Competitive Pressures

8/3/2019 Competitive Pressures

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Ahmed Ismail Abdi

Keele Number: 08014130

Business Management and HRM

HRM30008

Issues and Themes in the Contemporary Management of Labour

Essay

To what extent have the competitive pressures of the global economyimpacted on organizations and their management of labour? Discuss,with reference to high performance workplaces and changing forms of

work organization.

Williams and Adam Smith (2006, p. 51) state that changes in the economic context exerts a

profound influence on employment relations as organisations aim to maintain their

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competitiveness". This statement illustrates the importance of the need of organisations to

remain competitive in the face of a 'new global economy' that has come about after the 1980's

and 1990's, or as Bach (2002) put it 'the era of global economic transition'. This paper will

therefore illustrate how different work organizations have resulted from competitive

pressures brought by globalization and how these new work organizations have resulted in

negative effects on the management of labour. A significant number of surveys and research

literature such as Cully et al. (1999)will be used to illustrate the findings presented below;

To understand the new economy of the 1980s, it is important to assessglobalization and its

effects on changing the worldwide global product markets. For example, the

deindustrialization of Britain's manufacturing sector which saw the decline of previously

stable industries such as coal mining, steel and iron making and shipbuilding illustrates how

competitive pressures has affected whole industries and nations. Salomon (2002) states that

firms who previously used to look towards 'British labour' for such manufacturing services

are now seeking to outsource these jobs abroad in order to cut costs. The implications of this

on the management of labour will be discussed in greater detail further below; but it is clear

that the industrial economy of Britian that "employed a large number of highly unionised

workers on full-time contracts" would begin opposing mainstream recognition of unions and

encourage HR managers to adopt flexible working practises and employ an increasing

amount of part-time workers who are less trained, less-skilled and have low job statuses and

job security (Beynon 2002, p. 37). The following table has been adapted from Cully et al.

(1999) in his landmark survey on the changing state of UK's workplaces.

Competitive

pressures

therefore can

be stated to

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arise from the establishment of a global 'new economy'. Williams and Adam-Smith (2006)

explain the features of this new economy as weakening of the employment relationship

through offshoring practises, union de-recognition and the influences of MNC's on the

adoption of corporatism policies by world-wide governments, but also as being characterised

by a greater number of employees working without one at all with the rise of 'the autonomous

self-employed and the independent free-lance contractors'. Nolan and Wood (2003) find that

during the 1980's, the number of people who were self-employed had grown substantially

from 5% to 10% in Britain alone. This growth was encouraged and allowed to thrive by

successive British governments who saw small businesses as a solution to 'the competitive

pressures that enveloped the stagnant UK economy' (Williams and Adam-Smith 2006). In

fact, the need for UK businesses to become more competitive had, according to Nolan and

Wood (2003), forced them to cut back employees and adopt flexible working practices which

enabled a surplus of workers in the labour market, among them young and vibrant workers

who chose the option of becoming self-employed in a climate where there was a lack of

alternative opportunities.

Cully et al. (1999) presents evidence on how firms reacted to increased competitive pressures

by adopting cost-cutting measures that included on how they managed their employees. In the

case for the UK, Frenkel (2003) and Cully et al. (1999) discovered an increased use of sub-

contracting arrangements as a means of managing labour and cutting down on costs. The

following statement illustrates the changes argued by the aforementioned researchers;

Of all workplaces in Britian that were five years or more older, 28 per cent had contracted

out some services which five years earlier had been done by direct employees of the

workplace (or parent organizations). This proportion was higher in the public sector 36

per cent compared with 25 per cent in the private sector

Cully et al. 1999

Cully et al. (1999) further explains this form of managing labour as emphasizing on the

workforce being hired on short-term contracts through third parties. This leaves employees

vulnerable and exposed to management interests, whereby Beynon (1997, p.33) put it that

these employees "are paid by the company and to all intents and purposes are employees; but

the companies do not recognise this relationship" (see Table 2 in Appendix A). This furtherresult in the workforce obliged to bear most of the risks and costs of employment, as they are

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no longer able to enter into a direct and long- term relationship with their employers.

