The opening up of international markets presented greater pressures for quality enhancement and cost reduction, forcing firms to elicit greater labour productivity from workers. The competitive environment has thus contributed significantly to the increased trend to improve worker commitment. Employment participation schemes and performance related pay is symptomatic of these pressures and in turn have led to the marginalization and bypassing of unions in the management of employees. Firms have tried to internalise employee management and foster internal labour markets to create systemic loyalty and performance through career trajectories and time related perks. Decentralisation it is argued enables management to be flexible to firm specific needs. Management can therefore have greater control on their costs and can tie remuneration to the firm’s specific circumstances and give them better control over their business strategy and thus promote efficiency.
The move from industry wide bargaining to enterprise bargaining is not the end of the decentralisation story. Pay bargaining has also been devolved from the corporate level down to the divisional, subsidiary company or plant levels in a greater effort to give local managers greater financial responsibility. However evidence has shown that even where bargaining is at plant level there is evidence that guidelines and controls are often set own centrally. It is important to point out that the type of company, it’s products, it’s technology and the nature of its labour market play a major role in determining the degree of decentralisation undertaken.
The unitarist approach towards greater individualistic emphasis has led to Human Resource Management measures being undertaken by firms. Guest (1987) describes HRM as consisting of a combination of policies designed to produce strategic integration, high commitment and high quality and flexibility among employees. The central theme to this is that is the integration of employees on the basis of commitment rather than instruction and a more devolved business structure is likely to be able to do this against a centralised one. HRM has its hard and soft versions. The hard version views the employee as an economic resource and is normally associated with cost reduction strategy. The soft version places more emphasis on the human aspect and is what the usual rhetoric describes as motivation and commitment measures for employees. This ‘psychological contract’ between employers and employees has been combined with financial incentives (efficiency wage idea) to stimulate best practice and worker effort. HRM has led to a bypassing of unions and made them less important to workers since ‘good’ management means the employees’ needs for a union to protect them from ‘poor’ management is reduced.
Has the move to greater decentralisation and trade union de-recognition (generally speaking since specific industries have different forms which maybe more appropriate for them) increased flexibility?
Hendry (1990) argues that when product market pressures intensify (e.g. in a recession) corporate internal labour markets can reduce flexibility and increase costs but that plant level internal labour markets have a greater degree of flexibility and cost-effectiveness, promoting the argument for further decentralisation. The idea is that plants are free to adjust their strategies and employee relations in response to changes in external conditions and can do so without being constrained to a uniform structure or arms length, bureaucratic control. There is however an obvious danger regarding the principal-agent problem in that local managers may not quite work in tandem with the interests of the owners or principal managers in the company. Pressures to maintain share price can lead to short-termist attitudes on the part of local managers in order to retain their job at the expanse of long-term goals. There is therefore a rationale for hidden centralisation within large firms taking the form of guidelines and communication between top and local managers concerning the long-term efficiency of the firm.
While decentralisation to plant level gives individual flexibility it does not follow that there will be co-ordination, which may be vital for a company with many plants that needs to allocate resources amongst itself efficiently. Thus devolved management can mean individual plants work in a counter productive manner. Again we see the benefits of a dual combination between centralised guidelines and co-ordinating strategies and decentralised managements at the plant level.
De-centralisation negotiations can give individual groups of workers and unions greater bargaining leverage vis-à-vis their employer in firms where trade union recognition still exists. Collective bargaining gave employers the chance to defend themselves together against large unions but decentralised bargaining can leave isolated employers vulnerable in firms where trade unions are recognised. In this instance flexibility over cost decisions and business strategy can be constrained. The effectiveness of decentralisation depends on the level chosen and the nature of the firm. The general trend in management overall is a preference for more decentralised bargaining, although within a firmly controlled, centrally determined financial budget/ guidelines.
Highly devolved bargaining may generate intra-firm pay pressures because pay comparisons between the separate bargaining units are intensified. This is important because it is the notion of fairness and job status that legitimise pay structures and create employee co-operation. Co-operation may be essential between these separate units. In this way performance related pay systems can have de-motivating consequences, especially if both units work just as hard but one area has a more affluent supply of business. Thus productivity losses may be a consequence. Further, completely decentralized bargaining can undermine the company wide internal labour market if pay systems based on performance harm the non-wage attributes of internal markets (loyalty, motivation Earlier we described how during a recession, bargaining at the local level can improve flexibility, however if individualized pay systems create competitive jleapfrogging, their can be increased bargaining costs. Hence the reason why local bargaining units do not have complete autonomy but are subject to more intense monitoring and control by the centre.
The growth in multi-national corporations has further undermined the collectivist approach. Sentiments of solidarity according to Edwards (1994) do not flow easily across linguistic and national barriers. This has implications for European wide collective bargaining strategies, which will not appear until there is a significant level of harmonization between member states.
Product diversification and overseas expansion has driven the need for devolution of corporate structures combined with the productivity and performance requirements imposed on firms over the 1980. Multi-employer bargaining has ceased in many industries and now firm decentralisation is the main debate. The weakening of the trade union movement through de-recognition and falling subscription levels has also led to a fall in the coverage of collective bargaining and the employer attitude of safety in numbers. However extreme decentralisation does not always lead to the full flexibility of firms to respond to changing product market influences, technology or the labour market. The combination of decentralisation and the individualistic approach (e.g. emphasis on performance related pay) can create incentives for greater worker effort and commitment however there are negative externalities from these such as de-motivating pay comparisons which undermine solidarity between workers. Therefore decentralisation at the firm level appears to be carried out at an appropriate level for appropriate parts of the firm but under close central monitoring. This dualist approach is part of the ‘sophisticated modern’ model and is continuing to be developed.
Remember Soskice (1990) Corporatism debate- what matters is strong ‘de facto’ co-ordination of either employer organisations or unions- whichever is the stronger (Behind the scenes ‘centralization’ permits consideration of inflationary and employment impacts of pay bargaining. – unlike individual isolation bargaining.
When collective sacrifices are required, sentiments of solidarity do not flow easily across linguistic and national barriers. – Edwards
Tighter management control over bargaining has led to pay rises becoming increasingly conditional upon productivity improvements.
