Michael Muller
EU Research Fellow, University of Innsbruck, Austria
27 August 1998
In the following I specifically touch the following questions raised in your interim report at the example of Austria, Germany and Sweden: How have trade unions and employee representatives responded to "human resource management" (HRM)? What success have they had? What are the key issues to be examined?
On the basis of my research experience I can indicate how unions and employee representatives in Austria, Germany and Sweden have responded to neo-liberal pressures towards a US type unitarist human resource management (HRM). With US type unitarist HRM I mean the use of sophisticated human resource techniques in a non-union environment as described by Kochan, Katz and McKersie in their seminal study "The Transformation of American industrial relations".
Between 1991 and 1996 I conducted a study of industrial relations (IR) and human resource (HR) practices of 25 firms operating in Germany. The evidence collected indicates that there is a constrained convergence of practises towards the US HRM model. At the example of the banking and chemical industries, I showed that German companies still largely comply with the major labour market institutions of multi-employer collective bargaining, workplace representation, and initial vocational training. Pressures have been accommodated by changes within the system rather than by a radical change of the system. German labour market institutions still significantly reduce managerial autonomy in the area of human resource management and thus prevent a more unitarist type of HRM from becoming prevalent.
To be more precise, four main reasons for the relative stability of the German system of centralised collective bargaining were identified. Firstly, there is a significant and growing group of employees which is exempt from collective bargaining regulations, as they earn more than the highest tariff salary. For example, in 1994 in commercial banks 19.1 per cent and in the chemical industry 13.3 per cent of the workforce was outside the scope of collective bargaining. All these employees negotiate their salaries individually. Secondly, German firms usually pay tariff employees more than legally required. Whereas in the past this was mainly done in the form of fixed bonuses, today, in many firms, works councils have conceded that pay becomes more individual and flexible. Thirdly, as firms are not legally required to be a member of an employers association and thus automatically covered by collective bargaining there is some scope for an avoidance of collective bargaining. This room for manoeuvre is particularly used by subsidiaries of foreign multinationals. Fourthly, in recent years German trade unions have not only made significant flexibility concessions in regard to working hours, but also about pay. The chemical industry has been at the forefront of this development. Since 1994, chemical firms have got the opportunity to recruit certain types of employees such as long term unemployed below tariff and firms facing economic problems have been allowed to lower pay below tariff for their whole workforce.
Concerning the second mayor German labour market institution, workplace co-determination, works councils have largely retained their influence. Four reasons have contributed to this. Firstly, as the example of subsidiaries of US multinationals operating in Germany shows, a non-works council strategy can hardly be followed, as the legal regulations are relatively tight. Secondly, in most establishments there is a high trust relationship between employee representatives and management. Thirdly, the transfer of bargaining functions from the industry level to works councils has already strengthened and will further strengthen the position of works councils. Finally, German labour market institutions in general and works councils in particular seem to exert pressures on companies to follow human resource policies that are in line with the concept of HRM such as extensive training, internal promotion and employment stability.
Currently I am conducting a EU financed follow up study about Austria and Sweden. The case studies and expert interviews conducted so far show that world-wide pressures for convergence have an impact. Similar to Germany, in Austria and Sweden a decentralisation of pay from the industry or central level to the company level can be observed. Moreover, pay has become more individual and performance-related, as the ideology of performance-related pay has a strong appeal to employers. This is interesting, as anecdotal evidence, research conducted in the U.K. and the comparative HRM literature indicates that this HRM feature does not necessarily fit in a more collectivist environment.
All taken together, there has been no significant convergence towards US type unitarist employee relations practices. In particular no significant non-union sector has developed. However, unions and employee representatives had to pay a price, as they had to give up some of their influence on organizational decision making. In order to retain the remaining influence in the 21
st
century and to develop arguments for unions currently operating in more hostile environments, it would be important to study the following issues more closely.
Key issues to be examined:
How can strong industrial relations institutions exert pressures on companies to introduce sophisticated human resource practices? Can Austria, Germany and Sweden offer a model for other countries in the 21
st
century?
To which extent are managerial techniques developed in a different cultural context (such as the concept of performance related pay, which has originated in the U.S.) applicable in other countries? An examination of this question could provide unions with arguments against management initiatives that are not in the interest of employees.
A more extensive analysis of the above issues can be found in my following papers. If you are interested in any of these, I would be happy to send you copies.
Muller, M. (1997a). ´Stability or transformation of employment relations in German banking`. In Knights, D. and Tinker, D. (Ed) Financial Institutions and Social Transformations. London: MacMillan.
---(1997b). ´Institutional resilience in a changing world economy? The case of the German Banking and Chemical Industries´. British Journal of Industrial Relations, 35, 4: 609-26.
---(1998a). ´Human Resource and Industrial Relations Practices of UK and US Multinationals in Germany, International Journal of Human Resource Management, 9, 4, 732-49.
(1998b). HRM in Institutional Constraints –The Case of Germany- Accepted for ´Refereed Paper Track´ at British Academy of Management Conference, Nottingham, September, 14-16, 1998.
(1998c). HRM in Germany: A Comparison of Indigenous and Foreign-Owned Firms. Accepted for publication in Management International Review.
---(1998d) Human Resource Management in Austria, Sweden and Germany. Presented at 14th EGOS Colloquium, Maastricht, July 9-11, 1998.
---(1998e) The Viability of Pluralist Employee Relations in Austria, Germany and Sweden. Invited Paper for 11th IIRA World Congress, Bologna, September 22-26, 1998.
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