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At a recent industry conference, a keynote speaker talked about great outcomes a number of our clients achieved in a critical enterprise bargaining round.

One observation was the importance of “patience“ – with which we would wholeheartedly agree.

So it got us thinking about ingredients for success.

Here are some key ones, borrowed from our bespoke workshop process dedicated to this end.

  1. Clarity of need: articulated and connected to the business needs
  2. Gain v Pain: clarity of what’s needed and the pain points along the way
  3. Leadership: the bedrock of any project
  4. Strategy: integrated – articulated – understood
  5. Planning: which falls out of the strategy and in respect of which one can never do enough
  6. Alignment: cemented by sound governance
  7. Resilience: which comes back to leadership

Each can be strengthened for any employer embarking on a bargaining campaign by the taking of tangible steps. You might not be perfect on each but it’s possible to ‘move the dial’.

Would you like to hear more about our workshop process for enterprise bargaining? Contact Chris Gardner.

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For years, the emergence of truly global supply chains and the rise of large, increasingly skilled workforces has wrought havoc on labour supply in Western developed countries. It seems that these days nearly every industry, profession or occupation is facing an existential threat due to automation, artificial intelligence or other advances in technology (indeed, lawyers are said to be the next to go!). This is seen as the next frontier.

In this environment, there is a soothsaying comfort in taking measures that might “future proof” your organisation from the potentially terrifying effects of change and disruption.

But is that really possible? More to the point, is this thinking even helpful?

We work with many of the most successful global organisations. We are always curious to learn why some organisations are successful in the long term, on a massive scale, whilst others fall by the wayside or are diminished over time.

One feature stands out. The most successful organisations do not pretend that there is one initiative – that can be implemented now – to forever insulate them from the effects of change. Rather, their leadership (and these organisations have great leaders at all levels) cultivate a mindset of constant, very often brave, change.

They disrupt themselves before any competitor will have the chance. They make bets on the future and are open to doing things differently, seeing failure as an inevitable part of the learning process. These organisations know that in a truly dynamic and global business environment, there is huge risk in just repeating what has worked in the past. These organisations do not fall into the trap of trying to “future proof” their organisation. They intuitively understand there is no such thing, and that bold leadership, and a learning and calculated risk-taking orientation are a better bulwark against disruption than any future proofing initiative will ever be. These organisations know that an opportunity-driven approach is the only way, and that a risk-driven business model “don’t change anything, don’t break anything” is the riskiest business model of all.

In the last six months we at Seyfarth have seen so many great examples of these types of organisations. Here are a few:

  • An Australian big 4 retail bank with extensive overseas operations, introducing new ways of working that are breaking down silos and making collaboration within the bank much easier
  • A global e-commerce and data services client establishing its operations in Australia, in what is sure to be its latest successful international expansion
  • A global manufacturer and seller of solar panels, investing in Australia given the enthusiasm of various State and Territory Governments to promote renewable energy, whilst somewhat dismayed and discouraged by President Donald Trump’s introduction of tariffs on their products imported into the United States
  • An Australian based manufacturer of a unique biodegradable resin moving its manufacturing from China to Europe in order to take advantage of the friendly production environment in some European countries combined with the progressive and environmentally conscious nature of European consumers of its products.

These organisations are strong examples of opportunity driven leadership – willing to make bold decisions to position themselves well, always thinking in global terms, and always willing to incorporate new and better ways of working. That may mean incorporating or even inventing new technologies, or simply making constant incremental operational improvements. They don’t try to future proof, because they accept that tomorrow will bring more change – some of it unforeseen and perhaps unwelcome.

The cycle of change and transformation is constant. The tension between stability and change, between order and chaos, is ever present: but it is accepted and managed, not denied. These organisations accept the uncertainty that must be managed in today’s world. In fact, they embrace it, knowing that this attitude is itself a competitive advantage.

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Automation is a game changer that is altering the industrial landscape. A Committee for Economic Development of Australia publication estimates that over the next 10 to 20 years, 40% of jobs in Australia have a high probability of being susceptible to computerisation and automation.

