Problems with partnership at work: lessons from an Irish case study

Problems with partnership at work: lessons from

an Irish case study

Paul Teague and Deborah Hann*, Queen’s University BelfastHuman Resource Management Journal, Vol 20, no 1, 2010, pages 100–114

This article uses a case study of a celebrated enterprise partnership in Ireland that broke down to get aninsight into why such arrangements are hard to sustain. The argument of the article is that meaningfulenterprise partnerships require trade unions and management to accept agency costs, which in practiceinvolves management modifying their right to manage and unions accepting that issues normallyaddressed by the collective bargaining process may have to be delegated to the partnership arrangement.The evidence of the case study is that neither management nor unions were prepared to incur such costs.The case study suggests that the following trinity – meaningful partnership, full-blown collectivebargaining and management’s right to manage is exceptionally difficult to operate at the same time.Contact: Professor Paul Teague, Queen’s University Management School, 25 University Square,Queen’s University Belfast, Belfast BT7 1NN, UK. Email: [email protected]*Present address: Oxford Brookes Business Schoolhrmj_105 100..114

INTRODUCTION

Industrial relations in Ireland have been governed by a system of social partnership for thepast 20 years (Roche, 2007a). At the centre of this system are national social agreements thataim to guide pay increases and launch social and economic initiatives. In the mid-1990s,

there was concern that the social partnership regime was too centralised, disconnected fromrelations between employees and management inside organisations. In an effort to address thisconcern, a big push was made to establish enterprise partnerships in the hope of replicating thehighly successful shared understanding between unions and employers at the national levelinside organisations (Gunnigle, 1998; Teague, 2005). Extensive public policy support wasprovided to help organisations create partnership arrangements. Ten years later this activity hasslowed down: none of the parties appear to be working actively on the topic. Numerousenterprise partnerships were established in the late 1990s, but none have been set up in the pastfew years and some of the more celebrated cases have folded (e.g. Aer Rianta, MusgraveSuperValue Centra and Waterford Crystal). Although the National Centre for Partnership andPerformance still promotes the creation of enterprise partnerships, the promise of an economy-wide network of such arrangements has yet to be realised (Williams et al., 2004).

The purpose of this article is to provide an insight into the difficulties in sustainingenterprise partnerships by examining the fate of one such arrangement. The article isorganised as follows. The first section draws on the literature on the economics of the firm tohighlight the potential benefits of enterprise partnerships for management and unions. Thefollowing section discusses the difficult design issues associated with creating enterprisepartnerships that possess legitimacy and that are sustainable. After this assessment, theevolution of an enterprise partnership at Bausch & Lomb is examined to gain insight into thedifficulties of establishing and sustaining such an arrangement. The conclusions argue thatthe inability to overcome agency costs may explain why some enterprise partnerships fail toreach maximum potential.

doi: 10.1111/j.1748-8583.2009.00105.x

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 20 NO 1, 2010100

© 2009 Blackwell Publishing Ltd.

Please cite this article as: Teague, P. and Hann, D. (2010) ‘Problems with partnership at work: lessons from an Irish case study’. Human ResourceManagement Journal, 20: 1, 100–114.

THE PROMISE OF ENTERPRISE PARTNERSHIP

There is no widely accepted definition of enterprise partnership, but it is usually seen as amethod of governing an organisation so that corporate strategies incorporate the interests ofboth management and employees – the notion of mutual gains (Kochan and Osterman, 1994).Enterprise partnership is also seen as fostering new forms of collaboration and joint actionbetween management and employees (Guest and Peccei, 2001). Organisations with enterprisepartnerships are seen as possessing a series of characteristics. Employees and managementshare common values and understandings as well as norms of behaviour. Employees areprovided a voice in the decision-making processes of the organisation and feel they are listenedto (Martinez Lucio and Stuart, 2004). An expectation emerges among managers and employeesthat help would be given or received from others when needed. Employees have a sense ofbelonging to their job, their co-workers and the organisation (Kochan and Rubinstein, 2000).

On paper, enterprise partnerships promise benefits for both employers and employees. Theeconomic theory of the firm can be used to illustrate the potential benefits. Over the past fewdecades economists have developed richer accounts of the nature of firms, with the transactioncosts and resource-based views being the most developed (Roberts, 2004). While these twoviews are not immediately complementary, both can be used to highlight the gains that canpotentially accrue from enterprise partnerships. Consider first the transaction costs economicapproach. Whereas neoclassical economics describes firms in terms of production functions,transaction costs economics describes them in organisational terms (as governance structures)(Williamson, 1998). The starting point of this approach is that there are costs to using themarket. For example, discovering relevant prices can be costly as can the conclusion of separatecontracts for each exchange. These costs associated with using the price system causeentrepreneurs to decide ‘to make rather than buy’ – they establish firms rather than use themarket (Coase, 1937).

