Spain: Recent Developments in Work Organisation in the EU 27 Member States and Norway

  • Observatory: EurWORK
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  • Published on: 24 Listopad 2011



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Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

A number of reports published by academics on the issue of work organisation patterns allow distinguishing different types of companies within the Spanish business framework, such as “traditional” vs. “innovative” companies, and “integrated” vs. “reticular” ones. These categories are based on the analysis of several dimensions, including how open companies are towards changes in the organisation or the number of hierarchical levels within the organisational structure. Interestingly, social partners tend to criticize the adoption of flexible models in companies, since they require employees to be more polyvalent and affect work stability. In contrast, employers require more flexibility, so that companies can adapt to the changeable environment.

Block 1: Existing main sources of information dealing with the issue of work organisation at national level and its relation with working conditions, innovation and productivity

Generally speaking, there is not much information available on the issue of work organisation, and there are no specific national statistical sources that analyse this question. Moreover, many sources discuss work organisation from a theoretical point of view, whereas practical or empirical information based on the real business framework are scarce.

In any case, there are a number of reports published during the 2000s, which basically consist of studies developed in scientific and academic environments. Thus, most of the information included in this paper comes from articles and ad-hoc studies published by university researchers.

Block 2: Identify existing patterns of work organisation at national level and recent evolution in time

As shown by the consulted literature, patterns of work organisation can be clearly defined from a theoretical point of view, but in practice, company models are much more complex and each company has its own particularities. For this reason, results can only be approximate.

One of the main sources of information identified is the report “Organizational profiles in the Spanish manufacturing industry”, published by the journal Universia Business Review in the year 2005. This report describes the main organisational profiles adopted by Spanish manufacturing firms to face the challenges created by new competitive conditions. It examines a sample of 965 establishments, based on the analysis of 3 main dimensions or variables: technology, quality and organization. Following this classification, it is possible to distinguish 5 different groups of companies, which present significant differences in accordance with their technological complexity, quality management and internal organization (See Table 1).

Table 1. Type of companies according to their organizational profiles

Organizational Profile

% of companies in the sample

Traditional

26.4%

Innovative

25.8%

Technology- oriented

27.4%

Quality-oriented

10.9%

Process Management Oriented

9.5%

Source: “Organizational profiles in the Spanish manufacturing industry” report, 2005.

One of the groups identified is the so-called “traditional companies”, which includes companies that do not invest much in new technologies and slowly incorporate quality management practices, whereas their work organisation systems are based on job specialisation and hierarchical structures. The results show that traditional companies constitute 26.4% of the companies in the sample. These companies have a low tendency to export, their international projection is pretty modest, and frequently make use of short term contracts among employees in order to face demand oscillations. They represent a significant number of companies which are prone to experience many difficulties when competing in more intricate scenarios.

On the contrary, the group of “innovative companies” includes companies which make a great effort in order to incorporate advanced technologies, have actively integrated complex quality management practices and are moving away from vertical and hierarchical structures, promoting workers’ participation. Their human resources practices promote learning and team work among employees. Furthermore, all this practices are not seen as a collection of “independent” practices, but as a coherent system of activities and tools that complement each other.

More precisely, innovative companies represent 25.8% of the companies in the sample. They have high tendency to export, taking part in very competitive markets, and apply sophisticated sales systems. This group constitutes a substantial collection of companies willing to incorporate new practices and collaborate with clients, providers or other companies.

Between these two “extreme” groups, other 3 groups have been differentiated: “technology-oriented companies”, “quality-oriented companies”, and “process management-oriented companies”, implying that there are companies which, without being 100% innovative, are relatively advanced in one of the 3 dimensions. These groups are moving towards a model of flexible company in a progressive way, slowly adapting one of the analysed dimensions. Therefore, these 3 types can also be gathered into a single group known as companies “in transition”.

