Lorenzo Bordogna, Roberto Pedersini
BETWEEN THE “BLACK HOLE”AND INNOVATIVE LABOR RELATIONS
AND HRM PRACTICES IN SMALL SIZE ENTERPRISES.
THE ITALIAN EXPERIENCE OF LATE ’90SIN COMPARATIVE PERSPECTIVE
DSS SOC 8-01
INDICE
1. Introduction ............................................................................... Pag. 5
2. The sample ....................................................................................... 11
3. Industrial relations pratices ........................................................... 14
4. HRM initiatives ............................................................................... 19
5. Small-size companies: more than a “black hole” ........................ 23
6. A few concluding remarks ............................................................. 28
References ........................................................................................ 35
Bordogna-Pedersini 5
1. Introduction
Over the last 20 years, a large body of literature has developed on the
so-called ‘high performance work organizations’ or ‘high performance work
and human resource management’ practices (for an important review article
at mid-nineties, Ichniowski et al., 1996; for a recent contribution, Osterman,
2000; for a critical assessment of this literature, Storey, 1995; Guest, 1997;
Godard and Delaney, 2000, with the reply by Kochan, 2000). As it is
known, by these expressions a model of people management is meant which
includes a number of ‘innovative’ HRM practices, such as accurate
selection procedures, intensive training and development, internal
promotion, flexible job descriptions and assignments, team work, some
form of individualized and contingent reward systems (as performance
related pay), communication and employee involvement programs, etc. -
although the list is rather unstable and changing from one study to another.
This literature comprises several, somehow interconnected, streams of
research, concerning the actual diffusion of these new practices, the reasons
for their adoption on the part of the employers, their effects in terms of both
organizational performance and employees’ benefits, their implications for
the traditional industrial relations as a reality and as a field of study. In its
first phases of development it suffered several methodological and
theoretical weaknesses, which prevented comparison and the possibility of
cumulative results (Ichniowski et al., 1996; Guest, 1997). At the beginning
of the 1990s Sisson (1993) underlined that it was even difficult “to come up
with an adequate definition of HRM”, at least in the UK context, suggesting
that it could just be an “essentially ideological project masquerading for
greater individualization and work intensification”. A few years later Guest
6 Bordogna-Pedersini
(1997) again stressed relevant uncertainties, for instance in defining what
high performance work practices precisely are and which indicators to
utilize to identify them, in defining and measuring performance, in
specifying the nature and the rationale of the relationships between the two
variables. Despite these early, and at times still persisting difficulties (also
in the present paper), studies on the subject have become more sophisticated
in their research design and techniques of analysis, allowing to reach more
accurate results at least in some of the above-mentioned streams (as, for
instance, in the longitudinal analysis reported in Osterman, 2000, which
replicates his 1992 survey, largely as a follow-up to the same establishments
that had then been interviewed).
However, this body of research has often been focused on medium and
large companies or establishments based in the United States or, less
frequently, in Britain and Canada, disregarding generally the small business
sector and national experiences other than the Anglo-Saxon ones. In Italy,
in particular, systematic quantitative analyses specifically devoted to this
topic and based on nation-wide samples covering also the small firms sector
are rare, if existent at all, while they would be of great interest given the
extreme relevance that such a sector has in the overall Italian economy1. As
a result, the world of employment relations in small size enterprises is a
largely unknown object, so that often impressionistic and imprecise pictures
still prevail, at times just rooted in the cultural and political preferences of
1 According to comparative estimates, at mid-1990s the persons employed in
establishments with less than 100 employees were in Italy about 70% of totalemployment in manufacturing industry, against about 40% in UK and much less inGermany and USA; while those employed in establishments with more than 500employees were a little over 10% in Italy, against about 25% in UK, over 30% in USAand about 50% in Germany (Traù, 1999, p. 90, Fig. 3).
Bordogna-Pedersini 7
the authors. The debate has long been polarized around the old, opposite
stereotypes of the ‘sweatshops’ on one hand, versus the ‘small is beautiful’
on the other hand. The first vision identifying the small size with the
survival of characteristics of technological and cultural backwardness
typical of the early phases of development of the factory system, associated
with low wages and forms of intensive exploitation of the employees as the
main road to competitiveness. While the second one, in reaction to the
bureaucratization and alienation features often ascribed to large-size
organizations by the post-weberian literature, used to stress the advantages
of small businesses in terms of more interesting and varied job contents,
direct communications, informal and satisfying social relations, workers’
motivation, etc., in turn associated with greater flexibility, capacity of
innovation and rapidity of reaction to market demands and broader
environmental changes.
Both visions shared the drawback of considering the world of small
enterprises as a homogeneous and undifferentiated reality, while within it
different categories should be clearly singled out (among others, Scase,
1995). This is what has been done in Italy by the literature on industrial
districts, to which we owe the beginning of a rich season of studies on the
Italian small business sector (for all, Bagnasco, 1978 e 1988; Brusco, 1989;
Trigilia, 1986 and 1990). Despite these developments, however,
comprehensive, quantitative analyses on the subject which interest us here -
industrial relations and human resource management practices- have
remained rather infrequent, and the existing ones often suffer limitations in
terms of sectoral and territorial coverage (regional or local), firm size
(usually only above 50 employees), width and scope of the issues object of
8 Bordogna-Pedersini
inquiry, or a combination of them2. A lack of empirically grounded analyses
which is greater the smaller the size of the firms considered -while in a
country like Italy, where the average size is particularly small, it would be
necessary to cover firms not only below 50 employees, but even below 203.
