3.2 Internal enterprise transitions

Growing awareness of the need for improvements in certain aspects of job quality can be seen within small enterprises, for example in worker participation and health and safety. The increasing importance of innovation, quality control, flexibility and the need to adapt to continual change has resulted in a new emphasis on shop floor practices such as team working, cooperation and worker participation. Thus, for example, there is a rapid spread of organisational innovations such as self-directed work teams, job rotation, problem solving groups or quality circles, and total quality management (TQM). Such practices are reported to have spread rapidly in industrialised countries, and now seem to be becoming prevalent in developing regions, perhaps especially in those areas connected to global markets and requirements (See Box 1).

As a part of the new principles being introduced, labour is seen as an active input in the change process rather than a static cost of production. As a consequence, the conditions under which workers might be expected to cooperate and give of their best is rising to the fore as an issue. Thus commentators such as Pfeffer (1995; 1998), are noting that under current economic conditions successful companies in the USA and elsewhere are those which pay close attention to the needs of their workforces, providing security, good wages, training and other aspects⁹. Recently Levine (1998) called for the ‘reinvention of workplace regulation’ to promote greater employee involvement, encourage the development of problem solving skills and help stimulate improvements in quality to meet customer needs (Levine 1998).

9 In Germany, a recent study of over 100 companies in ten industrial sectors in Germany compared firms over a seven year period (1987-94) on aspects such as training expenditure, lay-offs and assistance with relocating redundant workers, promotion opportunities, and the extent to which employees have the freedom to take decisions and maximise individual initiative. It was found that those companies who scored most highly on such criteria also performed best in terms of stock market success (share prices and dividends), and also created the most jobs (Bilmes et al., 1997)

In the recent ILO review of conditions in export processing zones in countries such as Bangladesh, China, Costa Rica, Dominican Republic, Honduras, and others, the better enterprises were found to be pursuing initiatives to involve workers more fully in the challenge to meet new competitive requirements. This included initiatives to promote a better quality of production and service, lower costs, greater flexibility and speed. Typical measures by such enterprises, says the report, include: ‘the introduction of teams, gradual empowerment, increased sharing of information, joint problem solving and target setting, and the encouragement of worker innovation’. Teamwork is growing in zone enterprises. (ILO, 1998).

New participatory approaches appear to be growing in Europe also¹⁰. Cooke et al., (1998) have suggested that factors such as ‘trustful labour relations’, ‘shopfloor cooperation’, and ‘a worker welfare orientation’ are more likely to be associated with an innovative firm. In respect of Baden-Wurttemberg, for example, they suggest that the strong innovatory potential exhibited there is associated with factors such as an ‘associative, cooperative and civic culture’ (which results in) ‘high social partnership, low antagonism in labour relations and, through substantial initial vocational, then further training, strong mentoring in the workplace.’ However, concerns have been raised that attempts to introduce greater flexibility, especially those using new forms of precarious employment contracts, may undermine worker security. This in turn might undermine commitment and a readiness to cooperate, and indirectly the goals of increased innovation, quality, modernisation and change. In response, some larger enterprises seem to have recognised that change can be implemented more satisfactorily within a framework of trust and security. One aspect appears to have been an increase in longer term collectively agreed pay deals, which balance flexibility and cooperation for increased job security for the workforce¹¹.

10 In fact within Europe, the promotion of active cooperation within the workplace to introduce new working practices is reported to be an important part of EU policy. The aim is to improve competitiveness and employment through changes in work organisation based on ‘high skill, high trust and high quality’. Some progress has been made. For example, in Denmark, Cooperation Committees have been formed to encourage flexible organisations; in the Netherlands, works councils have been used to encourage trust and innovation in companies; and in Finland the government has launched a workplace development programme with employers and trade unions (Taylor, 1998a).

11 For example, in 1997, Bayer, the German chemicals and pharmaceutical company, signed a deal with 46,000 German workers which runs until 2001, whereby the company gained increased flexibility and cost cutting measures in the context of guarantees on job security (Bowley, 1997). In the UK, a Scottish whisky company, United Distillers, employing 4,500 workers, has made an agreement with the GMB union whereby a management guarantee of job security has been tied to a commitment to flexibility and retraining, and the pegging of pay increases to just above inflation. This agreement is said to have promoted an atmosphere of cooperation towards introducing modernisation, flexibility and increased productivity.

Doubts have been raised as to whether such agreements, valuable as they might be, are adequate for small enterprises and for the increasing numbers of mobile and unstable workers employed on flexible employment contracts. It has been suggested that attention be given to establishing systems for social and welfare protection at the community level for those employees for whom employment is unstable, seasonal and otherwise erratic. (Pyke, 1997b).

Health and safety is another area to receive particular attention in the future because of the increasing implications for modern competitive practices. The detrimental effect on enterprise productivity, morale and absenteeism of poor health, work related stress and inadequate social protection schemes is well understood. For example, a clear relationship between working conditions and productivity was found to exist amongst the self-employed, micro-enterprises employing less than ten people, and people involved in other informal sector activities in the Philippines (Joshi, 1997). In particular, poor working conditions were seen as having an economic effect in terms of wasted time, as well as imposing long term harm on workers.

Other Filipino research projects have been reported as coming to similar conclusions. For example, a study carried out by the Philippines Institute for Labour Studies noted that productivity is often diminished by accidents and illness resulting from poor working conditions (ILS, 1990, cited in Joshi, 1997). Other studies, such as ones connected to the ILO WISE and IWEB programmes have also demonstrated a link in developing countries between working conditions in small and micro enterprises and productivity in those enterprises.

In Europe, the economic cost of poor health has also been recognised. For example, the British Health and Safety Executive calculates that 33 million days are lost at work in the UK annually because of workplace accidents and a further 20 million due to occupational health problems (Taylor, 1998b). It has been suggested that the effect of work related illnesses such as stress undermines the capability to provide the quality products and services now so much in demand, and has an important cost consequence for business Buckby, 1998b; Harris and Arendt (1998).

Further, health and safety are becoming a significant issue in the context of supply chain effectiveness. Recent evidence from the UK indicates that as larger enterprises have restructured their supply chains and pursued new competitive strategies (such as just-in-time deliveries, high quality service, constant costs reductions, rapid product change, and minimum product defect) the reliability of small enterprises further down the chain has risen in importance. This leads many lead firms to take active steps to minimise disruption potentially caused by health and safety hazards. Thus health and safety aspects are becoming discriminating factors when lead firms choose their preferred suppliers (See Box 2). Consequently, more attention should be paid in the future to how small enterprises might be able to achieve adequate health and safety levels.