5.1 Procedural and substantive guarantees

The argument in the previous section suggests that partnership is most likely to lead to improvements in organisational performance when it functions as an institutional guarantor for trust, commitment and legitimacy.^[3] Two types of partnership guarantee are identified in the literature: "substantive" and "procedural".

"Substantive guarantees", as the term suggests, are mutual commitments to certain actions or outcomes, or to the avoidance of certain actions or outcomes. In practice, the most notable substantive guarantees are concerned with the terms and conditions of employment and with employment security. They can apply to a partnership relationship in general, or to particular change processes. "Procedural guarantees" are those that enshrine the position of employees and unions in decision-making. For example, the legitimacy of the organisation's aims and practices will follow from the direct or indirect democratic participation of its members in their specification and design. In this sense, the extension of an unambiguous and unpressured autonomy and discretion to individual employees represents a procedural guarantee simply because (we must assume) an employee will not exploit him or herself. Management's willing acceptance of union organisation is another procedural guarantee in the sense that it embodies the recognition of employees' rights to define their interests independently of the organisation and to have the satisfaction of these interests taken into account in decision-making. As Godard notes:

"A number of authors have argued that reforms [of work organization] are more likely to be successful to the extent that an employer is unionized, because the union is able to ensure that reforms will be implemented in accordance with worker interests and to assure workers of this, thereby reducing trust problems" (Godard 2001).

The idea of the union as procedural guarantor would also account for the fact that, despite the common argument that "high performance" human resource management practices assume a unity of interest between employer and employees, and are therefore incompatible with trade unionism, these practices are at least (if not more) likely to be found in unionised work places (Machin & Wood 2004).

Box 5.1 Substantive Guarantees

Kaiser Permanente

The employment security agreement is one of the most important components of the high-profile partnership scheme in US not-for-profit health services and insurance corporation, Kaiser Permanente. The agreement states: "It is our belief that workforce engagement is critical to the success of changing the way we do work, resulting in better quality, greater efficiencies and increased growth. It is unrealistic, however, to expect employees to participate in process improvements if as a result they redesign themselves out of a job or if the result is their co-workers lose their jobs."

Source: CKPU/KP (1999).

South Lanarkshire Home Care Service

A senior manager in the South Lanarkshire example cited in Box 3.2 argued that: "Trade unions were on-board for three fundamental reasons: no jobs under threat, no pay cuts and the service was being kept in-house".

Source: OPSR (2004b, p.36).

That unions are thought of as essential partners in change processes for precisely these reasons is also evident in the French literature, although we need to note the overarching background assumptions that staff will not accept unilateral reforms, that representative participation will necessarily involve unions, and that union-management relationships will only ever be possible on the basis of traditional forms of bargaining. Both Rehfeldt and Vincent (2004a, 2004b) and Mossé (2002) argue that the evidence from cross-national research in the hospital sector points strongly to the need to involve unions in reorganisation and reform for two reasons.

First, reform in practice means decentralisation, which in the French case means the fragmentation of the locus of union power - up to now firmly embedded only at the national level. If structural reform is not to be interpreted as an assault on the existing means of staff representation, then the unions must be involved in the development of new representative structures at the local level. Secondly, and related to this, the decentralisation of management gives rise to the need for a whole series of new policies and practices in the employment and professional arenas. As these can neither be imposed nor produced through non-union forms of representation, new and sophisticated types of local bargaining have to be developed.

Where procedural and substantive guarantees are in place, the otherwise well-founded union arguments against direct participation and non-adversarial or interest-based bargaining (IBB) evaporate. The Canadian Union of Public Employees, for example, objects to IBB on the grounds that it assumes that the common interests of workers and employers are more significant than their conflicting interests, and ignores existing power relations (CUPE 2001). UK public sector union, UNISON, makes a similar point about power, arguing that partnership is based on a notion of equality that is in conflict with the actual distribution of power. As an example, they point to the fact that the time an employee representative is able to devote to their task is under the control of the employer (quoted in Neathey, Regan et al. 2005). However, partnership guarantees exist precisely to ensure that interests and power relationships are brought into the open and directly addressed, thus removing the risks of commitment, co-operation and power-sharing.