O'Connell Davidson (1994) demonstrates this impact through a case study on a milk

company that sub-contracted it's delivery staff to operate as self-employed contractors. This

not only extended managerial control -as workers were "under some very specific controls

over how they must organise their work" (O'Connell Davidson 1994, p. 29) - but it also

allowed them to reduce costs in terms of eliminating pension contributions and National

Insurance payments by the company leading to major cost savings.

Nevertheless, this paper does find that although self-employed workers have increased

significantly during the 1980's, it has not carried forward enough momentum into the 1990's -

whereby it only increased a further 2% during this whole decade (Nolan and Wood, 2003).

Therefore, while there are valid arguments on how competitive pressures have forced

increased number of workers to taking up the option of becoming self-employed, it is

necessary to state that the employment relationship within the workplace remains the most

important means of organising work in this contemporary economy. Therefore, in support of

Gearys (2002) statement that the competitive nature of the new economy has affected the

nature of employee relationships in terms of the way whole organisations work, the following

section will look into the two most prevalent forms of work organizations to emerge; high

performance workplace systems and cost minimization techniques which include supply

chains, just-in-time/total quality management and offshoring.

High Performance Workplace Systems

During the 1990s, British firms was stated to have moved away from the external fit model

of HR practises which characterized the economic changes and organizational upheavals of

the 1980s. Schuler and Jackson (1987) who argued on the merits of external fit clarified

that British companies sought to align HR policies to the external product markets in order to

become more competitive and meet the changing demands that the new products markets

had placed on these firms. In order to link such policies to these external markets, firms

therefore needed to adopt flexible working practises that had considerable proven experience

in cutting back costs and transforming labour from being indispensible to becoming

disposable (Kochan and Ostermann, 1994). However, during the 1990s, new managerial

thinking supported by Sisson (1993) and MacDuffie (1995) argued that firms have moved to

adopt aresource-based theory whereby firms derive competitive advantage by focusing ondeveloping unique, internal resources. According to MacDuffie (1995), these developments

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had taken the form an internal fit strategy that focused on setting and implementing a

coherent bundle of HR practises that will gather together complementary HR practises so as

to form high performance work systems.

High performance work systems are claimed to not just better manage employees but to

actually improve organizational performance. Applebaum et al. (2002) referenced a number

of US studies that discovered a positive relationship between coherent bundles of HR

practises and firm performance and profitability. For example, in one of these studies,

Applebaum et al. (2002) surveyed three US plants and found out that the three main features

of high performance work systems; team working, employee participation and

sophisticated selection, training and appraisal systems were all present and integrated

together to help improve organizational performance outcomes and elevate it over those of

traditional work organizations. However, there are arguments forwarded by famous quality

gurus such as Deming (1986) and Crosby (1995) that stated high performance work systems

were mechanical and inflexible routes for production management and that such systems are

better termed as high-commitment managementorhigh-involvement work practises but as

Butleret al. (2004) stated, the significance of these differences in terms is simple semantics;

a twist of language and that the terms, more or less, mean the same (see Table 5 in Appendix

B).

High performances workplace systems have been thus implemented as a new form of work

organization that increase employment and contribute to organizational effectiveness and

competitiveness. In fact, it is important to state that while some academicians have been

critical of the impact HPWSs have had on organizational performance, it has now been

ratified as common consensus that there is a universal link between organizational

competitiveness and HPWSs (Whitfield and Poole, 1997). This is despite, no evidence to

suggest how such a set of management initiatives can bring about performance outcomes,

with no data so far indicating a direct relationship between the two (Sisson and Purcell,

2010). Furthermore, there is also the increasingly visible aspect of casualty that is occurring

in these same British workplaces which defies the heralded values of HPWSs on increased

worker commitment and involvement (Truss, 2001). However, this issue will need to be

further assessed below; but it seems that for now HPWSs have had an impact on

organizational performance..Therefore, while the role of HPWSs has been clarified, it

remains to be seen to what extent have UK firms adopted the practises of HPWS in Britain

today.