The problems for the entrepreneur do not end here as costs also arise from operating firms(hierarchies). These are usually called transaction costs and for the most part relate to thenon-production costs associated with business activity. They usually arise as a result of thelimits of human cognition: gathering, processing and communicating information constrainfirms from acting fully rationally. Limited information, sometimes referred to as boundedrationality, can result in firms operating suboptimally. To be competitive, firms need to createa low transaction cost environment. They normally do this in a number of ways. One is bydesigning incentives to reduce moral hazards, opportunism and various other forms of ‘badbehaviour’. Another is by creating structures and processes that encourage information sharingand the efficient processing of information. Finally, bargaining systems are established to solveproblems of opportunism and to reconcile competing claims on the organisation. This line ofthinking was used by Aoki (1990) and Soskice (1994) in the 1990s to explain the success ofJapanese and German firms at that time. For Aoki and Soskice, organisations that address thechallenges of incentive, information and bargaining more effectively than others are likely toachieve superior performance.

Alternative organisational routes can be taken to secure a low transaction cost environment– works councils are used in Germany and other European countries, enterprise unions inJapan and high-commitment HRM policies in the USA. Enterprise partnerships can also be seenas one such organisational route as they have the potential to make a positive contribution toinformation, incentive and bargaining systems within organisations. Consider, for example, thematter of incentive systems. An increasing number of firms are using some form of financialparticipation to establish ‘common fate’ between employees and the organisation (Gomez-Mejia

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et al., 2000). But financial participation schemes, whether they are profit-sharing or share-options schemes, are tricky to design. The core problem is providing employees with asufficient financial stake that will impact positively on their attitudes and behaviours withoutexposing them to excessive risk. There is no formula to calculate this point. Instead it has toemerge through a process of consultation and deliberation within particular firms. Enterprisepartnerships can provide a potentially useful venue for these types of discussions. They couldalso be a useful vehicle to solve any disputes concerned with the running of the financialparticipation scheme. Examples could be used to show how enterprise partnerships can helpimprove the supply and processing of information and ease bargaining problems byencouraging less adversarialism. But the overall message is that enterprise partnerships helpfirms reduce transaction costs in a manner that is consistent with employee interests.

Enterprise partnership can also be used to build capabilities within organisations, which isthe core focus of the resource-based view of the firm. Whereas the transaction cost approachregards differences across firms in terms of governance structures, the resource-based view ofthe firm sees these in terms of resource endowments (Barney and Clark, 2007). On this view,firms steal a march on rivals by creating internal dynamic capabilities. Creating dynamiccapabilities is difficult for organisations. Potentially, enterprise partnerships can be used torealise this task. One of the main strengths of enterprise partnerships, if they function properly,is to create credible commitments between employees and managers, which involve one partyproviding an assurance about its own behaviour and in return gaining a reciprocal assurancefrom the other party. The existence of credible commitments makes the task of developing andsustaining dynamic capabilities easier. Consider the problem of strengthening employee skillsand competencies within the organisation. The age-old problem with such HR policies is thaton acquiring new skills employees may consider themselves more indispensable to the firm –they see themselves as quasi-fixed factors of production. In this situation, employees may rentseek – seek pay levels not warranted by productivity levels – which might undermine the driveto upgrade capabilities. This opportunistic behaviour is less likely to happen where crediblecommitments prevail between management and employees (Finegold and Soskice, 1988). Thus,through cultivating and maintaining credible commitments, enterprise partnerships can play adecisive role in building the organisational foundations for dynamic capabilities.

DESIGNING ENTERPRISE PARTNERSHIPS: THE PROBLEM OF AGENCY

To reduce transaction costs and build dynamic capabilities, enterprise partnerships must createshared norms and understandings about the responsibilities of managers and employees toensure the success of the organisation in a manner that incorporates the interests of employees.There is now extensive literature on enterprise partnerships (Guest and Peccei, 1998, 2001;Martinez Lucio and Stuart, 2002, 2004; Roche, 2007b). A strong theme of this literature is thatenterprise partnerships seldom realise the benefits that they promise. Some who hold a strictpluralist view suggest that enterprise partnerships predicated on creating mutual gainsbetween managers and employees are inevitably going to malfunction because the interests ofthe two are incompatible (Kelly, 2004). Others who adopt a more pragmatic approach –management and employees having common and divergent interests – tend towards one of twoexplanations. Some point out that it is difficult to secure a workable balance between theinterests of employees and management, which jeopardises the sustainability of the partnershiparrangements (Oxenbridge and Brown, 2004). This framework is used by Dobbins andGunnigle (2009) to capture vividly the fate of two Irish workplace partnerships at WaterfordCrystal and Aughinish Alumina in their endeavours to deliver sustainable gains. Another view

Problems with partnership at work



is that the lack of meaningful effective action on the part of some enterprise partnershipsundermines their credibility: partnerships are seen as only gaining legitimacy if theymeaningfully advance the vested interests of both employers and employees (Eaton et al.,2000).

