Telstra: Managing Employee Relations - Research Paper Example

Telstra - Managing Employee Relations Introduction Telstra is one of the biggest telecommunications company in Australia. Being a government organization, the company was heavily influenced by labor unions before the privatization spree of the Australian government with respect to the telecom as well as the labor market. The Federal Government has reduced its shareholding in Telstra from 51.8% to 17% which is held by the Future Fund (au.finance.yahoo.com). SWOT analysis Strengths Huge customer base as the company is one of the biggest company. The company has achieved optimization in processes through various initiatives since the 1990s privatization process. The company is well diversified and technologically advanced with respect to the services. The company has lower skill because of its government backing Weaknesses There is still some instability in the company on account of ER issues as it is still downsizing. It keeps having union related confrontations in this regard. The company has not diversified much outside Australia Unions still have a hold over the employees of the company leading to insecurity on account of unionization activities. Opportunities The company has the opportunity of diversifying to developing economies of Asia and Europe as they are opening their telecom sectors. The company has further opportunity of streamlining its ER operations to further reduce the influence of unions. The company’s 3G experience in Australia can be used effectively in new market penetration. Threats The company is in an industry where technology changes very fast. Thus, the company is always at a threat from the new technological innovations. For decisions requiring major restructuring both technological and employees, the company is at constant threat from unions which can oppose its decisions and hence hinder the company’s objective of changing fast in the ever changing technological environment. Implementation of new technology is always a threat as there are bound to be some problems in the initial phases. For example, when the company launched the 3G services in Queensland, it faced major technical problems. ER environment and its development over the years This together with the liberalized labor laws has led to a reduced hold of the unions on the employees of the company. To achieve this level of privatization, the company had to confront very strong opposition from unions due to their high penetration at the time of privatization process which started in the late 1990s. At one time the company had to deal with twenty eight unions, though only five of them represented 91% of the members. Only CEO and 11 of his direct reports were exempt from being members of any unions. The company had pretty harmonious relations with these unions as management spent a lot of time in discussing and negotiating with them before implementing any decision (Katz 1997). From twenty eight unions that Telstra dealt with earlier, today the company deals mostly with only three unions which are AMFEU, CPSU and CEPU (Katz and Darbishire 2002). With the privatization, the management started moving towards employment relations strategy that was aimed at creating distance from the union involvement. There was a shift away from collective bargaining. Earlier, managers could deal directly with unions to deal with ER issues. However, with deregulation, the managers of Telstra started molding their ER policies to suite more competitive telecom market (Ross and Bamber 2005). Telstra’s group managing director ER argued that capable leadership was essential if Telstra was to make the transition to a successful company operating in the competitive market (Fairbrother 2002). The ER principals were devised around giving more autonomy to the management and their aim was to improve manager-employee relationship and not allow any third-party interference in their roles and responsibilities. This reduced the role of third party interference even to a greater extent. The major process of changed ER was initiated because of changes in the company’s changed divisional structure. The company changed from centralized way of working to decentralized divisions. This required a de-centralized ER structure to cater to the six business units and one service unit (Katz and Darbishire 2002). Human resource management (HRM) directorates concentrated on developing ER strategies that were in accord with corporate strategic objectives, while day-to-day ER responsibilities were delegated to line management (Ross and Bamber 2005). There was a participative approach towards dispute resolution process, but this came to an end with the change in HR director just before partial privatization of Telstra. Telstra management started the process of innovating its human resource management by increasing the worker participation in total quality management programs. The main aim of the management in using this approach was to bring in the unions in the management of key industrial relations issues. However, the company gave up this approach as it was very difficult to implement participation at the time when the company was downsizing and restructuring. These forums were used by the workers to voice their concerns regarding job insecurities. Hence, the company decided not to pursue with this approach as this was creating more hindrance to the process of change (Chu). There were a lot of confrontations between the unions and the company where the two did not agree on a particular decision as the managers had kept their relationship with the unions only to the level that was required by the ER legislations. Until 1998, the company continued to renegotiate a single enterprise bargaining agreement (EBA) with the unions (Ross and Bamber 2005). This strategy was later shifted to separate EBAs which were aimed at breaking the collective agreements and work force. The introduction of Australian Workforce Agreements (AWAs) which was introduced under the Workplace Relations Act (WRA) was another bolt to the unions. This is because Telstra started entering into individual works contracts, AWAs, with its employees further weakening the process of collective bargaining and hence the importance of the unions. They even started enticing the employees to get into these contracts by offering financial and other incentives. The company propagated the individual contracts as a source of improved relationship between the company and the employee. The workers started leaving the unions as they had now entered individual contracts with the company. The new employment agreements required greater working hours, fewer allowances and much greater functional flexibility. The employment contracts were relatively short documents with