Box 5.2 Procedural and Substantive Guarantees Leading to "Mutual Gains" in Indianapolis

When Stephen Goldsmith stood for election as mayor of Indianapolis in 1991, he pledged to outsource most of the city's services and to run them with a team of four purchasing agents. The union representing the city's workers, who opposed his election, strongly opposed that. For some months, the city's industrial relations were bogged down in disputes until the mayor decided that listening to what their members had to say about improving services was worth exploring further. The union had dug in its heels because the mayor's plans would have meant "half our members walking out of the door," as one of their leaders put it.

The result was an agreement that there would be no compulsory job losses, except for a group of middle management "patronage appointments". Instead, the workers were reorganised into increasingly self-managed teams which were given the opportunity to compete with private contractors and provided with training to enable them to do so. This was done on the basis of the employer's acceptance of key union demands, namely:

• the union would have the right to participate from the very beginning and to nominate the employee team members without interference by management
• the city would arrange for and fund the provision of training for all employees involved in the process, and enable them to submit several practice proposals prior to the real thing
• the workforce would be entitled to examine not only personnel issues but all aspects of a job and to redesign it as they saw fit
• the administration would help the workforce to release themselves from bureaucratic systems inhibiting their attempts to be more competitive
• overheads would be examined and reduced or, if that was not feasible, at least attached to private and in-house bids equally
• no union-organised employee would be retrenched as a result of the partnership, but a worker whose job became redundant as a result of the reorganisations effected by the partnership would be placed in a redeployment pool with access to retraining and job placement services.

This led to negotiated criteria for costing particular functions, negotiated cost reductions and negotiated performance criteria. The workers' project teams were also trained in Activity-Based Costing, so that they could measure their inputs accurately and identify savings. Costs were reduced by 25 percent and services improved, according to both the mayor and the union, and fewer services ended up being contracted out than had previously been the case. The employees also received financial bonuses to reward the savings they made, and they reported increased job satisfaction.

External support for these claims came when the mayor and the union were jointly awarded an "Innovation in American Government" prize by the John F. Kennedy School at Harvard University. "What has been the most surprising thing for me has been the degree of commitment from the workers," according to the mayor. "They had a reservoir of good ideas and I have also found a strong pride in the city which you don't often get in private companies." The workers' union leader commented: "The gains have not come without a price. While employees work smarter, they also work differently, leading to membership criticism. The process is very time consuming and we don't win every bid, leading to scepticism. We have had to look at all aspects of the job, including long standing work rules, and controversial work systems."

Source: Martin (2000).

The Indianapolis example illustrates a further condition for effective partnership on which others depend - political leadership commitment to the kinds of relationship it permits and encourages within organisations. Without such leadership, the evidence suggests that managers are much less likely to take the risks associated with entering into workplace partnership arrangements. Political commitment to partnership reduces those risks considerably. By contrast, political commitment to forms of public sector reform that are not compatible with workplace partnership tend to render managers not only unwilling, but also unable to enter into workplace partnership arrangements. We explore that theme by discussing the spectrum of types of partnership, which we divide into three broad categories. We will see that as we move from one end of the spectrum to the other, high-trust, co-operative employee behaviour becomes progressively more rational as the procedural and substantive guarantees that partnership provides become more solid. However, we will also see that the principal problem with partnership is that the more solid the guarantee, the less willing managers are to agree to it without political commitment. We argue that this is not simply the result of an ingrained cultural attachment to the power to command - although that can be a factor and is another reason why political commitment is decisive - but of external constraints and pressures over which managers do not necessarily have any control. In short, establishing the most effective forms of partnership depends on ensuring not just that managers are willing to provide appropriate guarantees, but that they are able to do so.

