1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140 
Productivity bargaining: the next phase
Page 87
Page 88
If you've noticed an error in this article please click here to report it so we can fix it.
WHEN the history of the present decade is written it would be surprising if the word "productivity" did not appear quite frequently_ The name was not unknown before the National Board for Prices and Incomes was set up in the early days of the Labour Government but the Board—and Mr_ Aubrey Jones—have certainly worked hard to identify themselves with every aspect of productivity. To date, more than 120 solid reports have been written on the productivity theme and report No 123 "Productivity Agreements", is as solid and perhaps even more indigestible than the others.
It is, however, of major importance for it re-draws the guidelines that all selfrespecting productivity agreements should conform to. No summary can do justice to its closely reasoned appraisal of the agreements negotiated by 40 companies over a wide range of industry, but one notable feature of the new report is its recognition that non-manual workers can contribute as effectively as manual workers to greater efficiency. "Efficiency Agreements", indeed, are recommended especially in firms where close co-operation between management and unions and the acceptance of continuing change are an established fact.
It is always the instinct of patients that doctors should take their own medicine. It is more than possible that Mrs. Castle was exercising an impish sense of humour when she asked the P and I Board to take a detailed look at the working of productivity schemes, some of them previously examined by the Board. The suspicion that the best of them could well have some unforseen effects—for example, on the morale of other staffs not included in the terms of the agreements—may have occurred to her. Equally, whatever the tangible effect of productivity agreements relating to sections of a firm or industry the ultimate test is the overall one.
Hint to DEP
In three-quarters of the cases studied in this latest review the Board concludes that the net effect of the agreements was the achievement of lower costs per unit of output or, where it was not possible to tell the effect on unit costs, worthwhile reductions in wage or salary bills. There is a strong hint that the Department of Employment and Productivity would be well advised to recruit some competent cost accountants to enable more stringent checking of the productivity agreements submitted for approval. Expert cost accountants are in short supply, notably in road transport: where can they be best employed, in the field or at the DEP?
The terms ofreference of this submission by the DEP called for an investigation of the relationship of improvements in productivity to pay structures, the implications of productivity bargaining for costs, prices and profits, and the evaluation of productivity agreements with particular reference to: (1) the potentialities and problems of industry-wide and company-wide productivity agreements; (ii) the application of productivity measurement and agreements to clerical and other non-manual work; (iii) the potentialities and problems of partial agreements covering only certain workers or some issues; and (iv) the renewal and later development of existing agreements.
This little chore landed on Mr. Aubrey Jones' desk on November 26 1968; his minions completed their report on July 25 1969. A time extension was necessary; a hurried report on such a complex subject would not have been helpful in charting the way ahead "for the next phase of the productivity, prices and incomes policy".
Detailed study
The 40 companies selected by the Board for detailed study were drawn mainly from the register of productivity cases kept by the DEP. The selection covered a wide field of industry; 31 of the cases studied covered manual workers and nine agreements related to non-manual workers.
When the selection was made in February 1969 the DEP's register recorded some 2,500 cases covering around 4+ million workers. At the end of June 1969 the register had grown to some 3,000 cases covering 6m workers or 25 per cent of all employed workers_ About 60 cases a month were submitted to DEP during 1967 but for the latter half of 1968 the number rose to about 200 per month. It is interesting to observe that currently some 130 cases covering about 48,000 workers have been rejected by the DEP. As a proportion of 6m it is clear that there is an excellent chance that an agreement submitted will pass the wide screen mesh of the DEP—hence the report's suggestion that more expert cost accounting assessments should be applied to test the claims made for productivity deals.
The factors leading firms to embark on productivity discussions are varied. Some firms were faced with falling profits and falling return on capital, "a situation common to the industry they were in rather than a reflection of any specific lack of efficiency on the part of the firms themselves". A factor common to some firms was that overtime working had become excessive not to meet demand but in order to bolster wages to what were thought an acceptable level. (These factors could be highly relevant in road haulage.) S6me of the agreements studied did little more than try to ensure through tighter performance measurement that the pay increase did not exceed the value of the expected increase in productivity; others set out to change the working atmosphere with the intention that the workers might become "productivity" conscious, with improved labour relations as a by-product.
Increased manpower flexibility was an objective in most of the agreements and manpower reduction was the aim when shift-work changes or the tighter scheduling of transport operations were involved.
The PIB has long been a convinced advocate of job evaluation schemes and in some of the agreements they studied the introduction of more rational wage structures were linked with productivity negotiations.
In the batch of 40 agreements examined there was a fairly even split between "single" agreements involving only one set of negotiations and "series" agreements on which, over a period of time, several agreements were signed covering different parts of a company's workforce or different premises, etc. (Esso and British Oxygen are two companies whose phase 1 and phase 2 productivity schemes have been well publicized.)
'Rapid bargaining'
It is evident that "rapid" productivity bargaining can be ruled out for all practical purposes in the contemporary climate of industrial relations. Attitudes—on both sides of industry—take time to soften. Given harmonious relations between management and employees it ought to be possible to introduce radically different pay structures based on accepted norms of output or efficiency within weeks rather than months. Perhaps, one day, under the influence of sociologists or industrial psychologists—even ergonomists—cordial relations between the two sides of industry will enable this to occur.
