Merino Wool Combing Company - Case Study Example

Note: All other references available for reading with Google Books...just paste the title and search. MERINO WOOL COMBING COMPANY 1. Introduction Established in the 1930s in Bendigo, the Merino Wool Combing Company has grown from a simple family business to a respected small public company exporting 95% of its products overseas. However, the globalisation of markets in the 1980s generated various competitions from low wage countries and affected the company’s competitiveness and profitability. Consequently, after many years of struggle, the company ultimately lost its viability and allowed a global and high technology oriented Italian company to take over their operations. However, a new problem started when the new management decided to build a more advanced plant in Geelong as a Greenfield site and close the Bendigo plant permanently. Moreover, although jobs would be available in the new site, the new management took in only half of workers from the old plant, leaving the other half unemployed. The following section explore the situation at MWC through analysis of different interrelated issues regarding that affect organisational sustainability, industrial relations, management, human resources, government policy, and legislation. 2. Case Study Analysis As one of Australia’s most important agricultural industry (Lyons, 2009), wool production generates jobs and opportunities for many Australians. However, the globalisation of markets, which started three decades ago, had affected the profitability of some wool processing companies. The growing competition from lower waged countries began to affect the viability of many wool-related establishments in the country. According to the case study, Merino Wool Combing Company or MWC, a family owned and operated business that started wool processing operation in the 1930s, was one of those companies that have lost its profitability after almost 60 years of success, due to the globalization of markets and the high tariffs imposed by the European Union. Consequently, disheartened by weakening export and potential closure of the company, MWC accepted the proposal of a big Italian wool spinning company to take over and modernised their operations through high technology. As a new and technologically outdated subsidiary, the Italian company started to change almost everything in MWC including building a new plant in the outskirts of Geelong and closing the Bendigo plant permanently. Moreover, since adoption of new technologies generally requires additional skills for the existing workforce (Stevens 2007), the Italian company introduced new ways of working which they think was appropriate for MWC to regain its international competitiveness. Considering the strategic plan and its implementation in general seems apposite and obligatory to revitalize the plummeting MWC. However, the Italian company failed to re-consider the well-being of MWC Bendigo plant’s unionised workforce. The Italian company seems to intentionally ignore or set aside their welfare in favour of new technology and competitiveness. For instance, the relocation of only half of the old plant’s employees to Geelong and the utilisation of the Employer Greenfield Agreement suggest that the new owner was at the very beginning was very keen to simply create a new company out of the old MWC instead of facilitating a transition. According to Cooper & Briggs (2009), unions have important role in industrial relations particularly in Australia (p.94) but it appears that it had been put aside by the Italian company using non-union form of agreement. Under the WorkChoices Act, the Employer Greenfield Agreements or EGAs are exclusively for newly established business (OECD, 2006; Gahan, 2007) that allows employer to select the union it wanted to recognise or decide which particular employees he wants to hire (Towers 1997). It “strips ordinary Australians of wages and protections” (Boucher & Sharpe 2008, p.222) including parental leave and other benefits when an employer refused it on reasonable grounds (Kamerman 2009, p.21). Moreover, under the Work Choices Act 2005, an employer can create an EGA even without an agreement or union involvement (Gahan, 2007) thus; MWC’s existing employees cannot take advantage of rights they normally enjoy with Union Certified Agreements. As the case study suggest, all 20 MWC employees that were fortunate enough to work on the new plant were considered “newly hired” as they cannot carry over their seniority and long service leave. Since most of those rejected to work in the new plant would be out of job for a long period, they consulted the MWC’s union and protested about the inequalities in the selection process. The workers argued that the new company was discriminating against long experienced workers of the old processing plant, as they were rejected because of insufficient education and knowledge of new technology. In other words, their potential to learn under a training programme was ignored in the selection process. In a more general view of the situation, the Italian company seems to employ a ‘segmentalist’ strategy so it can shield itself from internal career ladders, seniority wages and benefits, and in-house training programmes (Sadler & Fagan, 2004). Clearly, the Italian company had adopted a non-union form of agreement to undermine the union and pre-empt the imposition of collective bargaining (Cooper & Briggs, 2009). The new management’s strategy in MWC is in fact not new, as union ‘derecognition’ and reductions in collectivist employment relations have been affecting workers for years (Rose, 2004). According to Ed Rose, the increasing disregard to the importance of union in industrial relations arose from “composition changes” (p.34) and size of the company. Undoubtedly, MWC or the newly established wool combing company in Geelong, being a small public company with around 100 employees, was affected by these ‘derecognising factors’. In a survey of small establishments, 40% believed that “WorkChoices is an unfair system” (MacCallum p.70). More importantly, the WorkChoices reforms that dominates the Australian industrial relations since 2005 gives more weight on flexibility in bargaining, labour market deregulation, and freedom for employers than the protection of workers in general (Hall 2009). According to Richard Hall, the Australian WorkChoice reforms has an “anti-union character” (p.6) that favours lockouts and against strikes. Moreover, the rights of dismissed employees who want to bring their grievances to the proper forum, particularly those working in companies with fewer than 100 employees are strictly curtained by the reforms (Hall 2009; Manne 2008). In March 2008, after the new management was forced to negotiate redundancy packages when the union and the majority of dismissed workers threatened to take their case to the Anti-Discrimination Tribunal, the old MWC employees hired in Geelong plant however discovered that their wages are lower and annualised and required to work flexible hours. In other words, there would not be any payment for overtime work performed during peak production periods. The poor working conditions and wage reductions is actually the consequence of the Employer Greenfield Agreement provided under the WorkChoices law where an employer is free to select the bare minimum wage provided by the Fair Pay Commission (Peetz, 2006). Unlike other countries that are still imposing limits or regulate unsocial working hours, equitable minimum labour standards, work-life provisions, rights and conditions