The purpose of this paper is to overcome -at least partly- these
weaknesses, by utilizing the information collected by probably the main
large scale quantitative survey available at national level (see section 2) to
analyze the state of labor relations and human resource management
practices in Italian manufacturing enterprises. The attention will be focused
first on the small size businesses (with 20 to 100 employees), contrasting
then the results reached by this analysis with those of larger enterprises. As
a way of control, a few further considerations will also be developed on the
basis of a smaller survey carried out on a sample of small-size
metalworking firms of one of the largest and highly industrialized province
in the North of Italy. Section 3 is devoted to traditional industrial relations
2 Reviews on the state of the research on labor relations in small firms at early and mid
1990s can be seen in Perulli (1990) and Accornero (1996). Quantitative analyses atregional, sectoral and/or local (provincial) level are in Rossi, Sestito (2000), Lizzeri(2000), Negrelli and Pedersini (1999), Checchi and Flabbi (1999), Regalia andTerragni (1997), Regalia and Ronchi (1988-92), most of them covering onlyestablishments with at least 50 employees. Several studies on the specific issue of theso-called ‘participatory wage’ (salario di risultato), allowed/promoted in companylevel collective bargaining by the important tripartite agreement of July 1993, havebeen recently carried out by a number of labor economists, among which Del Boca,Kruse and Pendleton (1999), Manera, Paolucci and Rossetto (1999), Casadio (1999),Biagioli (1999). The few quantitative analyses on a national sample are mainly basedon a (almost) annual survey carried out by Cesos (see infra) on firms with at least 20employees; see Baglioni and Milani (1990), Baglioni (1991), Pellegrini (1995),Bordogna (1997 and 1999), mainly devoted just to labor relations and collectivebargaining issues, with the exception of the last one which includes also HRM issues.
3 A very important threshold for our topic would be in fact 15 employees, the size overwhich, according to the Statuto dei Lavoratori (law 300/1970, art. 19), trade unionrepresentation rights are recognized and employees have the right to form a collectiverepresentation body.
Bordogna-Pedersini 9
practices, section 4 will deepen HRM initiatives, section 5 will combine
both the dimensions and finally section 6 will draw a few concluding
remarks.
As a general frame of reference, to facilitate comparison4, we will
utilize the classification of policy choices facing organizations suggested by
Guest (1995) and Guest and Conway (1999), based on the four broad
options identified in the figure below.
Fig. 1. Employment relations policy options
Industrial Relations PriorityLow High
HRM PriorityLow The Black Hole Traditional Collectivism
High Individualized HRM The New Realism
Source: Guest, 1995, and Guest and Conway, 1999
The types in the lower row are the closest to the above-mentioned
‘high performance work organizations’ which would have spread out in the
North-American economy in the 1980s and 1990s, on which several
scholars have focused their attention. This seems especially so for the one
labeled individualized HRM, which according to Guest and Guest and
Conways would imply an extension of practices applied to managerial and
professional employees to the whole work-force, aimed at promoting
individual attitudes of high commitment to the organization, not mediated
through any form of workers’ collective representation body. In contexts
where a trade union tradition is established, this type can give way to the
new realism one, although the question remains whether this combination
4 Comparison will be possible however only to a limited extent, due to the differences of
the unit of analysis in the two surveys, as well as of the indicators utilized to identifyHRM practices.
10 Bordogna-Pedersini
would be an intentional and deliberate integration between the two kinds of
policies, or just an inevitable and mechanical coexistence. The types in the
higher row, instead, represent situations in which the employers assign low
or no priority to HRM practices and policies. Where trade unions are strong
and well rooted, this can coincide -both in the British and Italian
experience- with the persistence of an industrial relations and collective
bargaining model typical of the 1970s, not by chance labeled by the authors
as traditional collectivism. Finally the black hole type describes a context of
absence both of trade unions and HRM practices, where employment
relations policies are largely a unilateral prerogative of the employer,
outside any form of joint regulation with the trade unions as well as free
from not arbitrary HRM practices. A picture that would best correspond to
the ‘sweatshops’ vision, where one could expect the prevalence of low-
wage low-skill jobs, the adoption of elementary forms of pay for
performance (like traditional piece-rate systems), the diffusion of sub-
standards employment contracts, little job security, a modest degree of
individual involvement and commitment to the organization.
Now, is the black hole type the situation that we can expect to
predominate in small size Italian enterprises? Or is the landscape more
differentiated? Or may the picture of rather wide diffusion of ‘high
performance work organizations’, mentioned by Osterman with reference to
the US context, fit also the Italian experience? Moreover, what is the
relevance of the size factor from this point of view? Can systematic
differences be detected between small and large size enterprises with
respect to the employment relations policies adopted by the employers?
Bordogna-Pedersini 11
2. The sample
The main analysis will be carried out over a sample of some 300
manufacturing companies (actually, plants) with up to 100 employees. This
is a subset of a wider database used for the Collective Bargaining Survey
for the years 1995 and 1996 which is conducted by Cesos on behalf of Cnel
(Consiglio Nazionale dell’Economia e del Lavoro) on an (almost) annual
basis since 1984. The original sample is representative of units with at least
20 employees at national level and it is stratified as for sectors and size5.
