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Fragmenting WorkBlurring Organizational Boundaries and Disordering Hierarchies$

Mick Marchington, Damien Grimshaw, Jill Rubery, and Hugh Wilmott

Print publication date: 2004

Print ISBN-13: 9780199262236

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199262236.001.0001

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Conclusion: Redrawing Boundaries, Reflecting on Practice and Policy

Conclusion: Redrawing Boundaries, Reflecting on Practice and Policy

(p.261) 12 Conclusion: Redrawing Boundaries, Reflecting on Practice and Policy
Fragmenting Work

Damian Grimshaw

Mick Marchington

Jill Rubery

Hugh Willmott

Oxford University Press

Abstract and Keywords

This chapter draws together the main threads of the book. The focus has been upon the development and operation of inter-organizational relationships in the context of broader institutional changes, including the closer collaboration of public and private sectors. Cases were drawn from across these sectors and have included examples of their intersection through partnerships and the use of agency workers. The blurring of organizational boundaries and the fragmentation of work and employment have been central themes, exploring how established, standardized, and unified forms of organization and employment have been disrupted. The central argument has been that understanding the dynamics of inter-organizational relationships requires recognition of the critical significance of employment relationships beyond the boundaries of the single organization. This requires the development of a framework that is attentive to how organizations are embedded within wider institutional structures and how their strategies are shaped, at least in part, by legislation and industry-wide norms and regulations.

Keywords:   agency work, public sector, private sector, employment relationships

12.1 Introduction

In this chapter we draw together the main threads of the book. Our focus has been upon the development and operation of inter-organizational relationships in the context of broader institutional changes, including the closer collaboration of public and private sectors. Our cases have been drawn from across these sectors and have included examples of their intersection through partnerships and the use of agency workers. The blurring of organizational boundaries and the fragmentation of work and employment have been central themes, exploring how established, standardized, and unified forms of organization and employment have been disrupted. They have been disordered as hybrids; less singular and integrated arrangements have been constructed to address perceived shortcomings—of cost, performance, or innovation. Our central argument has been that understanding the dynamics of inter-organizational relationships requires recognition of the critical significance of employment relationships beyond the boundaries of the single organization. This requires the development of a framework that is attentive to how organizations are embedded within wider institutional structures and how their strategies are shaped, at least in part, by legislation and industry-wide norms and regulations.

We question accounts of change that assume the rational pursuit of more efficient and/or effective organizations, and instead find substantial evidence of fragmentation as an outcome of complex, institutionally anchored, political processes of negotiation over the form of organizations and employment relationships. Rationality is routinely invoked as a means of articulating and justifying the claimed ‘need’ for change and the reasonableness of the means of its implementation. However, what is claimed to be ‘rational’ or self-evidently logical by one party is frequently viewed as partial and/or self-serving by others. Politics are inescapably present as those engaged in negotiating (p.262) and maintaining the nature and boundaries of intra- and inter-organizational activity exist in a relation of interdependence to each other. Each party is engaged in a struggle to preserve or reform these relations in order to affirm or legitimize a collective and/or individual sense of identity and reality. A relationship of trust and transparency may, in principle, be favoured by all parties, yet this ethos may be underpinned and, on occasion, subverted, by the mutual knowledge that one or more of the collaborating organizations has the option of supplementing such trust with the use of credible, punitive sanctions.

Collectively and individually, those commanding greater resources, and who have other options, occupy a comparatively advantageous position when negotiating their preferred outcomes. They may mobilize resources to reduce their costs and/or to enhance their benefits by striving to shift risk to other parties. In this process, the accountability of more powerful groups may be diluted or obscured, yet they remain vulnerable. They are not omniscient about processes of negotiation, and they are ultimately dependent upon the cooperation of others who may deploy restricted capabilities highly effectively in the pursuit of their own claims, in the augmentation of their limited resources or even in shifting the definition of valued resources. In this sense, power mediates their relationships; the elimination of risk is elusive; and the construction of trust presents an appealing means of containing risk and gaining benefits.

We begin by revisiting our recurrent motif of ‘fragmenting work’, recalling the diverse ways in which our study has explored its manifestations. This leads us to reflect upon a number of key concepts—risk/power, trust, and identity—that, in combination, have proved valuable in analysing the different ways in which work, organization, and employment is fragmenting.

12.2 Fragmenting work

The metaphors of ‘fragmentation’ and ‘disorder’ have been used throughout this book in order to characterize changes in organization and employment. We have argued that established models of organization and employment, based upon the assumption of a single employer and a unified organization, have diminishing relevance and value where standardized employment conditions based upon full-time, permanent contracts with a single employer are accompanied and supplanted by a plurality of other forms and arrangements. Despite some signs of continuity, many jobs are now less permanent and secure, more people work for agencies supplying temporary workers, and organizations increasingly outsource activities that were previously undertaken in-house and considered integral to their operation. In short, work is fragmenting and boundaries between organizations are blurring, no more so than at the interface of the public and private sectors.

Such ‘fragmentation’ is, of course, relative to stability and integration. Prior to the establishment of large, vertically integrated organizations, employment (p.263) relations lacked the structures that were acquired during the late development of advanced capitalist societies. During this period, from the late 1940s to the mid-1970s, there was steady demand for industrially produced goods accompanied by limited international competition. That changed when the oil shock, which led governments and companies to reassess their commitments, was accompanied by the growing penetration of new competitors, together with alternative organizational, employment and regulatory structures, into established markets. For a variety of reasons, this effect was felt strongly in the United Kingdom where comparatively protected markets and the exceptional contribution of the City of London concealed the lack of re-investment in both ‘old’ and ‘new’ manufacturing industries. The outcome was a series of crises during the 1970s and 1980s, both of currency and labour relations, which were symptomatic of Britain's status as the ‘sick man of Europe’.