5.2 The spectrum of partnership relationships

We suggested in Section 3 that the organisational arrangements for partnership are less important in themselves than the principles on which they are based and the attitudes with which engagement is undertaken. These combine to shape the process and scope of partnership arrangements, but while the attitudes of individual leaders on both sides of the partnership can be critical to the establishment and early development of partnerships - which are typically born of external shocks that require change on both sides - institutionalisation of the arrangements is required to sustain them. In practice, the aims with which participants enter partnership arrangements, and the underlying attitudes they bring to them, cover a wide spectrum.

At one end are those who see partnership as a technique: one among a range of approaches to winning worker commitment from which managers can choose, and the appropriateness of which is wholly contingent on the circumstances. There is a good deal of evidence that this is the preferred model among managers, particularly in the UK. At the other end are those who see partnership as an extension of democracy, which is to say that they understand it as constituting a wholly new approach to organisational governance founded on democratic principles and applicable in virtually any situation. This is the ideal, deliberative conception of partnership proposed by Ireland's NESF which, in effect, involves the abandonment of the existing structures of authority, control and representation within the organisation in favour of radical forms of self-management. Although uncommon, not least in Ireland, there is nonetheless evidence that very successful partnerships of this kind do exist in practice, as the cases cited by Martin (1996, 2000, 2004 and 2006) attest.

Somewhere in between the extremes of managerial technique and deliberative industrial democracy we find probably the majority of existing partnership relationships, in which the aim is to promote "mutual gains" (Kochan & Osterman 1994). It is an effort to ensure that direct participation is used wherever possible, in the context of a recognition that the circumstances will not always permit this. While the emphasis is firmly on co-operation, the separateness of employees and employers as social groups is not questioned, and the inevitability of conflicts of interests is admitted. The most notable feature of this mode of partnership is that the most basic existing prerogatives of employers and unions remain unchallenged. Distributive or adversarial bargaining continues for traditional industrial relations issues such as pay and terms and conditions, and unilateral management decisions remain the norm for high-level strategic issues, such as capital investment or public sector mission development. In these circumstances, partnership is frequently conceived as a separate type of decision-making, an alternative both to traditional bargaining and management unilateralism that can be used when both sides recognise that it is appropriate. This conception of partnership, characteristic of the "dualist" systems to which reference was made earlier, is typical of Irish and US partnership arrangements.

The evidence suggests that although partnership is almost always described in "mutual gains" terms, many managers understand it as simply another technique for pursuing the aims of the organisation or as another means of exercising control rather than the sharing of decision-making power implied in the democratic model. Tailby, Richardson et al. (2004) report, for example, the unwillingness of public sector managers in Britain to loosen their grip on power, while Heaton, Mason et al. (2000), investigating partnership practices in the UK health service, found that

"concepts such as team building, communication and empowerment were typically perceived [by employees] as empty words, and not accompanied by appropriate management practices which gave employees a clear voice at senior management level" (p.327).

In a study of the Finnish Workplace Development Programme, Payne (2004) found that

"even in a relatively advanced social democratic country such as Finland, there are indications that management craves power unto itself and concedes control over work processes only very reluctantly and where it sees good reason for doing so" (p.517).

The recognition of managerial reluctance to engage seriously in partnership is evident even in case studies and policy papers produced by non-academic government agencies and other organisations with a stated prior commitment to it. The Irish National Centre for Partnership and Performance, for example, admits that there is "significant managerial hostility" to partnership in Ireland (NCPP 2003). Although it is insisted that this is "not the norm", statistics from the NCPP's own commissioned research suggest otherwise. If it were the case that managerial hostility to partnership was not the norm, then it would be surprising to find that only 27 percent of employees - including in the public sector in which partnership arrangements are widespread - feel they have a high degree of autonomy in their work (NCPP 2005c, p.53). Although public sector managers appear to agree that employee participation is of great importance, 88.6 percent of them also believe that managerial discretion to adjust employee numbers is important or very important, and 58.1 percent agree or strongly agree that the ability to hire and fire at will would be an important contribution to meeting the challenges they face (Williams, Blackwell et al. 2004b, p.115).

