Approaches and alternatives in best practice and their relationships with enterprise bargaining regarding the healthcare system in Australia. Speech by Martin Ferguson, ACTU President.

Introductory Remarks

Thankyou for the invitation to speak at the 2nd Best Practice in Health Conference. The ACTU and its affiliated Health Unions have strongly supported and actively participated in this Federal Government initiative over the last two years.

 

We believe the initiative has been an important vehicle in fostering the development of the Best Practice approach in this vital sector of the economy. Health care expenditure in this country runs to some $34.3 billion (1992/3 figures) financed by a mix of Commonwealth, State and private sources and constituting approx 9% of GDP. Hospital expenditure alone absorbs just over a third of the total $11.8 billion (90/91). At the same time we have developed one of the most accessible and equitable health care systems in the world and an increasing source of valuable export dollars.

 

The Australian Trade Union movement, like others in the community recognise that real cost constraints exist on governments in healthcare as elsewhere. Those constraints can lead to a variety of responses including the Kennett government type approach – what could be described as going `cold turkey’. That approach is simple, withdraw money from the system, combine that with total reorganization of financing through the introduction of casemix and hospital reorganisation and then see whether the system survives.

 

The alternatives is one epitomised by a Best Practice type approach whether at a macro or micro level.

 

It is these types of approaches and their relationships with enterprise bargaining which I intend to focus on today. However, I hasten to add that the issue of context is all important. Whilst, it may be possible to create a microcosm of Best Practice change in a particular health care setting it is unlikely to be maintained. The interface with the socio-economic and political context cannot be avoided and it is this context which will determine the continuing success of Best Practice initiatives – whether in health or elsewhere.

Key Perspectives

There are three aspects or perspectives I want to share with you today.

 

The first relates to this issue of the interface between context and Best Practice initiatives.

 

The second examines the relationship between Best Practice initiatives and enterprise bargaining across a range of industries – emphasising the Case Studies which epitomise ‘Best Practice in practice’.

 

The third issue is the role of the union movement in the approach to change and how our future as a relevant and important voice for workers relates to involvement and partnership in these initiatives.

The Macro Context

Whilst ‘Best Practice’ is focused on the internal needs and operations of a particular firm or organisation, the broader socioeconomic and political context will have a major bearing on how successful these initiatives will be in the longer term.

 

Best Practice needs to be linked to macroeconomic policy, social policy and industrial relations policy to be effective.

 

In Australia this broad macro context, established by twelve years of Federal Labor Government has fostered an environment which is conducive to Best Practice initiatives having at least the potential to be successful. Whether they are successful or not will depend on the particular circumstances – but I will come to this aspect a little later on.

 

The broad context in this country has been established by what is commonly referred to as the Accord. Introduced as part of Labor’s 1983 election policy, the Prices and Incomes Accord has underpinned the economic and social policies of the Government throughout its term of office. Six Accords and four elections later it is still the driving force in policy formulation.

 

The Accord approach has recognised the need for reform and development to occur across the spectrum of our institutions and structures but in a way which seeks to improve equity and fairness. The extent of the social safety net is a critical underpinning to our approach to reform.

 

In essence, the Accord approach recognises that we live in an increasingly competitive market driven world but the operation of that market needs to be tempered through socio/economic, institutional and legislative frameworks to maximise fairness and equity. The rationale behind this approach is that an equitable approach is also the most productive and efficient approach.

 

By contrast, the Free Market fundamentalists, and their friends in the Coalition would destroy this broad framework, installing a system ‘freed’ of the barriers inherent in these processes and policies.

 

Last year Ray Marshall, a US expert in Best Practice and an advisor to Robert Reich, US Secretary of Labor visited Australia and made the following observation.

 

“It seems to me Australia is ahead of the US in the way in which best practice is integrated with industrial relations policy, with macro-economic policy and with social policy. Unless you do that, neither of these policies is likely to be very successful.”

 

A key aspect of that broad macro context established by Labor and most relevant to the viability of Best Practice is Labor Market Reform. The approach adopted by the Labor government has been to support a process of managed reform working through the existing institutional framework of the Industrial Relations Commission and its processes. The approach has focused on reform of the award system through Award restructuring and more recently increased workplace bargaining through enterprise bargaining operating within a context of award minimum standards. A key focus in both these processes is to facilitate change, increase flexibility and efficiency, improve productivity and create an environment which fosters workplace change and skill formation.