The medicine administered to this ailing economy was monetarism supplemented by privatization. Thatcherism declared that enterprise must be liberated from the state and private sector disciplines—such as competitive tendering—were mobilized to revive its residual responsibilities. In the event, the vision was imperfectly realized but its effect has been to challenge and ‘shake-up’ established monopolies of all varieties—albeit that this spawned the contradictory creation of private monopolies either directly (e.g. Railtrack) or indirectly through allowing for the concentration of ownership (e.g. the privately acquired ex-public utilities). However, just as important as the withdrawal of subsidies, the championing of a discourse of enterprise encouraged both public and private sector organizations to reassess their obligations and commitments. The paternalist idea that employers have a social responsibility towards their employees has been widely supplanted by the entrepreneurial doctrine that nobody is owed a living and that future employment depends upon more flexible and fragmented arrangements. People could no longer expect, as of right, to have permanent, secure jobs. Instead, they must now recognize that employment is a burden and risk for organizations, and that their capacity to compete (or provide value-for-money public services) depends upon minimizing this liability—the substitution of franchises for direct employment at the Post Office being a prime example of this shift. In the calculations of shareholder value and ‘financialization’ more generally (see Chapter 1), only a privileged minority of workers can expect secure jobs with company pensions. An increasing number of workers are required to accept part-time, temporary, and insecure forms of employment, take greater responsibility for their future employment, and recognize that retraining is a recurrent obligation.1 In the public sector, this transformation has occurred through stealth; the discipline of ‘market-testing’ is applied to the provision of public services where private sector providers are hired to undertake the work previously undertaken by public sector employees, with the latter being faced with redundancy or accepting a transfer to a private sector company—such as FutureTech or TCS.

(p.264) As a means of securing profitable growth (or efficiency savings within the public sector), the erosion of employment security has been accompanied by efforts to identify, harness, and exploit previously untapped sources of innovation, revenue enhancement, or other means of cost reduction. The construction of inter-organizational synergies through vertical disaggregation offers one such strategy. Rejecting the conventional wisdom that vertical integration provides an effective means of improving control in addition to reducing transaction costs, and thereby enhances competitiveness, the new ‘network’ thinking suggests that organizations have specialist, core competencies; and that the horizontal meshing of specialization is a source of competitive advantage (or improved value-for-money). Mutually beneficial relationships may be the aspiration of network thinking and, where it is undertaken across organizations employing staff with shared value systems and priorities, there may be a good prospect of anticipated benefits materializing. The chemicals case provides an example of such mutually beneficial meshing of specialist capabilities, although it should be noted that in most cases the dominant partner, Scotchem, has applied its market muscle to influence supplier practices (see Chapter 4). There may, however, be considerable resistance to attempts to translate supposed complementary strengths into everyday working relationships that are experienced as ‘mutually beneficial’. Several of our cases (e.g. ceramics) highlighted significant, and perhaps intractable, ‘political’ difficulties involved in translating abstract economic principles into effective organizational and employment practices.

It is audacious to assume that relations between organizations within a network are inevitably effective just because their respective competences are complementary; it is equally plausible to characterize these relationships as ones of mutual exploitation and accommodation. As we saw in various chapters, the scope for fragmentation, prompted by the process of vertical disaggregation, is extensive. For example, in the customer service and teacher supply cases, tensions arose from the employment of agency staff, on different terms and conditions, working alongside staff employed by other organizations. Moreover, comparatively clear lines of reporting and responsibility have become disjointed, the final resort being to invoke the terms of the contract and ultimately pose the threat of legal redress (see Chapter 7). In principle, there is a shared responsibility for ensuring that the interface between purchaser and provider is effectively managed. Yet, in practice, as we saw in Chapter 5, the primary responsibility of the private sector manager is to the shareholders of the company, not to the public sector purchaser or the ultimate customer (e.g. hospital patient, school child, benefit claimant).

In summary, forces of change are manifest in the fragmentation of established organizational and employment relationships. Vertical disaggregation and horizontal meshing characterize the shift in organizational forms; and employment relationships are also fragmenting as the internalized worker (full time or part time) is supplemented, if not supplanted, by externalized, temporary, and self-employed workers.

(p.265) 12.3 Reflections on practice

A recurrent theme of our analysis is that network forms or inter-organizational relations are embedded within wider social structures and relations that include local communities and established norms, the involvement of trade unions, legislative requirements, and changes in product, labour, and capital markets. By exploring diverse dimensions of inter-organizational relations, we have shown how they are conditioned by dynamic distributions of power and risk, shifting degrees of suspicion and trust, and the redrawing of organizational and occupational identities.

Dynamic distributions of power and risk

Our analysis has been premised upon the understanding that relations of power and assessments of risk mediate decisions to participate in the development and operation of networks. Instead of assuming that exchanges between network members are entered without coercion or constraint, and are fair and equal in their operation, we understand these processes to be shaped by the balance of power between members. Scotchem's purchasing power, for example, enabled it to be highly selective in its choice of haulage suppliers, and to shape their behaviour by requiring them to abide by a code of conduct in order to minimize reputational risk. Similarly, as we saw in Chapter 6, while some schools were able to exert pressure on TeacherTemp to provide them with ‘good’ teachers, schools in more deprived areas had little option but to accept whom they were sent. While a major advantage of outsourcing is externalization of the responsibility and liabilities associated with vertical integration, it also involves a loss of control and associated risk that is then managed through a combination of (formal) service level agreements and (informal) efforts to engender relations of trust, as in the case of CleanCo's relational contract with Airportco or that between Council X and TCS.

The power of network members is exercised in the avoidance and shifting of risk to their partners. For example, FH and BH workers recognized they had to meet the demands of certain airlines, even if they appeared ridiculous, because of their purchasing power. Moreover, as we saw in Chapter 8, temporary and agency workers at the TCS-NW call centre knew that future job prospects depended on how well they were viewed by the client for whom they worked. A good example of shifting risk was seen in the ceramics case, where Domestic China mitigated the threat of receiving faulty product by favouring manufacturers with very low labour costs where rigorous inspection of product quality, often resulting in high wastage rates, was comparatively costless to the supplier. It is worth noting, however, that outsourcing is less straightforward where there is low substitutability of suppliers. For public sector bodies bidding for large contracts—such as the IT contract awarded by Govco to FutureTech—there is (p.266) invariably a limited choice of suppliers big enough to make a credible bid; and the costs of putting together consortia of smaller suppliers inhibits wider participation. Moreover, once a purchaser has invested in a provider, there is the risk of ‘lock in’—not only because the relationship becomes established and institutionalized, but also because the likelihood of the contract being renewed deters credible, well-researched (and therefore very costly) bids being assembled by alternative suppliers. The awarding of a contract to an alternative supplier could be interpreted as an admission of a failure, either in selecting a suitable supplier in the first instance or in acknowledging the contract has not been managed effectively.

In most cases, especially where there are substantial cost implications associated with a change of provider, the preferred option is to influence how the service is delivered—for example, by shaping the supplier's employment and human resource policies. This was most noticeable, as we saw in Chapter 7, in the airport and customer service cases. Here, there were interventions by clients to shape patterns of work, the implementation of different pay structures and rates, and varying proportions of temporary staff employed on different contracts, all of which led to a blurring of boundaries between employers as well as the emergence of more fragmented systems of employment. This also occurs at a collective level; in Chapter 11 we illustrated how workers were struggling to achieve or maintain their voice across organizational boundaries. In some cases, voice was disconnected or fragmented, while in others workers found they were effectively disenfranchised as the employer subcontracted work to a third party—as with security staff in the chemicals case and with some contracts in the customer service case. Indeed these and other examples show clearly how imbalances in power between clients and suppliers within inter-organizational relationships routinely re-emerge as increased risks for workers.

