This may seem like an odd question to ask however, many senior leaders do not know the answer. We regularly see the effects of this naiveté and it is distressing. Why and how is that that a functional area that can bind the organization to rigid contracts that last in perpetuity, that are in charge of relationships with the unions (who are extremely sophisticated and well funded), that make decisions on extremely personal and volatile issues such as employee discipline, that work most closely with operations and can directly influence employee culture and productivity with the largest cost line on your income statement (labour costs) can go so unnoticed by senior leadership?
The answer is that labour relations departments are often dramatically immature for the nature and tasks they should perform. This lack of maturity exists for many reasons as LR departments have either atrophied over time or were never set up to meet the demands. As a result, labour functionaries often remain stuck in a reactive mode; they only respond to the demands and grievances raised by the unions. It may offend some to say this is evidence of the function’s immaturity, but the truth is that when labour relations exists only to respond to the issues raised by the union, the function has failed to evolve from merely transactional to proactive and truly strategic.
Why do labour relations practitioners seem to get stuck in the reactive mode? There are many reasons for this. The primary issue though is the organization’s failure to recognize the importance of labour relations, and the broader function of Industrial Relations as key components of the overall business strategy. Often the labour relations function is seen by senior management as being purely a routine matter at the transactional level precisely because this is how the function operates.
A secondary issue is that Labour Relations departments are often structurally misaligned and therefore cannot be successful strategically. Senior Executives need to think of the importance of all external relationships with the same importance as human resources looks at internal relationships.
It is up to the most senior labour relations leader to change the viewpoint by being proactive and strategic in the way the function is lead and managed. This involves taking actions to help the function mature. These include:
Reframing: The labour relations function should ultimately be transformed into an Industrial Relations function whereby all stakeholder relations are actively managed as part of a coherent and comprehensive whole. These include relations with employees, unions, vendors/contractors, local communities, local indigenous groups and other interest groups. The reframing is an important step in breaking down internal silos as well as to ensure the organization has a balanced and sustainable approach to stakeholder relations.
Governance: The Industrial and Labour Relations functions should be governed by an oversight committee made up of senior executives including at a minimum the CEO, COO, CFO and CHRO. This ensures these functions have a forum where strategic activities can be sanctioned as part of the overall business plan.
Preparation: The function, once it has been reframed, needs to establish a strategy aligned to the business plan. This involves being very well prepared for every contingency including shifts in the business (mergers, acquisitions, divestitures), contract renewals such as collective bargaining or major contracting-in assignments, and major capital expenditures. The function should have integrated plans for the next year, the next five years and the next ten to twenty years.
Structure: Ideally the Industrial Relations function should report directly to the CEO. However, it can be part of the overall Human Resources portfolio as long as the dual accountability for both internal and external stakeholder relations is seen as the core function of HR and that the CHRO or equivalent is well versed in Industrial Relations. It simply makes no sense for the Industrial Relations function to report to a CHRO who has no experience or knowledge in the area.
Processes: Every business function is supported by underlying processes that ensure the function is managed efficiently. In too many instances we have seen the lack of any real processes in the Industrial Relations function. Yet there is often an assumption that certain processes will be followed and certain outcomes and behaviours will be observed. What is needed is a very disciplined and predictable approach to certain areas which might be seen as transactional including employee labour planning, collective bargaining (i.e. having a consistent process for managing the bargaining mandate), grievance handling, discipline, etc. Collective bargaining should always be completed by the time the current contract expires. Grievances should always be managed within stipulated timelines. It is difficult to be strategic when the transactional aspects of your function are not managed well.
Immature in this context means simple and unsophisticated. What is needed is wise, highly evolved and a mature industrial relations function. In all cases, especially large and highly complex operations, industrial relations and labour relations departments need to be conceived of, lead and managed in such as way as to allow for the development and sustainability of a high functioning, contributing aspect of the business.