An Enterprising Struggle: the Capacity to Manage Index

In the mid-1980s, considerable community debate began on a reform agenda for the Australian industrial relations system.  A central agreed principle emerged that workplace relations should be determined to the greatest extent possible at the enterprise level between the employers and employees.

The idea was that an enterprise focus would:  help erode the "them vs us mentality" that plagued Australian workplaces;  give workers an incentive to accept and gain from productivity improvements;  and provide management with a greater capacity to manage and compete.

While the labour movement was initially resistant, the benefits of greater enterprise focus were slowly accepted by all parties.  And enterprise-based agreements (EBAs) now govern the majority of large (100+ employee) workplaces.

Has the shift to enterprise based regulatory system produced the goods?  While, overall, reform has clearly generated major benefits including higher productivity, higher real wages, and fewer disputes as well as contributing to lower interest rates and greater employment, the contribution made by EBAs is unclear.  There have been a host of other reforms, which could account for the received gains such as the introduction of individual contracts, the reduction in award coverage to 20 allowable matters, and limits on the rights of unions.

My research published this month shows cause for concern about the effectiveness of EBAs.  The research which focused on two of the admittedly more troubled industries, food manufacturing and commercial construction, found that the majority (76 out of 85) of EBAs examined reduced the capacity of enterprises to respond to market demands and opportunities.  That is the majority of EBAs are more restrictive than relevant award (which was used as a benchmark) and the majority of clauses in EBAs restricted rather than enhanced the capacity of firms to respond to opportunities.  Moreover many clauses in EBAs seemed to neuter management in critical areas.  Some firms have negotiated EBAs which provide greater flexibility to management, but theses are few in number and the improvements comparatively small.

The EBAs examined varied tremendously in terms of flexibility with Grocon's national agreement being the worst and Rightway Electrics' NSW agreement being the most flexible.  Interestingly there were significant variations across agreements negotiated by individual firms.  For example Thiess's Victoria agreement was rated a negative 21 while Theiss's Queensland agreement was rated a negative 2.

The food industry fared better overall than construction industry.  Within the food sector, Nestle's Echuca agreement was found to be the least flexible and Sanitarium's Morooka agreement rated the highest.

Victorian based EBAs produce a significantly lower capacity to manage than agreements covering operation in NSW or Queensland.  Also non-union EBAs appear to result in greater capacity to manage than union EBAs, though the sample size of non-union EBAs in the study was small.

In short, EBAs appear to be failing one of their central functions, which is to enhance the flexibility of enterprises.  This is an important finding which much be addressed if Australia is to maintain its recent good form in productivity growth.  And it will need to be address soon as a large proportion of federal EBAs are due for renegotiation in 2003.

ADVERTISEMENT