This risk extends to the difficulties encountered by in-house bidders who lack experience in assembling and negotiating contracts, unlike their private sector competitors who have a wealth of experience (and credibility) in winning contracts. Fragmentation becomes institutionalized and virtually impossible to reverse for those lacking the power and resources to compete with large private sector companies. Similar outcomes were apparent in the housing benefits and Private Finance Initiatives (PFI) cases. In the former, the in-house bid was rejected at an early stage by the Council, only for TCS later to appoint an ex-local authority manager to run the service after their own internally appointed managers experienced problems due to a lack of housing benefits expertise. It surprised local authority managers that private companies were reliant on public sector knowledge when they had been led to expect modernization through the introduction of private sector disciplines and skills (see Chapter 9). The team that put together the specification for the PPP in the health service case was disbanded soon after the completion of its work, and specialist and experienced staff were transferred to the private sector (p.267) consortium. Indeed, the very demand for privatization of public services and the formation of Public–Private Partnerships (PPPs) is stimulated by the running down of public services, including—in the IT case—the severe difficulty of recruiting specialist staff on civil service pay scales. In short, the weakened capacity of in-house staff to compete for future contracts is symptomatic of the malady for which contracting out was commended as a remedy.

In contrast to the risk of ‘lock-in’ with the Govco-FutureTech partnership, the teacher supply case indicates the possibility that the purchaser might benefit by drawing temporary staff from agencies rather than relying upon a list vetted and provided by the local authority. In theory, schools can mobilize their purchasing power to extend the supply of teachers and shift the risk to agencies that undertake the time-consuming and politically charged process of recruiting and dismissing temporary staff. Against this benefit, however, schools were vulnerable to being harassed by agencies eager to provide them with teachers—often teachers that other schools were not willing to re-employ Given that supply teachers are cheaper than permanent staff in the long run, this makes them increasingly attractive to schools that are struggling to reduce costs, yet the increased use of temps, especially by the most disadvantaged schools, renders children vulnerable to an inferior education and further undermines the reputation of such schools.

In all these situations, service failure tends to be attributed to the public sector purchaser rather than the private sector provider. In the IT case, for example, FutureTech's failure to deliver robust systems resulted in national press coverage over several days, but Govco's service came in for sustained public criticism; there was little or no mention in media interviews that these services were delivered by a private sector contractor. Similarly, although it is widely known that many ‘hotel’ services within hospitals are provided by private sector firms, it is the hospitals rather than the providers that are issued with ‘stars’ to signify their level of (in)adequacy. The risk of failing to honour service level agreements is carried by the public sector, with minimal impact on the reputation of the private sector provider (see Chapter 5).

The structure and operation of power relations within a network is influenced by the employment situation preceding the establishment of inter-organizational relations, and it is also a condition of their development. In the Post Office case, the capacity to introduce agency and franchising arrangements was complicated by the comparatively advantageous terms and conditions enjoyed by employees who had previously worked in Crown Offices. One response has been to establish the grade of Customer Service Advisor (CSA) on a level of pay about half that enjoyed by established staff so that CSAs can be more readily transferred to future franchisees. In other cases, particularly those that involved transfers from the public to the private sector, lingering attachments to a public sector ethos were interwoven with influences from their new employers in a way that reflects changes to the balance of power in these workplaces (see Chapters 8 and 11) and shapes assessments of risk and opportunity (p.268) in their new circumstances. In general, the institutional context in which employment relationships are embedded necessarily enables the development of practices that are consistent with its features just as it constrains practices that deviate from it. For example, in the ceramics case, the use of overseas rather than local suppliers was tolerated by workers so long as they believed the company was fully committed to avoiding redundancies and protecting their future employment.

To sum up, we have highlighted the centrality of power relations in the establishment and operation of inter-organizational relations, both in terms of employer–employer linkages and in employer–worker relationships. For the most part, one of the organizations in each case-study network was in a weaker position, and it was commonplace for these weaknesses to be passed on in the form of higher risks for workers. However, given the contradictory dynamics of capital–labour relations, it ought to be no surprise that we also found evidence of risk being displaced even in organizations in a stronger position in the network relationship (e.g. in the private sector providers in the Private Finance Initiative (PFI) case, see Chapter 5). Of course, there were examples of greater equality in power relations and instances where individual workers were able to develop their careers more effectively following a transfer to the private sector, but the general picture was one of inequalities in the distribution of power and the allocation of risk.

Shifting degrees of suspicion and trust

Given the imbalances of power and risk identified above, it is hardly surprising that trust and suspicion manifested themselves both in inter-organizational relations and employment relations, either on an individual or a collective basis. Of course, as we have repeatedly argued, employment relations and inter-organizational relations can not be analysed separately; close and trusting relations between organizations at the most senior levels may well—but not necessarily—spill over into relations between employers and employees, in particular if there are long-term relations that allow for greater levels of employment security or a partnership arrangement with trade unions. Conversely, the implications of a low-trust relationship between organizations may lead boundary spanning agents working for the client to monitor the performance of the supplier—and its workers—more carefully.

Chapters 4 and 5 provided examples at an organizational level of variations in the degree to which private–private relations or public–private relations were built upon trust and suspicion, and it was apparent that trusting relations were more likely the longer the contract (or repeat contracts) had existed. Forces beyond the level of the organization—such as trade association rules, regional ties or legislation—were also influential in shaping the degree of trust or suspicion characterizing inter-organizational relations. For example, the (p.269) broadly relational contract between Scotchem and Acidchem was bolstered by the Chemical Industries Association (CIA) codes of practice, cultural similarities between the firms, and mutual dependence on each other in a highly competitive world market comprising a few major companies. Others, such as those between BH and FH at the airport, were largely extensions of prior informal practices that were insecure and subject to change as competitive pressures dictated. Yet others, such as contracts at the call centre or some of the schools, were typically of short duration with clients changing suppliers as new opportunities or pressures arose. There is little doubt, however, that the level of trust and suspicion in inter-organizational relations had major implications for employment relations. For example, if clients made no effort to hide the transactional nature of contracts this merely served to reinforce the precarious nature of employment, or continual questioning by the client might lead workers to have lower levels of job satisfaction and notions of self-worth. Moreover, in the absence of long-term trusting relations between firms it is highly unlikely that employers can see advantage in trying to establish partnership relations with trade unions and workers, even more so if the majority of workers are agency temps or have relatively short periods of service (see Chapter 11).