These case studies are consistent with the more general finding that, despite the clear evidence of a positive effect on productivity and performance, high-trust, involvement-driven work systems are yet to emerge on anything like the scale that could begin to be called the norm (Altman 2002, Martinez Lucio & Stuart 2004). In this context, one is bound to conclude that the more genuine types of partnership and the co-operative relationships they imply are likely to remain exceptional as long as managers are unwilling to share their existing prerogatives to the extent required. If even those managers who work in organisations that are willing to recognise unions and that take sufficient interest in employee relations to enter into partnership arrangements remain attached to a traditional model of hierarchical control, the prospects for a spontaneous shift in existing managerial attitudes must be extremely poor.

The experience of the very different, but very successful, types of partnership in Indianapolis (Box 5.2), Kaiser Permanente (Box 5.3) and Sweden (Box 5.4) illustrates the value of clear and enforceable procedural and substantive guarantees that appear to be required.

Box 5.3 The Kaiser Permanente Decision-making Process

The Kaiser Permanente partnership agreement provides a guarantee of employment security which, while not absolute, is nonetheless a model of clarity (CKPU/KP 1999). Its self-standing employment security agreement specifies in entirely unambiguous terms the rights and duties of employees, unions and managers in the event that jobs become redundant. What is more, it is accompanied by a related procedural guarantee. Precisely because the commitment to employment security is not absolute, any disagreement about the terms of transfers, the way in which the organisation goes about finding work for displaced individuals, or the willingness of employees and unions to be (appropriately) flexible about what jobs they will accept is referred to agreed impasse resolution mechanisms.

The other notable aspect of the Kaiser Permanente partnership is that it directly and explicitly addresses the issue of decision-making authority, which is rare in partnership agreements, even though ambiguity in this respect is frequently cited in partnership cases studies as having been very damaging. A significant feature of the decision-making process is that it recognises that both interests and technical expertise are relevant factors.

The decision-making process may vary from issue to issue. Nonetheless, it is vitally important to determine the decision-making method with consistently applied criteria. Two such criteria are the degree to which the parties' constituents or institutional interests are likely to be affected by the decision and the level of expertise or added value the parties can bring to bear on the decision to be made.

"If either party's vital interests are likely to be affected by the decision, consensus should be used. If constituent or institutional interests are even marginally affected, consultation should precede a final decision. If one party has little, if any, interest in the outcome, and no particular expertise on an issue to be decided, informing is adequate. We recognize that choosing the appropriate process is somewhat subjective, and that erring in favor of more rather than less participation by partners in decision-making displays commitment and respect for the Partnership. It is understood that this Partnership may not be sufficiently robust in its early stages to withstand many mistakes in the direction of unilateralism. Consequently, the parties will strive for consensus."

Source: CKPU/KP (1997).

Box 5.4 Procedural Guarantees, Partnership and Productivity Improvements in Swedish Municipal Services

During the 1990s, Stockholm Water, a municipally owned water supply and sanitation business, had to improve service quality and reduce costs simultaneously, faced with international pressures from rising environmental standards and global competition. It did so in part by developing a partnership with its workforce, represented by the public service workers' union, Kommunal. By then, the union had experience of transforming work organisation through partnership in many other municipalities, and had set up a company called Komanco, which took its title from the name the union gave to its model, Kom An!, meaning Come On! It sells its services to municipalities at commercial rates and is self-financing.

Komanco's first director was Lars-Åke Almqvist, who had previously been a trade union official of the conventional type and is now Kommunal's vice-president. Recalling the early days of his union's change of approach, Almqvist said: "Faced with demands from employers for cuts in public services or privatisation, we realised that just trying to refuse changes is not very constructive, especially as some of the accusations of inefficiency in the public services have definitely been true. In fact, we had for many years stressed that the traditional hierarchical organisation of work in local government administration must inevitably be inefficient if it does not involve the knowledge and experience of the employees. So we started to develop a model to build more efficient, non-hierarchical organisation by involving the employees, with the aim of saving money without making people redundant" (Personal interview).

