Information and consultation: from compliance to performance

The Information and Consultation Directive will challenge both employers and unions to abandon outmoded prejudices for the company good. Initial reactions to the EC Directive from various commentators suggested that it was likely to constitute both a major opportunity for and challenge to the employment relations system of the UK. An enormous range and diversity in background and experience will influence a company's approach to the new legislation. But there is a common factor - a belief that getting it right can have a positive effect on business performance. Managers will need to spend less time telling, and more time listening.

This case-study-based report, Information and Consultation: from Compliance to Performance, looks at the structural arrangements and underlying processes involved in establishing arrangements for informing and consulting employees. It provides a wealth of detailed evidence about the experience of a number of UK organisations that have developed or are in the process of implementing strategies for this purpose.

This report should offer serious help to any HR or employee relations practitioner who needs to ensure that his or her organisation is in a position not only to comply with the legislation but also to get business value from it. It will also offer some useful insights to policy-makers responsible for the detailed regulations.

Key themes

• An analysis based on the Workplace Employee Relations Survey 1998 which will provide the essential background context against which the case studies should be viewed.
• Involving the employee focus groups in the case studies.
• Moving beyond the issue of structures to that of process by attempting to spell out in some detail just what the term 'consultation' is likely to mean and involve in practice.
• Helping organisations to get business value from the new legislation and providing further insights for policy-makers about the practical issues that employers will face.

Methodology

Philip Beaumont, Department of Business and Management, University of Glasgow, and Laurie Hunter, Business School, University of Glasgow, undertook the research on behalf of the Chartered Institute of Personnel and Development (CIPD). The initial research was carried out late in 2002 - when the Department of Trade and Industry's first discussion paper was available. This consisted of unstructured interviews with senior HR managers in relevant organisations. A further round of case-study visits was carried out in the spring of 2003 - before the Government published its consultative paper setting out the results of first-round consultation. These interviews were held with the senior HR managers or other relevant individuals within the organisation.

Case-study organisations

The report is based on case studies of organisations that are seeking to develop effective arrangements to deal with the EC Directive. Some organisations have years of experience to draw on, while others are just starting out down the road. Coming through the case studies was a common belief that getting it right can have a positive effect on business performance. The case-study organisations were grouped into four categories:

• decisions on the new arrangements strongly influenced by their experience with European Works Councils
• decisions on the new arrangements essentially involving modifications and adaptations to existing voluntary arrangements
• decisions on the new arrangements made in the larger context of partnership-type arrangements
• decisions on the new arrangements made against a background of no prior experience with representative-type arrangements, or even, in some cases, no prior experience of any direct arrangements.

The 16 case-study organisations categorised within this framework are shown in Table 1.

Table 1 Case-study organisations

Background details

The UK has not been completely without experience of statutory requirements to inform and consult employees. Such legal requirements exist in relation to certain subject areas, such as, for example, collective redundancies, transfers of undertakings, occupational pensions and workplace health and safety. Furthermore, a number of larger British organisations have established European Works Councils.

However, the real challenge to the UK system is arguably that the EC Directive requires the establishment of representative (ie indirect) arrangements, whereas in recent times the overwhelming trend within the system has been towards arrangements for direct (ie individual employee-based) information disclosure and consultation.

Timetable for the enforcement of the EC Information and Consultation Directive

The EC Directive will come into force in the UK from March 2005. As implementation is to be phased, not every company to which the Directive applies will necessarily be affected in the short term. The Government intends to build a 'trigger mechanism' into the legislation implementing the EC Directive with the key dates.

Conclusions

• what will be the end result of the new legislation?
• will effective processes for information and consultation lead to a sea-change in employee relations?

The basic assumption underlying the legislation has to be that strengthening the processes for dialogue is in the interest of both employers and employees. Increased interest in corporate social responsibility assumes that improving relationships between management and a wide range of stakeholders (including employees) will bring strategic benefits. This does not of course imply that managers should surrender the right to manage. But it does imply that managers need to do less telling and more listening and need to recognise the importance of leadership rather than falling back on the old 'command and control' model of management.

If some employers see the EC Directive as a threat to their freedom to manage, equally some trade union officials see it as a threat to their traditional ways of doing business. The legislation challenges both employers and unions to abandon outmoded prejudices. Its long-term impact will depend on what happens inside people's heads rather than on the detailed processes and structures that are put in place.

The report underlines the value of consultation as a joint problem-solving approach benefiting from high levels of trust and extensive exchange of information. It suggests that in order to prevent recriminations and breakdown when the consultation process is subjected to 'strategic shocks', employers and unions should establish a mutually acceptable set of ground rules for the consultation process to ensure 'no surprises'. Strengthening dialogue between employers and employees is in their mutual interest and will bring strategic benefits to the organisation.

What we have tried to capture in our case selection and discussion are the lessons to be gleaned from the various experiences - lessons that may be helpful to other companies and organisations in developing their thinking about how to prepare themselves for the new legislation.

If you would like to discuss the research on which these findings are based, please email the research team.