 

These reform processes have provided a stable macro environment which has fostered unparalleled wage restraint by nonmanagerial (as distinct from managed) workers, reduced costs and increasing productivity. This is the type of environment where Best Practice can flourish.

2. Best Practice And Enterprise Bargaining

Before turning to some of the most exciting examples of linking Best Practice and Enterprise Bargaining I want to draw out four of the key insights which are emerging as our experiences with both Best Practice initiatives and enterprise bargaining deepens.

1 No One Solution

Firstly there is no magical formula to achieve a Best Practice workplace. Whilst the principles of Best Practice can be used to help drive change processes, specific solutions arise from the particular and often unique circumstances of a site or organisation.

 

In this context a forum such as this can help provide a mechanism for those on the road to Best Practice to test ideas and to seek to learn from others – but the solution is one you must find for yourselves – it is a process of accepted practice.

2. Cooperation And Commitment

To make Best Practice work you must have an environment of consensus and cooperation. In many instances Best Practice initiatives themselves become a vehicle to achieve this situation. But the reality is without such an approach the exercise will fail.

 

An essential feature of such an approach is that workers enter into the process without fear of losing their jobs.

 

To quote Ray Marshall again:

 

“Most American workers believe that if they improve productivity they will lose their jobs and they believe that because they will.”

 

This is not to suggest that change processes must have a guarantee of no job losses – that would be unworkable. What it does mean however is that job security is understood as an initial part of winning over the workforce and where, at some point it may become necessary it is managed best by the workers’ themselves.

 

Just as the Conservative approach to labour market reform at the macro level would fail to provide an environment conducive to Best Practice, so too does this approach at the micro level. This sort of approach is exemplified by the CRAs

with their ongoing attempts to brake the unions and introduce individual contracts – such adversial approaches constitute the antithesis of a Best Practice cooperative environment.

3. Union/Employer Partnership

Genuine Best Practice involves a significant shift in approach by both unions and employers/managers. For employers it means actual sharing of power in a joint leadership role, including determining both the vision for the company, the resources needed and the strategies to be deployed.

 

For unions it means operating in their members interests in completely new ways which in turn requires reexamining previous roles and processes.

 

This said, a Best Practice approach is not the same as some corporatist perspective which sees the needs of workers and management as one or the same. Best Practice does not remove the inherent divisions of labour in a capitalist society. There are always going to be disputes about how the cake is divided up, the objective is to ensure that the cake is bigger.

 

What it does do, though, is create new ways of working within those divisions maximising the areas of common interest.

4. Wholistic Approaches

Experience shows that success is premised on linking together all parts of the change process. Enterprises and organisations often believe they can pick up on one or two features of a total Best Practice approach such as implementing teams without recognising that there is a relationship to other components such as pay and skill. Such approaches are unlikely to lead to the sort of productivity/efficiency improvements sought.

 

Beyond the need to engage in a process of continuous improvements there are three essential aspects of implementing Best Practice wholistically. These are:-

 

 

• Benchmarking
• training
• reward systems

 

 

The emphasis on benchmarking in Australian Best Practice programs means this process is usually identified in the formal structure. Less emphasis is placed on the training and reward structures – yet these are equally important to overall success.

 

Without an infrastructure in the workplace which focuses on learning – the changes sought are unlikely to be carried through. Productivity and quality increasingly depend on the combined skills and knowledge of the whole workforce.

 

Such an approach breaks through the caste system of traditional work structures where management held the knowledge, a select group of qualified workers held the skills and the rest of the workforce followed procedures with limited pay and career prospects.

 

The macro agenda of change beginning with award restructuring has already created a vast new approach to skills training in this country with significant reforms achieved through what is commonly called the National Training Reform Agenda.

 

Best Practice approaches and enterprise bargaining must link these broad industry initiatives at the workplace level.

Reward Systems

This brings me to the third component of Best Practice, namely the need to ensure appropriate reward systems are put in place. This is the link to Enterprise Bargaining.

 

Of course reward systems can be broader than monetary rewards and may involve such aspects as increased participation and involvement in the work process and increased self esteem through learning – but it is the monetary side I wish to focus on.