Owning to some problems in data collection, which resulted in an
incomplete coverage of the whole sample, the theoretical representativeness
has been somewhat weakened and biased in favor of medium-to large-size
enterprises. However, with an amount of valid interviews of about 650
cases throughout 1990s (on an original sample of about 1000 units), we can
consider it as a very important source of information on industrial relations
and HRM practices at company-level and probably the most relevant one
providing national data on the Italian experience. The whole sample (650
cases) will be used to perform comparisons between small companies and
medium- and large-size ones.
5 The classes on which the Cesos sample is constructed are three: small (20-99
employees), medium (100-499 employees) and large (500 and more employees). In thepresent analysis, in order to investigate in deeper detail the world of small businesses,a higher number of classes will be utilized, so that the representativeness by size canbe weakened. For further details on the Cesos survey, see infra and Bordogna, 1997.
12 Bordogna-Pedersini
Table 1. Cesos sample composition by sector (units and employees). 1996
20-100 employees Over 100 employeesSector Units % Employees % Units % Employees %Chemicals 57 20.4 3.078 21.9 76 21.5 40.281 20.0Metalworking 82 29.4 3.957 28.1 151 42.7 103.593 51.3Textiles 51 18.3 2.668 18.9 51 14.4 22.132 11.0Printing and Publishing 24 8.6 1.340 9.5 27 7.6 16.008 7.9Food 27 9.7 1.372 9.7 24 6.8 14.056 7.0Wood and cement 38 13.6 1.669 11.9 25 7.0 5.733 2.8Total 279 100.0 14.084 100.0 354 100 201.803 100.0
The Cesos survey collects data on the company (size, sector, industry-
wide agreement, employers’ association affiliation, etc.), on industrial
relations (union membership, union representation, industrial conflict,
company-level collective bargaining, etc.), and HRM practices (variable
pay, training, TQM, forms of direct participation, etc.). The two years
included in the analysis (1995 and 1996) are the latest for which data are
available. Yet, they probably represent the central period of the first wave of
company-level agreement renewals after the tripartite agreement of July
1993, which introduced a two-tier bargaining system based on industry-
wide agreements, on one side, and a decentralized level (either company or
territorial), on the other. The former define the general regulatory
framework and set the basic sectoral wage levels. Decentralized bargaining
covers topics expressly identified by national bargaining, which do not
duplicate or overlap industry-wide provisions; among them, of particular
importance is some sort of performance-related pay (at times also called
‘participatory wage’, linked to productivity, quality and competitiveness
results).
Bordogna-Pedersini 13
Table 2. Sample composition by number of employees. 1996
Employees Units %(only firms up to 100 employees: 279 cases)
%(all)
20-35 94 33.7 14.836-50 65 23.3 10.351-100 120 43.0 19.0101-250 178 - 28.1251-500 88 - 13.9Over 500 88 - 13.9Total 633 100.0 100.0
14 Bordogna-Pedersini
3. Industrial relations practices
As far as industrial relations in small-size firms are concerned, an
important starting point is to see whether union membership and union
representative bodies are present at all. In fact, the idea of the small
enterprise as a “black-hole” rests upon the assumption that the entrepreneur-
manager is the sole actor of labor relations. As a consequence, no collective
forms of regulation are present (apart from the law, of course) and unilateral
action is the only available option. The positive link between company size
and the diffusion of industrial relations is well known; however, the impact
of collective representation on labor relations in small businesses is far from
negligible.
The presence of union members is reported in over 75% of units and,
quite interestingly, the mean union density in the relevant cases slightly
decreases with size (table 3), suggesting that, when unions gain access,
proselytism is more effective in smaller firms than in larger ones. This
feature may be consistent with the fact that “free-riding” is more viable in
large groups. Union representative bodies are active in the great majority of
cases (over 70%). However, there is a marked relation with size: while
union bodies are lacking in almost 40% of firms with 20-35 employees, the
same is true for only 13% of units with 51-100 employees.
Having ascertained that the diffusion of collective representation is
highly significant even in small-size businesses, it is important to take into
consideration an indicator of the effectiveness of such representation. In
pluralistic industrial relations systems, the most important outcomes are
probably collective agreements. In 1995 and 1996, company-level
Bordogna-Pedersini 15
agreements involved slightly more than 20% of units. Again, the influence
of size is remarkable: decentralized bargaining coverage passes from 10%
in the smallest class to over 30% in companies with between 51 and 100
employees.
Table 3. Industrial relations in small-size enterprises (1996)
Employees Union members(% of units)
Union density*(mean)
Union bodies(% of units)
Collectiveagreements**
20-35 70.2(94)
53.2(66)
60.4(91)
10.6(94)
36-50 75.4(65)
44.9(49)
64.5(62)
21.5(65)
51-100 81.7(120)
46.1(98)
86.7(120)
31.7(120)
Total 76.3(279)
48.0(213)
72.9(273)
22.2(279)
In brackets, the number of units (valid cases) in the relevant class is reported.* Only cases with union members are included** Reached in either 1995 or 1996
If we bring these three dimensions of collective representation
(membership, union bodies, and collective agreements) together, we can
build a sort of industrial relations indicator. Table 4 shows how the size
factor affects essentially the two extreme positions: that is, an increase in
the number of employees reduces the percentage of units with no collective
representation at all and increases the proportion of firms with a score of
three. About 20% of units with up to 35 employees has no collective
representation; the same is true for only 3% of units employing between 51
and 100 workers. At the same time, the quota of firms with all three
industrial relations dimensions rises from around 9% to almost 30%. A
steady 70% of units remains in between, basically covered by the less
stringent presence of either union members or union bodies or both. The
16 Bordogna-Pedersini
analysis of size effects highlights another important feature which refers to
the comparison of industrial relations in small firms with those in large
ones. In fact, data indicate that the general picture does not change
significantly if we consider units with more than 100 employees or even
above 500 workers. Actually, if units with no collective representation at all
progressively disappear, the percentage of cases with “full score” increases
only slightly and does not depart from around 30%. Besides, some 70% of
units still remains in an “intermediate” position. The only evident change is
that the proportion of cases with only one dimension of collective
representation diminishes to almost 10% from a level of more than 20%.