High trust relations may be pursued because both purchasers and providers are frustrated by the difficulties encountered and costs incurred by a low trust reliance on the contract. For purchasers, an ability to trust the provider—as in the case of CleanCo at the airport—minimized the costs of closely monitoring the contract and remedying underperformance. For providers, increased trust allowed them to innovate in service delivery without fear that divergence from strict performance criteria would immediately be interpreted as a failure to comply with the contract. Yet, time is often required to enable this degree of cooperation to develop, and there needs to be leeway in interpretation of the contract by the client if recriminations are not to dominate the relationship. Conversely, trust tends to be undermined if it becomes apparent that the supplier is solely interested in making profits out of the contract. This was particularly apparent in the chemicals case where Securiforce could extract a profit from the contract only through its breach—behaviour that did not concern the company as it had no desire to win further business from Scotchem. In the teacher supply case, many head teachers were suspicious about claims made by agencies regarding the quality of the teachers on their books because they recognized the agency needed to extract a profit from their business. Accordingly, efforts were made to establish ‘trust’ relationships with particular agencies from whom the schools hoped to receive preferential treatment. Moreover, depending on the degree of trust in their relationships with consultants at TeacherTemp, some teachers were repeatedly placed at schools they wanted whereas others always found themselves working at schools with discipline problems and/or a lack of resources.

Where imbalances of power and risk allow one party to exploit its position of comparative advantage, the establishment of trust may be impeded. Trust may (p.270) also be constrained where key performance measures are applied to monitor service delivery. In each case, it is a matter of how such arrangements are interpreted: do they signal a lack of confidence in less formal control mechanisms, or are they understood as part and parcel of an inevitable but largely ceremonial control apparatus with which each party is obliged to comply? The difficulty is that there is often no clear-cut or agreed answer to such questions. In the IT case, there was a mutual understanding at the most senior levels about the need for performance measures, but these were not viewed as ceremonial, if only because their publication and interrogation by the Public Accounts Committee had major implications for the reputations of FutureTech and Govco and the career prospects of those held responsible for managing the contract. Other cases were not so public as this, but external assessments of performance still occurred, most obviously where public money was involved—such as TCS-L, which was the subject of a consultancy report commissioned by Council X. Concern in many of the private–private networks focused more specifically on cost reduction, either in terms of cheaper goods as in the Ceramics case, or lower labour costs (and also lower wages as well) in the Airport or Post Office cases. As we saw in Chapter 7, contracting out in these situations offered a perfect opportunity to establish inferior terms and conditions for new recruits.

Despite, or perhaps because of, the importance attached to key performance measures there were often close personal relationships between the most senior managers (boundary spanning agents—see Chapter 6) on each side of the contract. This undoubtedly facilitated a process of give-and-take when the contract entered areas of conflict—for example, over late deliveries, failure to provide adequate advance notice of changed specifications, or the replacement of staff. Open discussion of problems is often identified as an indicator of a trusting relationship, such that instead of denying problems or blaming another party, they are candidly presented and explored. At the very least, this leads to a greater awareness of the difficulties under which each organization or individual is labouring; and, in the context of a partnership or relational contract, there may be an opportunity to explore how the problems may be jointly addressed, or at least worked-around. This may then feed through to particular operational issues; for example, assistance might be offered if bags drop off a trailer at the time of plane turnarounds; drivers might be allowed on site if they arrive early and there is a slot available; or teachers may be allocated to particular schools due to the nature of relations between the boundary spanners at the school and TeacherTemp. However, trust building moves may equally be interpreted as ways of buying time and sympathy, rather than encouraging a process of mutual learning, or they may be seen as a tactic on the part of suppliers to enhance their profits by ‘softening’ up the client; for example, there was a feeling that relations between Govco and FutureTech were too cosy, and indeed there are dangers that sweet-talking the purchaser around key issues of performance effectively distracts attention from the detail of contractual obligations.

(p.271) More generally, we have questioned whether the institutional ethos of individualism, distance and confrontation within the UK economy is conducive to the establishment of network forms based upon trust rather than mutual exploitation. In this context, the open discussion of problems can be seen as threatening, since it requires a reciprocity that disrupts habitual patterns of distance and secrecy, albeit that these are cloaked in superficial friendliness. In the public sector, this difficulty is compounded by widespread suspicion of private sector practices and priorities. Greater familiarity and face-to-face contact may mitigate these tendencies but they are unlikely to remove the underlying tensions associated with relations of dependency and risk or provide greater employment protection for workers.

Redrawing organizational and occupational identities

We have seen that the established identities of organizations, employers, workers, and trade union members are disrupted and redefined by the blurring of boundaries associated with the rise of network forms. This is most immediately apparent when there are changes in organizational forms and structures—such as the Post Office franchises and PPPs—as well as in the emergence of multiemployer workplaces where workers from several organizations work alongside and often in collaboration with one another—such as at the airport or the TCS-NW call centre. In other cases, such as the chemicals and ceramics networks, changes to organizational forms and structures are less radical, with outsourcing of work—such as security and cleaning—to other organizations and growing efforts to develop closer relations with both suppliers and clients. In the ceramics case boundary-spanners maintained and nurtured relationships with competitors to arrange for outsourcing of work so as to smooth peaks in demand for their products. In the teacher supply case, head teachers became direct purchasers of temporary teachers, and their previous hierarchical relationship with the local authority was replaced by a market relationship with several agencies to form a web of possible suppliers. In these cases, however, there was minimal blurring of organizational boundaries or work activities, notably because clients exerted little influence upon the internal operations of other organizations.

However, long-standing identities were disrupted in several cases, especially where privately supplied services were introduced into public sector organizations. POCL has been shifting its operations out of Crown Offices to become integrated with other retail outlets in larger units and extending the range of merchandise sold by its staff that have been incentivized to generate revenue by cross-selling goods and services. Along with lower rates of pay for workers in these units, their identity has been transformed from quasi-public servant to shop worker. The outcome is a messy set of compromises that disordered existing organizational forms into a complex and fragmented set of businesses (p.272) with multiple and competing identities. Employees of the Post Office and workers at its agency and franchise outlets are being retrained or recruited for their soft skills in selling to customers, and technical queries are directed to call centres, with massive implications for questions of skill (see Chapter 9). Similarly, major shifts of identity and identification have occurred at the three PPPs, particularly where staff had been transferred from a public to a private sector employer and the result was a complex and confusing set of different terms and conditions—as we saw in Chapter 7. Many workers found difficulty in identifying with a specialist service provider and even more so with a private company as they had previously regarded themselves as working for the NHS, a local authority or a branch of the Civil Service. Of course, for some employees—such as many of those who transferred from Govco to FutureTech—this change was welcomed as an opportunity to extend their skills, broaden the scope of their careers and work for a multinational company on a much wider range of projects requiring the development of new social and technical competencies. Balanced against this, however, was the fact that Govco employees had chosen to work in the public sector, and to remain within the sector even though jobs with much better pay and career prospects had been widely available in private sector firms. Not surprisingly, therefore, some ex-Govco employees continued to identify with their former organization rather than with FutureTech, even referring to their current employer as ‘them’ rather than ‘us’.

