Job security agreement at Blue Circle

A recent agreement at the Blue Circle Cement company gives guarantees of job security in return for wage restraint. It has been hailed by many as a future model for good industrial relations in the UK, which might also stem any tendency towards inflationary wage claims. However the Blue Circle deal has a specific 16-year history, and caution is advised before promoting such agreements as a model for all industries.

In January 1997, the cement company, Blue Circle (BCC), and two of Britain's largest trade unions, the Transport and General Workers Union (TGWU) and the General Municipal and Boilermakers Union (GMB), agreed what has been described as a "ground breaking" deal which gives a guarantee of job security, in return for pay restraint and more flexible working arrangements. Both the unions and the Labour Party see the agreement as a model for future employee relations, which could go some way towards reviving the fortunes of the British economy.

The agreement

The job security deal is in fact two agreements. The first has already been signed, while the second is still in the final stages of negotiation at the time of writing.

The first agreement, which covers 124 lorry drivers at the company, is a five-year deal in which the company agrees not to contract out any more haulage work, and not to carry out any compulsory redundancies. In return, the unions have agreed to a five-year pay deal which gives the lorry drivers a 3% increase in the first year and a pay freeze in the second year, with the increases in the final three years to be decided by a pay review committee. The unions have also agreed to additional flexible working arrangements, which will entail drivers taking on such tasks as fork-lift truck driving.

The second deal, which will cover the bulk of BCC's employees - process, craft and white-collar - is yet to be approved by employees in a ballot. It involves job security for three years, in return for a pay offer of inflation plus 0.25 percentage points for each of the next three years. Alan Black, the GMB national secretary, has stated that the union will also be looking at possible further deals to secure jobs after 2000, as there is a commitment to continuing job security on a rolling year-to-year basis. Workers will be expected to agree to additional flexible working practices, in return for better training, job enrichment and an "empowerment" clause, under which teams of workers will be responsible for making decisions on how work is carried out. The deal, which has already been approved by shop stewards - as long as the company agrees to minor amendments - was due to be finally signed by the end of February.

Responses

According to the press, the BCC agreement has been hailed as "ground breaking" by the Labour Party, which is reported in the Guardian to have said that "such social partnership tackling the core issues of job insecurity should become a model for future employee/employer relations". Not all senior Labour members agreed with this statement - one front-bencher is alleged in the Financial Times to have described the deal as "irrelevant" and a "wrong precedent" to set, especially for public sector pay. However, Labour's shadow employment minister, Peter Hain, has stated in the Financial Times that "in government Labour will encourage such agreements because we want business to think long term and focus on jobs, skills, and flexibility as the best passport for Britain's economic success". He argues that such initiatives allow employees to plan for the future, while employers can achieve the flexibility and efficiency measures necessary to be competitive. The debate reflects reported tensions within the party over worries that an incoming Labour government would face union demands for pay increases after 16 years of tight control, especially in the public sector.

While some in the Labour Party argue over the possible effects on pay, others - such as a Financial Times editorial - have commented that agreements such as that at BCC are contingent on the business cycle, demand characteristics and stable technology. Furthermore, a study by the Involvement and Participation Association (IPA) has suggested that working practices at BCC are the product of a specific factors unique to the company. In order to assess the validity of these points and the value of promoting BCC as an ideal model, below we look at BCC over the past 15 years or so.

Background

BCC is Britain's largest cement manufacturer, employing around 2,000 workers in 10 plants. Despite the fact that it has only two main competitors, and a 50% share of the domestic market, the company has been faced with falling demand for cement and the threats posed by cheaper overseas producers. It has made extensive efforts over the last 10-15 years to restructure its business, including extensive capital investment and the restructuring of employee relations.

Prior to the 1980s, union/management relations at BCC could best be described as "adversarial", but over the past 10 years the relationship has been transformed to "one in which goals are shared and owned between employee and employer", according to the IPA study ("Blue Circle Cement", Putting it into practice No.6, IPA (1996)). This was part of a strategic decision taken by the company on the way forward. Both unions and management realised that the uncompetitive nature of the company could not persist for much longer. In an attempt to reduce overall operating costs, management's decision to make extensive capital investments was also contingent on the radical restructuring of employment practices. Because the company had high levels of unionisation, the choices in terms of industrial relations and work practices were either to bypass the unions or include them in the restructuring - and it was the latter path that was chosen. The result was the "Integrated Working" (IW) agreement between the company and the unions. IW was introduced slowly on a plant-by-plant basis over a six-year period from 1984 to 1990 and, although the result was reportedly the transformation of the "them and us" atmosphere into one of cooperation, the path was by no means a smooth one. The fact that unions were initially forced into agreeing to IW meant that they were extremely suspicious of the changes, according to the IPA report and other recent research ("Blue Circle Cement: A case of industrial partnership", S Scali, unpublished MA dissertation, University of Warwick (1996)).

The cornerstone of IW is the "stable incomes plan", whose main features include no overtime, replacement of hourly pay rates with annual hours and flexible working. Other elements are employee involvement programmes, including a move away from plant to national bargaining, formal joint consultative arrangements and greater input by employees into the decision-making process.

The company has made enormous cost savings via IW, but it is still vulnerable to cyclical movements in demand. For example, BCC reportedly responded to a downturn about four years ago by cutting its workforce by 20%. However, it has been argued by the IPA that productivity growth through job reductions is now almost exhausted, and the only way that productivity gains can be made in the future is through increased flexibility .

In the recent study by Scali of IW at BCC, it was found to be generally agreed by all that there is now an atmosphere of cooperation within the company. Despite a reduced role for the unions in some aspects of bargaining and power, IW is seen as beneficial by the unions and their members. However, the agreement, it is claimed, still had shortcomings: training was considered to be poor in terms of both quantity and quality; the allocation of "flexi hours" under the stable incomes plan was felt to be unfair and; there was, and is, a considerable sense of insecurity. According to the IPA study, employees still feared that changing practices would lead to further loss of jobs, especially since three plants have been made responsible for finding their own markets by developing other products. The personnel director commented that: "Despite the fact that working arrangements include flexible working and annualised hours, there are still barriers to total flexibility eg we do not have a no-redundancy agreement".

Commentary

Two points about the BCC case can be highlighted:

  • job security was not an overnight decision, but part of a complex array of strategic decisions and conflicting tendencies. As a result, further productivity gains require further flexibility; and
  • further flexibility in this context may only be available by promises of job security.

To put BCC forward as a model, however laudable, may therefore be to simplify enormously the processes at work. It is worth concluding with a quote from Scali: "Other firms may learn valuable lessons from the experiences with which Blue Circle has been faced. None the less, initiatives such as Integrated Working are the product of specific organisational history, structure, strategy, outlook and potential. Thus transplanting of certain techniques to other firms are unlikely to result in satisfactory ends".

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