4.1 Evidence linking productivity gains to partnership

Establishing causal links between workplace partnership and productivity is not straightforward. As we saw in Section 2, measurement of public sector productivity gains is fraught with difficulty. Moreover, the links between social relationships within an organisation and their outputs in terms of products or services is so complex that it would be extremely difficult to untangle the effects of the introduction of partnership from all of the many other factors that might have an effect on productivity or quality. In addition, partnership relationships differ sufficiently from organisation to organisation that the validity of any comparison between organisations would always be highly problematic. For all of these reasons, most research on partnership takes a qualitative case-study approach.

These caveats having been registered, it can be said that, taken as whole, the wider body of research on the effects of different management practices and modes of work organisation provides every reason to believe that partnership does have strongly positive effects. This judgement is based in part on the assumption that partnership can encourage the development of work organisation and practices that have been shown to produce improvements in productivity and performance. For example:

• A report from the Irish National Centre for Partnership and Performance (NCPP 2003, p.19, table 5) cites more than 20 different studies that relate participative or co-operative work practices with some kind of performance gain.
• A report from Australia's National Institute of Clinical Studies notes the principal findings of almost 200 different studies, concluding (among other findings) that the research evidence establishes a causal relationship between high-involvement human resource management practice and better performance (Leggat & Dwyer 2003).
• Bryson et al., in an analysis based on data from the British government's 2004 Workforce Employment Relations Survey (WERS), concluded:

  "Overall, our results suggest that improving managerial responsiveness to employees would improve productivity, so policy interventions which change the beliefs and attitudes of managers and employees towards one another, so that managers are able to become more responsive, may be one way of improving UK productivity" (p.455).

• Analysing the 12 country cases reported in their edited collection, Farnham et al. found that in two cases staff participation had a "positive" effect on public management reform, while seven had a "partially positive" effect, two were "neutral" and none were negative.

  "Public managers believe that direct staff participation delivers better results and improves the productivity and performance of their organizations. By developing and utilizing the 'human capital' of the organization and enlisting its support for reforms, they believe that the managing of change will be made more effective" (p.296).

Similar reviews - citing much of the same research - are to be found both in the purely academic literature and among the more policy-oriented "primary" materials (for example, Guthrie 2001; Altman 2002; Hodson 2002; TUC 2003; Neathey, Regan et al. 2005). As Altman puts it, there is "rapidly amassing evidence that a certain set of work practices yield relatively large permanent increases in labour productivity" (p.274). These practices include employee participation, co-operative employment relationships associated with a minimally hierarchical management system, a relationship between wages and productivity, and employment security. Other research suggests, in turn, that workplace partnership can foster an environment conducive to the introduction and development of such practices. For example, Osmina and Yaroni (2003a) found:

"In sum, our findings suggest that LMC initiatives represent excellent developmental laboratories to help all stakeholders involved learn the appropriate combination of attitudes, knowledge and skills for effective individual and organizational performance. They also help observers study the change in roles necessary for effective service and quality-of-work-life outcomes" (p.167).

Box 4.1 Workplace Partnership and Productivity in the USA

In the United States, workplace partnership in the public sector was given a kickstart by President Bill Clinton when he created a National Partnership Council (including three union and seven management representatives) and directed in Executive Order 12871 that partnership councils be created within each federal agency. This followed the 1992 National Performance Review, which found that "no move to reorganise for quality can succeed without the full and equal participation of workers and their unions" (Gore 1993, p.87). Clinton stated that "the involvement of federal Government employees and their union representatives is essential to achieving the NPR's government reform objectives." One of the first acts of the George Bush administration, which succeeded Clinton's in 2001, was to revoke the order.

One of the federal agencies that put the partnership directive into practice was the Internal Revenue Service, in which the employees are represented by the National Treasury Employees Union (NTEU), one of whose officials has been quoted as saying: "From the very beginning in the design phase there were NTEU members on these teams designing the whole concept for prefiling, filing, postfiling ... In every phase we've had thousands of front-line employees on design teams as part of focus groups, as subteams of the design teams, being a part of the team that is making a recommendation to the commissioner as to how the new divisions will be structured, how jobs will be designed, and that's very different" (Thompson 2005, p.252). In other agencies, unions and employees were involved only in the implementation phase, if partnership went ahead at all, which was highly contingent on the attitudes of individual bureau chiefs (Thompson, 2000).