Confused organizational and occupational identities were apparent in several cases, most obviously at the airport and in the TCS-NW call centre. Operations at the airport were fragmented following requirements to break up the previous monopoly and set up a subsidiary to provide baggage-handling capability in competition with other established private sector firms. Airport operations are such that staff regularly wear the uniforms of another employer in their customer-facing activities, and the whole system operates through disordered systems of contracting and recontracting. In these circumstances, individual identities become blurred (see Chapters 8 and 10). Staff who are subcontracted to other organizations become aware of competing goals, contrasting styles of management and mission statements, and different patterns of working; on some occasions they are seduced by the glamour of working for the other organization. This causes problems when they return to their own employer or move back to agency work. Similar contradictions were apparent at the call centre; for example, an agency worker employed by Beststaff can work on a contract for a company such as Gambleco alongside workers who are employed by TCS on different terms and conditions. Multiple identities and commitments are, therefore, the unexceptional outcome of such a confused situation. We have already alluded to the retention of public sector values after workers have transferred to the private sector, and in some cases this stretches to an almost complete rejection of private sector goals. In this situation, as we saw in Chapters 5 and 8, other commitments may be much deeper—to an under-privileged group or hospital patient rather than to a company or even a public sector organization—and this can result in immense efforts to ensure these (p.273) people are well served even if it means breaching company rules or working longer hours.

Identities and commitments were also disrupted and challenged on grounds of gender stereotyping and allegiance to trade unions. The former was most overt in cases where men and women were segregated into different types of jobs or men undertook work that was traditionally seen as the preserve of women; in the customer service case, as we saw in Chapter 10, some of the managers preferred to hire women for jobs which were defined as those requiring female qualities but men also undertook these sorts of tasks. This caused some men to joke about the kinds of work they were expected to do, but it was apparent that any re-gendering of men's work was due to downgrading their jobs rather than upgrading women's work. More positively, given the problems that women have had to confront in male-dominated bureaucracies, there are hopes that ‘new’ forms of work and permeable organization might provide further career opportunities for women. Unfortunately, our research found little evidence that these hopes can be realized as women were being exposed to new forms of inequality that are perhaps less visible than under previous regimes. If the prospects for women are not particularly rosy, those for trade union commitment and organization are perhaps yet more challenging. We found evidence of workers/union members, whose jobs have been fragmented across organizational boundaries, such as at the airport or at TCS, blaming their unions or their fellow workers rather than employers for deteriorating terms and conditions. Also, many transferred workers blamed ex-employers, rather than their current employers, for problems of work intensification and performance monitoring (especially in the PFI case). Unions have always faced problems in trying to mobilize workers from the same union but at different places of work, but the sheer complexity of new organizational forms, and the transient nature of many jobs, makes it even more difficult to develop and maintain union commitment and identity. The situation for temporary workers is particularly problematic given their disconnections from a single and an ongoing place of work, though there was some evidence from other TCS sites that unions were being recognized and that workers were joining or rejoining unions. Overall, it is clear the fragmentation of work across organizational boundaries has disordered existing patterns of identity and commitment.

12.4 Rethinking policy

The fragmentation of work and organization demands a rethinking of conventional policy fields and policy approaches. Pressures towards fragmentation and the shifting of risk have concentrated power away from centralized locations where there are opportunities to establish effective institutions of countervailing power (Galbraith 1963). Accordingly, policy initiatives aimed at providing protection for the worker, as well as the citizen, may need to rebuild connections and re-establish lines of accountability. By default, if not by (p.274) design, the legal and policy framework often frustrates individuals and groups who seek to mount an effective opposition to corporate agendas as it prevents ready identification of the agents who are responsible, and thus frustrates the process of bringing them to account. If effective countervailing power is to be exercised, policies must be developed that reduce opportunities for risk shifting and fragmentation or, if this is not considered a feasible political option, the customary and legal boundaries to the fields of policy formation require redrawing.

It is frequently the least powerful who are most at risk from the fragmentation of work, yet the current system may also be damaging the interests of capitalists and producers. Research on varieties of capitalism has demonstrated that a more coordinated or orderly form of industrial organization can generate an environment more conducive to innovation and growth than less coordinated or unconstrained versions of market capitalism. However, history also suggests that many investors and managers are disinclined to acknowledge or anticipate such benefits, and therefore tend to oppose constraints on their actions (Jacoby 1984). Countervailing power is needed not only to protect the interests of citizens when engaging directly with corporate power as workers or consumers, but also to guard against the destructive impact of unfettered competition on the innovatory capacities of capitalism (Gray 1998).

To explore these policy issues further, the following section considers two main areas of policy reform—the governance of contracting relations and employment policy. Our concern is not to present specific policy prescriptions but to indicate the changes in policy orientation required—particularly changes in the formation of communities of interests necessary to match changes in the organization of work and production. We take an agnostic approach as to whether the development of new policy approaches would act primarily as pressure towards the re-integration of systems of production; we do not see the trends towards the so-called network firm or the ‘free’, independent worker as an inevitable aspect of twenty-first-century capitalism for many of the reasons we have outlined above. Our argument is that the outcome of fragmentation—in terms of both productive performance and distributional justice—is highly contingent. The policy framework, therefore, provides one element in the process of determining the scale and direction of trends towards integration or non-integration. Our concern is not to outline methods for opposing all forms of fragmentation, but to identify how a more even balance of power, and some strengthened forms of democratic lines of accountability and control, could be introduced. The focus is on the countervailing power that can be provided through government policy and legislation and by forms of worker representation. We do not address the roles of citizens as consumers, except in so far as this is discussed in relation to public services. This omission reflects the focus of our study on the workplace and does not imply any denial of the power of consumer and other groups to act as counterweights to forces for change.