 

The evidence shows that earlier initiatives in workplace change and Best Practice were unlikely to be linked to negotiated wage increases. In a survey known as the Workplace Bargaining Research Survey published in 1993 the evidence collected showed that 79% of workplaces had received no collectively negotiated wage increases – yet two thirds of the companies reported productivity increases.

 

There was no collectively negotiated increased obtained in 74% of those workplaces where profits had increased.

 

However, the same survey showed that where a ratified agreement had been made the incidence of workplace change was likely to be much higher than those workplaces without an agreement. This was particularly evident for such aspects of workplace change as reduction in job classifications, multiskilling, new management procedures and consultative committees.

 

The same Survey also showed that where workplace change was ratified by an Enterprise Agreement the impact or significance of the improvements was greater.

 

Building a nexus between enterprise bargaining and Best Practice appears to create the bridge which leads to longlasting reform.

Case Studies

Kent Breweries – CUB

The current reform process commenced in approximately 1991 when productivity was some 40-50% lower than other CUB sites. The IR situation was extreme with little or no trust between unions and management. The 1980s had seen attempts at reforms from above with external consultants bought in but these attempts failed – for good reasons they were pushed onto the workforce and the consultants brought in the ‘fixed’ perspectives with little understanding of how the place worked.

 

A new approach was tried with initial but cautious union support. It involved a 3 point plan with control around a massive shift in knowledge sharing about why change was needed and the economic problems facing the brewery combined with an approach to workplace change embracing a ‘leading by learning’ philosophy. Cross Function Teams were created to establish the change process coordinated by a further team comprising the company’s management, union and shopfloor reps.

 

1992 saw a set back because of increasing pressure on the company to enter into a redundancy program but this was settled with the shopfloor controlling the process of redundancy.

 

The next stage has involved developing an enterprise agreement which would supersede the award, describe the changes that had already taken place and set out the agreed principles of the change process.

 

This agreement is called an enterprise development agreement to reflect the linkage between the program of change and the industrial processes.

 

“The shopfloor now is organised into work teams, each built around specific tasks within the process, including brewing, bottling, and packaging. Demarcations have been reduced dramatically in this process. For example, there was a separate maintenance group that was assigned to tasks all over the site as needed. These people have now become members of the teams, allowing responsibility for maintenance programs to rest with those using the equipment.

 

Alongside these changes, training programs have been introduced that carry an incentive in the form of higher pay for better skills. The agreement enshrines the principle that work can be done by anyone “who has the skills and is competent to perform it safely, effectively and efficiently” – an important recognition that the enterprise is committed to moving away from demarcation as people are trained to perform new tasks.

 

The Kent Agreement approach is being followed at other CUB sites and is also being broadened to encompass the whole workforce including sales and administration.

Westpac

Westpac has also developed an Enterprise Development Agreement. The Agreement is seen as an enabling Agreement which supports the workplace change processes taking place.

 

Three key areas were targeted for change – promotion, part time work and FBT with the overall objective of achieving a learning enterprise.

 

The change process has led to a radical overhaul of the outdated timebased promotional scale and its replacement with a skills based structure grouped into five families – sales, credit, finance, human relation and systems.

 

The agreement enables greater use of part time staff but must be matched by opportunities for career advancement for those staff.

 

The third area examining change is over FBT concessions such as home loans. The process has bee managed by work teams and the FSU.

 

The Agreement deliver pay rises of 8% over 15 months.

Container Packaging (Endmaking Plant West Footscray) Certified Agreement 1995.

This Agreement also shows a comprehensive approach, maximising the relationship between the change process and pay. This latest agreement also shows how, with experience in enterprise bargaining the rhetoric is beginning to give way to real change.

 

The Agreement builds on earlier commitments in previous agreements and sets out a series of measures which relate to the shared objectives.

 

These shared objectives include: –

 

 

• total quality management;

 

 

 

• an internationally competitive industry capable of exporting on a profitable basis and replacing imported manufactured goods;

 

 

 

• continuous improvement of the productive performance of the company enabling increases in remuneration whilst improving the competitive position of the company;

 

 

 

• focussing on achieving competitive advantage not through short term negative cost cutting but on the basis of high skills, high quality, responsiveness to customers, effective utilisation of technology, and reduced waste and lead time;

 

 

 

• employees taking responsibility for the whole production process and not just their traditional job or department;

 

 

 

• increasing skills and training, including providing the broad skills necessary to adapt to change, solve problems, reduce hierarchy and strengthen effective teamwork and flexibility;

 

 

 

• job security and maximum use of the skills of the existing workforce provided statutory regulations are adhered to;

 

 

 

• continued investment in new technology, training, research and development;

 

 

 

• a consultative approach to production and change which minimises disputation and disruption. The efficiency of the consultative process may be enhanced by training of consultative committee members;

 

 

 

• an understanding that the change process and restructuring of the plant will be significantly advanced over the foreseeable future, and it is intended that this 12 month Agreement will act as a foundation for the next Agreement. The parties acknowledge it is management’s intention to seek a longer term for the next Agreement.