Two are the insights that can be drawn from the analysis, so far. First,
though company size does have a significant impact on the diffusion of
industrial relations, forms of collective representation, notably union
membership and union representative bodies, appear to be widespread even
in small firms. Second, the “size threshold” which marks the shift to more
fully developed industrial relations, as far as traditional “pluralistic”
indicators are concerned, is rather low and can be situated below the
traditional boundary of small-size enterprises (100 employees).
Table 4. Industrial relations indicator (IR): percentage of units by score
Employees 0 1 2 3 N20-35 20.9 24.2 46.2 8.8 9136-50 14.5 24.2 43.5 17.7 6251-100 3.3 20.0 50.0 26.7 120101-250 1.7 13.1 60.8 24.4 176251-500 1.1 10.3 57.5 31.0 87Over 500 0 13.8 56.3 29.9 87Total 5.8 16.9 53.8 23.6 623
Bordogna-Pedersini 17
The overall picture changes slightly if we consider other indicators of
the content and institutionalization of industrial relations (Table 5). Regular
meetings between the company management and union representatives are
reported in more than 80% of cases. The percentage increases steadily from
55% in units with up to 35 employees, to 73% in companies with a number
of employees ranging between 51 and 100, to almost 98% in the largest
ones. Forms of union and worker involvement in decision making are
present in half of the sample. Here, the percentages are 23%, 48% and 71%
respectively. The same linear influence of company size can be identified in
consultation practices over two specific issues: training and TQM
initiatives. In companies that implemented those initiatives, for both cases,
the quota of units that do have forms of consultation/negotiation rises from
20-30% to about 70%, passing from one end to the other of the size scale.
Finally, some elements on the institutionalization of industrial relations.
First, the presence of specific organizational structures (on the employer’s
side) devoted to industrial relations is practically non-existent in small and
medium size companies and it becomes of a certain relevance only over 250
employees. Second, around half of the largest units has formal dispute
resolution mechanisms, and this quota diminishes progressively to 10% in
the smallest ones.
Therefore, when we try to assess the scope and depth of industrial
relations at company-level, we find that the impact of size is more evident
than for the more “traditional” indicators analyzed above. The continuity of
union-management relations, the presence of consultation practices and
involvement in decision making, as well as the institutionalization of
dispute resolution is significantly linked to the number of employees. Yet, it
18 Bordogna-Pedersini
is important to stress that, if we leave aside institutionalization (which is
traditionally weak in Italy, even in large companies), even “advanced”
industrial relations practices are far from marginal in small companies. In
over half of the smallest units in the sample (between 20 and 35 employees)
there are regular meetings between the company management and trade
unions. Moreover, consultation practices and involvement in decision-
making are present in around 20% of those firms. This means that the
difference between small companies and large ones is more a matter of
degree than a real “divide” between the “rule of unilateral action” and the
“reign of industrial relations”.
Table 5. Institutionalization and “advanced” forms of industrial relations by companysize: percentage of units (1996)
Employees Regularmeetings with
unions
Forms ofunion
involvementin decision-
making
Prior unioninformation/consultationon training*
Unionconsultation/
negotiation onTQM*
IR dept. Formaldispute
resolutionprocedures
20-35 54.9(71)
23.3(90)
27.5(40)
18.1(22)
2.2(92)
10.5(86)
36-50 67.9(56)
28.1(64)
34.3(35)
20.0(30)
3.1(64)
11.5(61)
51-100 72.8(103)
48.3(118)
51.8(56)
40.4(52)
4.2(120)
21.7(106)
101-250 88.0(167)
58.0(174)
58.3(96)
53.6(84)
7.5(174)
19.6(158)
251-500 92.7(82)
65.9(88)
70.0(70)
64.9(57)
12.5(88)
34.5(84)
Over 500 97.6(83)
70.9(86)
75.0(72)
70.9(55)
33.7(86)
47.0(83)
Total 81.1(562)
51.0(620)
57.2(369)
50.7(300)
9.9(624)
23.9(578)
In brackets, the number of units (valid cases) in the relevant class is reported.* In the units where these initiatives are present
Bordogna-Pedersini 19
4. HRM initiatives
As far as HRM is concerned, the traditional view on small-size firms
would suggest a substantial lack of any “innovative” practices. We will
proceed as in the case of industrial relations to find out whether this
description is accurate or not. Training initiatives were present in 1996 in
almost 50% of small businesses; a percentage that was higher than 40%
even in the smallest units taken into consideration. “Total quality” systems
are reported in as much as 20% of units with up to 35 employees and in
more than 40% of the firms employing between 51 and 100 workers6. In the
great majority of cases, these initiatives have involved the whole company
(90-80%). This quota declines as size increases, probably because the
greater organizational complexity allows focusing quality initiatives on
specific areas. Meetings between the company management and group of
workers on the company objectives are reported in more than a third of all
small companies, regardless of their size.
