Although signed in good faith, Coca Cola’s 2012 SPC enterprise agreement was a potential long-term death warrant for the company.
Like the disaster enterprise agreements that contributed to the closure of Ford and General Motors, the SPC agreement made productivity improvement very difficult by prescribing complex management decision making formulas. There is no way any modern company could operate in a low margin competitive business like SPC with such an enterprise agreement because instead of being a clear statement of employee entitlements it extends deep into the management of the business.
SPC’s only long-term hope is for the detailed prescriptions and formulas in the enterprise agreement to be ignored by managers and workers. That’s not easy in a large operation.
Before explaining how the agreement put SPC at risk, I want to first express some sympathy for the local Liberal member Sharman Stone, because while Tony Abbott mentioned work practices he chose to emphasise worker payments in his statement blocking government aid. But, as Sharman Stone correctly pointed out, worker payments are not the main problem at SPC. The real problem is that the 300-plus page SPC agreement means managers have no hope of managing efficiently unless the agreement is ignored.
Secondly, as I understand it, Toyota foolishly signed an agreement with similar (but not the same) provisions to SPC. The minor changes Toyota proposed last year did not go anywhere near making the agreement a modern flexible one. Again, as in SPC, payments to employees are not the issue at Toyota.
Without government subsidies there is no way a large investment in new SPC plant could be justified when the workforce is not flexible and managers can’t manage. As pointed out previously (How SPC can be saved, January 31), with the promise of an agreement that gives management flexibility Coles and Woolworths are likely to help SPC as they have helped Simplot - because they want to maintain Australian grown processed fruit and vegetables.
For those wanting to read 300 plus pages I have attached the SPC enterprise agreement (and you can read it here). The agreement starts off with all the right aims, including flexibility, but as the pages drag on it is clear that the devil is in the detail.
In essence SPC agreement is not a simple statement of 'employee' entitlements but rather a prescriptive management process manual in which effectively nothing can occur without the union agreeing.
Unless the agreement is ignored, it turns the process of managing the SPC plant into a complex political game in which managers are just one of many players lobbying for their causes.
There's an appearance of managers making decisions but most decisions can be referred to a council and if no agreement is reached in some cases an independent person can be bought in.
When SPC could pass on the costs of this management complexity to supermarkets or the export market then life was good. But those days have ended.
The agreement does not give the managers the right to make decisions but rather establishes a “decision making matrix”. Again, in fairness, that “decision making matrix” is surrounded by aims that all would agree to but in fact it’s a way of saying that managers have few powers.
Instead of simply managing, SPC managers under the agreement are given tasks like setting the direction and strategies for the business; planning and organising resources to meet business goals; providing leadership; establishing and using business performance monitoring systems; coaching and supporting teams and building "partnership" between the company and employees.
So once the agreement limits the power of manager it then explains that power is to be shared with a ”council” which has representatives from both management and workers, and unions can attend.
The job of the “council”, like the managers, is prescribed. The council is to:
- Be the basis of improved communication between management and employees.
- Facilitate the resolution of disputes.
- Be consensual in its approach.
- Be the sounding board for significant change.
- Be a leader in the development of teams by acting as a team.
The agreement sets out in incredible detail the various types of work in the plant and has detailed prescriptions for each type of work, including payments, and rostering. If managers do not follow the prescriptions it can go to Fair Work Australia.
If an employee requires dismissal the manager will almost need a QC to work a way through the complex agreement.
Given that agreement no-one will want to buy SPC, so if it wants to sell then Coke may have to pay the workers out on a very generous basis. A new owner of the brand and perhaps the plant will need a totally different agreement. Of course SPC can do a “Toyota” and ask workers to vote on a new agreement. Then we have a new ball game.