 

 

The measures set out include: –

 

 

• continuous improvement/workplace change/restructuring

 

 

 

• training strategy

 

 

 

• teams development shift flexibility

 

 

 

• awareness training

 

 

 

• supplementing labour – through consultation

 

 

 

• quality functions – which includes QA personal becoming part of the production terms

 

 

The Agreement provided a 4% wage increases over 9 months.

Smorgan Fibre Containers

Provides another example of direct linkage between a continuous improvement strategy and a workplace agreement

 

The Agreement contains the following principles:

 

(a) customers first: –

 

 

• striving to find what your customers ‘ requirements are and the effect our services have on them acting on the information

 

 

 

• listening to the customer

 

 

 

• uilding customer requirement into the design of new products, services or processes and providing services and products better than their expectations, seeking to anticipate and lead customers expectations.

 

 

(b) focussed involvement of people:-

 

 

• systematically involving everyone through teamwork

 

 

 

• ensuring communication is open, effective and two-way

 

 

 

• empowering people at all levels to make the decision wherever possible providing people with the necessary training to carry out their responsibilities.

 

 

(c) acting on facts and knowledge:

 

 

• using a disciplined process to solve problems and improve quality

 

 

 

• endeavouring to find the root cause of issues.

 

 

 

• Ensuring people understand their responsibilities, how to measure their effectiveness and how to target improvement

 

 

 

• Collecting data that is informative and interpreting it correctly.

 

 

 

• Specific issues identified in the agreement are reduction lasting 12 months.

 

 

 

• Wage increases in this Agreement were 6% with the agreement lasting 12 months.

 

HEINZ (Dandenong) Enterprise Agreement 1994

Is also another good example of enterprise bargaining embodying Best Practice.

 

The objective of the Agreement is spelled out extremely clearly. It is:

 

“to develop a best practice world competitive company over the next five years. The parties are committed to providing the best possible employment security, highly skilled, well paid and interesting jobs with devolved responsibility, flatter structures, more effective integration of customers’ needs and supplier operations delivering high quality products, on time, in the market.

 

The Table of contents demonstrates the breadth of the Agreement

 

 

• The Partnership Agreement
• Advisory Committee
• The Consultative Process
• Work Teams
• Skills Based Classifications and Rewards
• Training and Development
• Team Development
• Work Design
• Key Performance Indicators
• Gain Sharing
• Single Bargaining Unit
• Demarcation
• Work Organisation
• Redundancy and Employment Security
• Overaward Payments
• Superannuation
• Avoidance of Industrial Disputes
• No Extra Claims
• Work Place Flexibility
• Flexible Part Time Employment
• Child Care

 

 

Key initiatives include: –

 

 

• meetings between CEO and the union and the ACTU to review the shared vision

 

 

 

• one joint coordinating committee to ensure the implementation of change consistent with the joint vision

 

 

 

• establishment of work teams

 

 

 

• establishment of skill based classifications

 

 

 

• systematic approach to training including training of work teams

 

 

 

• development of cellular work processes with non-traditional skill mixes

 

 

 

• agreed KPI’S

 

 

 

• examination of gain sharing

 

 

 

• increases in employer contribution to superannuation

 

 

 

• flexibility in operations

 

 

 

• examination of future childcare needs

 

 

The Agreement provided an 8% wage increase over 18 months.

Rothmans Of Pall Mall (Aust) Limited Manufacturing Businesses Unit Continuous Improvement Agreement 1995 (Ratified 1/2/95)

The Agreement links pay increases directly with the continuous improvement strategy with a wage increase of 7% over 18 months – 3% payable for participation in the process of continuous improvement.