Smart businesses will approach the automation process from the front end and engage with their workforce in a manner that ensures the business is able to harness all of the productivity benefits from automation, without suffering the industrial dissention and dislocation which so often coincides with dramatic workplace change.

Planning and practical implementation is critical

McKinsey recently published “A CEO action plan for workplace automation”, highlighting the benefits of business harnessing automation processes within their workforces. However, it cautions the need for an appropriate plan of action.

From an industrial relations standpoint, preparing for automation sooner rather than later can provide a business with payoffs down the track.

Where the opportunity presents itself for a business to enter into a carefully tailored enterprise (or greenfields) agreement prior to implementing automation measures, such an opportunity should be seriously considered. If timed properly, this will minimise the impact on the business from workplace change, and maximise workplace flexibility to allow the business to easily transition, saving time, cost and mitigating the risk of workplace disputes arising.

Left to the last minute, an enterprise may face pitfalls in implementing technological change. For instance, should a round of enterprise bargaining be imminent, employees and their representatives will push for greater job security during bargaining through superior redundancy and retention type arrangements. These could slow change, and add cost and complexity. Late engagement and consultation may also create resentment and cause further disputes and delays.

Where workforce engagement occurs early, these issues may not be so prevalent, and a business can ensure that it has the appropriate flexibility mechanisms in place to easily transition. As reported in The Australian recently, NAB’s Andrew Thorburn reflects on the importance of planning for NAB to “retrain and redeploy” workers post-automation. Clearly, planning can deliver the best outcomes for all stakeholders.

Enterprise bargaining in the post-automation world

There are implications on an employer bargaining for a new enterprise agreement (or for a greenfields agreement over a new enterprise) that will cover the business post-automation.

For example, the ability to influence new roles that will be required from technological advances comes with the ability for an employer to:

  • effectively bargain for terms and conditions off a fresh slate as post-automation roles may result in coverage of employees with vastly different terms and conditions
  • use a different modern award (if any) as a base for terms and conditions
  • provide an employer with greater leverage in bargaining through dealing with a smaller, more specialised workforce
  • bargain in circumstances where the agreement’s coverage will dictate which union (if any) has a right to represent employees.

Of course, the need to engage workers with a different skill set may also provide a business with an opportunity for workers to grow in their careers, and present an environment in which cultural change might be effectively promoted and achieved. Viewed through this lens, technical change need not be seen as a negative from an employee relations perspective.

Implementation of process

‘Redundancy’ is the word that comes to most employees minds when they catch wind of an employer taking steps to automate elements of their work.

However, despite many claims made to the contrary, major technological change does not necessarily result in a workforce being decimated. Opportunities are inevitably presented from change for employees to upskill in order to fulfil different roles in the business (or elsewhere).

Unfortunately downsizing a workforce is, in a number of cases, a necessary step in achieving the full productivity benefits that are so attractive in implementing technological change. Again, early and effective planning can minimise forced job losses, and maximise opportunities to upskill.

Transparency and appropriate engagement with employees is critical during the process, as is implementing an appropriate consultation plan.

In a world where so many businesses are moving to automation, failure to take these steps may result in your business falling behind its competitors, change (and its benefits) being seriously delayed, or the often significant capital costs required blowing out.

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Within eight days of each other Bill Shorten and ACTU head, Sally McManus, have called for changes to the enterprise bargaining regime which is a central feature of Labor’s own Fair Work Act. Whilst we will no doubt hear more on this these statements would be chilling to many an employer who regards the current system as stacked against them.

To be fair, finding the right balance in a system which directly effects wage outcomes is difficult. But Labor’s legislation cemented collective bargaining as a central platform for agreement making and did away with a statutory regime to make individual agreements. In doing so unions were given the best legislative platform to date to compel employers to bargain – even with a union that has a minority membership interest in the business.

