Negotiating changes in work force numbers or conditions of service lies at the heart of the challenge facing the implementing agency. This section provides a framework for negotiations, and some examples–good and bad–from different environments.
If consultation is meant to seek views about the nature of the changes to be made from a range of stakeholders, negotiation is intended to agree on the terms of those changes with the people directly affected by them. In practice, negotiation–as a specific form of engagement–will usually involve investors, workers and trade unions, and government.
For example, in the Buenos Aires water concession, the labor union was represented on the committee that was set up to oversee the process and was closely involved in negotiations on restructuring methods, severance options, and retraining arrangements (World Bank 2002).
Negotiation is a common feature of work force restructuring in infrastructure enterprises simply because the enterprises are usually large and the work force is generally organized. The employer–employee relationship between government and the work force provides the primary context for negotiation as a form of engagement. Key actors in the negotiations are therefore government and workers' representatives, although each party may enlist support (lawyers, advisers, nongovernmental organizations [NGOs]).
Negotiation arises in work force restructuring as a result of the employer–employee relationship between government and the work force.
The Ghana Ports and Harbours Authority (GPHA) is to be converted into a "landlord" port authority whereas the private sector will participate in port operations, particularly container handling operations, dock yards management, sites maintenance, and services. A critical issue was overcoming the resistance to change from many of the stakeholders in the port industry. This was achieved through:
There was public consultation through a national workshop on the acceptability of the government's policies about port reforms. The minister of roads and transport also made personal visits to the ports to speak and, more important, to listen to the port work force and the port labor unions.
Source: PPIAF 2001.
Negotiation is important because of the financial consequences for all parties. As box 6.6 illustrates, an otherwise exemplary engagement strategy can lead to adverse consequences for government if the negotiation element goes awry (in that case, on pension matters).
The ability to negotiate through collective bargaining is central to unions. Most OECD countries permit and guarantee rights to collective bargaining and the freedom of workers to associate, but restrictions on these rights exist in a number of developing countries. Although the economic benefits of collective bargaining for workers and for enterprises are context specific and not very clear cut (Aidt and Tzannatos 2002), unions can play a key role in achieving negotiated changes in work practices that are of mutual advantage and more sustainable.
Sri Lanka Telecom (SLT) was partially privatized in 1997 through the divestiture of 35 percent of shares plus management to a strategic investor–NTT of Japan. Issues of redundancy were considered explicitly from the time that privatization was envisaged in the sector. The sector was large, employing over 8,000 workers in the early 1990s. It was clear from the outset that worker support was essential if privatization was to be done smoothly, even though overstaffing was not a critical issue. Over a period of five years, from 1992 to 1997, various strategies were adopted to involve and increase worker awareness on preparations for privatization and the process itself.
A national steering committee was appointed to make high-level decisions and recommendations regarding the transaction while a Telecom Cell was created at the PERC (the privatization agency) to handle implementation of the transaction. The cell was meant also to interact with the 31 trade unions operating in SLT. However, for the purpose of closely interacting with the cell, the unions were represented as a "joint front" involving nine trade unions. Six union leaders already had been sent to visit privatized telecommunications companies in Chile and Mexico to familiarize themselves with the facilities available in those countries.
An independent consultancy group (the National Institute of Business Management, NIBM) was appointed to study labor issues relating to the reconstruction of SLT. A key finding by NIBM was that trade union leaders did not always voice the opinion of the majority of workers. This suggested that the trade unions had to be contacted individually and the workers had to be addressed directly. Such dialogue was found to be much more productive than dialogues with the union leaders alone. In fact, certain trade unions with skilled workers (accountants, engineers) were strongly in favor of privatization, recognizing that it would lead to enhancing of company worth and career development opportunity.
An in-house magazine, Amathuma, was launched by a media subcommittee. SLT also conducted regional open house "awareness" forums at offices throughout the island, along with representatives from the Ministry of Posts and Telecom, PERC, and NIBM. Several media campaigns were also launched, addressing the need for restructuring SLT and the telecommunications sector.
All of this careful preparation led to the comparatively smooth transition of SLT from a government department to a privatized enterprise. No workers were retrenched during the process. The government, however, had to pay a high price for this relatively peaceful transition. The price was not just in the form of expenses incurred during the awareness campaigns, or in terms of airfares for the unionists. The principal expense came in handling the negotiations that arose with regard to pensions, with the outcome leaving the government with substantial pension commitments to several hundred telecom workers for several decades hence.
Source: Salih 2000.
