This article was downloaded by: [RMIT University] On: 07 October 2013, At: 16:12 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK The International Journal of Human Resource Management Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rijh20 Human resource management and industrial relations in Italy Serafino Negrelli & Tiziano Treu Published online: 28 Jul 2006. To cite this article: Serafino Negrelli & Tiziano Treu (1995) Human resource management and industrial relations in Italy, The International Journal of Human Resource Management, 6:3, 720-734, DOI: 10.1080/09585199500000045 To link to this article: http://dx.doi.org/10.1080/09585199500000045 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is
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This article was downloaded by: [RMIT University]On: 07 October 2013, At: 16:12Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T3JH, UK
The International Journal ofHuman Resource ManagementPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/rijh20
Human resource managementand industrial relations in ItalySerafino Negrelli & Tiziano TreuPublished online: 28 Jul 2006.
To cite this article: Serafino Negrelli & Tiziano Treu (1995) Human resourcemanagement and industrial relations in Italy, The International Journal of HumanResource Management, 6:3, 720-734, DOI: 10.1080/09585199500000045
To link to this article: http://dx.doi.org/10.1080/09585199500000045
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all theinformation (the “Content”) contained in the publications on our platform.However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness,or suitability for any purpose of the Content. Any opinions and viewsexpressed in this publication are the opinions and views of the authors, andare not the views of or endorsed by Taylor & Francis. The accuracy of theContent should not be relied upon and should be independently verifiedwith primary sources of information. Taylor and Francis shall not be liablefor any losses, actions, claims, proceedings, demands, costs, expenses,damages, and other liabilities whatsoever or howsoever caused arisingdirectly or indirectly in connection with, in relation to or arising out of theuse of the Content.
This article may be used for research, teaching, and private study purposes.Any substantial or systematic reproduction, redistribution, reselling, loan,sub-licensing, systematic supply, or distribution in any form to anyone is
The International Journal of Human Resource Management 6:3 September 1995
Human resource management and industrial relations in Italy
Serafino Negrelli and Tiziano Treu
Abstract Evolution of industrial relations and human resource management in Italy in the last decade is analysed through qualitative case studies, quantitative surveys and a combination of qualitativelquantitative data originating from net- work researches.
In the 1980s, complementary industrial relations/human resource management in Italy were based on the trade-off between employment security, work flexibility and industrial adjustment. In the 1990s this complementarity is under pressure from a second restructuring process (and privatization) of Italian enterprises.
The last surveys underline that the basic features of industrial relations were not altered, but the data confirm the critical importance of the relationship between industrial relations and human resource management and also the fragility of this balance.
Keywords Industrial relations, human resource management, Italy, employment security
Introduction
Several kinds of data and researches are considered in this paper with the aim of analysing the evolution of industrial relationshuman resource management in Italy in the last decade. First, qualitative analysis, based on many case studies since the late 1970s, is provided in order to compare the private sector (Pirelli, Fiat, Olivetti, Zanussi) with state-owned enterprises (Sip, Italtel, Enel). Second, many recent quantitative surveys on privatelpublic and small-mediumllarge-size firms are based on annual or repeated observations in the North and the South of Italy (Crora-Bocconi: 200 firms in Lombardia; Assolombarda: 300 firms in Milan; Stoh: 50 firms in Campania and in the South; Cesos: 150 firms all over the country; Sinnea: 50 firms in Emilia-Romagna). Third, a combination of qualitativelquantitative date originates from research networks in telecommuni- cations, the automobile industry, banking, steel, transportation (air, railway, ports) and public services.
The main hypothesis of complementary industrial relations/human resource management in Italy is obtained from at least three considerations. First of all, this complementarity is based on the trade-off, more diffused in continental European firms, between employment security, (functional) work flexibility and economic performance (industrial adjustment).
In Italy, this trade-off is a consequence of a strategic choice of the unions: from the defence of the traditional work rules in the 1970s to a policy of bar- gained work flexibility (avoiding labour de-skilling) in the 1980s as a response to restructuring enterprises (Negrelli, 1992a).