Mr Shorten cites low wage growth to make the case for change amidst greater productivity. The wages-work bargain is unfair it seems. Conversely employers will tell you that the “productivity lemon” has been well and truly squeezed from enterprise bargaining with little or no incentive for unions to countenance genuine trade-offs. In its inception back in the 1990s, enterprise bargaining presented an opportunity – to move away from inflexible centrally set terms and conditions to outcomes which better reflect the needs of the enterprise. It paved the potential for “win-win” outcomes. But no more. If macro data points to increased labour productivity, the nexus between this and collective bargaining will be very tenuous.

To this extent there is universal acceptance of a system unable to meet the needs of the workplace today and certainly not the future. If no agreement is reached, the status quo typically remains. In negotiations, speak the “Best Alternative to a Negotiated Outcome” for a union and employees is the status quo being the existing enterprise agreement. Very often, the genesis of these agreements were struck when the business was in a very different place – many years ago and when current competitive conditions were beyond contemplation.

Enterprise bargaining, once an opportunity is now an exercise in managing risk. This involves stemming the tide of increasing labour costs and avoiding claims which, for instance, prevent outsourcing or mandate third party involvement in legitimate business decisions. But there’s more. The system relies on a game of leverage. Unions can organise industrial action to effectively coerce employers to agree. Employers can lock employees out in response. Neither are very constructive in the long run. Ms McManus is calling for greater ease to take industrial action and tighter controls on employer lock outs. Mr Shorten wants to shut down the Fair Work Commission’s (limited) ability to terminate old enterprise agreements – which provides employers with a precious opportunity to remove outdated and restrictive clauses albeit not without a contested hearing process usually over some months.

So, inherent in the thinking of both Labor and the ACTU is a re-setting of the legislative levers of leverage which drive bargaining outcomes. For employers more of the same but worse. Employers will make agreements palatable in the short term only because the short term cost of the bargaining process (industrial action) is too high. Rational economic outcomes are thus easily distorted. Of course in the medium-long term the cost of making an agreement becomes intolerable. Restructuring, outsourcing, and offshoring become part of an inevitable ‘solution’ for employers.

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Employers will need to be prepared for close scrutiny of enterprise agreements that use a “small group” or “seed group” approach, following a number of recent developments in enterprise bargaining. The recent Federal Court decision in CFMEU v One Key sounds a cautionary note for the “seed group” strategy that some employers have been using in recent years.

In recent blogs, we have been looking at recent trends in enterprise bargaining including issues about how the group of employees covered by an agreement is selected. The trends include:

  • unions seeking to undermine enterprise agreements made without union involvement
  • the Federal Opposition’s proposal to prohibit enterprise agreements where the voting population is not “representative” of the agreement’s potential coverage.

The One Key case highlights the intersection of these developments and provides an example of how some enterprise agreements can be “undone” even years down the track.

What is the “seed group” strategy?

At a high level, the strategy involves an employer engaging with a small group of employees to make an enterprise agreement that will potentially cover a much larger group of workers in the future. The goal is this: establish an enterprise agreement on suitable terms which creates stability for up to four years, and can be rolled out to a larger workforce as recruitment “ramps up”.

How has the strategy been attacked by unions?

The strategy has seen some success, but has been the subject of attack from unions. Indeed, the CFMEU has said that it will “relentlessly” target deals to which it objects, and has attacked agreements made with “seed groups”.

Previously, one avenue of attack was to argue that such an agreement failed to meet the requirement that the group of employees covered be “fairly chosen”. That avenue was effectively closed in a case concerning John Holland, where the Federal Court said that there was nothing inherently wrong with a small group of employees voting on an agreement which might subsequently cover many more employees. The Court also said that the “fairly chosen” requirement does not mean that the group of employees had to be chosen in a “manner which would not undermine collective bargaining”.

A different line of attack was used in One Key, where it was argued that the relevant enterprise agreement had not been “genuinely agreed to” by the relevant employees. The Federal Court accepted that argument and determined that the enterprise agreement must be set aside (even though it had been in force for 2 years) because:

  • the agreement had been voted on by three employees with very “confined” employment experience; and
  • the three employees represented only a small sub-set of the group of employees who would be covered by the agreement – the three voting employees were covered by mining and construction awards, whereas the coverage of the agreement extended to future employees who would be covered by 11 different awards including those in the hospitality, road transport and manufacturing industries.

