Sunday, July 24, 2011

Death by Haggling.

We should be way past this! It is simply unacceptable that labour negotiations routinely end up in strikes and work stoppages. What this is telling us is that apart from the highly destructive simmering conflict between employer and organised labour in this country, the negotiation process itself is broken.

Labour experts will argue that strikes are to be expected in free societies but only as a last resort, and they do not occur before an intense period of conciliation and due legal process. The fact remains that the country has been subjected to highly costly and burdensome industrial action since long before the devastating public service strike in the second half of last year. The litany of action has been well documented on Moneyweb and other media; with other big storms such as Mine workers, Municipal employees, civil service and Cosatu’s Living Wage campaign gathering on the horizon. We have, according to Reuters, become a “nation of strikers”. We have also, perhaps too cynically, accepted this period as “strike season” – as if it is an inevitable part of democracy and an environmental hazard in living, working, investing, and doing business with South Africa.

Commentators rush to spread sheets and crunch numbers on the cost in Rand terms. Most of these suffer from one or other form of double accounting and are often in dispute. In addition, the outcome of strikes is couched in terms of winners or losers according to the demands, offers and settlements. This obscene haggling starts at the outset with Unions demanding outrageous highs and employers offering equally outrageous lows. The childish posturing can drag on for weeks with each claiming to be “negotiating in good faith.” When this breaks down, all concessions achieved are wiped off the board and the parties revert to their original demands. One wonders whether this is not the outcome of the highly sophisticated and complex structures with their vested interests that have developed around industrial relations and centralised bargaining.

While they fiddle, Rome burns with the real cost hidden and incalculable. We simply cannot measure the cost in loss of trust, inflation, unemployment, consumer and business confidence, public frustration, foreign and domestic investment, and foreign trade competitiveness. These are subtleties that far more than the metrics, cause lasting, if not permanent damage. They deserve a lot more analysis, recognition, understanding and attention before being accepted cynically as collateral damage in the killing fields of raw material self-interest. They cannot be excluded as a backdrop to the conflict theatre.

I have always championed the nobility of work and by implication the contribution labour makes to the creation of wealth in this country. At the same time, I have argued that the near exclusive focus of organised labour on reward rather than contribution is self-defeating and destructive. Regurgitating this argument in the midst of the current unrest will be pointless. One learns very quickly to shut one’s mouth when partners in a marriage are having a go at each other, even though they may be disturbing the peace.

The fact that some or other settlement is reached after a strike action, raises the simple question whether the strike was necessary in the first place.

Could one or other party, or both, not have reached the same conclusion before the strike action? Logic tells us that the frequency and intensity of strikes in this country points to a far too facile reverting to them. Then perhaps the parties are less to blame than the circumstances that allow it.

Many of the causes are obvious and seemingly overwhelming.

Perhaps the most important is that the workplace is still viewed as an arena of an on-going but severely out-dated ideological revolution in which the power of labour must be repeatedly demonstrated. An unhealthy alliance between government and labour simply exacerbates the problem. An “injury to one” whether in job-losses, inflation, or even a business failure or two, becomes an acceptable sacrifice for the grand ideal. It makes the Cosatu slogan blatant hypocrisy.

The ideological opponent in “capital” is equally to blame in clinging to out-dated metrics, concepts and behaviours such as short term profit maximisation, defining labour as a cost and the singular focus on shareholder value. Since about the seventies the workplace from top to bottom, here and abroad, has been converted into a place nearly exclusively for self-enrichment – a place of means rather than meaning. Most are simply responding to this twisted perception.

For the negotiation process to be more meaningful there must clearly be some absolutes. The one is the full realisation that all wealth, whether it’s in a slice called wages, profit or tax, is a function of having added value to other’s lives: it is as a result of a collective contribution to society, NOT of collective bargaining. The common purpose of a partnership intent on creating value and reaping rewards from it is inescapably linked to service. This is a simple and powerfully unifying message that should not be negotiable and supressed. Sadly, it mostly is. Companies can go a long way in refocusing business strategy and executive behaviour on service and customer care and involving employees in this.

Linked to the common purpose is common fate. Employee pay as the biggest single cause of labour unrest has to be managed if not neutered. Fortune sharing, based on wealth creation is the only way to do this. All rewards are ultimately determined by the size of the pie (value added or wealth created) and individual rewards should be linked. Without such a link, an increase in the slice of one merely squeezes out another, setting off destructive rivalry that eventually ends up in marches on the street, a stomping on the pie, erosion of profit and loss of jobs. As Cees Bruggemans pointed out this week, this applies at a national, government and company level.

There are a number of other aspects of the current wave of unrest that are puzzling. One is the quibbling around inflation benchmarking that should not be part of negotiations, but rather settled in previous engagements. Many have a problem with the credibility of national price measurements as it affects them as individuals. But it has become an important feature of wage negotiations and to have a ruler in dispute reflects an inexcusable lack of establishing basic ground rules before reverting to strike action.

This raises the thorny issue of employee reporting and information sharing that I dealt with in an earlier article and which Felicity Duncan also touched on this week. There is undoubtedly an appalling lack of contextual information, particularly regarding company performance and earnings among a large group of employee representatives. We should be beyond this in today’s communication age.

Rumour flourishes in a vacuum, and issues such as executive pay become a single and distracting focus. In the absence of credible market force benchmarking on pay levels throughout, perhaps it is time to define acceptable pay differences in a kind of Gini measurement in individual companies. At least it will reveal averages and norms, and highlight those with extraordinary gaps. At present it is simply adding a fuel of assumptions to the fire. Shareholders can no longer avoid some serious soul searching on the impact of pay disparities on employee trust, labour unrest and longer term share value sustainability.

Our liberal labour laws and enlightened work practices are highly praiseworthy. I would argue simply that they are dysfunctional if the price we have to pay is constant strike action and accompanying intimidation and violence.

It is like driving a Rolls Royce on appalling roads.

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