According to Tobias (2003): "As Customs operations managers began to develop processes to improve employee productivity, they were working with employees through the NTEU. The union was viewed as an extension of the employees, rather than an institution separate from them. Agency operations managers, heretofore protective of their "management rights" and unilateral decision-making, included union leaders and employees appointed by their union as part of the operations decision-making process. Union leaders had a significant and meaningful opportunity to influence decision-makers on all operational matters before final decisions were made. Operations managers, and employees through their union, were aligned to increase individual and agency productivity and employee satisfaction" (pp.131-2).

An evaluation by the consultancy firm Booz Allen Hamilton (1998) found: "For each $1.00 Customs invests in these activities, it receives approximately $1.25 in benefits" and Tobias concludes: "The alignment of Customs management and NTEU, as hoped, did significantly increase the productivity of the US Customs Service" (p.133). Nevertheless, the programme was reversed following a change of IRS leadership. Tobias comments: "An agency seriously seeking to maximize the productivity of its knowledge workers in an organised workplace must create a more collaborative labor-management relationship in order to be successful." After the election of President Bush, however: "Without strong support from the chief executive officer of the executive branch, there are very few new labor-management partnerships being created, and those without a strong performance focus are dying" (p.134).

In addition, the literature suggests that, in the context of a high-involvement approach to management, unions have at worst a neutral effect and at best a positive impact on productivity. Based on research in 627 US establishments, Black and Lynch (cited in NCPP 2003, pp.26-28) found that unionised workplaces using high-involvement work practices had a productivity premium of 20 percent over similar workplaces with low-involvement management and no union, and a premium of 8 percent over workplaces with high-involvement management but no union. Similar research is cited by Godard (2001) and Machin and Wood (2004). Masters and Albright (2003) found that, in addition to "genuine management commitment", including that of political appointees, a strong union base was one of the "critical success factors" in high-performing partnerships and its absence a feature of low-performing ones (p.203). All of these authors argue that the positive effect of unionisation in these contexts is most likely to be related to the increased possibility of employee co-operation with management that arises when unions are present to guarantee that such cooperation will not be unfairly exploited.

4.2 Discussion: Reasons why workplace partnership should improve productivity

The literature suggests that there are three types of reason why partnership might lead, whether directly or indirectly, to improved organisational performance. These can be roughly grouped into three not-entirely-separate categories that relate to:

• the substance of the decisions about action that are made at different levels in the organisation
• the relationships, structures and processes by which these decisions are put into effect and
• the attitudes, beliefs and perceptions of individual members of the organisation.

We shall refer to these as organisational, relational and psychological categories.

4.2.1 Organisational Reasons: Organisational Adaptation and the Environment for Decision-Making

There is good reason to believe that workplace partnership may enhance performance simply by giving rise to more effective decision-making than that which is possible either under hierarchical-bureaucratic or market systems of governance. Workplace partnership involves a range of participative decision-making structures at various levels within the organisation, operating independently within their respective areas of competence in the context of an overarching general agreement about the aims and scope of the process. French industrial sociologist, Alain Chouraqui, has contrasted this kind of system, which he calls "regulated autonomy", with traditional hierarchial forms of regulation. On the basis of systems of participation, it "no longer follows the system of top-down rules within which people have only to obey" but rather "gives the actors certain autonomy to produce or co-produce the substantive regulation, within a very general and limited central" (Chouraqui 2003, p.3).

Chouraqui argues that this kind of system is particularly well-suited to circumstances in which the environment of an organisation is characterised by what he calls "permanent dynamic complexity", in which there is a continuing need to adapt structures and processes to meet changing demands. As we have seen, such a description fits not only the demands of the modern firm, but also those of the contemporary public services. Understood in this way, partnership appears not only as a means of delegating decision-making authority to the most appropriate level - and thereby ensuring that decisions take account of the most relevant information - but also of ensuring that it remains coherent with an agreed set of general organisational aims and priorities.

Box 4.2 Examples of Organisational Adaptation Based on Partnership

Oticon

Oticon is a Danish hearing aid production company which, until the late 1980s, had a conventional bureaucratic structure and depended on outdated analogue technology. However, beginning in 1991, the structure of the company was radically changed. Henceforth, it would operate on a project basis, with any member of staff entitled to start or join a project (with the permission of one of five senior managers). This work reorganisation based on staff empowerment led directly to a significant increase in new products, higher levels of innovation and the halving of lead times for product development. In 1995, Oticon introduced the world's first digital hearing aid. It is now one of the top three hearing aid manufacturers in the world.