Thus, the promise of enterprise partnerships is frequently seen as being thwarted by the twinproblems of legitimacy and sustainability. In this article, the apparent difficulty of translatingthe potential gains of enterprise partnerships is seen as a principal–agent problem, a core themeof the literature on the new economics of organisations (Moe, 1984). This framework sets outto explain why principals (in this case management and unions) delegate responsibilities anddecision-making capabilities to an agent (in this case an enterprise partnership) to act on theirbehalf. Invariably, the explanation is that delegation occurs to allow principals to realise certainobjectives that would remain unrealised otherwise. Thus, principals have the incentive todelegate to achieve goals that they cannot reach by acting alone. At the same time, there arerisks with delegation: adverse or at least unintended consequences may emerge if the principaldelegates too much or too little responsibility to agents (Bester and Krahmer, 2008).

For example, if principals delegate too much authority or responsibility to the agent, thenthe possibility opens up of the agent acting in a manner that is contrary to the interests of theprincipals. Alternatively, if the principals delegate too little power, then the agent may beinvested with insufficient authority to carry out designated tasks. Thus, if the delegationprocess is not properly designed some level of distortion may arise (Nielsen and Tierney, 2003).The principal/agent framework holds promise for conceptualising the problems encounteredby enterprise partnerships. First of all, it brings into sharp relief why management may seekto enter into a partnership agreement with trade unions. In particular, as a principal,management may calculate that delegating authority to some form of partnership body insidethe organisation may be the only way to secure the level of employee commitment andengagement necessary to make the organisation a success, re-establish positive workingrelations with unions or signal that the organisation is launching a new employment relationssystem. For their part, trade unions also face incentives to delegate responsibilities to apartnership body. In a highly competitive economic environment, engaging positively withmanagement in an enterprise partnership may be as viable a strategy to protect the interestsof their members as any alternatives.

Therefore, both management and trade unions as principals may have incentives to delegateresponsibilities to an agency structure known as enterprise partnerships. Delegation occurs toinduce stability in management–employee interactions, thereby mitigating conflict and pavingthe way for the realisation of mutual gains. Because the interests of management and unionsare not likely to be contiguous, both must incur some agency costs as a result of the delegationprocess. An agency cost is incurred for management, for example, when the enterprisepartnership obliges it to do something that otherwise it would not: partnership needs tocompromise manager’s right to manage – for example, they may have to allow partnership todevise strategies to introduce workplace changes. The same is true for trade unions: partnershipneeds to impinge on collective bargaining – unions may have to accept that the partnershipshould have the authority to establish a gain-sharing or profit-related pay scheme. If no agencycosts are associated with the setting up ofan enterprise partnership then the arrangement isunlikely to engage in meaningful matters. Dealing with small-scale, unimportant issues is likelyto result in the partnership arrangement running into legitimacy problems.

Incurring agency costs by setting up an enterprise partnership may not be a big problem formanagement and trade unions if the arrangement contains something of value or producesconcrete benefits. Ideally, partnerships should create an equilibrium whereby trade unions and




employers get sufficient return to compensate for agency loss. At a minimum, both parties mustfeel that partnership is more successful than previous workplace regimes: problems and conflictare resolved satisfactorily. More positively, the partnership arrangement should foster jointaction that produces mutual gains. But this may not always happen. If either side extracts toomuch from the partnership arrangement over a consistent period of time, then the dangerincreases of instability or even defection. If management or trade unions demand more fromthe partnership arrangement than the concessions they are prepared to deliver, then theviability of the arrangement is likely to be precarious.

The Irish literature on enterprise partnership has indirectly touched upon the matter ofagency costs. For example, Gunnigle (1998) in a prescient piece argued that enterprisepartnerships would encounter difficult times if they were restricted to operational matters: inother words managers had to accept agency costs and allow these arrangements to discussstrategic issues relating to organisational performance. Geary and Roche’s (2003) work on themisplaced activist also points indirectly to the dangers with having to incur agency costs tomake an enterprise partnership operate effectively: if trade unions fully support an enterprisepartnership, a danger is that they may lose support of members who feel that union collectivebargaining activity has weakened.

Thus, enterprise partnerships are difficult to establish and sustain over a period of time.Another problem is the behaviour of management and unions inside the partnershiparrangement. The general view is that both managers and unions have to act differently in apartnership arena than they do in a collective bargaining arena where advances are madethrough parties trading different interests (Eaton et al., 2003). Such an approach to partnershipis likely to be inadequate. Enterprise partnerships will find it difficult to produce durable formsof joint action if each side is continually calculating their interests in a way that does not takeaccount of the interest of the other side and engaging in negotiation and renegotiation ofpartnership terms. Roche and Geary (2006) found, in their study of Aer Rianta in Ireland, thatalthough benefits accrued for a time from the workplace partnership, the arrangementultimately floundered because of the relentless pursuit of self-interest by both parties. Thus,both managers and employees have to engage with each other collaboratively to makepartnership work.