Table 6. HRM in small-size enterprises (1996)
Employees Training TQM Meeting with workers oncompany objectives
20-35 41.9(93)
21.5(93)
35.9(92)
36-50 58.5(65)
46.8(62)
37.1(62)
51-100 50.4(117)
43.1(116)
39.3(117)
Total 49.5(275)
36.5(271)
37.6(271)
In brackets, the number of units (valid cases) in the relevant class is reported.
6 These figures are to be taken with some caution, however, due to a possible
misunderstanding of the question (the percentages of firms which report “qualitycircles” are in fact lower than those with TQM systems).
20 Bordogna-Pedersini
We can use these three dimensions to build an “HRM indicator” as in
the case of industrial relations, in order to investigate the difference
between small firms and larger ones. Table 7 illustrates a different situation
than the one we have found for collective representation. Company size
apparently has a more definite impact on HRM practices than on the
presence of industrial relations. The most evident effect is still on the two
ends of the scale, that is a progressive reduction of cases with no HRM
practices and a corresponding increase of those presenting all three
dimensions, but the rise is far from complete in units with up to 100
employees. In the best situation, the percentage of small companies with a
full score does not reach 20%, a level which is half that of largest firms.
Besides, there is a substantial increase also in units with at least two
dimensions. Actually, the proportion of companies with at least a score of
two on the HRM indicator surpasses 50% only for companies with more
than 100 employees. It may be useful to point out that, for the IR indicator,
this is true even for the smallest companies. Though this may be the effect
of a bias in sampling procedures (see above), there seems to be a certain
divergence between small and large firms as far as HRM are concerned.
Table 7. HRM indicator (HRM): percentage of units by score
Employees 0 1 2 3 N20-35 33.3 43.3 13.3 10.0 9036-50 20.0 36.7 26.7 16.7 6051-100 26.5 32.7 23.9 16.8 113101-250 24.7 22.8 24.1 28.5 158251-500 11.3 21.3 32.5 35.0 80Over 500 6.3 19.0 35.4 39.2 79Total 21.6 28.6 25.3 24.5 580
Bordogna-Pedersini 21
As to investigate deeper this difference, we can take into account an
important element of HRM, that is wage policy. The diffusion of variable
pay may be considered an element of a more developed incentive systems,
while more generic economic incentives, especially individual ones, are
probably closer to the view of a predominant role of unilateral (and maybe
episodical) decisions on the part of the manager-entrepreneur. Such an
interpretation finds some support also in the survey results, as individual
incentives do not seem to be linked to the development of either industrial
relations or HRM. The analysis shows, in fact, that they are present in at
least 50% of companies, regardless of their score on either the IR or HRM
indicator. Instead, collective incentives and variable pay are significantly
linked to an increase in either of the two indicators. For example, the
percentage of firms that report to use variable pay increases from 17% to
80% if we move from the lowest to the highest grade on the IR scale, and
from 36% to 73% if we consider the HRM index.
In some respects, the traditional view on small-size companies is
supported by the analysis, though some caution is suggested by a possible
overlapping between the three items (basically between variable pay, on one
side, and the other incentives, on the other). In small companies the tool of
individual incentives is predominant over other incentive mechanisms.
However, collective pay and even performance-related incentives are
present in around a quarter of cases. Moreover, if variable pay becomes the
main element of company-level wage policy as the firm size increases,
individual incentives remain important throughout the sample and involve
almost 60% of even the largest units. This probably means that individual
bonuses, in the form of one-off payments or ad-hoc wage increases, are a
22 Bordogna-Pedersini
relevant part of the wage policy of Italian companies and are not being
replaced by performance-related schemes. Rather, the latter added to the
former.
Table 8. Wage policy according to company size (1996)
Employees Variable pay Collective incentives(blue-collar workers)
Individual incentives(blue-collar workers)
20-35 25.0(92)
31.3(83)
58.8(85)
36-50 35.4(65)
30.9(55)
59.6(57)
51-100 44.4(117)
45.0(109)
48.1(108)
101-250 55.8(172)
51.3(152)
58.3(163)
251-500 70.9(86)
67.1(79)
53.8(80)
Over 500 86.4(88)
51.9(81)
59.8(82)
Total 53.4(620)
47.4(559)
56.2(575)
In brackets, the number of units (valid cases) in the relevant class is reported.
Finally, we can consider the company initiatives in the field of health
and safety, equal opportunities and “welfare” benefits. The impact of
company size is substantially confirmed. Only in the case of health and
safety initiatives we find a substantial presence of small-size firms. Here,
however, the effect of health a safety legislation is particularly stringent.
Even in the field of equal opportunities there is a specific law to support
affirmative actions, but its provisions do not introduce mandatory initiatives
and are essentially of a promotional character. The other benefits are
apparently a characteristic of large-size companies and are probably part of
Bordogna-Pedersini 23
the “benefit packet” they offer to their employees; small companies seem to
be less incline to provide such kinds of incentives.
Table 9. Other HRM initiatives by company size (1996)
Employees Health and safety Equal opportunity Pension schemes Other benefits(health insurance,scholarships, etc.)