Source: NCPP (2003).

Community Leg Ulcer Clinic, Elphin (Ireland)

In the context of a regional Health Board's quality improvement initiative, two public health nurses suggested that it would be effective to move to a clinic system for the treatment of leg ulcers rather than treating patients in their homes. This idea was pursued via a steering group involving both staff and managers and led to the establishment of a nurse-led clinic. The nurses involved now have much greater autonomy and report greater job satisfaction. The clinic operates flexibly, extending opening hours when necessary to deal with excess demand for treatment. Patient outcomes have improved because the clinic offers opportunities for more effective treatment, as well as greater clinical consistency and opportunities for staff to learn from each other.

Source: NCPP (2005a).

It is certainly arguable that a deregulated or market system of governance could provide the same kind of reactivity and efficiency without the considerable costs of organising participation. However, as Kaufman (2004) argues, the market approach - characteristic of NPM - ignores the degree to which successful economic or organisational action is dependent on social conditions such as trust, co-operation and commitment that are strongly related to context. These conditions cannot arise in the absence of the recognition that relationships within organisations have moral, ethical and political as well as contractual dimensions (Zafirovski 1999; Godard 2001; Lazonick 2003; Cradden 2005). In this respect, systems of regulated autonomy, such as workplace partnership, have an enormous advantage over market systems of governance precisely because, as Chouraqui (2003) argues, they integrate the social/political and economic/technical dimensions of action within a single decision-making process, thus ensuring that neither is neglected.

4.2.2 Relational Reasons: Commitment, Legitimacy and Mutual Trust

It follows from what we have just argued that there are also reasons pertaining to employment relationships why partnership might give rise to improvements in productivity and performance. These apply not at the level of organisational action, but also at the level of the social relationships within the organisation.

The argument begins from the assumption that a genuine commitment to the goals and practices of the organisation will give rise to initiative, willing co-operation and functional flexibility. Other things being equal, it would be surprising if an organisation whose members were all committed in this way did not perform better than a similar organisation in which members' attitudes to their work and its rewards were purely self-interested. The extensive literature on employee commitment can sometimes give the impression that the pursuit of commitment is a technical managerial task that bears no relation to the strategies, plans and methods to which employees are required to be committed. However, overall the literature supports the conclusion that the objectives that an organisation sets out to achieve, how it goes about achieving them and whether or not they are actually achieved in practice has a strong bearing on the outcome. Guest and Peccei (2001), for example, argue that employee commitment is only likely to arise when the "balance of advantage" in the employment relationship is such as to make it rational for employees to become engaged with the organisation. This is to say that commitment depends on whether the process and the outcomes of organisational action are perceived by employees to be broadly in their interest, whether as individuals, as members of a collective or, ideally, as both.

So, the outcome of organisational action - organisational performance - depends on the degree of employee commitment, but the case for becoming committed depends on the outcomes of organisational action. Where organisational processes, structures and relationships have some history, their outcomes are reasonably predictable and participants can be confident that the stance they adopt in response is appropriate. In the context of change, however, when organisational processes are new, the commitment-action-performance circularity makes it difficult for participants to decide whether or not commitment is rational. In these circumstances, the only possible solution is trust.

Mutual trust is of crucial importance in partnership processes because much of the point of the exercise is to move away from the inflexibility that gets in the way of institutional adaptation and that characterises the comprehensive collective regulation traditionally favoured by unions. Collective regulation of this kind is intended precisely to remove the need for trust - and hence the possibility of betrayal - by ensuring that the tangible outcome of any change in workplace relations is clear before that change occurs. The assumption of an inevitable conflict of interest between employers and workers means that either side's propositions for change to the status quo can only ever be treated as strategic attempts to gain some advantage to which the appropriate response is an equally strategic scepticism (Cradden 2004). By contrast, where mutual trust is sufficiently high, change can be embarked upon in the confidence that its full benefits will eventually accrue to each participant in proportion to the costs borne.