Lastly, the complementarity between industrial relations and human resource
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management was stronger in the state-controlled enterprises with many institu- tional arrangements of participative industrial relations: disclosure of informa- tion, joint labour-management committees, mandatory union consultation (Iri and Eni protocols). But in the early 1990s a similar pattern of participative models of industrial relations was adopted in some of the most important pri- vate enterprises (Fiat Melfi, Zanussi, Merloni, etc.).
This tendency in industrial relationslhuman resource management is now under the pressures of economic crisis, more competition and a second restruc- turing process of Italian enterprises. The privatization of telecommunications, banks and other public firms could modify the traditional social pact. New research findings underline that participative industrial relations models are more developed in the larger enterprises but with a declining unionization. And there are still many obstacles to the development of strategic human resource management, also in these larger firms.
The question for a certain length of time in Italy will be how to maintain the virtuous trade-off between human resource management and industrial relations and how to avoid low skill-low wages solutions.
In the public and service sectors, protected from the market competition, equivalents of the market could have positive effects on human resource man- agement and on the motivation of the personnel. In the private and competitive sectors, a stronger interaction between more participative models of industrial relations and strategic human resource management could improve economic performance and firms' productivity.
The impact of industrial relations and human resource practices on economic performance
The interrelationship between industrial relations, the quality and quantity of employment and the economic performance of enterprises (or of other organiza- tions) has been traditionally more evoked than analysed. ' '
It is also significant that collective industrial relations have attracted greater practical attention than 'individual' human resources, to the point of reducing the innovation in this latter area, which has been more concerned with promot- ing enterprise efficiency and the development of internal labour markets.
This predominance of industrial relations over individual human resources and the scarce concern for the impact of the former on performance can be seen not only in systems characterized by conflictual unionism and collective bargain- ing (the industrial sectors of France, Italy, Spain) but also in some areas where highly institutionalized forms of labour management participation were present, i.e. the public services in most of the same countries. In the protected environ- ment of these services labour-management relations were more concerned with the forms of collaboration and with the share of power and income distributed to the parties than with joint effort to improve manpower service quality and efficiency.
Greater attention to the positive or negative impact of individual relations has been devoted, at the macro level, to the main aspects of economic welfare: employment, working conditions, income distribution. The debate on social con- certation and its practice in the 1970s and early 1980s is particularly significant. But here too the relevance of this impact has not been analysed and measured
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to the same extent; often it has been distorted by ideological assumptions. During the 1980s the concern for more effective labour policies and industrial
relations has grown also with respect to the micro aspects of the economy and of the labour market, mainly under the pressure of international competition and of technological innovation.
The various labour relations systems and human resources practices have reacted differently to these pressures depending on many variables: not only the economic and technological characters of the individual economic sectors, but also the strategy of the actors concerned and the tradition of labour relations themselves. Even in those European countries where industrial relations have become relatively well entrenched, including Italy, and not challenged openly by neo-liberal policies doubts have arisen as to whether they could contribute posi- tively to the industrial and economic needs to face the new challenges and under which conditions. In this context the interaction between industrial relations and human resource practices in the shaping of enterprise labour policies was redis- covered too.
The development of innovative human resources practices as an alternative to industrial relations has not been openly proposed or practised by continental European firms as it has been in the United Kingdom and USA. The 'softer ver- sion' has been accepted - that new human resources practices can be profitably used by a participative management in order to spur innovation also in indus- trial relations and to 'complement' them in view of human resource management and consequently enterprise performance.
The validity of this assumption and the possible interaction between industrial relations and human resources and economic performance has been tested in dif- ferent ways.
The response of industrial relations to restructuring in the 1970s
In countries like Italy with a tradition of high labour conflict the capacity of industrial relations to respond positively to the new challenge was put at a severe test already during the first wave of industrial restructuring (late 1970s).
Reactions were uneven, and innovation in industrial relations practices rather uncertain and often disguised. In quite a few cases the parties to industrial rela- tions came to collaborate in order to overcome enterprise crisis, using specific labour policies as a decisive instrument.
A key element of these policies was precisely to protect human resources and the internal labour market from the threats of the outside environment, i.e. from mass dismissal and de-skilling. One can already see here the protection of employment security as the major quid pro quo that the union asked for and obtained in exchange for their acceptance of and collaboration with industrial restructuring. Such an exchange was facilitated by the legal tradition relatively accepted, at least in large firms and for 'core' employees, that mass dismissal must be used only as a last resort. It was also helped by the considerable sup- port offered by the state to enterprise restructuring: mainly income subsidies to the employees via the wage supplement fund (Cassa Integrazione Guadagni [CIG]) and early retirements.