Reaching agreement through reasoned, consensus-based dialogue seems the mostappropriate behaviour for management and unions to adopt in enterprise partnerships. It isnaïve to think that enterprise partnerships work to a prescribed agenda that has been set inadvance (Rubinstein and Kochan, 2001). Business circumstances change, as do the goals ofmanagement and unions, which require enterprise partnerships to develop forms of joint actionthat were not anticipated at the start. In addition, although the functioning of partnershipdepends on a two-way relational dynamic between management and unions, it is naïve to thinkthat both view partnership in similar terms. Most enterprise partnerships have to operatein the absence of an agreement about the ultimate purpose or objectives of the arrangement.This is done through the creation of a procedural consensus – an agreement is reached on theprinciples about how issues are tackled with the ultimate objective of the partnership left open(Ackers and Payne, 1998).

RESEARCH METHODOLOGY

The aim of this article is to learn the lessons from the establishment and operation of onehigh-profile enterprise partnership in the Republic of Ireland. A case study was considered themost appropriate data collection method as a detailed insight was being sought into how




management and unions went about constructing a partnership arrangement inside theorganisation and how they related to each other inside the organisation. Conducting a surveywas not considered appropriate as it would not reveal to the same extent the ebb and flow ofmanagement and union interactions as they strive to produce collaborative organisationalstrategies. The company selected for the case study was a single site subsidiary of a USmultinational based in Waterford, Bausch & Lomb, as its enterprise partnership was among themost celebrated in the country. Although care has to be taken not to overgeneralise from onecase study, this assessment of partnership at Bausch & Lomb does allow insights into thedifficulties that arise from operating such arrangements, which may hold wider lessons.

Interviews were carried out in the organisation over a two-year period, involving three sitevisits. A common set of questions were put to all interviewees. Common questions related to:(1) the motivation for creating the enterprise partnership; (2) how different constituencies insidethe organisation viewed the concept; (3) how the partnership arrangement evolved in theorganisation; (4) how the Partnership Forum functioned; (5) critical incidents and developmentsof the partnership experiment; (6) why partnership collapsed in the company; (7) the future ofmanagement–trade union relations inside the organisation. In addition to these commonquestions, specific questions were asked of particular constituencies. Thus, trade unions wereasked questions about how they viewed the relationship between collective bargaining and thePartnership Forum and what ‘employee-friendly’ partnership initiatives did they want to seeimplemented. Managers were asked specifically about the relationship between partnershipand management’s right to manage as well as the relationship between partnership and thehuman resource management strategy of the organisation.

Altogether, eleven interviews were carried out in the organisation. The HRM manager wasinterviewed on two separate occasions. Two other managers were also interviewed to find outhow the partnership arrangement affected the organisation’s production and businessstrategies. Three trade union representatives inside the company were also interviewed. Thesecretary to the partnership forum was interviewed as well as three members of the PartnershipForum. The questions making up the structured interview schedule were drafted on the basisof our reading of other case studies on enterprise partnerships. Additional interviews were alsocarried out with three staff of the conciliation and advisory services of the Labour RelationsCommission (LRC), the public employment dispute resolution agency, as well as with aDirector of the Irish Business and Employers Confederation (IBEC), all of whom worked closelywith the company on a variety of industrial relations matters. Trade union officials andrepresentatives from the Services, Industrial, Professional and Technical Union (SIPTU) and theTechnical, Engineering and Electrical Union (TEEU), which represented 60 and 10 per cent ofthe workforce, respectively, were also interviewed. These additional interviews were requiredto gather further information about how the partnership process was supported and about theemployee audit carried out by the LRC. These primary interviews were complemented by aclose investigation of company documentation and business plans. Access was also providedto minutes of meetings of the Partnership Forum.

BAUSCH & LOMB

Creating the enterprise partnership

Bausch & Lomb is an American multinational company with its headquarters in Rochester,New York State. It operates worldwide in the optics business, making contact lenses andcomplementary surgical and pharmaceutical products. The company first opened a plant inWaterford in 1981 and currently employs about 1,250 people at the site. Between 1981 and 1995




the company enjoyed the reputation of being one of the best local employers: workingconditions were good, and pay and benefits were generous. As a result, industrial relationswere stable, if not exactly harmonious: management and unions really had no reason toconfront one another. On the surface, all the indications were of a highly successful andprosperous business from which employees benefited.

But behind these outward signs, important changes were occurring in the global opticsbusiness. First, in the early 1980s Bausch & Lomb had virtually no serious competitive rivals.However, by the end of the 1980s, several new companies had entered the market, eachpursuing aggressive business strategies focused on winning market share from Bausch & Lomb.These strategies weakened the company’s dominant position: in 1985 the company enjoyed 52per cent of the world market, but by 1995 this figure had been reduced to 15 per cent. Whilethe overall size of the market had increased, within a decade the market context for thebusiness had been transformed. Instead of operating in a low-volume/high-margin market, thecompany now faced a high-volume/low-margin competitive situation.