(p.275) Governing contracting relations

Ideas and exhortations about improved modes of corporate governance have been a feature of contemporary discourse on employing organizations within both public and private sectors. In the public sector, the focus has been upon internal means of eliminating inefficiency and waste, with the remedy often taking the form of introducing private sector expertise and disciplines, including the ‘market testing’ of services. In the private sector, attention has been focused upon external accountabilities, spurred on by corporate failures and an emphasis upon the value delivered to shareholders. Somewhat overshadowed by these issues, there has been an undercurrent of discontent and concern about the adequacy of established thinking about the nature and scope of corporate governance—not least a questioning of shareholder value as a dominant philosophy of corporate governance. This concern extends to considerations of the broader, institutional infrastructure in which thinking and reforms of corporate governance develop. The challenge, as we see it, is to develop modes of corporate governance that are better aligned to changes in organizational form and inter-organizational relationships. Our research suggests three areas for policy development: multi-stakeholders and new performance indicators; the limits of the ‘smart client’; and greater clarity on what constitutes inter-organizational synergies.

Multi-stakeholders and new performance indicators. Present and proposed modes of governance are too narrowly conceived. The claims of some stakeholders are privileged while the less powerful or well organized—ranging from small investors to citizens affected by the environmental impacts of big business—are marginalized or excluded. Our conception of corporate governance stretches beyond internal checks and balances (e.g. the role of non-executive directors) to encompass the wider social responsibility of public and private corporations with respect to the lives of consumers, pensioners, suppliers, and disadvantaged groups.

It is not just shareholders, or even organized sections of their workforces, but many other parties that are affected by, and dependent upon, the effective, cooperative operations of organizations. An institutional infrastructure, including corporate governance policy that includes a concern for the interests of diverse stakeholders, is more likely to be perceived as legitimate and to be supported by the wider community; and this increased legitimacy may prove more conducive to establishing and maintaining the conditions of stability necessary to foster economic prosperity.

Any move in this direction involves the building and supporting of institutions that enable the multiple constituencies to give voice to, and exert an influence over, all aspects of corporate governance—from the appointment of board members to the recognition of the rights of workers who are not direct employees of the core organization. In this, legislation can play a role, but it (p.276) needs to be accompanied by opinion leadership by politicians and senior executives, as well as trade union leaders who spearhead efforts to modernize the institutions and day-to-day realities of corporate governance.

One way to extend corporate governance so that it becomes more socially inclusive of other constituencies would be to reform annual reports and related modes of accountability so that information is made available in a form that has direct relevance to a plurality of stakeholders. Key performance indicators need not be restricted to measures of profitability and growth but can be extended to demonstrate the record on issues of pollution and community service, as well as employment and working conditions. One step in this direction could be the proposed requirement to introduce human capital reporting into corporate accounts (Accounting for People Task-Force 2003). A publicly visible and broadly based assessment of performance would begin to rebalance the erosion of countervailing power that has been a major consequence of the fragmentation of work. It would stimulate organizations to review their operations, and to introduce governance changes that would demonstrate their attentiveness to their wider constituencies and social responsibilities. Tax breaks or additional funding for organizations that can show significant innovation and improvement in their governance may be required to make such systems effective.

Within the debate on public–private contracting, it is especially important that measures of value for money incorporate an assessment of whether citizens' rights are being upheld. According to Crouch (2003a, b), these rights are challenged by the new triangular structure of public services provision: each citizen has a democratic link to government, the government has a contractual link with the private sector supplier but the citizen, following privatization, has lost his or her link to the supplier. The problem, Crouch argues, is that government has pursued its outsourcing agenda without first clarifying what ought to be the ‘core activities’ that are retained in-house, including those associated with the distinctive place of citizenship. Instead, they have defined the core as narrowly as possible in order to liberate government from the messy tasks of service delivery:

Indeed, if we follow the logic of commercialisation to its conclusion, one can envisage the emergence of a quite different idea of politics. By distancing itself from service delivery through lengthy contract chains, government could imitate a discovery of the really smart firms of the 1990s: get rid of the core business itself.…How much easier would the work of governments be if they needed to cultivate only their brand and image, and were not directly responsible for the actual quality of their policy products! (Crouch 2003b: 23)

New solutions are required to meet citizens' demands for improved public services but contracting for services with private sector firms does not provide a panacea. Instead reforms to make public sector organizations more participative and consultative need to be developed within the framework of a social democracy, and not through the substitution of market principles for citizenship rights.

(p.277) The limits of the ‘smart client’. The ability of both public and private sector organizations to benefit from inter-organizational contracting is very contingent upon the expertise of the client (or purchasing) organization in designing and monitoring the contract for services provision. In government circles, the importance of this was only appreciated by the end of the 1990s. Time and again, government reports and evidence given to the Public Sector Accounts Committee stressed the failure of many public sector organizations—NHS Trusts, government departments, and others—to act as a ‘smart client’ in their dealings with more experienced private sector contractors. In 1999, a government commissioned report on public-private contracting concluded that many features essential for proper contractual relations were lacking on the public sector side. In particular it found there was no coordination among different agencies and bodies involved with procurement, no standardized process for managing large, complex, or novel procurements, no common data base of information about private sector suppliers, no good common systems for measuring the true costs of procurement transactions and the year on year value added, and insufficient skill and expertise among staff in the government procurement agencies (with a ‘serious situation’ regarding the high turnover of the more qualified staff to the private sector) (Gershon 1999).

The government has responded to some of these issues, but problems have persisted. At one of the government's Public Sector Accounts Committee meetings in 2002, it was reported that almost one in four public sector clients experienced a decline in value for money during the life of a PFI project, ‘with high prices for additional services an area of concern’ (House of Commons 2002); that only half of contracts surveyed had appropriate mechanisms in place to ensure value for money (benchmarking, open book accounting, etc.) and very few (just 15 per cent) had put in place mechanisms to share in refinancing profits2 (ibid.: 1–2); and that many organizations suffer from a ‘loss of memory’ due to quits among the management team involved in negotiating the original partnership agreement (ibid.).

Policy reforms continue, albeit at a very slow pace, with efforts to standardize procurement approaches, to reduce contracting costs, to systematize a value-for-money appraisal process and to improve capabilities of public sector client personnel (HM Treasury 2003). Our research suggests that a narrow policy focus on improving client expertise will prove insufficient to restore countervailing power. In many areas of services provision, the private sector base of suppliers is becoming increasingly concentrated, resulting in problems of overdependency on two or three powerful conglomerate firms, as the government's 1999 review suggests:

A significant number of senior level government inputs identified concern about the potential level of dependence on a small number of key suppliers in areas of strategic importance and the inability to collectively identify this level of dependence without asking the suppliers for the data. (Gershon 1999: 6)

(p.278) Trade unions have also become increasingly critical of the power of a handful of multinational firms to shape the quality of public services. UNISON found that just six firms handled 60 per cent of outsourced services in the NHS. Moreover, these firms were moving away from the previous practice of specializing in say catering, or grounds maintenance, and were offering combined services (UNISON 2003a).3 Even the best efforts to increase client capabilities may not, therefore, be sufficient to match the extra clout enjoyed by increasingly powerful private sector suppliers. More needs to be done to discourage concentration in services provision.