The opportunity to try out that approach came first in a town called Malung after the municipality there began to draw up plans to reduce staffing and contract out some areas of service to save money. Before going ahead with their plan, the social democratic local politicians in Malung agreed to give the union the chance to show what could be achieved in partnership with the workforce and to allow them enough time to produce results. Almqvist recalled: "When we got the chance to test our ideas in practice, in Malung back in 1991, the municipality's goal was to decrease costs by at least 10% within three years. We managed to save 10.5% in the first year." The savings are made by focusing very directly on costs in a process in which quality improvements are also identified.

The first condition of Komanco's involvement in any workplace is that both management and the union say they want them there. A second is that there are no compulsory job losses as a result of reorganisation effected through the workplace partnership. And a third is that managers do not have access to the detailed cost-saving information developed by the teams, which the workers themselves implement once agreement in principle to do so has been reached. These conditions enable workers to release their knowledge for the benefit of their organisation, free of the risk that they or colleagues will lose their jobs or otherwise suffer as a result.

Soon after a decision has been taken jointly by management and unions to set up a workplace project, all the employees are divided up into groups of up to 12 people. Each group elects a "tutor" from its membership, while a "project leader" is selected by agreement between management, unions and Komanco. The tutors lead the process of drawing out from their groups as many ideas as possible to improve services and reduce costs.

For example, in the municipality of Ostersund, after its political leaders had decided that savings of five percent had to be found over the following year if its in-house services were to remain competitive, 147 tutors were elected from among 1,800 employees for the Kom An! project in health and social services. The process produced more than 800 ideas for large and small changes, and exceeded the objectives intended by the employer. One tutor commented: "We have now nearly forgotten that this was a process started by our project - it is now so natural for employees to take responsibility. It has led to a big change in job content for employees, and a big change in attitude. People no longer reject the need for change. As an employee, you now take responsibility for your own ideas" (Personal interview).

Another said: "We feel we have a different view of our job now - more responsibility, more confidence. If you have more influence, you take more responsibility for quality. It has come as a surprise to us to learn how many savings we could make in this way -- we had been suspicious about demands for savings because we had assumed it would only be about cutting staff, as before. Some workers had had incentives to keep costs hidden" (Personal interview). And a manager echoed their views: "There is no way I would have been able to solve the problems myself that this process has solved. We are increasing productivity and what has been clearly crucial has been the participation of the employees " (Personal interview).

Almqvist insists: "Every employee needs to know how his or her costs relate to the costs of the whole organisation. It is only on this basis that you can have a dialogue between the chief executive and the auxiliary nurse. Then you can define the limits within which you must operate and go on to identify how to be successful within these boundaries. The members become researchers in their own jobs. The workplace groups break down their organisation's budget into its smallest components, to enable everyone to understand it and see where the money goes. They measure the costs of specific tasks, so that each person knows the costs associated with their own job and develops ways of reducing them. They discuss how to improve quality, where responsibility lies and should lie."

Source: Martin (2006).

5.3 Mutual gains: An uncomfortable compromise?

The mutual gains model is currently the form of partnership winning most favour with public sector employers in most of the anglophone world. Unions and government in Ireland, the UK, the USA, South Africa and New Zealand are all broadly in favour of union-management relationships in which the formal rights of each party remain as they have traditionally been, but where there are voluntary moves - some modest, some more ambitious - towards a co-operative blurring of these boundaries.

The theoretical benefits of partnership and evidence of practical results discussed earlier in this report beg the question: why is workplace partnership not more widespread in the public sector than it is? An explanation could be the continuing, though declining, dominance of approaches to public management reform that militate against partnership. If it is the case that the benefits of partnership arise from individual employee autonomy and discretion, and from representative participation that guarantees that employee interests, opinions, knowledge and experience are factored into decision-making, then it is difficult to understand why the adoption of partnership is allowed to be a managerial choice when managers are so evidently unwilling or unable to choose it. The evidence that managerial attitudes to power-sharing are a key factor in the effectiveness of partnership is not simply negative. What repeatedly emerges from the case studies is a clear correlation between the degree to which managers are prepared to devolve decision-making authority and positive views from participants on all sides about the success of partnership (NCPP 2004; OPSR 2004b; NCPP 2005a; NCPP 2005b).