In this new competitive environment, the company sought productivity improvementsfrom the workforce. Seeking changes to work practices brought management and unions intocollision. The number of disputes increased and, on occasions, involved the LRC. By the endof 1996, relationships between management and workers were frosty. Around this time,management put the idea of setting up a partnership arrangement to the main union at theplant, SIPTU. A newly appointed regional official, alongside in-house union representatives,responded positively to the idea. As a result, a joint management/union committee wasestablished to progress the matter. This committee evolved into a Steering Group, involvingmanagement, SIPTU and TEEU, to oversee the establishment of a partnership arrangement.Relatively quickly, the Steering Group concluded a partnership agreement. This agreementwas put to the workforce, which voted 3 to 1 in its favour. As a result, an enterprisepartnership was created in the company.

The partnership agreement stipulated that the partnership and collective bargainingstructure should remain separate channels. It also confirmed management’s right to manage.An overarching partnership committee, known as the Partnership Forum, was set up and it wasstipulated that it was to meet once a month. A Partnership Secretariat was established,consisting of one person working three days a week and a part-time secretary. The personappointed to the Secretariat position was selected because of his background in communitydevelopment work. The interview panel, drawn from both management and unions, was of theview that the partnership process would be better served by somebody without a backgroundin mainstream employment relations. Skills associated with coordinating and mobilisingcommunity groups were considered more appropriate to the way partnership was seendeveloping in the organisation.

The design of partnership at Bausch & Lomb is noteworthy in two respects. First, bothmanagement and unions calculated that the establishment of an enterprise partnership couldpotentially deliver important gains that may not be realised by continuing to work usingestablished industrial relations structures. For management, partnership held out the promiseof securing employee buy-in into efficiency programmes, whereas for trade unions it held outthe prospect of getting close to company decision making for the first time. Thus, managementand unions recognised the potential of creating partnership as an agency structure within theorganisation. Second, while both management and unions were committed to creating ameaningful partnership process, neither appeared to accept or perhaps was aware that such anarrangement would almost certainly involve incurring agency costs: trade unions were insistentthat partnership should not encroach on the collective bargaining process while managers were




equally emphatic that their right to manage would remain intact. One senior management saidthat ‘from the very start, managers were adamant that partnership would not compromise theirability to manage the factory.’ In contrast, a SIPTU shop steward said ‘most union activists wereprepared to give partnership a go . . . but they were determined to make sure that collectivebargaining worked as well.’ No changes were deemed necessary to existing organisationaldecision-making procedures: there was no agreement or plan about how to demarcate collectivebargaining and partnership activities: the operating assumption was that full-blown collectivebargaining and full-blown partnership could sit cheek-by-jowl inside the organisation. In otherwords, both parties were of the view that the partnership agreement could be aligned relativelypainlessly with established ways of doing things and work effectively to bring mutual gains.

Operating the partnership agreement

While question marks could be raised about the design of the partnership agreement, bothparties appeared to be of the view that they needed to adopt a more cooperative style ofinteraction to make the experiment work. However, this new cooperative style did not comespontaneously to either party. The initial forum meetings resembled collective bargainingsessions. The person running the Partnership Secretariat suggested that people talked in a fairlyadversarial manner – he stated ‘unions and management sat opposite each other on differentsides of the table, each demanding to know what the other was going to do on particularissues.’ Over time, this situation seemed to change and ‘quality discussion,’ as one manager putit, started to emerge. This change in behaviour was put down to two factors. One was theextensive training given to Forum representatives in technical matters, financial planning andin ‘soft skills’, such as how to be more persuasive when communicating with others. The otherwas the facilitation support given to the Forum, which involved a third party working withmanagers and unions to adopt a more problem-solving approach to discussions. Thus, the earlysigns were that both parties were prepared to act in a collaborative fashion even in the contextof a faulty design structure.

Probably because of this consensus-orientated behaviour, concrete advances were made atthis early stage. By the end of the 1990s, the Forum had established five subgroups workingin the areas of pensions, finance, communications, suggestion schemes and training. Pensionswere seen as the most advanced subgroup, described by one Forum member as a ‘bull terriercommittee.’ As a result of this group’s activities, ‘real-quality’ information emerged about theoperation of the company’s pension scheme. Asking the right questions and improving the flowand quality of information in the organisation were widely seen as the two main benefits fromthe partnership forum. Although intangible, these two benefits were seen as bringing aboutsome positive and meaningful change.

In particular, they were seen as improving management style. Because managers expectedto be asked searching questions at the Forum, they prepared better and presented higherquality information. This, in turn, obliged them to give fuller explanations for choosing onemanagerial path over another. One manager stated that he ‘spent several hours the night beforepartnership meetings getting together information.’ However, this preparation was only doneat senior management level as he went on to say ‘only senior managers gave presentations tothe Partnership Forum.’ An additional benefit of the partnership process, particularly theactivities of the subgroups, was that it allowed untapped expertise and knowledge in theworkforce to come to the fore. As a result, the working lives of certain employees wereenhanced and the management of change improved. Thus, the early workings of the enterprisepartnership appeared to suggest that it could work effectively without management and tradeunions having to pay agency costs.