Re-assessing inter-organizational synergies. Even if the key performance indicators used to assess inter-organizational relationships are broadened, as we propose, there remains the very real problem of how those benefits, or synergies which are effectively intangible are to be measured. The pooling of capabilities, or knowledge, between organizations is often claimed to benefit all organizational partners, but these effects may be difficult to identify or measure. A particular problem is the absence of counterfactual information. In practice, studies that have researched the performance attributes of various inter-organizational contracting arrangements tend to rely on relatively subjective perceptions of client managers who have a vested interest in making a favourable assessment, and sweeping embarrassing findings under the collaborative carpet (House of Commons 2002). While there can be no laboratory-type test for assessing performance, more can be done to ensure that clients and suppliers establish well-informed expectations of both the tangible and the intangible benefits (and risks) from entering into contracting arrangements.

A particular concern is with the claim that private sector companies add management expertise. In practice, many private sector suppliers appear to have positioned themselves as specialists in the art of government contracting, often by poaching skilled personnel from public sector organizations and then contracting back their services. Pools of private sector expertise may lie mainly in the practice of winning and overseeing contracts, not necessarily in adding of value or service quality (see also, Crouch 2003b).

Our research evidence suggests that many managers believe in the need to establish strong trusting relations to secure many of the intangible benefits of inter-organizational contracting. In practice, however, trusting relations were often undermined by a lack of shared understanding of agreed codes of conduct, of standards of services provision, and of what was defined in the contract. A rebuilding and strengthening of trade associations, active intervention by trade unions and proposals from government regarding procurement rules all represent measures which would usefully complement trust-building between organizations and reduce the risk of inter-organizational arrangements being plagued by opportunistic behaviour and the oppressive exercise of power.

(p.279) Employment policy

In the realm of employment law and employment policy much of the framework remains predicated on the notion of a single employer and allows responsibility and accountability at the organization level to be limited to the actions of the legal entity. As organizational boundaries become more blurred and work fragments, the question of where responsibility lies for poor working conditions, poor customer service or inefficiency, and waste of resources is increasingly ambiguous. The following discussion considers three areas: training policy; employment rights; and trade union renewal.

Training policy in a context of fragmentation. Training is a key area of state policy, in large part because of the acknowledged problems of market failure in this area. Inter-organizational contracting may intensify such problems as responsibilities for training become even more ambiguous. The client may distance itself from the process of renewal and replacement of skills and shift the responsibility to the market, in practice placing the burden on the supplier. Training requires organizations to take a long-term perspective but the risks that contracts will not be renewed reduces the capacity of, and incentives for, suppliers to provide training, particularly in specific product-related knowledge. The tendency to train in more generic skills may not generate the same quality of service or product, nor offer the same opportunities for employee skill development. The scope for upskilling may be further reduced if, in order to minimize the risks of contracting, jobs are designed to limit the level of discretion. Research has shown that the effectiveness of training depends upon opportunities to utilize skills and knowledge in a challenging work context (Eraut et al. 2000). If contracting leads to a reduction in job tenure, there is the additional risk of skill loss unless current skills are certified and recognized, so that they can be deployed in a new employment context.

As our research evidence demonstrates, the extent to which fragmentation leads to reduced skills level is in part an empirical issue, contingent upon, for example, the training requirements built into the contracts or the involvement by clients in training provision. Training may actually increase in a context of labour supply shortage, or where workers are transferred into more specialized organizations. However, even though not all changes to the boundaries of organizations result in negative impacts on skills or training opportunities, the increased diffusion of responsibility for skill development poses additional problems for the achievement of a high skill economy within the UK's voluntarist, employer-driven training model.

These concerns suggest a need to rethink training policy. The increased risk is that under inter-organizational contracting, responsibility for training will be shifted between parties without resolution. This adds weight to the case that universal levies should be made on all companies to promote investment in (p.280) training. However, the government has set itself against extending to all sectors the Industrial Training Boards that are still operating on the basis of statutory levies in engineering and construction: ‘while the statutory levy approach may suit some industries, it is unlikely to be a solution for many’ (National Skills Strategy September 2003: 58).

One mechanism that could improve the skill base is to extend ‘licence to practice’ requirements since these provide information on skill levels and offer the individual employee a marketable skill. The government is not prepared to use direct regulation except in the context of ‘overwhelming market failure’ (The Cabinet Office's Regulatory Impact unit—quoted in SKOPE 2002); the 2003 National Skills Strategy fails to mention extending certification or licence to practice arrangements. Instead the government favours voluntary measures or self-regulation, reinforced by minimum training requirements specified in subcontracting agreements. For example, the Strategic Rail Authority has been allowed by the government to ‘establish minimum training levels across the industry by setting higher thresholds through the franchising mechanisms’ and the Learning and Skills Council has encouraged contractors in the gas industry to ‘exercise purchasing power by setting minimum standards which firms tendering for contracts must meet (subject to procurement law)’ (Learning and Skills Council 2002). Here, we find a paradox: the very same arrangements that are causing risks of under-training are being adopted as a vehicle for the diffusion of good practice in the training area.

These developments could, however, be regarded as far too weak a response to the training problem. Not only are the schemes partial—applying only to some sectors, regions or even specific supply chains—but there is no intention to generalize these to all sectors. Moreover, even the new schemes are unambitious in design; in construction the United Kingdom is aiming for NVQ level 1 or 2 while other northern European countries would be training more to level 3 (Green 2001; Bosch and Phillips 2002). The overall skills strategy still focuses on sectors without any detailed analysis of how sectors or occupations are to be defined within a context of increasing fragmentation. Where the boundaries around sectors should be drawn, and whether these now define relevant communities of interest, needs to be seriously addressed. Similarly, we need to question whether the solution to low productivity and performance within the UK economy lies mainly in remedying training deficiencies or in countering the tendency for inter-organizational contracting to favour systems of work organization which minimize the scope for discretion and the full development of productive skills.

Employment rights in a context of fragmentation and the presence of multi-agencies. The single employer framework for employment law and employment protection is increasingly being called into question by cases coming before the courts involving ‘multi-agency’ situations—that is, where an employee provides services for, or works under the control of, more than one employing organization. Case law based on the existing framework is likely to lead to further (p.281) ambiguities as, at the time of drafting the legislation, the question of how to provide protections and rights to those working under such conditions was not generally taken into account. Under the influence of European law, some employee rights have been extended to workers, thereby blurring the boundary between employees and the self-employed. Further change is now required to take into account the ambiguities in the concept of the single employer.

