why information and consultation

is good for business

July 2003

It’s good to talk

Background

Transposition of the European Information and Consultation Directive offers a once in a lifetime opportunity to improve the quality of working life and the productivity and efficiency of British business.

There is mounting hard evidence that a mix of direct employee involvement (good one-to-one relationships) and representative participation (collective dialogue and negotiation) delivers the best results for both employers and workers.

Yet both are rare. The authoritative UK workplace study WERS 1998 found fewer than one fifth of workers reporting that they were frequently consulted about workplace change. (All references in this briefing can be found in a longer version of this document at www.tuc.org.uk/highperformance). Only 17 per cent said they were asked for their views on changes to future work practices and 14 per cent on plans for the workplace. The lowest levels of participation related to issues like redundancy (8%) and pay (5%). (all references in this briefing can be found in a longer version of this document at www.tuc.org.uk/highperformance)

Both union and non-union employees back information and consultation rights. The British Workplace Representation and Participation Survey 2001 found that 89 per cent of union members and 77 per cent of non union members favoured ‘legislation that required management to meet with employees or their representatives’.

The evidence

There is an increasing body of evidence that information and consultation is good for business. We present a selection here.

In the UK, a 1997 IPD study found that HRM practices relating to employee skills and job design accounted for:

• 19% of the variation between companies in change in profitability, and

• 18% of the variation in change in productivity.

The ILO has found similar results reported in Australia, Brazil, Canada, China, Japan, Korea, Mexico, New Zealand, Taiwan and the USA.

A major European study of employee participation reforms in eight countries in the 1990s looked at the impact of 'delegation' - where groups or individuals carry out their tasks without having to refer back to their managers all the time. In workplaces that had introduced group delegation:

• 94% claimed an improvement in quality,

• 58% in output,

• 37% experienced a reduction in absenteeism, and

• 32% in sickness.

Of those with individual delegation:

• 69% claimed a reduction in throughput time, and

• 53% an increase in output.

Many studies of high performance reforms have underlined the importance of introducing them as ‘bundles’ of simultaneous changes.

The EPOC survey, for instance, found that direct (one-to-one) participation had 'a strong impact on economic performance - nine out of ten respondents in the case of quality reported so.' but the gains from involving employees as individuals only reach so far and no further. Trust is partly built on the foundation of information, which can be shared with employees as individuals in discussions with their supervisors. But a deeper commitment to policies and support for decisions also depends on having been able to influence important business judgements.

Direct and indirect participation do not conflict with each other as some claim. A European survey of the research into this issue found that 'direct participation does not endanger indirect participation. In making this statement we are on rather safe ground as all our research evidence testifies to this point.'

As Sisson et al put it:'The EPOC survey results confirm the importance of employee and employee representative involvement in the regulation of direct participation in order to improve both the quality of the participation itself and its economic and social effects. Far from being a barrier to progress, it seems, employee representatives are the agents of change. The greater their involvement, in terms of both form and extent (and this applies particularly to negotiation and joint decision-making), the more the indicators of effects were positive.'

A study of UK pharmaceutical companies found that consultation with the workers 'only took place where the company recognised trade unions.' A 1999 study of European multinationals found that relying only on direct participation, to the exclusion of unions led to less employee involvement and poorer productivity.

Analysis of data from the CIPD’s 2001 Training and Development Survey has revealed 'a more extensive involvement of trade unions in the introduction of HPWPs in the United Kingdom than has generally been recognised.' Where unions are directly involved in training policy decisions at the level of the establishment, the company is more likely to use staff attitude surveys, workplace consultative committees, job rotation, mentoring, train-the-trainer programmes and quality circles. Data from the 2001 Skills Survey shows that 72% of employees had meetings with management to discuss broader organisational issues in firms where unions were present, compared with 55% in those where they were not.

In the USA, Black and Lynch analysed data from the Educational Quality of the Workforce National Employer Survey (a very large survey) and found that employee ‘voice’ arrangements have a larger positive effect in unionised establishments. The positive effect on productivity of high performance working practices was significantly higher in unionised workplaces:

• In terms of the impact of employee voice on labor productivity,' Black and Lynch concluded, 'we find that unionised businesses have higher productivity.

Black and Lynch were elaborating on strongly positive union effects discovered by earlier US studies, which had found that:

• Unionised companies improve product quality when union leaders are involved in administering participation programmes, but not when they are not, and

• Unionised firms make more use of direct participation practices than non-union firms.

In other words, collective voice, whether through a union in the USA or works council in Europe is a necessary condition for the successful implementation of high performance work practices.

An OECD review reinforces this conclusion: 'Social partners and government can work together to ensure that this virtuous circle of new work practices, new technology and productivity is set in motion. This crucially depends on workers being given a sufficient ‘voice’ in the firm. Institutions, which allow a closer contact between management and employees, can indeed help build a high-skill, high-trust enterprise climate that facilitates change. New work practices tend to be more prevalent among firms with some form of employee involvement than among other firms.'

An earlier OECD review concluded that, in general, flexible working practices were more likely to be in place where workers enjoyed the benefits of independent representation. 'Establishments with works councils - more precisely, those employers who have representatives of the employees in the largest occupational group recognised for consultation or joint decision-making at the workplace - are more likely to have taken initiatives in all practice areas.'

Other studies showing the strong links between unions and reform include:

• A West Midlands study found 'strong associations' between union presence and task flexibility.

• A survey of 143 large British enterprises found that quality circles were more likely in companies that recognise unions, with none in non-union companies.

• Unionised workplaces are more likely to have an employee share scheme in place than non-union workplaces.

• And unionised workplaces are characterised by employee share ownership and a much wider range of arrangements for worker participation.

Conclusion

Information and consultation is far from common in UK firms, yet it is good for business and productivity and supported by both union and non-union members.

Press release (1,300 words) issued 7 Jul 2003