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HPWSs are highly effective when they are implemented together as a bundle of

complementary, overlapping and highly-related practises. Godard and Delaney (2001) state

that there many studies that indicate that this is very hard to implement and sustain, while

Pfeffer and Veiga (1999) argue that where British firms do implement such practises, they are

unable to find and match a suitable set of practises together. On the other hand, Whitfield

(1998) and Pil and MacDuffie (1996) both state that the transformative capacities that was

brought about by new work organizations such as HPWSs, teamworking and quality circles

have created a new industrial relations. Whereas Pfeffer and Veiga (1999) argue that this is

not the case, as Britain while imitating the Japanization model of teamworking and quality

and the American systems of HPWS, have failed to absorb the national institutional factors

that have made these work systems a success but are rather picking and choosing the

aspects of these systems of which they find attractive. The empirical consideration of these

contradictions will be assessed below;

Up until late 1980s and early 1990s, findings from the UK Workplace Industrial Relation

Survey (WIRS) suggested that new work practises were not widely diffused and have not

managed to penetrate the UK workplace to a great extent. For example, Edwards et al. (2003)

claims that the 1990 WIRS survey shows that only 2 per cent of the total workplace

establishments in Britain allowed for the existence of semi-autonomous work groups.

Nevertheless, Cully et al. (1999) found out that the proportion of workplaces that use

problem-solving groups grew significantly to 38 per cent in 1998, while the number of

establishments that had at least part of their employees work in teams numbered at 83 per

cent. However, these evidences cited by Whitfield (1998) and Pil and MacDuffie (1996) can

in fact be called into question, as when stricter definitions of the terms such as team working,

semi-autonomous work groups were adopted, the overall percentage fell back to 35 per cent

and when one further criteria was added (whether teams can elect their own leaders) which

was generally found in the national institutions from which these systems were borrowed, the

figure was dramatically reduced to 3 per cent (Cully et al. 1999).

Another key feature of HPWS is the presence of quality circles (QCs) which were

implemented after British organizations regarded the need to meet competitive pressures

required value-added HR practises whereby employees are encouraged to become more

involved. The Employment in Britain Survey stated that 20 per cent of employees in British

workplaces participated in quality circles and that more importantly, those who did join such

group claimed to be empowered by the ability to have a say in the way in which their work

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was organized (Gallie et al. 1998). This therefore clearly indicates how quality circles as a

part of HPWSs can be highly effective in promoting employees sense of involvement.

However, it seems to significant to the thesis of this paper to present not only the current

coverage of HPWSs in Britain in order to assess how competitive pressures had affected the

adoption of new work organizations, but to also do a cross-analysis of it in comparison to

other countries. The European Foundation for the Improvement of Living and Working

Conditions (1997) did a survey on the adoption of quality circles and its essential feature of

consultative groups; either temporarily or permanently and contrasted the scope and impact

of these new work organizations on various nations within the EU including Britain (see

Table 6 below).

The study above indicates how Britain fares in terms of coverage, scope and autonomy and a

few interesting analysis can be drawn. Edwards et al. (2003) stated that this study indicated

that Britain had a consistent coverage of HPWSs in terms consultative participation,

whereby managers encourage workers to make their own views known on work-related

matters but nevertheless retains the right to make decisions on whether to take action or not.

