Best practice: Employee relations

Personnel Today’s monthly series reveals how managers deal
with business problems and enhance performance. In this issue, Andrew Walker,
HR manager at East of Scotland Water, explains how working with staff and
unions to deliver business strategy can help a company through times of change,
driving the business forward with the support of all employees

In 1996, East of Scotland Water was born out of the merging of the water and
drainage departments of five local authorities. These authorities were diverse
in almost every way, with different ways of working, different cultures and
different terms and conditions. There were 97 different pay structures, people
working different hours, paid different rates for doing the same job and with
different holiday, bonus and sick pay arrangements.

But the newly formed company had a clear goal – universal franchise, one
company, and one working culture.

There was a strategic decision to be made – take the highest levels of
benefits from each employer or start with a blank sheet and design a package that
was right for the new organisation. ESW opted for the latter and started the
planning process from scratch.

Negative feedback

The key objective was to involve employees as much as possible in driving
the new company forward. A series of project teams were established so
employees could develop an approach to job evaluation, salary levels, terms and
conditions, overtime, hours of work, bonus schemes and communications.

The company set a very challenging schedule for this development process
lasting 18 months, with a ballot of all employees at the end of this time to
see if they agreed with the new company strategy. Despite the company’s best
efforts, the feedback from the employee ballot was a 2-1 rejection.

At that time, and continuing today, the company recognised four unions – the
AEEU, Unison, GMB and TGWU. Although the company had tried to involve them as
much as possible, the effect of this 18-month discussion period was that the
unions had felt increasingly marginalised.

Part of the problem was that certain unions’ rules would not allow them to
act on behalf of non-union members.

While the unions were keen to be involved, they didn’t feel they could
participate fully in the proceedings. The regular meetings of the joint council
and divisional forums were perceived by many as toothless and not particularly
representative, and did not have the weight of the unions behind them.

Most important of all was the view from employees that, when discussing
terms and conditions, they wanted the confidence of union involvement to ensure
they really were getting a fair deal.

A way had to be found of achieving universal franchise, but without the
marginalisation of the unions and to address the still- dominant culture of
command and control linked to a tradition of collective bargaining of any and
all changes.

Facilitating change

ESW thought it was managing change well by involving everyone in the
decision process, but something had gone wrong. With an important lesson
learnt, the HR team realised that greater involvement from the unions was
crucial to instil employee confidence in the decision-making process.

The solution to this problem was found with the introduction of an external
facilitator. ESW chose an academic from Strathclyde University who had a good
reputation and who all parties trusted to be neutral and unbiased. Professor
John Gennard facilitated a series of meetings between the HR team and the

Gennard’s intervention involved several months of straightforward talking.
The group discussed many matters over this time, drilling down to find the real
issues that underpin ESW’s business strategy.

It was during this period that the principles for ESW’s future strategy were
laid down. Eleven principles were agreed, including:

– Employment security

– Free exchange of information

– Joint problem solving

– Training and development of all employees

The main objective, agreed by all, was to avoid disruption to customer
service at all cost. After thorough consultation, union members and the HR team
delivered a joint presentation to the ESW board, outlining their proposals.
This was a breakthrough at ESW, as it was the first time the unions and
management had stood before the board as a unified group, with a common

With the board’s approval, ESW began turning principles into tangible
actions. This meant a completely new way of managing change. Strategic company
decisions would now be debated by an Enterprise Council – rather than regional
divisions – and newly formed Employee Business Groups. These groups would
discuss company policy from their specific business angle, and the Enterprise
Council would consider company strategy.

Within this structure, there were guaranteed seats for the trade unions,
with elected places for non-union members and shop stewards.

Straight talking

Last summer ESW took 150 shop stewards, employees, managers and union
representatives away for two-and-a-half day sessions facilitated by the GMB
Management College. The purpose was to build a consensus about the way the new
system would work.

Participants were given techniques for joint problem solving, the
opportunity to try things out, and also to build trust among the potential
decision-making group.

Elections took place after these sessions and the new business groups and
Enterprise Council were up and running by the end of last year.

After the mistakes of the past, the frustrating setbacks and a lot of
straight talking, the real business of moving the company forward could begin
in earnest.

Induction days started off the process for the newly elected
decision-makers, who soon realised the full implications of having a say over
company policy. It’s all very well mulling over the nice things about company
life, but before long, difficult decisions have to be tackled.

The induction days looked at how the group might deal with situations such
as the rationalisation of staff.