What does this mean for bargaining with seed groups?

Importantly, the Federal Court has not said that an enterprise agreement can never be made with a small group of employees that ultimately might cover a much larger cohort. However, the One Key decision does suggest that an employer may encounter difficulty if the employees who vote are not broadly representative of the range of different employees to whom the agreement will apply in the future.

In this way, the One Key decision emphasises that, unlike Jack trading the family cow for beans, there is no “magic seed” which will give employers quick and easy access to untold riches. While seed group agreements are legitimate, employers will still need to carefully consider the scope of an agreement and understand that a close examination will be made of whether the group of employees who vote is “representative” of the potential coverage of the agreement. This will be particularly important for agreements that cover multiple occupations and industries.

At a broader level, the debate remains whether enterprise bargaining is actually delivering a system of regulation of terms and conditions which are meeting the needs of employers and employees. That employers are seeking to adopt these strategies, and that debate has to be had about whether such a strategy is “legitimate” or not, does tend to suggest that the entire system needs to be revisited, rather than tinkered with.

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Trade union conduct is constantly changing, and our team have observed trends that are reshaping the boundaries, and that have already begun to impact our clients.

Policy Measures: increased scrutiny on trade union conduct

On the policy front, the conservative government has implemented three measures addressing unlawful behaviour by unions and their members based on the findings of former High Court Justice John Dyson Heydon AC QC in the Royal Commission into Trade Union Governance and Corruption in 2015.

Two key measures passed in late 2016.

Continue Reading United we stand. But lawfully.

The gig economy is only one of the reasons that workers of the future will not have close connections with one employer or business – another is the movement towards arranging their life so that they spend substantial periods of time not working at all.

The trend towards regularly spending long periods of time away from the workforce is highlighted in an article by Christine Long in the Sydney Morning Herald considering people who only work a few months of the year, and the renowned demographer Bernard Salt’s column in The Australian that looks at changes that millennials will bring to the workforce. Continue Reading The future of work: managing a workforce that is away half the year

We have been watching with close interest the exponential expansion of crypto-currencies. These instruments, such as Bitcoin, Ethereum and Litecoin, are methods of secure, electronic transfer of value between individuals using advanced digital encryption techniques – without any central regulation by government.

Recent research published by The Conversation suggests that crypto-currencies are showing no signs of being merely a speculative bubble. With their recent translation from purely online origins into tangible interfaces, for example, the establishment of Bitcoin ATMs in Australia, employers need to consider not only the future of work, but the future of the ways in which businesses will be able to, or might want to, reward contribution. Continue Reading The future of work: when will I be able to pay employees in Bitcoin?

One of the more interesting recent developments in relation to work has been the continual rise and development of the gig economy – that is, workers developing niche areas of specialist expertise, but having careers characterised by a series of interactions with various organisations, rather than being employed by one company for many years. This doesn’t just mean a person working in multiple jobs over the course of their life, but that they are much more likely to be running their own independent business providing services to customers.

Over the last 15 – 20 years, many businesses have made the distinction between core and non-core functions, using that distinction to drive and make judgment calls about the nature and form of their relationships with those contributing to their business (including employees, contractors, suppliers or others). With the development of the gig economy, businesses will need to be more sophisticated in their analysis, taking a much more fundamental and holistic view of how they want the business actually to operate – entrepreneurs, leaders and managers need to consider how the emerging gig economy will impact on the structure of the business’s relationships with its contributors.

So, how can your business make the most of the opportunities that a gig economy offers, while also managing the legal, reputational and business risks of dealing with multiple independent contractors? Continue Reading The future of work: using the gig economy to your advantage

Enterprise bargaining is down. That’s the big call out from the Department of Employment Report on Enterprise Bargaining February 2017. Comparing private sector agreement numbers from 2014 there is a reduction by a third overall, with close to 50% less in retail and construction and around 20% in most sectors.

As a result, the number of employees covered by current agreements (ones that haven’t expired) has declined. The decline is felt in respect of both union and non-union agreements. Continue Reading The trend is your friend: why enterprise bargaining is down