According to this study, the group of companies “in transition” is reasonably numerous, as it represents 47.8% of the sample. The characteristics of the companies in this group are a mixture between the characteristics of traditional companies and those of innovative ones.

Interestingly also, this study provides some information on the main barriers which hinder the process of innovation. In this sense, it is considered that the transition process is very difficult to begin, and it is full of dangers and uncertainties which require a complex modification of all dimensions within the company. Four main barriers are identified, as follows:

  • Qualification of the management board and ignorance of the new models’ benefits.

  • Limitations in the financing and investment for organisational redesign.

  • Size limitations: SMEs normally have fewer resources than large companies.

  • Structure of the Spanish company: according to Spanish legislation, shareholders play a central role in the modification of the company organisation.

From a different perspective, there is a remarkable report known as “Network and integrated production organizational models in Spanish industrial firms: distinctive features and performance”, published in 2009. This paper is based on a study carried out in the Jaume I University. The empirical contrast studies a sample of 159 Spanish industrial firms, among which two different organisational models are characterized, that is, “integrated companies” and “reticular companies”.

“Integrated companies” are those companies specialised in the manufacturing of products which are part of the productive process of their clients, that is, those specialised in the manufacturing of the final product, using components produced by providers. On the other hand, “Reticular companies” are those companies which subcontract other companies to develop a number of their productive activities, that is, those which decentralize a part of the production process, but keeping core activities in-house.

The results of the study show that 66% of the companies define themselves as “integrated companies”, whereas the remaining 34% see themselves as “reticular companies”. This data shows the cohabitation of both models in the Spanish industrial tissue, but with a predominance of the integrated models.

The report offers a conceptualization of both models, identifying several aspects than can characterize both groups as confronted models. Thus, according to the study, reticular models consider the competitive environment to be very dynamic and turbulent, whereas integrated companies do not perceive such a high degree of instability or dynamism, and their structure tends to be more rigid.

Additionally, costs reduction is the basis of integrated companies’ strategy. Those companies are more focused on the manufacturing of standardized products, and they have further difficulties to adapt to changes. As well as this, subcontracting and outsourcing is less common among integrated companies. On the contrary, reticular companies are better prepared for modifying their products according to consumers’ needs, and their manufacturing system is much more flexible.

Finally, concerning the organizational structure, integrated companies have a “mechanic structure”, strictly organised according to hierarchical levels. In contrast, reticular companies have traditionally been based on the so-called “organic structure”, where the power/authority is decentralized, tasks are flexible and there are a low number of hierarchical levels.

Interestingly also, this study analyses the performance of companies according to the organisational model. The results show that the implementation of a specific organisation model does not guarantee the success of the company. Therefore, those theories that defend the supremacy of network models in comparison to integrated ones should be put under question. In fact, the success of organisational patterns depends on many circumstances such as the capacities of the company, the characteristics of the environment, etc.

Finally, the report “Evolution of strategy and structure in large Spanish firm: A comparative European analysis”, also offers some interesting information on the issue of work organisation. This report, based on a research study conducted in the University of Salamanca, was published in the year 2006, and it analyses the evolution of corporate strategy and organizational structure in 100 of the largest Spanish groups for the period 1993-2003.

Concerning the issue of work organisation, this report distinguishes 4 different models: “functional”, which includes divisions according to functional areas (production, financing, etc.); “functional-holding”, which is similar to the functional structure, but with subsidiaries; “holding”, which includes different independent business units without a common corporate management; and “multidivisional”, with different divisions defined according to their business units and a common corporate management.

Table 2. Work Organisation Models. Percentages in 1993 and 2003.

Work Organisation Model

% of companies (1993)

% of companies (2003)

Functional

43%

22%

Functional-holding

16%

17%

Holding

6%

4%

Multidivisional”

35%

57%

Source: “Evolution of strategy and structure in large Spanish firm: A comparative European analysis” report, 2006.