But organisational cracks soon started to emerge in the partnership arrangement. Inparticular, the deliberations of the Forum and its subgroups only involved a select group ofworkers and managers and did not gain a profile among the wider workforce. The PartnershipForum identified this as a weakness of the partnership process. Several Forum membersdescribed the group as an ‘upstairs committee,’ and suggested that some middle managers,shop stewards and the general workforce were not properly connected with the partnershipinitiative. One trade union member of the Forum stated ‘most employees did not know whatpartnership was about and this worried Forum members as it might make people suspiciousof what was going on.’ Thus, not only did management and unions consider it unnecessary tomake any organisational adjustments to accommodate partnership, they also did not at theoutset launch any dedicated activities to ensure that their respective constituencies bought intothe concept.

After a time, both recognised lack of buy-in as a problem and as a result a new internalcommunications system was set up. A major effort was made to publicise the workings of thepartnership inside the organisation. Another view held by some management and unionrepresentatives in the Forum was that the workforce would not properly connect with thepartnership process until it made direct changes to work organisation. One manager said that‘partnership had to be brought to middle managers and employees to get them involved in theprocess.’ As a result of this view, a new effort was made to implement teamworking within theorganisation, part of which was to create ‘online’ opportunities for the dissemination ofdecisions made by the higher level Partnership Forum.

The Partnership Forum made progress on rescheduling some work tasks. In addition, acontinuous improvement initiative was implemented in various parts of the plant. But a biggerplan to introduce teamworking ran into difficulties because of the reluctance of some middlemanagers and shop stewards. The middle managers were concerned that teamwork wouldsimultaneously change their work roles and diminish their authority. Employees were worriedthat teamwork was simply a ruse to get them to work harder and take on more responsibilities.Attempts were made to address these fears by some subgroups of the Partnership Forumthrough developing training and communication programmes: the Partnership Forum wastrying to act in a problem-solving manner to advance a joint management/trade unioninitiative. One trade union member said that ‘it was difficult to sell the idea of teamworkingto our people, a lot thought we were doing management’s job.’

Thus, efforts to win over some middle management and employees to the teamworking planwere only partially successful. As a result, the initial plan had to be substantially scaled back,resulting in teamworking being diffused in only particular parts of the organisation. The planto use teamworking to embed partnership inside the organisation had to be abandoned. Thisepisode suggests that agency costs associated with creating enterprise partnerships operate attwo levels: one level relates to the extent to which management and unions accept thatestablished ways of doing things may have to be modified to ensure that partnership is asuccess; the second relates to internal efforts made by both parties to mobilise their respectiveconstituencies behind the concept.

Problems with reconciling partnership and bargaining

The deliberations of the Partnership Forum started to run into other problems. At the outset,the intention was to keep the partnership process separate from collective bargainingprocedures. But, in practice, it proved difficult to keep the two channels apart. For example, atthe end of the 1990s, management concluded a gain-sharing agreement with the main union,SIPTU, which stipulated that employees would receive 23 per cent of any elaborated efficiency




plan. This agreement was reached through the collective bargaining channel, but it had animpact on partnership proceedings. First of all, the deal led to the smaller craft union, TEEU,which opposed the gain-sharing agreement, to withdraw from the Partnership Forum. Inaddition, the partnership process was given the role of governing the gain-sharing scheme,which of course meant that an agreement made in one channel was influencing the activitiesof the other channel: management and unions were realising that the boundaries betweenpartnership and collective bargaining could not be delineated in any precise manner.

Because the boundaries between collective bargaining and partnership activities are blurred,tensions can arise about appropriate topics for each channel. This is what happened at Bausch& Lomb. During 2001 SIPTU and management increasingly disagreed on what matters shouldbe discussed in the Partnership Forum and what matters should be left for the realm ofcollective bargaining. For example, management sought agreement for a new internal conflictresolution procedure from the unions in the Partnership Forum, but the unions objected to thismove on the basis that the topic was a collective bargaining matter. As a result of these clashes,SIPTU came to the view that management was seeking to manipulate the proceedings of thepartnership process to tie the hands of the union in the realm of collective bargaining.Effectively, the union had lost confidence in the attitude of management towards partnership.Thus, the failure to address front-on at the outset whether the creation of partnership wouldgenerate agency costs for collective bargaining was now wreaking damage.