The hard facts, revealed by the PIB, show that the average duration of negotiations for all the agreements studied was 11 months; "single" agreements took on average nine months to conclude, the range being from six weeks to some 2-1 years—approaching the gestation period of elephants!
It is well known, of course, that a limiting factor in negotiating major productivity deals is the pressure of normal business routines on management time. Some large companies have seconded sections of senior management to work virtually full time on the varied aspects of the problem. Trade union district officials, too, are busy men, for whose services it may be necessary to join a queue of employers. The smaller firm, in theory, should be able to make quicker progress if the parties involved can construct viable agreements on their own.
The PIB notes that limited use seems to have been made of employers' associations, only one case being reported of an association presenting the case for a productivity agreement affecting one of its members to the DEP. (Does this suggest that the RHA should undertake one or two trial runs?) The DEP's Manpower and Productivity Service was little used by the firms examined, perhaps because it was in an early stage of organization at the time.
Incomes poricy Although it might be thought that agreements would take longer to negotiate when more than one union was involved the PIB survey did not find this to be so. From one to eight unions were involved in the sample companies and there seemed no connection between the number of unions involved and either the duration of negotiations or degree of success of an agreement.
With incomes policy becoming increasingly unpopular •in the last two years— though few critics are candid enough to praise the virtues of a wages free-for-all, in which the big battalions would certainly come off best—it is not surprising to learn that the DEP was "conned" more than once. Two companies granted a wage increase following, or to stave off, industrial unrest, and productivity agreements were presented "on the basis of figures which had little foundation in fact". Another firm enterprisingly discovered some productivity increases after the event to justify a settlement which it had initially omitted to report under the early warning arrangements. A company which negotiated a long series of agreements told the DEP when notifying each individual agreement—of the inter related whole—that it would have no impact on the rest of the workforce, "a contention which in the event could clearly not be sustained".
Although a well-designed productivity scheme may offer measurable benefits to employers and workers—even, conceivably, a hint of advantage to customers by way of improved service or lower prices—it is not surprising that many, major schemes have been planned from the outset to tackle productivity enhancement in stages.
There are good reasons for this. The trade unions, who are generally concerned with the bargaining at an early stage, are naturally hesitant about signing any agreement that demands too many "concessions" from their members. Employers may not wish to gamble too heavily on a costly "once for all" agreement—the conception is a ludicrous one: productivity is a continuing process or it is nothing.
Hence the experience of British Oxygen, whose first agreement reduced the average weekly hours of work in the Gases division by 15 per cent but made no attempt to standardize performance levels in the many plants and transport depots though it was known that these levels varied substantially. The bonus of 25 per cent paid to the workers was a "sweetener" compensating almost exactly for the loss of earnings due to reduced hours. There was a "pay-off" for the company in increased output per man hour "but it was not part of the agreement to seek at that stage to reduce costs and increase profitability".
BOC and the trade unions did not want to bite off more than they could chew with the first agreement. It was designed to pave the way for the second agreement intended to achieve reduced costs, increased profitability, substantial reductions in manpower, the setting of common standards of performance through work measurement and a radically revised wage structure. The negotiating structure developed during the first agreement provided an invaluable base for the second, much more important, agreement. (It is significant that the second agreement includes an undertaking that another will follow.) Productivity growth One of the recent features of Esso productivity bargaining is the formal agreement by the company and the trade unions that "productivity bargaining should be a continuing process". In fact, Esso's productivity growth has tended to be jerky; the famous Fawley refinery agreements in 1960 and 1962 were not followed up between 1963 and 1967, when pay increases came from "conventional" bargaining. The rates conceded were well below the national average and the company emphasized that larger wage increases could only come from further changes in working practice. By 1967 productivity talks were under way again and these led to an agreement in 1968. It seems that comparison with the manning scales of refineries in the American parent company, plus a major computerized centralization of control methods, were factors in getting constructive talks started again.
A useful by-product of the 1968 agreement was the setting up of local joint committees meeting at least monthly and the supervision of the full agreement by a Standing Joint Productivity Committee. A main task of the standing committee was to ensure that all changes in equipment and operating techniques were recorded and reviewed annually to assess changes in work load. The implication underlined by the PIB is that Esso at Fawley were beginning to establish the principle of adapting the workforce to new technical requirements as they occurred and negotiating later about the implications for workers' pay. In many fields of transport, perhaps most significantly in the docks and at container terminals, this crucial principle ought to be accepted.
The Esso distribution "New Deal" agreement of 1966, says the PIB, was remarkably successful in achieving some of its objectives, such as overtime reduction and the extension of double-shifting in the context of improving work standards. But its success was not unqualified for there were considerable variations in work standards between different depots: Hence a major objective of the 1968 productivity agreement was an evening out of standards between plants and depots and a realistic exploitation of the 40 mph maximum.
[A further examination of this NB report on Productivity Agreements will appear next week.]