The results of the study show that the main work organisation model given in 1993 was the functional structure (43% of the cases), whereas data for the year 2003 show that this model decreased significantly until 22% in 2003. Meanwhile, the main pattern in 2003 corresponds to the multidivisional structure, given in 57% of the cases, whereas it was applied only in 35% of the cases in 1993. This advancement shows the success reached by the multidivisional structures over that decade. Finally, “functional-holding” and “holding” structures have not experienced great changes throughout those years, and the number of companies with those types of structure in 2003 was 17% and 4% respectively. (See Table 2)

Additionally, this report includes a comparison with the situation in Europe, specifically Germany, France and the United Kingdom, where the trend towards the dominance of multidivisional structures is confirmed. However, in Spain the importance of multidivisional structures is lower than in the analysed countries, which could be due to differences in size (average total sales of companies in the analysed European countries is higher that in Spanish companies), and in the property structure (family business are more common in Spain than in the analysed European countries).

With regard to the identification of a dynamic national economic sector, there is an interesting report published in 2010 by KPMG, which reflects the transformations experienced by the Spanish Real Estate sector, one of most badly hit sectors by the crisis. Thus, just to give some background, until 2007 Spain had experienced a decade-long housing boom. But after that year, housing construction greatly exceeded sustainable levels, and when funding became difficult, the activity of the sector extremely decreased, giving rise to high unemployment rates. According to this KPMG report, main Real Estate agencies have lost an annual average of 17% of their annual turnover since 2007. This situation obliged companies to modify their organisational structure, including an adjustment of their workforce (in 2009, quoted real estate agencies had reduced their staff in 40%).

Taking into account these changes, the sector is being restructured and rationalized, and it is reducing its production capacity. Vertical integration models, where companies were builders, property developers and sellers at the same time, are not valid anymore. The structure of adapted real estate agencies is based exclusively on the resources required for the core activity, whereas outsourcing turns out to be an effective way for reducing costs.

Moreover, the successful work model requires a high level of professionalization, and new strategies should be based on product differentiation, offering innovative value-added products and services. Thus, the new scheme entails a higher level of specialization as well as investment in R&D.

Block 3: Associated effects of identified different forms of work organisation and work organisation-related items on working conditions

Concerning the effects of forms of work organisation on working conditions, the previously mentioned report “Organizational profiles in the Spanish manufacturing industry” provides some interesting data for the 5 groups of companies differentiated: “traditional companies”, “innovative companies”, “technology- oriented companies”, “quality-oriented companies”, and “process management-oriented companies” (these 3 last groups can all together be considered as “companies in transition). This data is illustrated in the following table (Table 3).

Table 3. Patterns of Work Organisation and Company Policies

Pattern of Work

Short-term contracts

Suggestion box

Education and Training*

Payment of Incentives

Reduction of hierarchy

Innovative

16.8%

73.3%

27.9 hours

16.5%

45.3%

Traditional

18.9%

41.4%

21.8 hours

6.3%

22.4%

Technology- oriented

19.9%

60.8%

20.4 hours

12.8%

26.8%

Quality-oriented

19.1%

64.6%

21.7 hours

7.4%

25.6%

Process Management Oriented

22.5%

56.3%

23.2 hours

18%

28.2%

Source: “Organizational profiles in the Spanish manufacturing industry” report, 2005.

*”Education and Training” refers to the number of training hours provided per worker and per year.

The figures shown in Table 1 confirm that traditional companies have a higher percentage of employees with a short-term contract than innovative companies (percentages are 18.9% and 16.8% respectively). Remarkably companies in transition have the highest percentages of short-term contracts, although theoretically their figure should be lower than the number corresponding to the traditional pattern.

With regard to the existence of a “suggestion box” or some kind of system to facilitate the participation of workers within the organisation, innovative companies encourage workers’ participation in 73.3% of the cases, whereas this figures goes down to 41.4% in the case of traditional companies. Meanwhile, companies in transition have medium levels.

