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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Old work hour habits won't die

Monday, August 20, 2012
The Federal Court decision last week to uphold the legality of industrial relations deals that restrict the use of contractors and labour hire adds further concern about the declining productivity in Australia. And the court's ADJ Contracting decision contrasts sharply to a recent discussion paper from the Australian Institute of Management arguing that flexible work improves productivity.

Managing in a Flexible Work Environment mounts the argument that flexible work enhances performance, innovation and productivity. The AIM paper is of value to ‘big end of town’ corporate managers because it challenges those who believe that efficient and effective work requires staff to be locked into rigid organisational timetables. AIM observes that the prevailing managerial concept of the ‘ideal worker’ is “someone who is able to work full time, and to be solely committed to their job.”

Further, most managers see flexible work as an inconvenience and even a threat to their efficient control of work. AIM states: “Business owners or senior executives may perceive that flexible work arrangements are associated with a lack of commitment to the organisation.”

It’s a good discussion but misses two elephants in the productivity room. The AIM discussion ignores the Australian industrial relations environment and it is not relevant for the 70 per cent of the Australia workforce working in small business.

AIM asserts, however, that this concept of the ‘ideal worker’ no longer fits with the realities of a changed society and of totally changed work situations. Further, it says that in experiences where flexibility has been applied, higher levels of productivity and innovation have been evident. That is, that increased work flexibility is part of the productivity improvement agenda.

That view makes sense. But when considered in terms of Australia’s labour law, culture and practices, ‘flexibility’ is a one-way street frequently working against the interests of managers. The ADJ Contracting decision shows just how strongly the industrial relations rules work against flexibility and productivity. If a business is restricted in using contractors, for example, that limits their ability to flexibly respond to market needs.

Such restrictions happen because Australia’s labour law orthodoxy overwhelmingly approaches issues from a ‘workers rights’ perspective. The rules under the Fair Work Act and the way unions and the Fair Work Authority and courts apply the rules, means that flexible work is a worker privilege imposed on businesses.

That is, workers can demand changed rosters to suit family circumstances. That’s good! But if businesses seek work flexibility (eg; use of contractors) to adapt the business to market demands that’s portrayed as employer exploitation of workers!

The reality is that if work flexibility is to lead to increased productivity it must deliver for both parties. Businesses have no option but to adapt to demands of clients. If customers want food on a Sunday night, restaurants, and supply chains must be able to respond. That means flexible work!

Further, because society and the economy now operate 24/7, people look for work outside of the nine to five, Monday to Friday assumptions of the ‘Fair Work’ system. People want flexible work.

What’s happening is a constant feedback loop between people’s desires as consumers and workers and business and economic responsiveness. It’s this that the AIM discussion paper seeks to address and it makes a good contribution in suggesting managerial techniques.

What’s missing, however, is any recognition that a theory of good ‘flexible’ managerial practice is heavily blocked by an industrial relations system pushing Australia back to a 1950s concept of society!

Also, and typical of these sorts of managerial discussions, the AIM paper only applies to big business and big government operations. That’s not a criticism. The AIM discussion is good as it stands. But little if any management theory or management institutions, have any comprehension of small business management dynamics.

In small business the distinctions between the ‘boss’, manager and ‘worker’ are irrelevant. Instead work is about direct one-on-one people relationships. For people working in small business, flexible work is a normal and required part of everyday life/business. The concept and practice of ‘flexibility’ is different to that happening in large concerns. For small business people the marketplace is ‘in your face’ everyday. There’s no choice but to be flexible!

The managerial challenge that AIM talks about is not, in fact just to ‘managers’ but to the very concept of big organisational processes. That is, how do big organisations maintain innovation? AIM is saying that flexible work is part of that.

But I think the challenge is much bigger than just flexibility. It’s much more about how organisations allow the vagaries of the market to enter the very sinews of the firm. Small business people do this by the very nature of their existence. Big organisations, whether government or private business bureaucracies, resist this because they are hamstrung by their structures and processes.

The broader concept moves beyond the single idea of flexible work and relates to the concept of ‘markets in the firm’. I first wrote about this in 2001, for the Institute of Economic Affairs in London and in my subsequent book Independence and the Death of Employment. ‘Markets in the firm’ involves breaking down the structural barriers that prevent businesses being responsive to markets.

The AIM discussion provides value to managers of large organisations in this quest but it ignores the reality of the inhibiting industrial relations environment confronting many managers. AIM addresses part of the productivity picture. What’s needed is more discussion, and action on other productivity influencing factors as well.
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