The more radical experiments reported here also illustrate the potentially enormous changes in work organisation that can come about when managers delegate authority to allow employees to deal with challenges through self-managed team work. However, what also emerges is the fact that managerial will and attitudes are not constant. Particular managers or groups of managers retire or move on to be replaced by colleagues less sympathetic to partnership or with a more "technical" understanding of what it is about. Sustaining partnership over time by institutionalising it is often the biggest challenge; another is overcoming resistance from middle managers to the shift of decision-making power to employee representatives. Pressures from outside the organisation, including political pressures, can also lead to changes of position; governments change and impose new methods and targets on public organisations, for example.

Box 5.5 Partnership for Quality in New Zealand Meat Inspection Services

An example of workplace partnership developed in the context of New Zealand's Partnership for Quality programme came in the state-owned enterprise responsible for meat inspection services, ASURE, at a time of changing regulations in the context of growing international food market competition. The partnership protocol signed in 2000 gave expression to "two important principles":

• "the parties' relationship is underpinned by a commitment to no surprises, which is achieved through open and regular communication on matters which affect the interests of the parties;
• "the parties will use problem-solving methods to promote the speedy resolution of problems by participative methods, with the aim of avoiding industrial stoppages and minimising litigation."

In an evaluation carried out in 2005, it was found that, while the partnership operated well at senior levels, it was not embedded at all site levels, and that this was related to the arrival of a new layer of managers through a graduate programme, rather than through the traditional route of progression from the shopfloor. In addition, it was found that information about how the arrangements worked at other sites was not systematically shared. Many employees felt they were insufficiently involved in decision-making and this undermined their confidence in it to a degree.

Nevertheless, benefits of the partnership were also evident, including that there had been mutual gains in terms of service quality - to the extent that "ASURE's meat inspection practice is now recognised as the benchmark for best practice in the world" - and strengthening of the union, the Public Service Association (PSA). It was acknowledged that there were sometimes failures to agree, leading to "a healthy use of the Department of Labour's mediation services". However, this was happening less frequently and there had been no major disputes.

Source: McIlhone (2006).

This accumulation of evidence has led several commentators to ask whether any kind of partnership, let alone the more radical forms, is ever likely to be introduced on a large scale in the absence of some kind of more determined government action, in particular the introduction of some kind of obligation on managers to share their existing prerogatives (Terry 2003; Geary 2006; CGT Undated). So far, however, even those governments that are most supportive of partnership and which recognise the potential benefits have felt unable to make such a move. Indeed, both the British and Irish governments have actively resisted European Union measures to oblige enterprises to engage in employee involvement practices, for example adopting a "minimalist" interpretation of the Directive on Information and Consultation (Dobbins 2005).

In this context, unions have found it difficult to accept that they should give up the older procedural guarantee of collective bargaining on the adversarial or distributive model. The maintenance of traditional bargaining at least ensures that they have some ability to resist imposed changes to work organisation and terms and conditions in case partnership breaks down. There is clearly a lack of faith in the union movement that managers can be trusted to abide by the stated intentions of partnership as long as their existing formal prerogatives remain intact. Equally, many managers may be discouraged by lack of evidence that unions and their leaders are prepared to cede power and territory to the required degree, as the remarks of the Tilburg chief executive quoted in Box 5.5 below. The combined effect produces a sort of chicken-and-egg paralysis.

Box 5.6 Rival Perceptions of the "Tilburg model"

The "Tilburg model" was a celebrated example of municipal service modernisation in the late 1980s and early 1990s, gaining widespread notice as the Dutch city turned a large budget deficit into six successive annual surpluses. In that way, a financial platform was created for what both management and unions believed would be a new generation of service improvement reforms. By the late 1990s, however, the two sides could not agree about the way forward and agreed only that the reform agenda was running out of steam.

One shop steward said: "The model has undoubtedly increased the possibility of workers influencing and being involved in work processes. In my department that is definitely so, because at the beginning of each year we have our list of tasks and a sum of money and we are free to make our own way about how to carry out those tasks within that budget."