 

The Agreement – sets out the areas of change including – cooperation between departments, employee participation in recruitment process, employee surveys of management, recognition and reward surveys, improved communications and no retrenchments efficiency measures to be developed by joint Manufacturing Consultative Committee. Two weeks extra paid leave for improvements to date, are novel features of this Agreement. It is also includes a commitment to introduce of competency based pay systems. Average hours 36 per week. New Grievance procedure. New shift rosters.

Saturn Corporation

Whilst not an Australian example I think this example deserves mention if only because it stands out as Best Practice in practice.

 

Saturn Corporation is a wholly owned subsidiary of General Motors building medium sized cares to compete directly with Japanese equivalents.

 

The production plant is a greenfields site 30 miles north of Nashville Tennessee. The plant is considered an integral part of a partnership involving suppliers, workforce, community, retailers and the media.

 

The plant has 7000 team members producing 1100 vehicles per day over two shifts. Within the plant a new way for General Motors of organising production has been developed and is being refined continuously. The plant is the product of a manufacturing strategy based on a combination of people, technology and processes. The plant has fewer robots for example than General Motors plants in general. Equal it has unique technologies such as the skillet (moving platform) assembly line.

 

Previous attempts to make cares differently at General Motors such as failed Vega in the 60’s and 70’s proved that one can not move technologies and processes ahead of people systems. The misalignment will only produce expensive failure.

 

Saturn is the product of an agreement between the United Auto Workers and General Motors and this relationship is reflected in a power sharing structure from board level down to the shop floor. This partnership has allowed for new and innovative processes, systems and procedures to be implemented on site. At the centre of the partnership is empowerment of individual Saturn members to make business decisions. To do this effectively information is shared “like never before” on all aspects of the business eg. car cost, recalls, engineering hiring and firing.

 

Empowerment is enacted within the basic organising structure of the work unit. The work unit is a self directed team with thirty identifiable functions including hiring and firing.

 

The pay system rewards the employees for performance and participation.

The Union Role

I would like to finish by addressing the issue of what role unions play in this process.

 

The case studies reveal that a commitment to genuine union participation is critical to the success of best practice initiatives. Failure to understand and engage unions in the process particularly where unions are present will lead to poor outcomes.

 

Participation in these processes represents a challenge for both management and unions – both groups must find new ways of working together whilst maintaining their distinct responsibilities.

 

As the Saturn example shows, the processes of Best Practices involved defining key union and management roles and the area of shared partnership. Understanding and acknowledging the parameters of each groups responsibilities including the arena of partnership is critical.

 

The ACTU has been a strong advocate of Best Practice approaches – seeing these developments as part of the continuum of change.

 

This trade union commitment can be traced back to 1987 when we produced Australia Reconstructed.

 

Our later commitment to structural efficiency and the award restructuring process followed, alongside our key involvement in forging new approaches to education and training.

 

The framework for enterprise bargaining built on these initiatives paving the way for workplace bargaining facilitated by award restructuring. Linking these processes to Best Practice initiatives is the next logical step.

 

Many commentators in this country question the relevance of unions as membership continues to decline. They assert waning membership equals waning influence. Certainly the membership issue is critical and the ACTU is working through a number of strategies to address this problem. But the reality is unions will remain relevant – particularly in heavily unionised sectors. Part of maintaining that relevance is to accept that the nature of work is changing rapidly and the nature of the union’s role must respond to the change.

 

The most obvious change from traditional union activities has been the commitment to negotiate and work with management in a partnership to improve efficiency and provide an equitable and progressive future for our members.

 

It means changing the way we work as an organisation and approaching the concepts of unionism with new perspectives matched by new skills which in turn help the membership to both actively pursue and respond to the change processing.

 

Best Practice – approach embodies the high performance – high skill model of competitiveness. It also embodies an active role for unions prepared to accept that responsibility. Indeed such an approach extends the collectivist approach of unionism and imparts it to the very work process.

 

However, it is by no means certain that we as a nation have embraced the model despite such initiatives as the Best Practice programs in industry and health.

There is an alternative – it is the model favoured by the conservatives and by companies such as CRA. It is a model which sees labour as a commodity bought and sold in individual units at lowest cost. Such an approach fails to understand the collectivist approach to work which has been the hallmark of Australias wage system and which must take us into the future.

 

Speech By Martin Ferguson, ACTU President, To The Second Best Practice In Health Conferences, Sydney. 30 May 1995.