But the content of these agreements was limited in many respects. The collab- oration offered by management and accepted by the unions was not only firm
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specific but time specific, i.e. strictly restricted to the crisis period. It implied more a temporary suspension of traditional work practices and acceptance of emergency conditions (including increased functional mobility; suspension of overtime; wage truce) than a full acceptance of a stable trade-off between employment stability and functional flexibility.
The content was mainly a defensive set of measures directed to reducing the pressure of crisis on the workplace rather than the implementation of active labour policies concerning mobility and job reclassification. Some of these restrictions were linked to the strategy of the unions who were still reluctant to accept experiments in participatory industrial relations and human resources practices. But they were equally clear on the side of management, traditionally diffident towards trade union collaboration and scarcely equipped to develop long-term strategy.
Experiments in participative industrial relations in state-controlled enterprises
In fact these experiments were usually short lived and not supported by an insti- tutional framework (legal or contractual) capable of stabilizing them.'
Significantly enough, a more systematic and innovative approach was fol- lowed by the two largest state-controlled industrial groups, Iri and Eni. They signed, in the early 1980s, a comprehensive set of agreements establishing a sta- ble consultative procedure with the union on all major issues concerning indus- trial restructuring and their effect on labour policies. Not only enterprise but also group mobility and a vast programme of training programmes were agreed upon in order to redistribute scarce employment opportunities within the vari- ous firms.
This new approach to industrial adjustment was favoured by various factors. One is the tradition of participatory management and of 'good' labour relations typical of public enterprises, a dimension of the enterprise group which allowed more room for the trade-off between employment security and flexibility than what could be found within the boundaries of an individual firm. Other factors were the preferential state support of these groups and the sheltered environ- ment in which they operated, their major activity being in sectors protected from international competition like the telecommunications, steel, shipbuilding, con- struction. Moreover the workforce employed in most of these sectors already presented some aspects of a developed internal labour market - firm specific skills, rather sophisticated job classifications, better-than-average wage levels - which could be used to retain core employees and protect them from outside competition. On the other hand, it was possible to expel older workers - senior- ity being a relative accepted criterion of selection - and the groups of precarious employees then still relatively small. These agreements represent the first case, at least in Italy, in which industrial relations were directly concerned with regulat- ing and supporting the major aspects of an industrial restructuring process. The centre of attention was still the 'defence' from economic turbulence; but indus- trial relations collaboration and human resources practices were important in implementing the long process of restructuring without great losses to the core employees and to the core technologies. Wage losses were also reduced to the minimum because no real concession bargaining was implemented. In a period of still relative growth even the most diffident groups of employees and most
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militant trade union representative could be convinced that the new strategy of restructuring might have a globally positive outcome.
The industrial relations framework agreement supported some of stables experiment of joint regulations implemented in the 1980s like that of telecomrnu- nications (see below).
The factors of (relative) success of these experiments however implied some possible limits. As in other cases of social concertation, the trade-off proved to be more defensive than proactive. Considerable costs were put on the state bud- get and for this very reason 'omitted' from the overall evaluation of the experi- ment; their effects were to be apparent only in the medium to long term.
The challenges of the 1990s to industrial relations and human resource management
By the second half of 1980s it became clear that the pressure for industrial adjustment and consequently the challenges to traditional industrial relations and human resources management were not going to stop and indeed could become a continuous element of the scenario. The impact of international com- petition and technological innovation was internalized but not reduced in Europe by the acceleration of the process toward a unified market.
In the new international markets of the 1990s, where quality and innovation are valued more than mass production, it was also becoming evident that the competitiveness of European enterprises could not be based on a strategy of 'low skill-low wage', but required growing attention to highly skilled and flexible workforces. Consequently, human resources were even more at the centre of attention as a major, or the major, factor that drives competitive advantage.