However, the city manager said: "I am not optimistic about the role of the trade unions in this development. We are leading this and the unions have a tendency to stop us, because they cannot see the overall effect yet. I think the national union directs them strongly - the national union doesn't want Tilburg to go too fast because they are afraid of losing control."

But another union representative commented that it was management that was afraid of losing control: "Too much is top down - we need more bottom-up. Sometimes [the management team] are so ambitious they forget to talk about their ideas to outsiders - they are thinking in a little group about reorientation of a municipality and they forget that there is a whole system of workers here who also want to talk about it. To really make the model work, they must engage more."

Source: Martin (1996).

However understandable this may be, it is still the case that the persistence of the existing industrial relations machinery means that there is a danger that partnership will break down more easily than would otherwise be the case. As Ospina and Yaroni (2003) argue, both management and unions have the potential to disrupt the "role transformation" that partnership requires by behaving in such a way as to reinforce older assumptions and ways of thinking. Yet other examples, such as those in Sweden and Indianapolis cited above, suggest that the continued existence alongside partnership arrangements of conventional labour relations machinery was a necessary factor in the construction of the required levels of trust in that they reassured both parties as to their ability to retreat into it if necessary.

5.4 New public management as an obstacle to partnership

A factor in managerial reluctance to more wholeheartedly embrace partnership with employees and unions may be the pressures on them of performance management methods typical of the New Public Management approach to results orientation. In many circumstances, conceptions of what constitutes organisational performance - over which managers themselves have little direct control - militate against the adoption of high-trust, co-operative work systems. Maddock (2002), writing with reference to the UK, argues:

"Innovation in the public sector involves finding new ways of working which involve staff talking more, not less, to users and to colleagues; yet the current output-task-finish regime reinforces the opposite behaviour and results in many staff being criticised for the very behaviour required... public sector audit, performance review and service standards are all forms of control and mechanisms for maintaining the status quo, not change. Such controlling management is totally inadequate to changing societies because it misses the very dynamic of change." (p.33).

Tailby et al. (2004) draw very similar conclusions on the basis of a case study in the UK health service. Having found very high levels of work-related stress among hospital managers, Tailby and her colleagues argue that the regime of management-performance monitoring clearly contributed to this. Middle managers argued that they could not afford to not achieve targets; it was the sort of thing for which they would "be shot". Union representatives also noted that there seemed to be a "climate of fear" among managers. In such an environment, it is understandable that the perceived obligation to concede decision-making powers to others could be interpreted by managers as both burdensome and threatening (p.414). They reproduce the comments of one health service manager who told them,

"I think if you're going to involve staff you have to carry through the things that are important to the staff and when you've already got a huge agenda for change which is government-driven, which may be at odds to what the staff think in some situations, then I think you've got big problems. And you know if you're just going to drive it according to government objectives then you're better off not involving the staff." (p.416).

New Zealand's Partnership for Quality programme offers a contrasting approach of involving unions at all levels precisely in order to drive through government objectives in a way that is compatible with one of the conditions of doing so: employee support.

Less sympathetic to the public sector managerial dilemma, but nonetheless very much in the same vein as Maddock and Tailby et al., are Carter and Poynter (1999). They argue that public sector decentralisation is necessarily accompanied by some means of centralised policy goal-setting and the negotiation between purchaser and provider of the framework for labour costs, work volumes, service standards and the pattern of provision. In many circumstances, they suggest, this has permitted managers to present demands for change in work organisation and employment conditions as externally imposed and by implication non-negotiable. Again, the New Zealand Partnership for Quality approach avoids that problem.

German research has pointed to similar conclusions. Having studied a wide set of what were seen as pioneer municipalities in the field of local government modernisation, the late German researcher, Frieder Naschold, identified some major conceptual and practical limitations of the results-oriented approach that constitutes the underlying principle of the NPM-paradigm (Wegener 2002), namely:

• a general lack of strategic goals
• centrifugal departmental forces, accompanied by emerging "egoisms" within the newly decentralised units leading to sub-optimal strategies
• lack of commitment and involvement of political actors within the reform process
• failure to mobilise involvement of the employees (Naschold, Oppen et al. 1998).