Of course, the misalignment that emerged between partnership and collective bargaininginevitably spilled over into the behaviour of management and unions. For example, wary of themotives of management, unions became reluctant to agree to anything significant inside thePartnership Forum. One union official stated that ‘at union meetings before the PartnershipForum strict instructions were given not to agree or make commitments to any managementinitiative.’ Inevitably the work of the Forum began to falter: projects and other subgroups ofthe Partnership Forum started to meet infrequently. Relations between management and unionsstarted to become more confrontational, leading to an increase in the number of industrialrelations disputes. Between 2001 and 2003, various public employment dispute resolutionagencies had to intervene 12 times to settle disputes. Union disaffection with the partnershipprocess came to a head in September 2004, when SIPTU members voted to withdraw from thepartnership process. The regional secretary of the union said of the vote: ‘where workers’industrial relations concerns are not given due weight, disenchantment begins to creep in. Itdoes illustrate that real partnership has to be a partnership of equals.’ Plainly, the union hadbecome disillusioned with the arrangement. This withdrawal did not lead to the collapse of thePartnership Forum. It continued, but its membership consisted solely of management andwhite collar workers employed by the company. Stripped of union representation, the Forumwas effectively turned it into a talking shop. Thus, in the end the initial decision not to delegateproperly activities to the partnership committee laid the foundations for subsequent faultlinesto emerge within the arrangement

Repairing relations: back to the future

Like any other industrial relations problem, the effective breakdown of an enterprisepartnership can have serious negative consequences. Relations between management andunions can become embittered as the shared understandings and consensus-based decisionmaking promised by partnership gives way to mistrust and adversarialism. Management atBausch & Lomb were alert to this problem, as it was concerned that SIPTU’s withdrawal fromthe partnership process would lead to a further deterioration in industrial relations within thecompany. In an effort to avoid this situation, an agreement was reached with the union to bring




in the LRC to assess the strengths and weaknesses of management–union relations in theorganisation and to make suggestions how these could be improved.

The LRC carried out a detailed audit of the views of management and unions inside theorganisation. This survey revealed that the majority of employees were happy with their payand conditions and accepted that the organisation needed to make continuous changes to workpractices to remain competitive. But the survey also found that management and unions werecritical of each other. Union representatives complained that management handled the changemanagement process poorly and did not give enough attention to rewarding improvementsmade by employees. For its part, management was critical of the unions for not fully embracingthe change agenda. Clearly, the partnership experiment had not fostered any meaningful newshared understandings between management and unions.

The main recommendation of the LRC was that management and unions needed to negotiatea new procedure to solve problems more effectively. After protracted negotiations in 2005, theparties reached a new agreement on the management of change and a new dispute resolutionprocedure. The management of change process set out a methodology for change and a newformula for rewarding employees who engaged in the change management programme. Anextensive range of communication procedures were established through which managementhad to engage with unions on restructuring plans and proposals. The new dispute resolutionprocedure covered two matters. One was an industrial peace clause, which involved anagreement not to strike for the lifetime of the agreement in return for management not takingany action to lock out employees.

The other was the creation of an alternative dispute resolution (ADR) mechanism, in theform of a binding arbitration procedure to deal with most in-house industrial relations issues.This new mechanism requires the parties to go through a number of internal steps in order toresolve disputes. If an agreement cannot be reached at any of these stages, a newly createdinternal Appeals Body, comprising a jointly appointed Chair sitting alongside SIPTU andcompany representatives, would arbitrate a resolution. If necessary, the Appeals Body wouldissue binding decisions. The intention was to keep conflict in-house whenever possible.

It cannot be said this endeavour has been fully successful as in 2006 there was anacrimonious employment dispute between the company and the craft union, TEEU, largelyover the behaviour of a shop steward, which threatened to destabilise relations inside thecompany. But the most striking aspect of the period after the breakdown of enterprisepartnership has been the eagerness of management and SIPTU to create a framework to bringpredictability and stability to management and union interactions. Partnership may have failed,but management are still very much eager to develop consensus-based relations with theunions. For example, in the near future, management are hoping to use the recently introducedlegislation on workplace information and consultation to establish a new formalisedarrangement for dialogue with the main union SIPTU. This arrangement will not have the termpartnership in its title, but it will seek to build cooperation between management and tradeunions. One senior manager said, ‘we are very eager to have good working relations with theunions, but the term partnership will not be used. It is very much a dirty word with bothmanagers and unions.’

Thus, management and unions are still eager to build cooperative relations. But the mannerin which they are trying to do so differs between the partnership and post-partnership period.The partnership experiment was an effort to combine a meaningful partnership arrangement,fully-fledged collective bargaining and management’s right to manage. Workplace change wasseen as progressing by establishing a workable balance between all three arrangements. Afterearly hopeful signs, it proved difficult to create this balance, which caused a range of




organisational distortions. In the post-partnership process, a different approach has beenadopted. Partnership was off the agenda and the emphasis was on recasting the relationshipbetween collective bargaining and management’s right to manage. An agenda on organisationalchange was thrashed out and a new dispute resolution process was established to address anyarising problems. In other words, in the wake of the collapse of partnership, management andtrade unions resorted to traditional industrial relations methods to handle the sometimesdifficult problems that arise from organisational modernisation.