This assumption was gaining ground not only for the industrial sector but also for services. The implications were even more drastic for them since they had lagged behind industry in the innovation of quality and human resources management. On the other hand, the quality and efficiency of the service sector appeared to be, more than in the past, an essential condition of the competitive- ness of the entire national system. In many European countries, moreover, the issue acquired specific importance in those sectors of the economy, industry and services which were still under public influence. Italy was an extreme case, given the fact that the share of this public influence was higher than in all other near competitors. For this reason the debate concerning national competitiveness and the impact of industrial relationshuman resources management practices on per- formance came to be closely connected with that on 'privatization' in most of these countries, including Italy.
Research findings
A series of researches conducted in the early 1990s, which were for the first time focused on the interrelation between industrial relationshuman resource man- agement and the performance of industrial and service organization, indicate some common trends.
One of the most significant is the diffusion of participative industrial relations and new human resources practices both directed to promote greater perfor- mance via the optimization of the internal labour market of the enterprise. The components of these internal labour policies in Italian enterprises are similar to
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those analysed in other countries. The institutionalization and the reinforcement of the traditional functions of personnel administration (recruitment and select- ing; training; job evaluation and' career; selective wage systems) are very extended. New efforts are directed to improving-the systems for evaluating posi- tions, performance and potential of managerial and lower-level employees.
Forms of direct individual relations with employees are developed at the ini- tiative of management.
In most of the enterprises analysed by a survey which is concentrated on man- ufacturing in the area of Milan, these managerial initiatives are not developed as an alternative to collective labour relations but seem to complement them (Negrelli, 1992b). A reciprocal effect of stimulus and modernization seems to emerge (see below).
The system of industrial relations is relatively more developed than the prac- tices of human resource management and seems to be relatively stable: the unionization rate remains at medium high level (1985-8). It is around 40 per cent in the average manufacturing sector; it reaches 50 per cent among blue-col- lar workers.and between 30 per cent and 20 per cent among white-collar work- ers (according to the size of the enterprise).
Significantly enough the relative loss of union members is greater in larger enterprises than in smaller enterprises due to the heavy restructuring processes which have affected mainly the former (Negrelli and Santi, 1990).
Collective bargaining over these processes and over the consequent adjustment of internal labour markets (greater flexibility and mobgity) has created tensions, immediate sacrifices to the employees and loss of unions members; but, on the other hand, it has often stimulated a long-term collaborative approach to indus- trial relations (Regini and Sabel, 1989).
The experience of bilateral crisis management through collaborative bargain- ing (sometimes not completely formalized) is more .diffused and 'richer' in medium large enterprises than in smaller. Among small enterprises only 17 per cent claim to have involved union representatives in matters concerning internal labour policies and restructuring, against 38 per cent in medium-size firms and 75 per cent in large ones (Negrelli, 1992b).
In small enterprises the model of industrial relations during this period is still marked by managerial paternalism: while in larger firms it is evolving towards forms of collaboration in most aspects of labour policies, although with latent possibilities of conflict of interest and conscience differentiation.
This evolution of industrial relations helps to explain why Italian management has not attempted to use direct relations with personnel and new human resource practices as a means to destabilize collective bargaining and union rep- resentation within the undertaking. The survey quoted shows that managerial unilateral initiatives are (se1f)limited to matters which require individual consent of the employees involved in industrial transformations - internal mobility, part- time working, flexibility of working patterns, overtime, participation in quality programmes and productivity bonuses. They do not touch areas which involve the representation and defence of employees' collective interest: employment sta- bility and working conditions in general; and sometimes collective productivity bonuses.
In this respect, one can speak of mutual integration between a participatory model of industrial relations and a more active human resource practice, which
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allows a 'virtuous' trade-off between employment stability, labour flexibility and industrial adjustment. Industrial relations and human resource practices both contribute to this 'trade-off: the latter tend to implement personalized and flexi- ble techniques of workforce utilization, challenging the unions themselves to per- sonalize their approach to the workplace; the former maintain a function of overall 'reassurance' via the guarantee of basic employment security and involvement control in the restructuring processes.
The interrelations hi^ between industrial relations and human resource man- agement appears to be more complex and bilateral than that proposed and found in other non-European systems. The conditions for this virtuous trade-off and for its positive influence on enterprise performance are also more complex than those envisaged in the past by those who conceived a rather deterministic relation between workers' participation and firm performance (Freeman and Medoff, 1989) or between new technologies and labour relations (Hyman and Streeck, 1988).