In contrast, delegative participation allows management to grant employees increased

discretion and autonomy to work without recourse to management for decision-making

(Edwards et al. 2003; Geary and Sisson, 1994). In this case, Britain averaged 41 per cent for

permanent consultative groups in either word, quality circles (Geary and Sisson, 1994)

which represents a significant increase over other countries by more than 10 per cent. In

establishing teamworking or group delegation, firms averaged around 37% around the same

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of the average rate for the ten sample countries. Nevertheless, as mentioned before, a high

adoption of certain work organizations does not necessarily equal scope or autonomy and

thus, we will present a second analysis to measure the intensity of principles adopted from

HPWSs.

Britain averaged lower than the average country in providing for high intense work

practises and rather settled for more limited scope and autonomy in their implementation of

HPWS. This final analysis presented by the European Foundation (1997) of a very minimal

adoption (16%) of proper high performance workplace systems indicates that Britain as well

as other countries tend to cite the adoption of new work organizations as indicating a new

economy and that wide coverage of such systems are evidence of this statement. However,

the reality as indicated by the numerous literature and research studies mentioned above is

that despite wide presence of HPWSs systems, British workplace environment rarely adopt

the key aspects of such systems which include giving greater voice to employees and

providing for greater autonomy and discretion to workers so that they become more involved

and committed to improving organizational competitiveness. Instead, many firms

complement the ineffective use of HPWSs with a industry-wide adoption of policies such as

casualization through cost minimizing techniques such as the use of long supply chains, just-

in-time methods and off shoring activities all of which allow for greater management control

and the increased cheapening of the global workforce (Guest, 2001a).

Cost Minimizing Work Organizations

The impact of globalization on work organizations has led to an increase in off shoring

practises by companies who aim to gain competitive advantage by cutting down on labour

and shifting overseas. According to Buxey (2000), many firms attempt this in order to

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increase organizational competitiveness, most managers are willing to reduce either the

number of their staff or the income expenses by outsourcing jobs. This form of off-shoring is

usually termed as outsourcing when jobs are moved abroad (Gomez-Meija et al. 2010). The

competitive pressures that have resulted from globalization had resulted in domestic firms in

developed countries such as the UK to recognize the threat of global competition from firms

who are willing to move their operations to places where labour costs are lower.

Off-shoring has had the most significant impact on front-line workers such as those in call

centres and computer engineering sectors. Korczynski et al. (2000) examined this impact and

further classified the front-line workers into two; knowledge workers such as those that

work in the financial services, and less skilled mass-customized service workers such as

those involved in the call centres. The author went on to state that in these cases, the former

was likely to find significant benefits and higher job satisfaction and are willing to migrate to

other countries if their management were to request them to do so. However, in terms of

those less-skilled front-line workers, lower job satisfaction and high volatility in labour

turnover has been observed despite claims by MNCs that off-shoring allows the opportunity

to bring job growth and higher job expectations for workers in host countries.

This fraction of the global labour force, the workers who are merely warm bodies, works on

precarious contracts for extremely low rewards. Despite their initial transnational mobility,

low pay, antisocial working hours and heavy workloads trap them in place

McDowell et al. (2008)

This argument presented by McDowell et al. (2008) that workers are losing their ability to

harness their collective power in order to improve their working conditions is also critical to

understanding how organizations function today. According to Torrington et al. (2002) firms

that contribute most to the private are multi-national companies or companies that have

decided to take their operations abroad. This form of work organization can be established to

sell goods to new markets or more realistically, utilize various comparative advantages from

different countries in order to maximize effective supply side economics. Sisson and Purcell

(2010) stated that firms that move abroad are large conglomerates that have a diverse range

of business and employ large number of workers in different locations or sites. This thereforefirms to dabble in labour efficiency and employ flexible working practises that will bring

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better productivity to the organization (Geary, 2002). Therefore, the management of long

supply chains illustrate perfectly how cost minimization techniques are affected by the

globalization and the development of a new global economy.

However, it is important to understand that not all forms of work organizations are required

to occur on a global level in order to recognize the impact that competitive pressures brought

on by globalization has had on the development of new work organizations. Storey et al.

