Chris McLachlan

University of Leeds

Responsible restructuring and integrative concession bargaining

An empirical examination of the role of trade unions at a UK steel firm

Chris McLachlan, University of Leeds
Mark Stuart, University of Leeds

This paper explores the connection between responsible restructuring and integrative bargaining at a UK steel firm. Through a qualitative case study of the negotiation process between management and trade unions, and drawing on Walton and McKersie’s (1965) seminal framework of labour negotiations, the paper argues that trade unions are able to induce management into more responsible forms of employment restructuring by realising the ‘integrative potential’ when bargaining over restructuring.

Research by Pulignano and Stewart (2012; 2013) highlights two distinct union responses to job loss, described as confrontation based on job protection and cooperation based on job transition. Findings suggest these strategies point to both the positive role unions can play in addressing the social and economic effects of restructuring for affected employees. For instance, unions may cooperate with management in the early stages and bargain around issues such as redeployment, retraining and severance payments. Alternatively, unions may take a confrontational approach that refuses redundancies initially yet uses this as a platform for subsequent negotiations. Although much of the prevailing research tends to accept that unions engage with management to shape the outcomes of restructuring, caution has been raised around whether this reduces unions’ independence from the actions of management and their ability to contest managerial initiatives (Martinez Lucio and Stuart, 2005; MacKenzie, 2009; Rodriguez-Ruiz, 2005).

Recent debates in industrial relations literature have highlighted the relationship between trade union activity and Corporate Social Responsibility (CSR), suggesting unions are well placed as key stakeholders to engage with CSR initiatives in order to improve outcomes for their members and wider society (Harvey et al, 2017; Preuss et al, 2014). Nonetheless, there has been little empirical research on the role of trade unions in relation to specifically responsible practices. With regards to restructuring processes, the term responsible restructuring represents a range of practices implemented by organisations in order to ameliorate the consequences of redundancy for affected employees (Forde et al, 2009). Responsible restructuring has thus been viewed as connected to an organisation’s CSR agenda, with research suggesting ways in which a more ethical approach to restructuring may also bring strategic benefits (Tsai and Shih, 2013; Rydell and Wigbald, 2013). Moreover, a burgeoning consistency has been identified between responsible restructuring and integrative bargaining, whereby unions may engage with management when bargaining over restructuring in order to seek a quid pro quo when agreeing concessions in relation to job losses (Walton and McKersie, 1965; Teague and Roche, 2014; Garaudel et al, 2008). That is, in an era where restructuring and redundancy is considered inevitable, unions may acknowledge certain complementary interests with management in times of restructuring and utilise these in the negotiation process.  Garaudel et al (2008) refer to this as ‘integrative potential’, where by unions engagement in restructuring processes may help mitigate some of the negative social and economic effects of redundancy for employees.

A key point of departure in this paper is thus to explore burgeoning claims in the literature that integrative concession bargaining may offer a strategy for unions to induce management into implementing more responsible forms of restructuring and redundancy (Teague and Roche 2014; Garaudel et al, 2008; Ahlstrand, 2015; Rodriguez-Ruiz, 2015; Kirov and Thill, 2018; Harvey et al, 2017). In particular, Teague and Roche (2014) have pointed to a consistency between integrative concession bargaining and the management practice of responsible restructuring, though in the specific context of responding to recessionary pressures. The authors suggest that greater union involvement may be mutually beneficial as unions can secure certain ‘institutional gains’ related to extended recognition or representation rights, whereas for management union involvement in restructuring programmes can bestow a legitimacy upon the process amongst the workforce. Research into partnership arrangements between union and management has also demonstrated this, where union presence in restructuring processes, and wider workplace change initiatives, afford management a ‘legitimizing rhetoric’ and help consolidate employee consent (Butler et al, 2011; Martinez Lucio and Stuart, 2004; 2005; Butler and Tregaskis, 2018).

Through an examination of a restructuring process at a UK steel firm (SteelCo), this paper explores the dynamics of management and trade unions bargaining over restructuring. Through interview and ethnographic data, the analysis highlights contextual conditions and critical moments that were indicative of an integrative bargaining approach between management and trade unions and hence shaped management’s claims to have implemented a responsible restructuring process. Three critical stages in the bargaining process are identified. First, the early engagement between senior management and senior trade union officials six months prior to the restructuring is considered. Second, the establishment of an internal redeployment process (cross-matching) shortly after the restructuring announcement which was jointly managed by the HR team and senior trade union officials. Third, contentious incidents in the subsequent delivery of the restructuring are explored. Each of these stages is analysed in relation to three criteria: how legitimacy between management and unions was established; areas of integrative potential; and the outcomes and tensions for each party. There is a specific conceptual focus on understanding an integrative bargaining approach in the restructuring process. Attention is afforded in the findings to analysing the interactions in the negotiations, the concessions sought from either party, critical moments that shaped the bargaining process and implications for trade unions’ role in the implementing of responsible restructuring. The paper concludes with an extended discussion on the subsequent implications for trade union strategy in relation to responding to restructuring processes more widely.