of workers, and much other protective legislation, the Australian WorkChoices legislation had ignored such standards and insisted that “workers stand on the same level as employers” (Smith & Pocock 2008). For this reason, Australian workers are no longer protected by the traditional “juridified” (Weller 2007, p.10) system of industrial relations since wage setting under the WorkChoices legislation is now decentralised and tribunals influence regarding such cases are limited (Cooper & Briggs, 2009). To ensure productivity, efficiency, and facilitate flexible rotating system, modular-training packages were developed by the Geelong plant’s management and encouraged workers to participate in exchanged for extra pay levels and opportunities. However, the real lack of opportunities and advancement in such a small company prevented the Geelong’s plant management to keep the agreement. Consequently, the management had no choice but to limit the rewards and let the workers wait for the availability of the next position to access the agreed opportunity after the training. Faced with various dilemmas during the first year of operation and expiration of the Employer Greenfield Agreement, the Geelong’s plant management finally decided to adopt either individual common law contracts or employee collective agreement. However, the workers expressed their desire for a union negotiated agreement so they can deal with training and rewards issues, health and safety associated with irregular working hours, and effects of work and family life inequities. As expected, the same management who persistently disregard worker’s grievances from the very beginning refused the idea of negotiating with union and workers and stood firm to non-union agreements in the face of various protest. Consequently, instead of bargaining with workers, the management initiated a lockout and opted to stop operation until now. 3. Possible Solutions and Implications The Italian company could have avoided the conflict arising from wage and health and safety issues if they had adopted a tolerable form of agreement. Initially, workers denied of collective bargaining power are more likely to challenge employers particularly those with “take it or leave it” attitude (Hall 2009). Moreover, particularly in Australia, the Italian company management should have realised the fact that workers’ power to bargain with their employer is an underlying principle of industrial relations and labour law (Hall 2009) which unions adapt or restrict (Sadler & Fagan 2004). The Rio Tinto mining vs. Forestry, Mining and Energy Union in 1997 and the waterfront dispute of Patrick Stevedores and the National Farmers Federation demonstrated the power of union to reject non-unionised agreements and discourses on work practices re-structuring because of global market necessity and flexibility (Sadler & Fagan 2009). The problem with the MWC’s take over can viewed as a product of decentralisation, which had brought employment agreements that are clearly hostile to unions, conciliation, and arbitration (Fairbrother & Rainnie 2006). Eradication of union’s bargaining power in a country that encourages direct relationship of labour and management appears irrational in many ways. For instance, unions are inherent to democracy and may affect the outcome of workplace endeavours to benefit the employers and themselves (Richardson, 199). It is therefore necessary, particularly in a company with an existing union like the MWC, to consider and consult them on matters of employment and operation. What had happened to MWC was not simply a matter of taking over a diminishing company but sudden alteration of once harmonious working relationship demonstrated by the new management’s total disregard to the organisational value of a unionised workforce. The new management perhaps failed to recognise that the problem is not the union itself but the amount of power the union can have. According to Richardson (1999), the Australian industrial relations were always a combination of conciliation and collective bargaining (p.83) thus there is no way a foreign employer can ignore the presence of a unionised workforce. In addition, the Employer Greenfield Agreement under the WorkChoices legislation as mentioned earlier is only ideal for newly formed companies with no existing labour force since employers can freely select their workforce from external sources and hire only those assenting with their terms and conditions. The case of MWC takeover was a different case because acquisition of a long-existing company with existing employees accustomed to trade unions and collective bargaining is much more complicated than establishing a new one. Initially, the more logical approach is to give the union a chance and consult them on important matters about their members’ future to avoid tension. According to Wooden et al. (2000), an essential part of the changing employment strategies being adopted by some companies is their approach toward trade unions. Some are seeking to acquire the constructive side of union’s influence in nurturing a more trusting environment while others adopted strategies that would eliminate unions by substituting innovative human resource management strategies that would minimise the need for workers to be represented by union (p.37). Although it may not work for all, the later strategies may be the best option for the Italian company, as it would reduce union’s excessive influence in industrial relations. Giving union members more control over their employment lessen the legitimacy of the central controlling union body and decrease trade union membership (Gollan, 2002). However, the consequence of this approach may not be pleasant if the supposed innovative human resource management fail. For instance, the Geelong’s plants training for awards programme was a good human resource management strategy but incorrectly implemented since there was no real opportunities exist. 4. Conclusion The globalisation of markets negatively affected MWC and the new management who took over the operation introduced new ways of working that was not acceptable to the existing workforce. Moreover, the strategic plan failed to re-consider the well-being of the majority of workers. The imposition of the Employer Greenfield Agreement worsens the situation as it had affected not only the union but also the quality of working conditions for the individual workers. The problem could have been avoidant if the company adopted a more acceptable form of agreement since workers’ bargaining power, is very important to industrial relations and harmonious working relationship. They could have adopted an innovative human resource management as it can reduce the excessive influence of union to individual employees of the company. However, implementation of innovative human resource management option should be carefully plan as the consequences of failure may worsen the situation and further increase the gap between workers and management. 5. Reference List Boucher G. & Sharpe M. (2008). Times Will Suit Them: Postmodern Conservatism in Australia. Australia: Allen & Unwin Cooper R. & Briggs C. (2009), ‘Trojan Horse’ or ‘Vehicle for Organizing’? Non-Union Collective Agreement Making and Trade Unions in Australia, Economic and Industrial Democracy, 30-93, Sweden: SAGE Fairbrother P. & Rainnie A. (2006). Globalisation, State and Labour. UK: McGraw Hill Professional Gollan P. (2002). Works councils in Australia: future prospects and possibilities. Australia: Federation Press Gollan P. 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