(1997) states that it was during the 1980s and early 1990s, that Japanese work systems such

as just-in-time and total quality management were passionately adopted by British

management and the rest of developed world including the USA. These forms of work

organizations which emphasized on flexibility and quality control had a profound impact on

corporate policies including those that fall under HRM. The coverage, scope and impact of

these work systems will be discussed below in terms of how it affected management of

labour and whether it still continues to do so.

Management of Labour and Competitive Pressures

In previous sections, this author has discussed the impact of competitive pressures on how

firms choose to organize their work and labour. However, there is also a direct link between

the effects of organizational competitiveness in the face of globalization and how labour is

managed (Torrington et al. 2008). Firstly, human resource management needs to be

contended with the implications of globalization which include the cheapening of labour

whereby work can easily be offshored to work sites abroad or to different regions in order to

lower labour costs by making them compete with one another (Dimba, 2010). Furthermore,

as firms begin to adopt new methods such as farming out work to subsidiaries and

implementing a flexible and adjustable labour force, there is a necessary need to assess the

role of HRM in todays competitive environment.

International firms have been claimed to decentralize and expand their HR roles thereby

providing autonomy to subsidiaries that base their HR practises on the strategic direction set

by the firm. However, Torrington et al. (2008) claims that while the terminology of

decentralization is used to empower subsidiaries, in reality, most firms establish firm lines of

control and restrict the autonomy of their subsidiaries to set out to implement independent

HR decisions. There have been many examples of this occurring in contemporary society as

firms such as Wal-Mart, Marks and Spencer and McDonalds do not allow their subsidiaries,

suppliers and franchises to recognize trade unions. In fact, these firms prefer to retain strong

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central control over how the supply-chain works and are committed to monitoring every

aspect of their labour management policies. To illustrate this example, Apple widely

considered being the most profitable company in the world has only just recently published

its list of suppliers whereby it was prompted to disclose the working practises of its suppliers

over which Apple had so much control over.

Apple released a list of its major suppliers... accompanied by a report

detailing troubling practices inside many of the technology giants suppliers.

Apple said audits revealed that 93 supplier facilities had records indicating

that over half of workers exceeded a 60-hour weekly working limit. Apple said

108 facilities did not pay proper overtime as required by law. In 15 facilities,

Apple found foreign contract workers who had paid excessive recruitment fees

to labor agencies.

Source: The New York Times (Jan 13, 2012)

The use of such long supply chains has had a highly negative impact on the role of

employees. Edwards et al. (2003) claimed that firms are reluctant to widely adopt the main

features of the knowledge-based, up-skilling techniques pioneered in high performance

workplace systems but rather move their labour workforce abroad where they can gain the

same organizational competitiveness by reducing labour costs and taking advantage of loose

labour regulations in host countries. In support of this statement, Bach (2002, p. 26)

categorically states that the lightly regulated character of the UK economy has encouraged

high levels of inward and outward foreign direct investment whereby it has become more

open with relatively few regulations and ratcheting up competitive pressures. This opening

up of the UK economy goes to better illustrate that international firms are not just looking at

moving to third world countries in order to exploit such opportunities. Bach (2002) further

goes on to state that competitive pressures further increased through the expansion of the

European Single Market, trade liberalization and continuing privatization and deregulation.

The impact of these competitive pressures on the management of labour has been the

casualization of an increasing number of workers, whereby the companies have continued to

indulge in high levels of restructuring whereby their entire labour workforce model has beenbased on temporary labour and part-time workers (see Figure 1.1).