Internal conditions concerning the traditions and politics of labour relations have already been mentioned; other external conditions will be discussed below.
The case of telecommunications
As indicated above, the findings of the survey are mainly derived from the pri- vate manufacturing sector and cannot be extended per se to the service sector. Indeed most international researchers have confined their analysis to manufac- turing, disregarding the specificities, also in this respect, of services. Trends not dissimilar have, however, been formed during the same period in one sector of services, namely telecommunications (Treu, 1993).
It is significant that these trends are common to the telecommunication sectors in the major continental European countries. In these countries several collective agreements were reached, aimed at guaranteeing the stability of employment or at least underlining industry's pledge not to dismiss employees as a result of automation, institutional changes or decentralization of company organizational structures. The renunciation, formally endorsed, of numerical flexibility on the part of European companies in the 1980s has helped to moder- ate trade unions' fears and to make them more receptive to solutions, both for- mal or implicit, of functional flexibility.
In the Italian case of Sip (now Telecom Italia) changes in the organization of work, tied to the introduction of new technologies, have been the object, throughout the 1980s, of several agreements and joint consultations between management and trade unions at different levels, mainly aimed at defining sys- tems of job classification more flexibly and with more openness towards 'multi- skilling'.
In all European telecommunications companies the need to improve quality of service promoted the search for more qualified personnel or methods of retrain- ing internal personnel, both being phenomena which tended to compensate for the elimination of obsolete professional positions such as telephone operators. At British Telecom the difficulties of these changes were due to the low turnover of staff and to conflicts with trade unions which followed the substitution of senior technicians by junior ones. At Sip the transformation process took place in a less dramatic way. Right from the beginning of the 1980s the changeover
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was facilitated by planned workforce reduction (early retirement and subsidized voluntary resignations) and the hiring of young diploma holders and graduates. This resulted in an increase in the number of graduates to 47.5 per cent of the overall staff and a reorganization of the labour force to the advantage of white- collar workers (57 per cent) and to the detriment of blue-collar workers (41 per cent).
Internal job mobility was also subject to discussion between trade unions and management in the context of bilateral commissions or of informal confronta- tion in many European telecommunications companies. An example is staff ter- ritorial mobility at Sip following the passage from a structure based on macro zones to a regional one.
Also, the introduction and management of performance-related pay was less traumatic in the presence of employment job security and good industrial rela- tions.
This may lead to a more general assumption concerning the 'deviant' British case. Some scholars have argued that the conflictual relations between human resource management and industrial relations in the United Kingdom are linked to the specific character of British industrial relations. Their fragmentation and rigidity have reduced their capacity to react positively to the challenges of flexi- ble production; so industrial relations have been seen as an ,obstacle to be removed rather than a possible instrument for greater enterprise performance. In contrast, at Sip the productivity bonus was introduced after extensive consulta- tions with trade unions on various issues concerning the enterprise reorganiza- tion and strategy. The variable part of wages was based on company profits and on the contribution of the different groups of workers to production outcomes and functional parameters (staff presence, productivity in relation to the quality of service, productivity in relation to the cost effectiveness of the service). Flexibility in a significant part of the salary and transparency in wage bonuses motivated involvement of employees, on the mechanism.
Consultations between trade unions and management.continued through the experimental phase up to the renewal of the collective agreement in the late 1980s and the early 1990s. These changes increased the flexibility of the pay structure, lowering the incidence of cost-of-living allowance and of seniority to the advantage of professional salaries, of management processes and of produc- tivity.
The telecommunication network research shows that a parallel commitment of trade unions and of management is needed to introduce some key innovations in labour policies similar to those found in other countries: higher functional flexi- bility, multi-skilling and employment security (IRRA, 1992: 239, 165).
Implications
The case of telecommunications is particularly important because the sector has traditionally been characterized by features not easily conducive to this type of experiment: centralized and rather bureaucratic organization; strong public influence and protection; rigid labour relations, more pervasive than human resource practices. On the other hand, it is undergoing, as also in Europe generally, a strong technological change under the increasing pressure of exter- nal competition and of deregulation.