20-35 48.4(91)
2.2(91)
4.3(92)
3.3(92)
36-50 52.5(59)
1.6(63)
6.2(65)
4.7(64)
51-100 63.8(116)
5.1(118)
5.1(117)
5.9(118)
101-250 66.7(171)
6.9(173)
4.6(173)
11.6(172)
251-500 78.0(82)
9.6(83)
11.9(84)
18.8(85)
Over 500 82.4(85)
27.4(84)
7.1(84)
44.0(84)
Total 65.7(604)
8.5(612)
6.2(615)
14.0(615)
24 Bordogna-Pedersini
4. Small-size companies: more than a “black-hole”
The picture that emerges from the separate analysis of industrial
relations and HRM in small-size enterprises is quite different from the
traditional one. Collective representation is fairly developed even in very
small companies and the shift to a more effective presence of trade union
representation (basically consisting in the conclusion of company-level
collective agreements) can be situated in companies with more than 50
employees, within the traditional limit of small-size companies (100
employees). As far as HRM is concerned, the situation is a bit different,
since the size factor apparently exerts a stronger and more linear influence,
with large firms showing a consistently higher presence of HRM practices.
However, HRM initiatives are present to a significant extent in small firms
too. And this is true also for important features such as training, TQM,
variable pay and meetings on company objectives.
Now, if we put the two composite indicators (IR and HRM) together,
we can assess the extent of the “black-hole” image of labor relations in
small-size companies. Taking a very strict definition of the “black-hole”
situation (that is, no IR coupled with no HRM), we find a very marginal
presence of units: only 3.5%. If we consider the presence of only one
element of both scales as the conventional limit for a substantial absence of
both industrial relations and HRM practices, we can label around 20% of
units as belonging to the “black-hole” of employment relations. Therefore,
80% falls outside this configuration. The great majority of these units is
somewhat “locked” into a “traditional” system of industrial relations
Bordogna-Pedersini 25
without the development of significant HRM initiatives (44%). A
percentage of slightly more than 20% counterbalances the “black-holes”,
while a minority of companies is apparently trying to foster human relations
without the presence of collective representation.
Table 10. IR and HRM in small-size companies (1996)
IR0-1 2-3 Total
HRM0-1 20.5 44.4 64.5
(166)
2-3 13.3 22.2 35.5(91)
Total 33.8(87)
66.2(170)
100.0(257)
What is the picture for medium- and large-size companies? The basic
difference is that industrial relations are almost invariably and significantly
present: only 13% of units has a low score on the IR dimension, against
33.8% in small firms. This is a quite straightforward conclusion. But there
is another difference which is more interesting. Almost 70% of small
companies with a relevant presence of trade unions (that is 44% of the
66.2% which has a score of at least 2 on the IR index) does not develop a
corresponding important HRM system. On the contrary, only 37% of
medium and large firms with a developed industrial relations system
remains in the situation of the “traditional collectivism”. Over half of those
units, in fact, present an advanced employment relations system, with a
significant presence of both industrial relations and HRM. It is possible to
advance two hypotheses on this apparent “difficulty” of small enterprises to
26 Bordogna-Pedersini
develop HRM practices. First, it may be not a real difficulty, but rather a
lack of need: that is, the organizational and economic situation is not
perceived by the manager-entrepreneur as requesting “innovative” forms of
labor relations or worker involvement. This brings us to the second possible
explanation: such a perception on the part of the management of small
companies could be linked to a limited understanding of the potential for
company performance of HRM practices. The positive role of HRM may
become evident when there are external pressures, such as market
competition, which could push the manager-entrepreneur to adopt new
initiatives. Possibly, the 13% of small firms that show signs of
individualization of labor relations may fall into this situation.
Table 11. IR and HRM in large-size companies (1996)
IR0-1 2-3 Total
HRM0-1 6.0 32.3 38.3
(120)
2-3 6.7 55.0 61.7(193)
Total 12.7(40)
87.3(273)
100.0(313)
A more accurate analysis of IR and HRM combinations by firm-size
confirms the picture that has emerged so far, and notably the two main
results that have been drawn. On one hand, the most significant
concentration of “black hole” cases can be situated within the boundaries of
small companies. Their proportion decreases from a level of 37% among
units with up to 35 employees to less than 10% of those employing between
51 and 100 workers. On the other hand, the actual possibility to develop
Bordogna-Pedersini 27
full-fledged employment relations seems to be reached only after the limit
of 100 employees has been crossed, since the percentage of “new realism”
cases more than doubles passing from the 51-100 employees class to the
largest firms. However, a notation can be added: despite this “difficulty”,
there is a large share of small-sized firms (over 40% of units employing
between 36 and 100 workers) where the role of HRM is recognized.
Table 12. IR and HRM by company size
Type “Black hole” Traditional collectivism Individualization New realism N20-35 36.8 40.2 9.2 13.8 8736-50 17.5 38.6 19.3 24.6 5751-100 9.7 49.6 13.3 27.4 113101-250 8.3 39.1 6.4 46.2 156251-500 3.8 29.1 3.8 63.8 79Over 500 3.8 21.8 10.3 64.1 78Total 12.7 37.5 9.6 40.2 570
An important factor that can help explain the different features of
employment relations in small-size companies is whether the firm belongs
to a wider group. In particular, if this circumstance occurs, the percentage of
“black hole” cases diminishes remarkably and the development of both
industrial relations and HRM practices becomes more common.