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HPWSs are however not exempt from impacting negatively on the management of labour in

those workplaces that have adopted such practises. As Geary (2002) already stated, HPWSs

are meant to increase employees voice in the workplace, and thus achieve greater employeeinvolvement and commitment. However, Millward et al. (2000) claim that HPWSs are

management-based intitiatives that sought to weaken the influence of trade unions and ensure

that control of the workforce falls under management prerogatives. This is illustrated by

earlier mentioned reluctance of UK firms of adopting the features of HPWSs that allows

teams to gain more autonomy and select their own leaders. Empirical evidence of the impact

of the adoption of HPWSs after the 1980s in terms in worker voice arrangements is

provided in the table below;

12ource: Metcalfe (2003)


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Therefore, in recognizing the limited adoption of the significant features of employee

involvement and decision-making autonomy and the negative impact that MNCs and

international companies have had on the management of the global workforce, the issue of

cost-minimization techniques through flexibility and total quality management may perhaps

indicate a better ideal for the management of labour. This paper will attempt to provide its

final and most significant findings of its comprehensive analysis of changes in the

management of labour by utilizing Cullys (1999) study illustrated in Appendix C as well as

case studies such as Clarks (1995) research into the company Pirellis Greenfield facility in

South Wales.

Clark (1995) for example stated that after the adoption of total quality management in the

firms plants at South Wales, many of the employees expressed optimism, stating that such

methods allowed for the overwhelming support for self-supervision and are strongly

committed to the involvement in the day-to-day management of product quality. However,

such optimism did not last long as it was found out that the system of self-supervision were

quickly limited by management, numerical flexibility rather than task flexibility was

emphasized but most especially workers complained of work intensification and the overall

job satisfaction rates began to drop.

Geary (2002) claims that in systems such as just-in-time and total quality management, work

is highly intensified for individual workers and is more significantly, couched under terms

such a job enrichment and skill development which allows management to increasingly

make workers disciplined. In fact, while it has already been mentioned how long supply

chains have caused work to become Taylorised with no room for employee skill

development, empowerment or autonomy, it can be critically argued that the same issues are

occurring in new work organizations that emphasize on flexibility and the efficient use of

labour. Cully et al. (1999) shows evidence that only 14% of workplaces that implement such

new work organizations guarantee job security or no compulsory redundancy policies. In

fact, management use the opportunities of work reorganizations to limit the exercise of

discretion and increase effort levels, rendering the role of employees as less human and

more as resources. In summary, Guest (2001a, p. 12) pointedly put it as follows;

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What this implies is that management is not doing a very good job of

managing human resources. The popular clich that people are our most

important asset is patently untrue

Therefore, in conclusion, while globalization and the development of a new global economy

has resulted in competitive pressures which forced firms to adopt different work organizations

systems, it remains to be seen whether any of these different work organizations have resulted

in a positive impact on the management of labour. In fact, from HPWSs to the cost

minimization work systems, competitive pressures have allowed management to gain control

over the workforce and limit their ability to actually influence the work system with which

they are involved in. Nevertheless, the continued adoption of cost cutting measures and the

reluctance of HR managers to implement the key features of HPWS which influence

employee involvement in the face of the new global economy, portrays a bleak future

whereby casualization is set to become the norm and issues such as employee skill

development, job security and the right to have autonomy and discretion within the workplace

will become less visible in the continual evolution of new work organizations.

APPENDIX (A)

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WORD COUNT:


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APPENDIX (B)

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Table 5: The Lexicon Of High Performance Management

Terminology Studies Dominant EmphasisHigh-performance work

systems

Applebaum et al.

(2000)

Danford et al. (2004)

Farias et al. (1998)

Harley (2002)

Ramsay et al. (2000)

Thompson (2003)

Production

Management

Work

Organization

Employee

Relations

High-performance work

practises

Ashton and Sung (2002)

Lloyd and Payne (2004)High-involvement work

systems

Edwards and Wright

(2001)

Felstead and Gallie

(2002)

Harmon et al. (2003)

High-involvement work

practices

Fuertes and Sanchez

(2004)High-performance practises Goddard (2004)High-involvement

management

Forth and Millward

(2004)High-performance

employment systems

Brown and Reich (1997)

High-commitment

management

Baird (2002)

Whitfield and Poole

(1997)

Source: Adapted from Butleret al. (2004)

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APPENDIX (C)

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