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In order to modernize such an important sector of public services a drastic transformation was necessary both in the organization of the enterprises and in the quality of manpower utilization, including that of industrial relations. In the case of British telecommunications the policy choice was inclined to rely mainly on the liberalization of both markets and labour relations. The assumption has been that greater competition in product markets can be decisive also in making labour relations more flexible. Other European systems have taken into account that internal labour markets are highly regulated and organized by collective rules which cannot be simply destroyed or bypassed, particularly given the char- acter of the continental industrial relations tradition.
The decision of the actors, management and unions, has been to introduce innovation in both collective and individual relations with the aim of moderniz- ing these rules and to use the internal labour market as a resource for better ser- vices. This policy choice illustrates the meaning of mutual integration of human resource practices and industrial relations.
The use of 'internal' (individual) relations as complementary to industrial (col- lective) relations allows management to adopt new human resources practices in order to motivate individual personnel, but after having obtained wide consen- sus through participative industrial relations.
The modernization of public services, at least in telecommunications enter- prises having well organized internal labour markets and stable industrial rela- tions, may be implemented through the modernization of human resources. Those practices which in the past were considered alternative to industrial rela- tions can be useful to stimulate innovation also in industrial relations and sup- port a participative model of industrial relations.
The impact of economic crisis
The conditions required to implement, through a combination of human resources and industrial relations, a virtuous trade-off between employment security and labour flexibility with a positive influence on enterprise performance are rapidly changing under the pressure of economic crisis of the early 1990s. The growing difficulty and cost of maintaining of employment security as a con- sequence of economic turbulence (Biiechtemann, 1993: 6-7) may also endanger the other terms of the trade-off. Examples of these difficulties come from the Fiat collective agreement on redundancies in 1994 and from the Volkswagen case.
In the case of Fiat, the preoccupations of the unions and employees with the breach of the rules on employment security have been reduced by the adoption of a set of protective measures agreed upon among the parties with government mediation and support: 6,600 early retirement; subsidized lay-off for 2,200 employees; 4,100 suspensions of the employment relationship paid for by the CIG; 3,400 solidarity contract (reduction of working time with partial reduction of pay).
This agreement is particularly significant not only because of the importance of Fiat but also because, in the early 1980s, this enterprise had been inclined to handle its restructuring process unilaterally. The recent events have seen a grow- ing trend to apply, also by Fiat, a balanced mix of participative industrial rela- tions and of innovative human resource practices. However, the specific solution
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to the 1994 crisis has been criticized by economic commentators as too costly for public finances. The guarantee of employment security has been considered a form of social protectionism. Indeed, employment security is a form of social protection. But its costs are not necessarily higher than those of other forms of welfare (like unemployment benefits). Its economic value may be appreciated taking into account the trade-off with higher functional flexibility (and in gen- eral better labour relations). The merit of the agreement adopted at Fiat may not compare favourably with the Volkswagen case, because the former has relied heavily on early retirements, which are a costly solution also from the point of human resources, while the latter has given more room to solidarity contracts.
In fact, it is the Volkswagen model that seems to be spreading, as the recent German metalworkers' collective agreement indicates. Its focus is concentrated on maximizing the value of. the internal labour market, but distributing the scarce job opportunities, mixed with retraining, among all the core employees so as to avoid lay-off and total suspension of work. In any event the pressure of economic crisis may increase the costs of the trade-off to the point of making it less easily practicable, unless with heavy public subsidies. Only an overall recov- ery of the economy and an effective employment policy may restore the condi- tions for a balance functioning of the trade-off.
The evidence of the impact of economic crisis is not (completely) conclusive, because the recent researches concern the years 1991-2 and consequently do not fully capture the effects of the economic crisis. Research conducted on 1992 data concerning a wide sample of firms of the industrial and tertiary sector (250) in the province of Milan confirms the results of the analysis quoted (above) (Negrelli, 1994).
It is significant that the negative economic trends and heavy restructuring of the early 1990s have not altered the basic features of industrial relations. The last surveys of 1992 and 1993 underline that the average unionization has not decreased in the last four-five years; collective bargaining is still solidly entrenched in the majority of enterprises. The data confirm the critical impor- tance of the relationship between industrial relations and human resource man- agement and also the fragility of this balance.