many employment conditions shifted into company manuals (Ross and Bamber 2005). With these contracts the company avoided any negotiations with employees or unions as they could unilaterally alter the employment policies at any time. The management had redefined and distanced the unions from legitimate representatives of employees to a body that has a transactional relationship with employees around a narrow range of employment issues (Fairbrother 2002). Another strategy that Telstra employed was the introduction of outsourcing, subsidiaries and joint ventures (JVs). This made it easy for the Telstra management to implement greater flexibility in its ER strategies. It was much easier to implement new ER policies in the external firms than to change the policies within Telstra (Ross and Bamber 2005). One of the major changes that the company had to implement was the change in culture from internal producer view to an external consumer view. Most of the senior management of the company was from technical background in which they took great pride. However, with privatization, the company needed to change the senior management skills to more on marketing as they needed to focus more on customer service now (Katz 1997). Telstra managed to achieve high level of de-unionization by completely doing away with the tripartite Promotion Appeals Board (PAB), the Discipline Appeals Board (DAB) and the selection panels (Fairbrother 2002). This was not an easy task as the company faced a stiff competition from the unions on this initiative, but WRA under the new liberalized labor laws regime helped them to reach this goal. The WRA did away with the award giving process which facilitated in complete abolition of the PAB and DAB. Though these bodies were more of a symbolism as the actual cases they heard were not too high, the dent in the symbol was strong enough to remove the hold of the third parties, i.e. the unions and the independent chair, in the decision making process with management becoming the sole authority in all internal decisions of the company (Fairbrother 2002). The company tried to follow the same route with the Redundancy agreement, which disabled the company to forcefully make an employee redundant if there was a volunteer who was willing to be made redundant in his/her place. This led to a loss of talent for the company and hence Telstra wanted to be in a position to choose the employees who should be made redundant. However, the unions opposed this very strongly at the end of a four year long battle in the Australian Industrial Relations Commission, the original redundancy agreement was allowed to stand. With this, the relationship between the company and the unions became even more hostile leading to the company revoking the passes of the union members which disallowed them free entry at the company’s sites. Any entry into the Telstra site was required to be under the rules of the WRA. This required the unions to have a permit by the Australian Industrial Relations Commission (AIRC), give 24-hour notice to the management before entry into the premises, visit the site only during working hours and hold any discussions only during breaks. Another step that the Telstra management took towards breaking the union stronghold was the discontinuation of the deduction of union dues from staff salaries as they were the discretion of the employees and not the responsibility of the company (Fairbrother 2002). Main problem with unions The two main unions CPSU and CEPU were not able to do much in the changed environment. With lack of support from the government on account of deregulations and the resources getting dried up as the company stopped the automatic deduction of the membership fees of the unions from the employees, the unions are now nothing but symbolic groups. The membership of these unions has depleted considerably as the employees now do not feel the need to be members of the unions because of their individual contracts with the management. Another factor that led to their ineffectiveness was the inability of these unions to change their internal structures to match with the changes in the organizations with which they were dealing. With the change in the environment, Telstra changed its structure from highly centralized to a decentralized one, while the unions carried on with the structures to cater to the old Telstra way of working. Hence, they were not able to fit themselves into the organization as they did earlier. This was one of the major drawbacks of the unions. Workplace relations at Telstra with recommendations Currently around 69% of the company’s employees are on individual contracts. The remainder employees are employed under collective agreements, including Telstra’s Employee Collective Agreements made in the 2008/09 financial year (Telstra.com). The direct employee count of the company stood at 30,336 employees as of June 30, 2009 (Telstra.com). This means that around 9,400 employees are working under collective agreements. The company has very clear guidelines for workplace relations. It recognizes freedom of association principles, including the right of employees to choose to be members of a union. Telstra has clear policies in place (and provides training to managers) to ensure that employees are treated fairly, equitably and do not suffer any form of discrimination on the basis of political beliefs or union membership (Telstra.com). This means that the employees have the full right to align themselves with the unions. The unions have their own communication methods with the employees. For example, CEPU has a website which carries all information an employee needs regarding the work related issues. Its main features are – an organizer which lists all the details of the union officials, latest news is featured at the site which keeps the members up to date regarding key developments, awards and agreements are posted at the site to make sure that the employees are aware of developments in the areas of salaries and other conditions and entitlements, and workplace advice is also provided for the convenience of the employees (ceputelserv.asn.au). Thus the employees can visit these sites and contact the union officials. Dispute resolution process is very transparent. It is also included in the collective agreements. As per these agreements, the employees have the right to look for support in case of any dispute and this support can also come from the unions. As per these agreements, the employee has the right to get an early resolution of his/her grievances at the work place itself. “Telstra complies with requirements to consult with unions who are party to its collective agreements, as well as affected employees in relation to organizational changes” (Telstra.com). This means that the