Philip Whiteley's Blog

October 25, 2012

It’s the management, stupid

Filed under: Uncategorized — felipewh @ 9:42 am

Employment lawyers, HR professionals and trade unionists have queued up to denounce the British Chancellor’s recent suggestion that employees in a start-up could trade their employment rights for a share in the business.

The storm of protest was entirely predictable. It was also based, as usual, on a fundamental misunderstanding of what employment rights can do and of the importance of the role of management. For decades now, both sides in this debate have been wrong. Rights don’t help the worker as much as their representatives imagine, but don’t impede the business as much as some conservative lobbyists suppose.

Let’s look at some common beliefs about management and employment law. They may be found across the political spectrum. Trade unions, employer groups and prominent politicians would broadly share these assumptions:

  • Poor management, including carelessness, bullying and discriminatory practice, is inevitable. There is little we can do to prevent it.
  • Ruthless cutting of wages maximises operating margins and boosts profits.
  • Legislation and trade union militancy are the only counter-balancing forces that can prevent low pay and workplace misery.

These beliefs are closely intertwined, and strongly supported by the dominant left-wing and right-wing economic theories. They are also almost completely wrong. The evidence base suggests the opposite: that fair, enlightened management practices help the business as well as the employee; that the direct costs of paying staff are usually outweighed by indirect factors such as skills, commitment and teamwork.

Many trade union leaders counter that they do make the case for the enlightened manager, pointing out that they have often sought to reassure businesses that they have nothing to fear from better conditions for staff. Many do make this case, but not consistently. They also use the ‘social dumping’ argument, which is the opposite: that workers’ rights must be strong and international to prevent firms gaining a sneaky competitive advantage by ‘dumping’ their operations in a low-wage environment. I once heard the then head of the British Trade Union Congress John Monks make both arguments in the course of the same speech. You cannot convincingly make the case for better business from enlightened management if your base your argument for more laws upon the exact opposite.

Let us consider the first of these cultural beliefs, that poor and discriminatory management is inevitable, and let’s go back 200 years and make a comparison with medicine. Before safe surgical practices, evidence-based treatment and long before antibiotics, many medical interventions were horrific: useless where there were not actually dangerous. ‘Blue mass’, which contained mercury, was still widely used in the 19th Century.

Management now is like medicine a couple of hundred years ago: most practitioners are unqualified, most practice is poor, the evidence base is ignored.

So the question is: should the response to poor medicine be confined to pressing for more and more complaints procedures? Or should most effort be applied to improving practice?

We have to have complaints procedures – the shockingly discriminatory practices exposed in a recent local authority equal pay case demonstrate this – but it is by no means clear that always adding to the entitlements for workers automatically improves management: the really big changes come from reformed and enlightened practice. An over-regulated workplace can be an impediment to good management. Talk to anyone with a day job: the conduct of their boss is the single biggest factor that shapes their daily working experience. Given a choice between a good boss and a new route to the tribunal, all well-balanced people will choose the former.

This is of pressing concern to human resources managers and the trade unions, which have almost become branches of the employment law profession. At the moment, they probably spend 90 per cent of their time learning about or pressing for more laws, and 10 per cent of their time encouraging enlightened management practice. If this were reversed, the consequences would be revolutionary.

But we have to want to. The problem is that our left/right political duopoly tell us that bad management is really rather good.

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