LESSONS FROM THE PARTNERSHIP EXPERIMENT

Four main points emerge from this case study. First of all, the company was unable to sustainthe enterprise partnership beyond the short term. Second, the partnership arrangement,although promising much initially, never produced joint initiatives of real substance. Third,with perhaps the exception of the early period, neither managers nor unions appeared to adoptin any systematic manner consensus behaviour. Finally, partnership was continuallyundermined, if not thwarted altogether, by its inability to gain legitimacy from workers andmiddle managers and supervisors. For many on the shop floor, partnership was an elite activityinvolving senior management and union representatives, which suggest that the ‘misplacedactivist’ phenomenon identified by Geary and Roche (2003) in their study of Aer Rianta wasalso present in Bausch & Lomb. All in all, enterprise partnership at Bausch & Lomb was notsuccessful and certainly did not lead to the revamping employment relations inside theorganisation. The promise of partnership remained unfulfilled in the organisation.

The architecture of the enterprise partnership is probably the main reason why thearrangement failed. The partnership arrangement was designed in a manner to allowmanagement to retain its right to manage, permit robust collective bargaining to continue andto foster meaningful partnership activities between management and unions. In other words,the internal industrial relations system was seen as operating along these three axes. But thelesson from the enterprise partnership at Bausch & Lomb is that these three axes are difficultto synchronise so that they operate harmoniously. As pointed out earlier, effective ‘verticalalignment’ (Cutcher-Gershenfeld and Verma, 1994) between these three elements can only besecured if management and unions recognise that the creation of enterprise partnershipsinvolves incurring agency costs. Invariably, these agency costs come in the form of having tomodify the management’s right to manage and the remit of collective bargaining.

At Bausch & Lomb, management and unions considered the creation of a meaningfulpartnership arrangement to be costless. Partnership was seen as creating benefits by allowinga two-way relational dynamic between managers and unions to emerge without impinging toomuch on managerial prerogative and collective bargaining. But in practice, partnership becamethe source of tensions. After a relatively short period of time, for example, tensions emergedbetween partnership and collective bargaining processes: trade unions regarded participation inthe partnership process as undermining collective bargaining. Misalignment betweenmanagerial prerogative, partnership and collective bargaining bred mistrust and suspicionbetween managers and unions. Most of the other problems that were identified with thepartnership arrangement can be traced back to this core design defect. For example, neithertrade unions nor managers never really developed a new sustainable consensus-based mode ofbehaviour. As a result, the partnership process never really engendered credible commitmentsbetween the two parties – both maintained a self-interest conception of partnership.

Thus, the necessary behaviour to make the arrangement work did not develop sufficientlyamong management and trade unions. With the effective absence of credible commitments, the




partnership arrangement continually struggled to launch meaningful initiatives that had thefull support of both parties. As a result, the outputs from partnership were meagre, which wasa critical factor in its lack of legitimacy. The lack of decisive action by the Partnership Forumonly fuelled the suspicion of rank-and-file trade union members and lower/middle managers.After a period of time, the lack of effective action and the problem of buy-in started to feed offeach with fatal results for the partnership process.

The analysis in this article chimes with the theoretical argument developed by Freeman andLazear (1995) on why enterprise partnership-type arrangements set up on a voluntary basismay not be sustainable. They suggest that employees and management may not engage inmutually advantageous cooperative interactions even if it is in their self-interest to do so. Onthe one hand, management will tend to invest institutionalised employment involvementarrangements, such as enterprise partnerships, with too little power as they seek to protect theirright to manage. On the other hand, workers will demand more power than is consideredoptimal by managers because they want to advance employee influence over organisationaldecision making. They suggest that this ‘negative externality’ can only be effectively addressedby legislation that would give enterprise partnerships the same legal status and authority asGerman works councils. This might be pushing the argument too far. This article suggests thatenterprise partnerships can be successfully developed provided an effective equilibrium isestablished between management’s right to manage and employee demands for a meaningfulvoice inside the organisation. Marchington et al. (2001) highlight the problems with creatingsuch equilibria. But without this balance being established, the danger is that sooner or latereither managers or trade unions will become disgruntled about the enterprise partnershiparrangement.

CONCLUSIONS

Ambitious claims are sometimes made in the literature about the transformative potential ofenterprise partnerships (Kochan and Osterman, 1994). From this perspective, enterprisepartnerships can transform management/employee relations: mutuality and reciprocity aremore evident than adversarialism and problem solving rather than confrontation is thedominant mode of behaviour. This is an attractive model as it envisions a workplace wherepolicies and practices are designed to advance the interests of both management and employersat the same time. Unfortunately, the evidence from this case study suggests that there is a gapbetween the theory and practice of enterprise partnership. In practice, it is difficult to establishsuch arrangements and the case study suggests that the unwillingness of management andemployees to accept the agency costs associated with establishing bodies such as enterprisepartnerships is a big part of the explanation.

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Problems with partnership at work: lessons from an Irish case study

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