Table 13. IR and HRM in small-size companies (20-100 employees): ‘independent’ firmsand firms belonging to a group
Type “Black hole” Traditional collectivism Individualization New realism NIndependent 25.7 43.3 14.4 16.6 187Group 7.1 45.7 10.0 37.1 70Total 20.6 44.0 13.2 22.2 257
Now it is important to spend a word of warning on the results of the
analysis on small-size companies. As already mentioned, the actual data
collection has weakened the original theoretical representativeness of the
28 Bordogna-Pedersini
Cesos sample, probably introducing a bias in favor of larger and unionized
firms. This can be seen by comparing these results with those of a similar
research carried out in small-size metalworking firms of one of the largest
and highly industrialized province in the North of Italy7. The comparison
cannot be conclusive, but it can provide some insights in the direction of the
bias and on the distribution of small firms. The research was carried out on
a sample that included very small companies (below 15 employees). If we
consider only those with over 15 employees, we find that the “black hole”
involves as much as 55% of remaining units (49). “Traditional collectivism”
is the second commonest situation with 29% of cases. The “new realism”
involves 10% of firms, while in the rest there are signs of an
individualization of labor relations (6%). This outcome, despite all its limits
(specific sector, particular area, very small sample which includes firms
with less than 20 employees), suggests caution in generalizing the results of
the analysis developed on the Cesos sample. However, some conclusions
are supported: the “black-hole” does not represent an accurate picture for all
small-size companies. In fact, industrial relations are developed in a fairly
significant proportion of them. HRM initiatives, on the contrary, find it
more difficult to emerge in companies with less than 100 employees,
although they are not entirely absent. “Traditional collectivism” is therefore
the usual outcome for firms escaping the “black-hole”. However, there are
also attempts at developing HRM initiatives, even when a company-level
system of industrial relations is lacking.
7 This survey, covering a total of 119 cases with at least 6 employees up to 100, has
been carried out in 1999 by the authors on a questionnaire partly similar to that of theCesos survey, and has been sponsored by the Ordine dei Consulenti del Lavoro of theProvince of Brescia.
Bordogna-Pedersini 29
5. A few concluding remarks
With reference to the questions raised at the end of section 1, in the
light of the results reached by our analysis we can try to draw a few simple
and tentative conclusions.
First, although it is difficult to make definite propositions on the
diffusion of the “high performance work organizations” in the Italian
manufacturing industry, given the absence of appropriate terms of
comparison and the uncertainties we have recalled about the
representativeness of the sample, we can notice that the percentage of cases
displaying significant HRM practices (at least as we have defined them
here), in conjunction or not with traditional industrial relations institutions,
is not just a minority, neither in large firms nor in the smaller ones (in this
latter case, 35% in the Cesos sample, and 16% in the Brescia one).
Conversely, those with no or at most one HRM practice are no more than
half of the whole Cesos sample, covering firms with 20 or more employees
(respectively 22% and 28%; Table 7 above). As far as such a comparison
may be relevant here, in his last survey on US private for-profit sector
establishments with 50 or more employees, Osterman (2000: Tab. 2) found
about 15% of cases which adopted none of the four innovative work
practices investigated (off-line problem solving groups as quality circles;
job rotation; self-managed teams; TQM), 14% which adopted at most one,
32% two, and about 40% which adopted at least three out of four. In turn,
Guest and Conway (1999, p. 372-74 and Tab. 1), adopting a different unit
of analysis (individual employees rather than establishments or firms) and
utilizing individual reports collected in telephone interviews to a national
sample of about 1000 British employees in organizations (not only
30 Bordogna-Pedersini
manufacturing) with 25 or more staff, found that about 46% of the sample
worked in “high human resource practices” organizations (that is, adopting
at least seven out of the ten practices investigated).
Second, contrary to what is often suggested by the HRM literature,
especially the one based on the US experience, in the large majority of cases
of the Cesos survey in which HRM practices are found (230 out of about
285), they are in conjunction with traditional industrial relations
institutions. These findings are consistent with the results already found in
UK at the beginning of the 1990s by the third Workplace Industrial
Relations Survey (Millward et al., 1992), stressed by Sisson (1993), as well
as with the outcomes of previous surveys on the Italian experience,
although not based on national samples (Regalia and Ronchi, 1992;
Negrelli, 1995; Regalia and Terragni, 1997; Regini, 1995). The question
remains, however, whether this double presence means a conflict between
the two dimensions, a mere coexistence between them but along clearly
separated and non-communicating channels, or finally the development of
synergic and integrated relationships. As for Italy, due also to legal
regulations of the employment relations which impose basic standards even
in rather small firms, it is likely that HRM practices, perhaps more often
than in Britain (Sisson, 1993), are not simply the expression of a unitary,
monistic view of the firm, aimed at challenging and weakening traditional
industrial relations. From the point of view of trade unions, there is the
possibility that they use their conditional support to the diffusion of HRM
practices as a strategy of survival and development, as suggested by Guest
(1995). Although a distinction should also be made, especially relevant in
Bordogna-Pedersini 31
small firms, between ‘innovative’ human resource practices and forms of
more or less benevolent paternalism (Scase, 1995). Further research is
needed to deepen these last features.