Box 5.7 Workplace partnership in the Detmold municipality

The work of Hermann Hibbeler, the former chairman of the staff council in Detmold, Germany, illustrates how a staff council played a role as a change agent and even become a 'co-manager'. Detmold began in 1993 to introduce the concept of the "New Steering Model" (Neues Steuerungsmodell), i.e. the German version of the New Public Management concept as developed in Tilburg, the Netherlands. Over the following five years, a large number of restructuring efforts were developed which would not have been possible except for the active participation of employees and staff council.

From the very beginning the former chairman of the staff council decided to actively go beyond the traditional defensive role prescribed by law which was far from being uncontroversial even within the staff council (Hibbeler 1998). However, after long discussions, the other members of the staff council agreed that a co-management strategy would serve the employees' future interests. In order to win the acceptance of the employees for this new strategy, two measures were applied: intensive public relations work and direct employee participation through quality working groups. Additionally, feedback channels through employee surveys and operational agreements on the participation of employees in the creation of performance indicators were established.

The latter became necessary as the staff council noticed that financial considerations were over-represented, they believed, in the development of performance indicators. Therefore, the staff council pushed for further developing the core objectives to produce a "balanced scorecard" that included "employee orientation", as well as "efficiency and effectiveness", "users' and citizens' orientation", and "quality assurance" (Hibbeler 1998).

Another operational agreement provided for substantive and procedural guarantees, i.e. job security and income security guarantees, as well as extensive participation rights in the process were agreed upon. The great success of the quality working groups led to a further agreement on introducing a test stage on self-managing teams (Hibbeler 1998).

By 1998, when Hibbeler wrote his article, it was too early to judge whether the strategic readjustment of the staff council would sustain and lead to collaborative employment relations. However, it showed that a strategic readjustment of staff councils to a role of a co-manager is possible through a transparent information policy and direct involvement of employees in quality working groups.

An additional element of the NPM philosophy is that centralised systems of public sector management or administration, and particularly the centralised establishment of pay and terms and conditions of employment, are inimical to the achievement of the local management flexibility and discretion required for the efficient and effective operation of public services. Throughout the 1980s and into the early 1990s, the application of NPM frequently involved experimentation with what has been called a "hard market" in public sector employment (Teicher & van Gramberg 1998), notably in the UK, New Zealand and certain states in Australia. As it was combined with a severe cost-cutting agenda, this trend directly undermined a very important substantive guarantee by exposing employees to the threat of market-based determination of pay and conditions, and unions to the threat of the division in their ranks, and loss of control, that could result.

Finally, we should take note of Allen Schick's critique of New Zealand's experiment in public sector decentralisation (as reported in Martin 2004). Essentially, Schick argues that the contractualisation of the purchaser-provider relationship has had precisely the opposite effect to that intended; that is, it has prevented rather than enabled institutional adaptation: "Chief executives now have a strong incentive to go by the book and ignore promising detours" (Schick, 1996). This actively discourages innovation, pushing public service culture back towards rule compliance and away from results achievement.

What this discussion suggests is that managers may frequently feel that they are unable to provide the procedural and substantive guarantees that successful partnership demands. Their commitment to partnership is circumscribed by the perceived necessity to maintain their freedom to insist on certain plans and strategies, even in the face of employee opposition. The problem is that the wish to retain these prerogatives signals clearly that employees' interests and objectives are not the same as and, more importantly, do not have equal status with, the interests and objectives of managers or those of the organisation. The causes of the problem are various, but they appear to include insufficient political will to oblige mangers to facilitate workplace partnership in a way that devolves authority closer to the front-line. That in turn may be related, as was suggested earlier, to the different timescales of the organisational transformation and political cycles, with the result that politicians are less able than they might otherwise be to take risks which may not produce the required results in time to benefit electorally from them.

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