The question that arises is how to create the circumstances under which it is rational to advance trust even though there is no history of relationships based on trust - or worse, a history of broken trust - rather than comprehensive regulation. Arguably, partnership permits the resolution of this problem to the extent that it represents an institutional guarantee that reduces or, in the best of cases, removes altogether the risk that one party's adoption of a co-operative stance will be strategically exploited by another. The requirements of such "procedural guarantees" and "substantive guarantees" are discussed in Section 5.

4.2.3 Psychological Reasons: Control and Empowerment

The psychological reasons why partnership might improve performance apply at the level of the individual employee and are related principally to the opportunities that partnership provides for employee autonomy and other forms of direct participation in decision-making.

The literature on the psychological aspects of participation and employee involvement is truly vast, and is generally associated with what Farnham et al. (2003) call "soft" models of industrial democracy, that is, those that emphasise "the importance of the workgroup as a unit of social organisation [and] the need to encourage personal development and job satisfaction at work" (p.2). Research has been focused on showing that there are links between participation and employees' psychological well-being, and between psychological well-being and individual performance, including the propensity to co-operate with managers and other employees. (Guest & Conway 2001). Lines (2004) has provided a concise and comprehensive summary of the literature in this field. Arguing the hypothesis that participation in the workplace leads to positive outcomes is widely supported, he outlines the possible reasons:

• Participation gives employees increased control over their work, which responds to a more generalised psychological need for control in life, as well as ensuring that the relationship between effort and outcome is reliable.
• Participative practices are valued because they respond to the need of normal healthy adults to be autonomous: to be active rather than passive, independent rather than dependent, equal rather than subordinate.
• Participation is valued because it is compatible with the values of democracy.

This positive theoretical picture has to be tempered by empirical evidence that suggests that certain practices designed to increase worker autonomy and direct participation in decision-making may, in some cases, lead to negative outcomes for the individuals involved in terms of increased stress and work intensification (Everaere 2001; Mosse 2002). It has also been widely reported that direct participation, particularly team-working, tends to be accompanied by increased levels of mutual surveillance and social control within the group (Sewell & Wilkinson 1992; Du Gay, Salaman et al. 1996; McKinlay & Starkey 1998). However, these risks can be minimised by ensuring that direct participation is part of a coherent overall strategy that includes the partnership guarantees discussed in Section 5.

Box 4.3 Shift Time Management in Hagen

The small German city of Hagen reorganised many of its services into one-stop shop during the early 1990s. It meant that citizens could go to the same office not only for "over-the-counter" services, such as renewing licenses and making tax payments, but also to apply for other services, such as social care assistance. Working with the staff's union, the city set a standard that any citizen walking into a one-stop shop would be seen within 10 minutes, and the shops stayed open 45 hours a week. That meant a shift system for the staff, and that was where the Hagen reforms became more radical.

Subject to the collective agreement requiring the shop to be staffed to a certain minimum level at all times, and that each member of staff fulfilled their contractual obligations, the task of arranging shift patterns and cover was left to the workers themselves to agree between them.

Jörg Bogumil, a researcher who assisted the union in developing the project, said: "This was a completely new experience for the staff, to actually organise their own shifts, but in two years they never needed any interference from management about it - the team organised it themselves without any problem. It is a big change, but they enjoy it. People like being responsible for their own time management - it is liberating, even if it does bring new stresses as well as opportunities."

Source: Martin (1996).

4.3 Workplace relationships as the foundation of individual and organisational performance

What this brief discussion suggests is that the procedural and substantive guarantees provided by partnership (explored in Section 5), while not necessarily related directed to performance, do contribute to the success of organisations because they underpin and enable both organisational adaptation and individual performance. (Guest & Peccei 2001).

Unilateralist, top-down management practices are consistent neither with the autonomy and control over the immediate work environment that promotes individual responsibility and performance, nor with enabling the location of decision-making power at the most appropriate points in the organisation. In a genuine partnership environment, by contrast, employees are treated as adult human beings with rights that must be respected under all circumstances. The scope of an employee's direct control over his or her work is maximised, in an accountability system that links that control to responsibility to others. At the same time, structures of representative participation articulate and transmit employees' knowledge, opinions and interests within collective decision-making processes. In this way, the interaction of the organisational, relational and psychological factors outlined above may well be mutually reinforcing through a virtuous spiral of co-operation, improved performance and individual benefit.

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