company recognizes the consultative power of those unions which it recognizes and with whom it has signed the collective agreements. Currently, the main unions that the company recognizes and negotiates with are CEPU (Communications, Electrical and Plumbing Union of Australia) , CPSU (Community and Public Sector Union), APESMA (Association of Professional Engineers, Scientists and Managers, Australia )and ACTU (Australian Council of Trade Unions) (docstoc.com). The officials of these unions talk to the company representatives and HR heads to discuss the issues of the employees which have been brought to their notice through various communication channels. For example, in one of the confrontations between the company and the unions, the HR heads of Telstra agreed to talk to the union members to come to some mutual agreement on issues raised by the unions. This was communicated by the HR heads to the employees through the following e-mail - "We are committed to treating you and your bargaining representatives with respect, and we will be consulting with Telstra unions ahead of the formal bargaining process." (Hannan 2009). Thus, we can see that though the influence of unions has decreased in Telstra, it has not completely disappeared and the company has to negotiate with it on broader issues. The company recognizes the need of this consultation process when it proposes to introduce significant business initiatives or major changes that have a visible impact on employees (Telstra.com). These changes could be as follows (Telstra.com): Changes in technology The composition, operation or size of Telstras workforce or skills required The elimination or diminution of job opportunities. Thus, the company expects union intervention in cases which affect the employees to a substantial extent and not in daily functioning of business. Where the employees have been impacted with respect to job loss, skill changes or technological changes where there is a perceived high adverse impact on their functioning, the company is willing to talk to their representatives in the form of unions. Other stake holders influencing ER Other stake holders that are involved in the company’s ER affair are the Australian labor regulatory authorities, the internal human resource department and the employer association of which Telstra is a member. The main federal organizations that are stakeholders in the company are AIRC and the Office of the Employment Advocate. The HR department acts as a bridge between the company, employees and the unions. Among the employer associations, Telstra is a member of The Australian Chamber of Commerce and Industry (ACCI). Future challenges Thus, we can see that the company has managed to achieve high degree of de-unionization. The major problem in the kind of ER structure that the company has acquired is that there is a difference in the contracts of the members who are covered under individual work agreements and those who are covered under collective agreement. There is always a risk of the former getting influenced by the latter which could lead to difficult ER situations. The company still is at loggerheads with the unions on many issues, one of them being job cuts. This can be a source of dissatisfaction for the employees and the return of the unions with greater strength. One of the challenges for the firm would be to balance the two employee types as the influence of the unions will continue to be there in the organization. Employee relations has a great influence on a company’s risk profile as poorly managed employee relations can lead to inability of the firm in accessing the human capital and loss of talent leading to raised transaction costs. Not only can there be a loss of human capital, there can also be extra costs on account of employees going into litigation leading to reputational risks as well (Baur, Derwall and Hann 2009). The company should thus take a softer stand on retrenchment or device better ER strategies to overcome the problem. Profitability data Year Net Profit * Net profit to sales 2009 4,073 0.29 2008 3,692 0.27 2007 3,253 0.24 2006 3,183 0.24 2005 4,204 0.32 2004 1,381 0.11 2003 3,759 0.29 2002 3,898 0.29 2001 3,738 0.30 2000 4,093 0.26 *Note: Figures in millions of Australian dollars Above table shows the profitability data of the company over the last 10 years. We can also see the ratio of profits to total sales (moneycentral.msn.com). Looking at the data we can see that the profits have been increasing since 2006. Similar trend can be seen in the profits to sales ratio. This has been achieved on account of improved process due to restructuring, greater privatization of the company and investment in latest technology to increase market penetration. The company is bound to improve further on account of its introduction of the 3G technology in Australia. References au.finance.yahoo.com. Telstra Corporation Limited, viewed on May 21, 2010. http://au.finance.yahoo.com/q/apr?s=TLS.AX ceputelserv.asn.au, 2008, CEPU Bulletin, viewed on May 24, 2010. http://www.ceputelserv.asn.au/cepu-bulletins/?idx=265 Bauer, R, Derwall, J and Hann, D, 2009, Employee relation and credit risk, viewed on May 24, 2010. http://www.unpri.org/files/Article%20for%20synopsis%201%20May%202010.pdf Chu, J, Privatization and Labor: The Telstra Experience, viewed on May 24, 2010. http://www.mngt.waikato.ac.nz/departments/Strategy%20and%20Human%20Resource%20Management/Airaanz/old/conferce/newscastle2000/Vol2/chu.pdf docstoc.com, Telstra’s Sample Employee Collective Agreement Comparison Table against Telstra Unions position, viewed on May 24, 2010. http://www.docstoc.com/docs/31618328/Telstras-Sample-Employee-Collective-Agreement Fairbrother, P, 2002, Privatisation, globalisation, and labour: studies from Australia, Federation Press Hannan, E, 2009, Telstra calls truce with unions over negotiations, viewed on May 24, 2010. http://www.theaustralian.com.au/business/telstra-calls-truce-with-unions-over-negotiations/story-e6frg8zx-1225716198859 Katz, H.C, 1997, Telecommunications: restructuring work and employment relations worldwide, Cornell University Press. Katz, H.C and Darbishire, O, 2002, Converging Divergences: Worldwide Changes in Employment Systems, Cornell University Press Ross, P.K and Bamber, G.J, 2005, Hierarchy versus the market: Downsizing, outsourcing and employment relations at Telstra and The Telecom Corporation of Newzealand, Griffith University, Australia. moneycentral.msn.com. Telstra: Financial Summary, viewed on May 24, 2010. http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=TLSYY&lstStatement=10YearSummary&stmtView=Ann Telstra.com, Telstra: workplace relations, viewed on May 24, 2010. http://www.telstra.com.au/abouttelstra/corporate-responsibility/employees/workplace-relations/ Read More