Exploring internal labour market ‘churn’

Analysing employees’ experience of internal redeployment

Chris McLachlan, University of Leeds
Robert MacKenzie, Leeds University Business School

Employees who are subject to organisational restructuring processes typically experience a range of social and economic effects, whereby the loss of employment has implications for future employability, future earnings and disruption to career trajectories. For employees displaced through redundancy, the transition to new employment typically involves retraining for a new job and engaging with institutional support mechanisms externally. In this sense, displaced employees face a period of employment instability and the experience of labour market ‘churn’ (Brand, 2015; Jolkkonen et al, 2017). One organisational approach to limiting the impact of restructuring and avoiding compulsory redundancies has been through the implementation of internal redeployment processes. This paper thus explores the consequences of the implementation of internal redeployment processes for affected employees, provoking a wider debate around the function of internal labour market systems and the notion of internal labour churn in relation to organisational restructuring.

The rationale for organisations implementing internal labour market systems is traditionally understood as a means of protecting job security and job instability through employer-led solutions (Grimshaw and Rubery, 1998; Grimshaw et al, 2001; Capelli and Neumark, 2004). The organisational practice of internal redeployment has therefore sought to insulate employees affected by restructuring from the vagaries of the external labour market by offering them alternative employment internally. Rubery (1994) notes the importance of organisational contingencies on determining the condition of the internal labour market yet remains critical however of a tendency to over emphasise the organisational focus at the expense of neglecting the firms relationship with the environment in which it operates. Therefore, defining the existence of an internal labour market in terms of its distinction from the external labour market raises the question of the effect of the state of the external market upon the operation of the internal market. The point is to demonstrate the need to go beyond the tendency for asserting the dichotomy of the internal and external labour market and adopt an integrated approach in recognition of the interplay between the internal and external markets. As argued by Grimshaw and Rubery (1998), internal and external competitive pressures mutually interact to shape employer’s strategy and the labour market status of employees.

The paper hence builds on ideas of external labour market churn, viewed as the volatility caused by the voluntary or involuntary turnover of employees for organisations and employees alike, and the consequent impact on employment outcomes and career trajectories. We develop the notion of internal labour market churn and suggest this represents an analogous phenomenon, focusing attention on the way employees’ experiences and outcomes are shaped specifically by internal labour market systems such as through the practice of internal redeployment. Whilst employees can experience such churning due to the vagaries of the external labour market, this paper argues that churn may also be evident, and equally negative, within processes such as internal redeployment. Exploring redeployment process also connects to recent policy developments at European Union level, with the European Restructuring Monitor (2018) emphasising the need to anticipate the consequences for ‘stayers’ – those that remain employed post-restructuring such as through internal redeployment – in order to more effectively manage organisational change.

With regards to methodology, this paper seeks to further conceptualise the notion of internal labour market churn by building upon empirical research conducted at the UK subsidiary of a multinational steel firm (SteelCo). Based on a qualitative case study of an internal redeployment process the findings revealed the challenges faced by redeployed employees. Data was collected as part of a wider case study where 1700 jobs were lost at SteelCo between 2011-2015 over the course of two restructuring programmes. The focus on establishing an internal redeployment process meant employees moved between jobs in the internal labour market. The findings highlight how redeployed employees experienced similarly negative effects of ‘churn’ to those faced in the external labour market. Such effects included career scarring, feelings of displacement, underemployment and poorer terms and conditions. These effects are also often compounded by the external labour market environment, with a paucity of alternative employment opportunities and relative wage levels place constraints on employees and oblige them to engage with internal redeployment processes. Crucially, however, this brings into focus the role of HR in managing redeployed employees. Thus, the paper also points to the wider structural tensions in HR’s implementation of restructuring, highlighting the specific challenges faced by HR in relation managing internal redeployment. Structural tensions emerged in relation to the timing of the process, the availability of internal vacancies and the provision of retraining for redeployed employees. The paper concludes with some reflections on the changing role of internal labour markets and future implications for the management of restructuring processes.

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