Also, this second restructuring process has affected mainly larger enterprises, as in the 1980s. The unionization rate has strongly decreased from 33.7 per cent (1989) to 21.2 per cent (1993) in firms with more than 500 employees. And it is now higher in smaller and medium-size firms (24.1 per cent in enterprises with 50-99 employees; 32.3 per cent in enterprises with 100-199 employees). Blue-col- lar workers are more unionized (37.8 per cent) than white-collar workers (15.3 per cent) and men like women.
It is significant that young people under 29 years (16.6 per cent) are less unionized than workers 30-44 years old (46.6 per cent) and older (36.8 per cent). This high positive correlation between unionization and the age of the workers is now particularly evident.
The spreading of participative models of industrial relations meets with persis- tent resistances from both actors. The practice of collaborative labour manage- ment relations remains often informal and short-lived due to the same resistance. Management initiatives, while not antagonistic to collective labour relations, are in many cases opportunistic, particularly in small firms where
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modernization of human resource practices still lags behind. Rarely they imple- ment that consistent 'bundling' of policies which is necessary to finalize human resource practices and participation for better economic performance.
Some tentative indications concern the relationship between industrial rela- tions and firms' performance. The most important is that the diffusion of a par- ticipative model of industrial relations is found in different types of enterprises, including those with above average economic performance.
Union involvement can be required by management both in enterprises work- ing at 'full production capacity' or 'below production capacity' and in those working at 'much below production capacity'. Participative models of industrial relations are more diffused in firms with steady or increasing sales than in those with decreasing sales. And they have the same diffusion in enterprises with bet- ter or worse financial performance.
This is not enough to prove causal relations between quality of industrial rela- tions and performance, but it contradicts a common opinion that a participative model is mainly adopted by firms in order to reverse conditions of economic cri- sis (Katz and Keefe, 1992).
Moreover, there are no correlations between economic performance and the determination of pay by merit ('superminimi individuali') or by collective bar- gaining at the firm level. This confirms definitely that industrial relations and human resources management are complementary in Italy.
This tendency is also evident in the case of merit policies in human resources, which management can adopt both in unionized and in non-unionized firms (see Table 1).
Table 1 Merit policies of HRM in the enterprises
% Unionization rates Industrial relations Industrial relations with merit HRM not merit HRM
0
&lo%
1&25%
25-50%
More than 50%
Source: Research Assolombarda 1992
Some traditional correlations may be found instead. Merit pay is more dif- fused in smaller firms, while pay determined by collective bargaining is higher in larger ones (see Table 2). The former is particularly significant for white-collar workers (15-20 per cent of the global pay); and the latter for blue collars (13-18 per cent). Obviously, merit pay is positive correlated with the absence of RSA (shop stewards committees), of collective bargaining and of union favour (see
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Table 2 Percentage of global pay determined by merit (superminimi individuali) or col- lective bargaining at the industrial relations level, size and skills
Table 3). But it is indifferent to the presence of participative industrial relations and quite complementary to collective bargaining when the management intro- duces merit policies in human resources management.
Table 3 Percentage of global pay determined by merit (superminimi individuali) or col- lective bargaining in the enterprise with collective negotiation and participative model of industrial rleations
Collective bargaining: YES 11.81 NO 13.51 Union representation: YES 11.22 NO 17.15 Union involvement: YES 12.76 NO 11.90 Better union rights: YES 10.12 NO 13.43
Merit HRM: YES 13.23 NO 9.60
Source: Research Assolombarda 1992
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The uneven experience of the public sector and the pressures for privatization
The Iri and Eni protocols and then the case of telecommunications seem to indi- cate that the specific position of publicly controlled enterprises has contributed to a positive reaction of industrial relations and human resource management to the challenges of economic adjustment through the 1980s.
The traditional attitude of public management inclined to promote employees' participation and good human relations practice according to the political guide- lines prevailing in Italy has created a favourable climate for experimenting with new forms of labour management relations and supporting the virtuous trade- off mentioned above. This attitude has reassured the trade unions and reduced their diffidence to overcoming rigid work practices and embarking on the risky process of co-operative bargaining.