The centrality of negotiations for unions has four practical implications for the implementing agency:
There is no easy recipe for negotiations, but clarity of the objective (a successful PPI) and good preparation will always be needed. At its simplest, negotiation requires four steps:
Preparation is essential. Working with othe r government stakeholders, the implementing agency must:
"Last year government announced its plan to break Spoornet [the state-owned rail enterprise] into separate businesses and concession them to the private sector. This year, after more than six months engagement with labour, government has accepted that this plan makes no developmental, business or financial sense. What persuaded government to change its view? Why did it adopt such a flawed plan in the first place? The first important point is that SATAWU [South Africa's transport workers' union] successfully used Parliament and the press, as well as mass action and a march to the Minister of Transport's office, to put pressure on government to engage in serious and meaningful consultation. The trade union movement can draw several lessons from this experience. Firstly, engaging with government requires a large commitment of time and resources–in this case the SATAWU policy officer [and two researchers] working between half and full-time for more than six months. Secondly, the labour team focused on issues of socio-economic development and sustainability, rather than simply negotiating over job loss. Thirdly, management was a crucial party to the process, since only management can generate the detailed financial and business information that is necessary for a proper assessment of restructuring proposals. Fourthly, labour has to take responsibility for managing the process of engagement, as the DPE [Department of Public Enterprises, responsible for the management and restructuring of state enterprises] lacks the skills of stakeholder consultation. Finally, government was not monolithic. Fortunately, management was totally opposed to government's plan, and there were officials both within DPE and in other departments, and ministers, sufficiently committed to socio-economic development to change their minds on the basis of the evidence" (Von Holdt 2001, pp. 2-4).
Preparation is essential before entering into negotiations.
"Transnet [a public sector holding company for transport enterprises] has finalized its social plan agreement with organized labour. This process has been long and arduous, stretching over 2 years with no less than 30 meetings of negotiation to reach agreement. Spoornet itself has been dealt with separately, given the major concerns that exist there. Thus, a joint Government/Labour task team on Spoornet was established and so far has had 10 meetings that have resulted in the presentation to the principals of a final report. However, a further technical working group has been established to review the end-state model for Spoornet restructuring, and this group has met at least 12 times so far, but is yet to complete its work."
Source: Department of Public Enterprises, South Africa (www.dpe.gov.za/docs/policy/restructuring.html.
Notes on arbitration and labor conflict prevention.
During this stage both sides set out what outcomes they are looking for. The discussion stage of negotiations contains significant exchange of messages and information about the wants and needs of each party. It is important not to close this out too soon, or to "box in" the other party, because the other party has little or no room for making concessions and effectively is forced out of the negotiations before moving to the next step–proposing and bargaining.
Table 6.4 provides a checklist for implementing agencies that suggests possible negotiating issues between labor and government, setting out labor's possible concerns and potential bargaining incentives and the outcomes that may be mutually beneficial. Although it is not an exhaustive checklist because every circumstance will bring out different issues, it can be used as a starting point and a framework for identifying areas of potential negotiation, building on step 1.
This stage is also important in creating the right climate for discussion. The aim of the implementing agency should be to engender a tension-free atmosphere where mutual trust and confidence can be developed.
It is during this stage that personal negotiation skills are most important. Key elements are clear communication, active listening, a willingness to separate the people and personalities from the subject of the negotiation, and a desire to look for outcomes that can satisfy the interests of all parties (even though they cannot always be found).
There may be a number of negotiations going on in parallel for different subsectors or issues (perhaps pensions or legislative change) or for different operating divisions. The implementing agency will then need to ensure coordination among all these aspects. The example from South Africa (box 6.8) again illustrates this point.
| Issue | Labor concern | Potential bargaining areas | Possible outcomes or agreements |
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| Staff reduction to meet competitive- ness benchmarks |
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| Introduction of flexible work practices instead of rigid work rules |
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| Improvement in labor productivity |
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| Merit-based recruitment |
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| Flatter hierarchy |
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| Market-oriented pay structure |
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| Reduction of nonwage labor costs |
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| Managers' right to manage (and discipline) the work force |
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| More efficient use of company resources |
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| Changed relationships with unions |
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Source of the table content
When agreement has been achieved, it is important to be sure that it can actually be implemented by all parties. The agreement needs to be put in writing, but rushing to signature may be inappropriate. Usually each party will have to ratify the agreement: workers' representatives need to gain agreement from the work force, and the implementing agency may need approval of the privatization agency, ministers, or the head of state.