Industrial relations in German-owned companies in the UK

Events in the UK during 1998, such as the deal struck at Rover to secure the Longbridge plant and the closure of the Siemens plant on Tyneside, have drawn attention to managerial attitudes towards redundancies and towards consultation and negotiation in German companies in the UK. New research into the human resource management practices of German multinationals operating in the UK sheds light on the issues.

Do German-owned companies transfer a cooperative industrial relations style to their UK operations, or are such companies taking advantage of the deregulated UK environment to increase their quantitative flexibility? These questions are particularly topical, following a number of high-profile events in 1998, such as the agreement reached to secure the Rover car plant at Longbridge in Birmingham, owned by BMW (UK9812168N), and the closure of a Siemens plant on Tyneside. Recent research into the human resource management practices of German multinational companies in the UK sheds new light on the matter.

The research, carried out by the University of Warwick's Industrial Relations Research Unit in cooperation with the Institute for the Study of Labour Law and Labour Relations in the European Community (Institut für Arbeitsrecht und Arbeitsbeziehungen in der Europäischen Gemeinschaft, IAAEG) in Trier, Germany, was financed by the Anglo-German Foundation for the Study of Industrial Society and the UK's Economic and Social Research Council. It involved approximately 80 in-depth interviews with managers, both in 40 UK subsidiaries of 35 German companies and at head office level. The study covered a wide range of sectors, but most of the case-study companies were concentrated in motor vehicle suppliers, chemicals and pharmaceuticals, and electrical engineering. The size of the companies ranged from medium to very large, and the sample included several family-owned firms. The companies studied together employed around 50,000 people in the UK.

"German multinationals and the management of HRM in their UK subsidiaries", by Anthony Ferner and Matthias Z Varul, an interim report on the research, was presented to an Anglo-German Foundation workshop held on 11 December 1998 at the University of Warwick.

Non-intervention but subtle influence

Although the focus of the Warwick-IAAEG study was on the interaction between head-office and subsidiary management, the findings also shed light on the implications of ownership nationality for industrial relations in the UK. Rather than actively trying to benefit from the absence of regulation or attempting to transfer perceived benefits of the arrangements existing in Germany, a large majority of the German multinationals studied did not exert any influence on participation, communication and negotiation practices in UK subsidiaries. The study confirms the findings of previous survey-based research that German companies do not set up Betriebsrat-style works councils in their subsidiaries and do not display a tendency towards unionisation. The study suggests that this can be explained by a reluctance to intervene in subsidiaries' industrial relations rather than by a strategy of avoiding the kind of constraints experienced in Germany.

Respondents at head-office level in general took it for granted that industrial relations is an area requiring very deep local knowledge where interference could only be harmful. So involvement in ongoing negotiations was avoided, as was the prescription of information and consultation procedures: at most they required to be kept up to date about what was happening. Furthermore, the highly institutionalised industrial relations landscape in Germany inhibits the development of a strategic approach that could subsequently be transferred - in contrast to Japan ese companies which export their single-union or even company union approach, or the US companies which tend to avoid unionisation. Accordingly, most of the British managers interviewed stated that they have considerable freedom to follow their own agenda.

Unionisation rates varied as one would expect them to do in British establishments: approximately half of the UK subsidiaries were unionised. Decisions for or against unionisation were justified by local needs or by strategic arguments, but hardly ever by reference to the corporate style of the group as a whole. Instead of drawing on the procedures found in the German operations, they followed what would be seen as good practice in a British context, with a strong emphasis on direct communication.

Despite this picture of non-interference, British managers felt there was a more subtle head-office influence on general management style: "macho management" was a taboo, and most respondents emphasised a cooperative style at their establishments. This general attitude was transferred through various channels, but mainly through personal relations, and to a much lesser extent through explicit guidelines. Some head-office personnel managers emphasised that they would step in if a blunt confrontational style was emerging in a subsidiary. Nevertheless, such situations were nearly always hypothetical and, where they did occur, concerned general management style and working climate more than concrete industrial relations practices. Ironically, a cooperative style was often seen as implying non-unionisation: staff demands for unionisation might indicate a failure to establish a climate in which employees did not feel the need for union representation.

European Works Councils

One issue on which British and German personnel management have had to cooperate is the establishment of European Works Councils (EWCs). Most of the companies studied have one. UK subsidiaries have always been invited to participate and have nearly always taken up the invitation. In many cases, the election of British representatives has proved problematic as company-wide representation structures are usually lacking. Head offices have sometimes had to intervene to make sure that an appropriate procedure was applied as they are usually bound by agreements with the company-level works council (Gesamtbetriebsrat) in Germany. Nevertheless, these interventions were all at a very general level (eg to make sure that representatives are elected and not appointed), so that they hardly changed the overriding impression of non-interference, and most British personnel managers saw no other implications of participating in the EWC than an increase in costs. In some cases, personnel managers welcomed the EWC as a trigger for the establishment of international personnel committees - but again without perceived implications for local industrial relations.

Employment stability

One major implication of the absence of central control over industrial relations is an absence of guidelines as to how to deal with redundancies. Where there was a preference for more socially responsible ways of handling or avoiding redundancies, this too was a reflection of the company's general management style. At the same time, the prevailing "long-termist" commitment to investment seemed to result in securer jobs. British managers often contrasted the way redundancies were handled in their establishments with the "hire and fire mentality" they experienced in UK- or US-owned firms for which they previously worked. However, there were also high-profile cases where German head offices pressed for substantial redundancies in UK plants while jobs in their German operations remained secure.

Commentary

While the assumption of a more cooperative style in dealing with employee representatives in German companies is supported by the findings of the study, the assumption that German companies are more likely to recognise trade unions and would like to set up Betriebsrat-style consultation bodies in their subsidiaries is not. "Home country effects" are to be found as subtle influences rather than at an institutional level. While multinational companies in general may act as "innovators" in national systems of industrial relations (UK9711178F), this does not seem to be the case with German companies in Britain. Evidence regarding redundancies adds to the experience at Siemens and Rover: German management may be committed to employment stability in their foreign subsidiaries as well as at home, and may be ready to strike location-securing deals, but that does not justify any expectations that they will shrink from "tough decisions". (Matthias Z Varul, IRRU)