Concerning “education and training”, innovative companies constitute the group which provides the highest number of training hours per year to their employees (27.9 hours), whereas traditional companies provide 21.8 hours of training to their employees.

On the other hand, 16.5% of the innovative companies give pecuniary incentives to their employees according to the performance of the company, reinforcing the involvement and participation of employees. The percentage of companies in transition offering incentives to their employees is lower, but the lowest percentage corresponds to traditional companies, which only offer incentives in 6.3% of the cases.

Finally, with reference to the attenuation of hierarchical levels, 45.3% of the innovative companies state that they have reduced their hierarchical structure, whereas the number of traditional companies having done so is only 22.4%. Moreover, as shown in the table, the percentages of companies in transition which have reduced hierarchy levels are between the levels of the two “extreme” models, but closer to the percentage of the traditional model.

Block 4: Social partners’ position with regard to the issue of work organisation patterns

In 2004, the regional division of the UGT Trade Union (General Union of Workers, or ‘Unión General de Trabajadores’ in Spanish) in the Autonomous Community of Valencia published a short report on flexible production systems. This report states that change factors such as technological innovation, economic pressure, globalisation, etc., have encouraged companies to modify their organisational structure towards more flexible and horizontal structures.

Concerning working conditions, and according to this UGT report, flexibility negatively affects labour stability, working time, salaries, types or working contracts, etc. For instance, flexible production systems require employees to be polyvalent and versatile, in order to quickly adapt to changes in demand and production. Polyvalence means that workers must make greater education and training efforts, and it also implies higher mobility rates, as employees must be ready to change their post according to production levels. Therefore, guaranteeing workers’ stability within the company is much more difficult.

At the same time, together with the implementation of flexible structures, production processes have been split. Outsourcing and externalization of services are more and more common, in order to better deal with changes in unstable environments. As large companies have externalized a number of their production activities, they have diminished their workforce, whereas SMEs (the subcontracted companies) keep a fluctuant workforce based on short-term contracts.

All in all, and according to the 2002 Action Programme of UGT Trade Union, flexible structures and division of production processes promote mobility among workers (both internally and externally), and give rise to smaller working units. These new human resources policies, based on flexibility, have caused the individualization of the labour relationship, which weakens the role played by trade unions and obstructs the joint action in collective bargaining.

Finally, the 2010 yearly book of Fundacion 1º Mayo, created by the CCOO Trade Union, includes an interesting article on workers’ participation. It states that private companies try to achieve quality and differentiation objectives by implementing practices such as promoting employees’ participation and involvement in the organisation, encouraging employees to offer suggestions, and enhancing team work. Thus, according to this article, companies try to develop a ‘sense of belonging’ among employees and keep the workforce on their side, in order to easily justify changes in the organisation or production systems.

On the other hand, the CEOE (the Spanish Confederation of Business Organisations) stated in its “Principles and Propositions” report published in 2009 that nowadays flexibility is highly required among companies, especially given the current highly changeable and competitive markets. Employers should have more autonomy to modify working conditions (functional and geographical mobility, working time, retribution system, etc.), so that companies can adapt to external circumstances. If work organization is not flexible (and thus, working conditions), companies’ only option is to resort to redundancies to keep their business, which is much more drastic.

Commentary by the NC

The available information in Spain shows diverse perspectives on work organisation. The degree of introduction of new technologies and quality management practices, together with the extent and rigidity of hierarchical structures are identified as key variables in order to identify innovative vs. traditional type of companies. Additionally, these variables seem to have influence on working conditions, in the sense that innovative companies show better working conditions for employees.

Finally, it is worth mentioning that some reports reveal that the implementation of a specific organisation model does not guarantee the success of the company. Thus, the failure or success of patterns of work organisation will depend on both intrinsic and extrinsic circumstances, such as company size or sector environment.

Antonio Corral & Jessica Duran, IKEI research & consultancy

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