Back in October of last year, BHP announced that it was moving from an industrial award to individual workplace agreements in its Pilbara operations. It offered its 1,000 iron ore workers the option of moving over to staff conditions.
This marked a major shift in BHP's industrial relations philosophy. For over thirty years BHP's approach was to work closely with unions in the management of its mines and factories. This approach worked especially well in the Hawke/ Button years of the 1980s. With tripartite industry/ management/ government plans all the rage, it made special sense for BHP to cooperate with a trade union dominated government. For the company, the steel industry plan that emerged from this process delivered real benefits in terms of investment concessions and import protection.
But Government industry plans for steel and other industry sectors gradually lost their allure as outcomes elsewhere, particularly the US, showed that planning did not bring home the bacon. The plans themselves distracted management and often impeded the flexibility of firms to adapt to shifting circumstances. By the Keating era, the Labor Government itself had quietly shelved or downgraded its industry plans in favour of more economy-wide measures.
The appointment of American Paul Anderson as Managing Director of BHP signalled radical changes at BHP across a range of areas. Many previous ways of operating had run out of steam. It had become clear that globalisation required a fundamental change for BHP if it was to remain competitive. As an outsider, Anderson carried none of the baggage of the past which had, for example, led BHP to incur lavish termination payments as a means of exiting its Newcastle facility. As an American, he had an indifference to unions rather than the Anglo-Australian tradition of deference. And with Labor out of office in Canberra a key underpinning of union influence was removed.
BHP's move to introduce individual agreements to its Pilbara operations is also the final chapter in the mining companies' managements' long march to regain control of their operations from unions.
The process started in 1986 at Robe River where productivity had been falling, and the owners found they were paying an increasing proportion of its workforce to be nothing more than full time union agitators. Initiating the reform took great courage on the part of the firm's management, especially its CEO Charles Copeman. In addition to desperate and vicious union attempts to maintain themselves as the virtual management of the facility, the local supervisory staff had little stomach to fight, and rival firms (including BHP) did not want the system threatened. Copeman also confronted intense denigration from ALP Governments in both Western Australia and Canberra.
In addition Robe River faced the hostility of an Industrial Relations Commission guarding the myth that it was the arbitrator of workforce arrangements even where it simply endorsed lavish conditions the unions had extracted. The Robe River dispute did much to undermine the old industrial relations framework and laid the groundwork for the vast improvements in industrial relations seen in Australia over the past decade. From the dispute, which lasted over a year, Robe achieved a doubling of labour productivity. CRA followed suit in its own Pilbara mines and achieved similar gains. The Pilbara, once notorious for massive overmanning and union demarcation disputes, has, until the recent dispute, become an island of industrial peace and prosperity.
BHP's management had long displayed strong skills in playing the industrial relations game. But working within the system could not provide the quantum leap in productivity achieved by Robe's staff run Pilbara facility, and later at CRA's operation. BHP found in the Pilbara -- as P&O is finding on the wharves -- that there are areas where unions are institutionally unable to accept the workplace gains that are delivered by individual staff agreements.
The advantage of workers being on staff is greater flexibility and mutual agreement of the firm's employees and its owners on the best outcomes for the business. This brings win-win outcomes which mean benefits for shareholders, and better pay and more satisfying employment conditions for the workers. For BHP it had become clear that the improvements from this approach that its competitors in the Pilbara were reaping were bringing richer dividends than the traditional industrial relations approach.
Compared with the bitterly fought pioneering struggle at Robe River, the unions' fight against BHP's decision has been foot-stamping and posturing. This dispute is their last gasp. And even if BHP concedes some on-going role to unions, they will cover few workers and be influential in even fewer workplace issues. The individual employment agreement approach is now the dominant form of workplace arrangement in Western Australia. It is generally recognised as bringing improved productivity and wages.
The changed approach of BHP in its iron ore operations may presage similar changes in its coal mining and steel divisions. The unions' reactions to the Pilbara change show this is uppermost in their minds. Even though, over recent years, the traditional union bargaining approaches have delivered good productivity gains in both steel and coal, the Western Australian developments are a direct shot across the union bows.
This is particularly so for the CFMEU. At the very least BHP's determination to effect change in the Pilbara demonstrates the Big Australian will adopt an alternative approach if there is a return to the bad old days of confrontation in the coal mines. The union leaders' nightmare is that it may even trigger a renewed acceleration of the decline in union importance and membership.
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