However, the positive influence of a publicly guided evolution of industrial relations is far from absolute and unambiguous. On the one hand, the researches mentioned above do not show any clear correlation between the qual- ity of human resource management and industrial relations and the public own- ership or control of the enterprise. On the other hand, the public services present more negative than positive examples in the handling of human resources and industrial relations and in economic performance.
A peculiar case in point is that of public services run or controlled - directly or indirectly - by local governments, municipalities and regions (water, gas, elec- tricity, public transportation). These sectors have been among the first to be subtracted from the legislation on public services. In fact, the employment rela- tions of all employees, including the functionaries, have been regulated by the principles of private labour law and by collective agreements. But the legal pri- vatization has not been sufficient to develop labour relations similar to those promoted in the private sector.
Public service in a strict sense still presents a very uncertain scenario. The bad experience of the 1980s has suggested to the legislator (Act No. 2911993) to pro- ceed towards the privatization of the employment relationship, through the fol- lowing innovations; deregulation of the rules; strengthening of managerial powers in human resources; full recognition of collective bargaining but within given limits; decentralization of administrative structure and human resources management; tight financial control on labour costs and adoption of budgeting techniques in guiding and evaluating administrative units and managerial efficiency.
It is too early to evaluate the impact of Act No. 2911993. But the aim is to give a solution to the modernization of public services different from the past and, at the same time, from the outright 'privatization' adopted in other coun- tries: i.e. transformation of quite a few administrative sectors in private organi- zations owned or controlled by privates.
This solution might lead to a dual form of organization of public services: some of the sectors most appealing to the market might be fully privatized (as has been the case of many Iri companies); others might remain under public control but with private-like human resource management practice. A dual solu- tion may be risky but to some extent inevitable in the various services according to their structural and functional position.
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Conclusions
The preceding analysis suggests some tentative hypotheses concerning the impact of industrial relations and human resource management on the modernization and efficiency of enterprises in the private and public sectors.
The conditions for a virtuous trade-off between employment stability, labour flexibility and performance are complex. No single factor is sufficient, including a participative model of industrial relations; automatic correlations of this type are as misleading as others have been in the past, e.g. that between new infor- mation technologies and performance. A ,consistent bundling of labour policies adopted at managerial initiative and with trade unions' participation is a neces- sary precondition.
External conditions are also important: ' the technological and competitive push in the first place. These external pressures may not be left to the market but require to be 'guided' by some kind of institutional policy.
As Streeck (1992) pointed out, a regime of free markets (and private hierar- chies) cannot generate and support a pattern of 'diversified quality production', based on a set of functional requirements such as co-operation between small, medium-sized and larger firms, 'redundant capacities' of broad and high skills, 'collective production inputs' of social peace, competence and knowledge.
This results from a long and diversified European tradition. A tradition in which the German case has been dominant. But in many European countries, and also in Italy, production patterns should be based on 'attaining superior competitiveness in world markets through sophisticated application of informa- tion technology, a diversified product range and non-price-competitive market- ing strategies, combining all these with high wages, skilled labor and a flexible, non-Taylorist organization of work' (Streeck, 1992: 4).
But public guidance and control may be counterproductive if joined with 'protection' from market competition and lack of managerial influence. The case of Italian public services is negatively significant and the experience of telecom- munications itself will have to meet a conclusive test when the present condi- tions of protection are completely removed.
The labour market is not simply a replica of the product market (Reynaud and Reynaud, 1994). It is highly regulated by social rules of either unilateral or bilateral origin. In the European tradition the optimization of the internal labour market is usually a joint labour-management venture: human resources management and industrial relations are complementary instruments. But the pressure of the product market is still relevant for shaping the 'virtues' and pre- venting the slacks of the internal labour market. In fact, the experience confirms that privatization of the formal rules of employment relations and even of the legal status of the organization is not sufficient to promote the modernization of p;blic services. The pursuance of this objective requires a joint effort of labour unions and public management, as 'diversified quality prodution' requires that human resources management and industrial relations be more and more com- plementary in the private sectors. Serajino Negrelli
University of Brescia
Tiziano Treu Catholic University of Milan. Italy
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Notes
1 No stable procedure of consultation was put in place. Information rights were the only institutionalized innovation to promote a more collaborative approach to enterprise labour relations.
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