Consequently, and this is the third remark, some support was found, as
already noted, for the Guest and Conway idea that the “black hole” type
does not exhaust the employment policies adopted even by small firms in
the Italian experience. This holds not only for the larger (and probably
partly biased) Cesos sample, which excludes firms with less than 20
employees, but, to a lesser extent, also for the Brescia survey (which
includes firms with 15 to 100 employees). It is true that in this latter case
the percentage of firms falling into the “black hole” cell is much higher,
even the absolute majority (55%) and nearly three times as much as in the
Cesos sample. Still, also almost half of the Brescia sample reveals the
adoption of IR-HRM policy options which fit one of the other three types,
although among them “traditional collectivism” is the most frequent case. In
addition, in the same survey some relevant features of the ‘sweatshops’
pattern are lacking, namely the high degree of ‘precariousness’ of
employment contracts and the low level of job security. In particular, the
employment ‘precariousness’ is rather low both in terms of stock and of
flows, as suggested by the scarce diffusion of various types of contingent
workers (fixed-term, temporary, apprenticeship, work/training contracts);
while job security is apparently challenged not so much by the ‘freedom to
fire’ of the employers, but rather by the very high employees’ mobility in
search for better jobs, as suggested by the rate of turn-over of about 40% of
total employment in 1996-97 period, almost entirely due to voluntary
32 Bordogna-Pedersini
resignations. A context of very fluid, sellers’ market, certainly linked to the
economic peculiarities of the province under exam, but probably common to
many Northern regions of the country. A context which makes hardly
viable both autocratic and paternalistic employment relations (Scase, 1995),
and in which granting permanent jobs on the part of the employers is a form
of incentive in the competition to attract and retain employees. We conclude
that small firms are not simply synonymous of “sweatshops” and that the
landscape is more differentiated, although the picture which emerges is less
rosy than the one highlighted by Bacon et al. (1996) (at the very least, the
reality of the black economy cannot be ignored, especially in the South).
Again, as far as such a comparison is pertinent here, Guest and
Conway (1999, Tab. 1) found that one third of their national sample of
about 1000 British employees worked in “black hole” organizations (in term
of firms the percentage would probably be higher).
Fourth, and last, the size factor confirms its importance in influencing
both industrial relations and HRM practices, although with different
intensity and according to a different pattern, as shown in section 5. If clear
cleavages are to be found between small and larger firms, the threshold is
significantly lower with reference to traditional industrial relations
institutions than to ‘innovative’ human resource practices. In the Cesos
sample, union membership and union representation bodies are rather
diffused even in the smallest class of firms (around or over two thirds of the
cases )8, to become the almost universal rule not only in the largest
8 As already mentioned, 15 is the threshold established by the 1970 law (Statuto dei
Lavoratori) over which employees have the right to promote the constitution ofcollective representation bodies within firms.
Bordogna-Pedersini 33
companies but already in the class between 51 to 100 employees (above,
Tab. 3, and Bordogna, 1999, Tab. 3). A similar pattern is displayed by the
Brescia survey, although on the whole with lower percentages of diffusion.
Collective bargaining and the conclusion of formal collective agreements,
probably the most significant component of traditional industrial relations
institutions, is much less frequent, covering on the whole Cesos sample only
about 28% of cases in 1995-96 (Bordogna, 1997, Tab. 12). But it also
shows a strong connection with the size factor, more than doubling its
diffusion in firms with 36 to 50 employees with respect to the smallest
class, and three times as much in firms with 51 to 100 employees; after this
threshold the diffusion still increases, but at a lower pace, up to about 40%
of cases in the largest companies (500 and more employees)9. In conclusion,
as for traditional industrial relations, 50 employees seems to be the relevant
cleavage: over that threshold, irrespective of their actual size, firms
apparently do not differ so much with regard to the presence of union
members, collective representation bodies and (to a lesser extent) the
likelihood to have collective agreements, although this last institution is far
from covering the totality or even the large majority of firms.
A partly different pattern is displayed by HRM practices, whose
diffusion is also tightly connected with the size factor, but which tend to
show up in significant terms only in firms above a higher threshold. In small
firms they are less frequent, either because they are less needed, being, so to
say, naturally built-in in that reality, or because it is more difficult to detect
9 In a survey carried out by Istat (1999) on a sample of 8000 firms, representative of the
universe of firms with at least 10 employees, a similar cleavage is found in theindustrial sector between firms with 20 to 49 employees and those over 50 employees,but the diffusion of collective agreements keeps increasing with company size, up to65% of companies with 500 or more employees.
34 Bordogna-Pedersini
them, being less formalized, or finally because forms of more or less
benevolent paternalism prevail. But the rather diffused presence of unions
prevents this situation from precipitating into the “black hole” or “bleak
house” scenario even in small firms, probably more often in Italy than in
Britain.
Finally, to conclude, a methodological remark. The findings we have
reached, although improving our knowledge about the characteristics of IR
institutions and HRM practices in the Italian industrial firms, are only partly
satisfying from the point of view of comparative analysis and of the
possibility to reach cumulative results. Some of the methodological and
theoretical weaknesses we have underlined in section 1 affect also our
work. We have often made reference, as terms of comparison, to inquiries
carried out in Britain and the US, namely by Osterman, Guest and Conway,
Bacon et al.. But we cannot neglect that all these studies, including our
paper, utilize different lists of items to identify HRM practices, only to a
limited extent overlapping. At the very least, definitional problems still
persist. To carry out sound comparisons and reach genuine cumulative
results further work is needed, with a research design specifically dedicated
to the subject under exam, apt for replication.
Bordogna-Pedersini 35
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