Union officials, shop stewards, managers and employee representatives were
now making choices that had previously been made by managers behind closed

The group used the induction days to work through such problems in detail,
finding the best way to manage tricky situations and setting out criteria for
agreeing the best solution. This was when the groups fully realised that they
were in charge of important decisions. For the first time, management was not
presenting set views, it was asking for them – sharing both the problem and the

The new system presents another challenge for group members. Not only do
they have to make decisions, but they must also justify them to the people they
represent. They have to explain why they came to the chosen solution, however
controversial that might be.

Reality bites

The induction workshop scenarios have already become a reality. For example,
the Water Industry Commissioner has set ESW very stringent savings targets that
the company has to make in its operating expenditure. In the past, ESW
management would get together and privately discuss the cuts and savings that
needed to be made to balance the books. Now there is ongoing dialogue with the
Enterprise Council and each of the business groups to come up with solutions.

Crucially, there are no secrets. The groups know the size of the savings
that need to be made, and are working on the solution together.

With the involvement of the union representatives, management and employees,
ESW has introduced a voluntary severance scheme.

The groups are also discussing the implications of letting people go. This
means changing working practices to manage the impact of reducing staff in
certain business areas. In these tough times, it is a real challenge for the group
members to get support from the people they represent.

If there is a positive side to making savings at ESW, it is that decisions
and solutions have been made in the open, with the involvement of as many
people as possible. This means that employees and unions know exactly what the
company is facing, and have influence over the outcome. Employees know that the
management team is doing everything it can to reduce job losses.

The groups have also been looking at other costs the company incurs, seeing
if they can make savings elsewhere. This should reduce the number of job losses
and also demonstrate to employees the importance of trying to find
cost-effective suppliers, reducing wastage and taking positive steps to make
savings in all areas of business.

This process has also shown that there is not necessarily a link between
cost savings and jobs. If there are other ways to save money, the company will
find them.

Further education

ESW has spent the past six months demonstrating to all involved that things
really have changed for the better. The company has engaged people in the
business groups because they are prepared to take the responsibility.
Participants know it is good for their career development. They are getting a
lot of information about the business and about the strategy, where the company
is going and are starting to realise that they can have a real impact on its

However, there is still a large proportion of people that ESW needs to
educate. Starting in September, ESW is taking everybody off the job to lead
them through a process to help them understand the business strategy, how this
relates to customer management and how money flows through the business. In
this way, the company hopes to have all employees armed with a full understanding
of what it is trying to achieve.

There are plenty of other developments to keep the Enterprise Council and
business groups busy. Next April, ESW is moving towards a merger, becoming one
Scottish Water Authority. This move towards a larger, more diverse organisation
will present many new challenges that ESW employees must address and prepare
for now.

The training and development programmes for representatives have also been
mapped out by the groups. One of the first parts of this programme is financial
awareness training, which involves taking employees off the job for a couple of
days so that they can understand the budgets and finances that they are having
to make decisions about. Not only does this help them with the decision-making,
but also helps them report back their decisions to the people they represent.

In the past, employees have been able to criticise decisions, as they had no
influence over them. When they have an understanding of the financial process,
there is less room for criticism, just good, sound ideas.

Sharing in the future

A good example of how the financial training has paid off is with pay
determination. The traditional way to settle this would be by collective
bargaining. The company would put its offer to the unions, which would return
looking for something higher, and eventually they would meet in the middle.

Now, all parties share the same information, understand the budgets and the
business context, so a collective decision is made about where the money should
best be allocated and where that money might come from.

Another training focus is IT. At ESW, about 1,000 out of 1,700 employees
have access to computers on their desks, but others, such as those working on
network repairs, do not have that luxury. ESW has installed kiosks in the
places where employees congregate so those without desk access to the Internet
can keep up to date with team briefings, company news and – in the future –
their personnel records.

These are exciting times at ESW. The company is moving through a great
period of change, which needs to be managed well to drive the business into the

But with the support of employees, unions, management and the board, change
is not feared at ESW, it is a challenge, but not a threat. The building blocks
are in place to ensure that company strategy and policy will never be decided
behind closed doors, and that every person at ESW is fully represented as the
company moves into a new era.

On getting your staff involved in decisions

– It is crucial to get commitment from the top. This needs to be more than
just verbal support – it must be visible and consistent

– Don’t assume everything’s going OK. Progress can be achieved quickly, but
continual feedback from those involved manages expectations and helps find ways
of improvement

– Recognise that it is different on a course from being on the shop floor.
Ten or 20 like-minded people will agree on a great idea, but they have to go
back to the shop floor and explain their decision to people who haven’t been on
the course. The representatives need continual support to ensure that they
don’t feel pressured into agreeing to ideas their colleagues will hate

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