Protection for employees in the workplace is being compromised by a number of ambiguities in the employment relationship that relate to the presence of multi-agencies. The first problem in focusing on the legal employer as the basis for the protection of employees is that there are limitations to their legal employer's liability for the actions of other agents or their employees. Second, this focus deflects attention from the influence of clients and other agents on the actions of the employer; for example, currently a dismissal can be deemed fair, even if not based on substantiated evidence, if an employer is placed under pressure by a third party such as a client to dismiss or not deploy a member of staff. Particular problems arise when workers employed by different organizations are found working side-by-side in the same workplace, cooperating in the same labour process. Here, for example, the restriction of liability for equal pay to the ‘single employer’ prevents the use of comparators drawn from the same workplace if they happen to work for a different organization. Indeed, in some cases, the legal separation of entities may be used explicitly in order to evade the responsibilities and risks associated with the role of employer.

A number of ways forward suggest themselves. First, there is the possibility of developing the notion of joint employer responsibilities to reduce incentives for using the single employer concept in order to avoid employment responsibilities: for example, employers would not be able to use repeated subcontracting instead of direct employment to evade responsibility for personal injury claims by employees. A ‘joint employer’ doctrine is used in the United States in relation to the National Labour Relations Board and the concept of a ‘statutory employer’ is also used for workers' compensation schemes. In the United Kingdom, the only similar example is found in S23 of the Employment Relations Act 1999, under which any order by government may ‘make provision as to who are to be regarded as the employers’ of individuals, thereby extending ‘employee’ rights to groups of workers currently excluded.

It may, however, be desirable to determine who is the responsible employer in relation to the question being posed. For instance, if an employee has been injured at work, the person who should be deemed to be the employer is the one who has the greater control over the working environment. In other areas of employment law, the appropriate approach may be to increase the obligations of the legal employer rather than to enhance the role of third parties. For example, an employee should have the right not to be disciplined on the basis of the claims of a third party unless these have been subject to investigation and verification by their own employer. An alternative approach could be to make more use of legal fictions which would place obligations on the (p.282) non-employer for a restricted period or a restricted purpose, in circumstances where it is the non-employer who is exercising the employer functions of control and supervision.4 However, again such fictions should not permit the legal employer to evade responsibility to its own employees.

There is also a case for extending the remit of certain rights and obligations beyond the immediate employer. An existing example is the extension of the duty not to discriminate unlawfully to the agency to whom contract workers are made available for work. Contract compliance clauses and other mechanisms could be used to diffuse protection though a supply chain or network organization. The need to extend notions of fair employment conditions to include consistency between workers in the same workplace is explicit in the European Commission's proposal for a directive on the working conditions of temporary (agency) workers (DTI 2002).

A case can also be made for extending the field for comparison under the Equal Pay Act to cover situations in which there is perceived inequity of treatment between similarly placed workers, even if they do not share the same legal employer. The increased use of contracting out in the public sector, in particular, places in jeopardy the commitment to establish gender sensitive job grading for all workforce groups (Kingsmill 2001). The presence of employees of different organizations in the same workplace also poses problems for legislation relating to employee voice. The Employment Relations Act (1999) bases the rights for workers to be accompanied by a trade union official (or work colleague) and for trade unions to be recognized for collective bargaining on achieving a 40 per cent or more votes of those in the workplace unit in favour. However, employees of other organizations cannot be included within the bargaining unit. While it might be difficult in practice to make more than one employer a party to the bargaining unit—and might indeed reduce the chance of reaching agreement on recognition or on subsequent bargains—it might be possible and desirable to consider extending the terms and conditions negotiated through the bargaining unit to some groups of non-employees such as agency workers. This would continue the trend towards extending of the scope of worker protection beyond the boundaries of the legal employer.

There are two main legal mechanisms that can be used to reduce the risk of downgrading pay and employment conditions as a consequence of inter-organizational contracting. The first is the establishment of a set of minimum employment rights that provide an effective floor to employment protection that is not dependent on the particular employer, such as minimum wages. The second is to protect the rights of transferred workers—as is currently provided for by the TUPE regulations. The present system protects the terms and conditions of transferred workers but freezes them in time with no procedures laid down for either upgrading terms and conditions, or for harmonizing them in some way with those of the new organization. At least for unionized workplaces some use could be made of the concept of derogation, where it maybe acceptable to bring (p.283) in new terms and conditions provided these are both acceptable to the unions and can be shown to be equally favourable to those prior to the TUPE transfer.

Policies for trade union renewal in a context of fragmented organizations. The main response of trade unions to the fragmenting of work and organizations has been to seek to reorganize and renew their influence within the model of the single autonomous employer (see Chapter 11), and indeed there is some evidence of limited success with this approach at Scottish call centres (Bain and Taylor 2001). But unions have also become more aware of the weaknesses of relying on company-specific bargaining. This realization has led to major changes in UK trade unions' attitude towards legal employment rights—from one of agnosticism, or even hostility, to strong support for developing cross-national institutions for collective bargaining and voice for multinational companies. The main force galvanizing interest in issues of inter-organizational relations has been the growth of public–private contracting since this carries with it the danger of reduced protection for employees and the creation of a two-tier workforce. Trade unions are now demanding a role in public–private contracting, in particular in the process of selecting the private sector contractor.5 They have also mounted a general campaign against a two-tier workforce that enjoyed an apparently major victory in the early part of 2003 when a new statutory code of practice governing transfers to the private sector in local government was agreed. This code provides protection for new recruits as well as transferred staff that they will receive terms and conditions no less favourable than those of non-transferred staff in the public sector—and this time to include pension provisions.6 However, this code has yet to be extended to other parts of the public sector. Elsewhere, in the health service, a campaign by UNISON has led to an interim solution, known as the ‘retention of employment’ model, whereby in PFI schemes signed off after June 2001, most non-supervisory ancillary staff will not transfer to the private sector provider but remain NHS employees, albeit managed by the private sector partner. However, supervisory and managerial roles still transfer to the private sector (UNISON 2003b).7

The risks to the trade union movement of the process of fragmentation is much greater in the United Kingdom than elsewhere in Europe, where systems of collective bargaining and union protection still apply across the majority of the workforce, often to non signatory employers. As such it makes more sense to look to the United States, where the system of confining collective bargaining to single organizations has a longer history, reinforced by regulation, than in the United Kingdom. Perhaps surprisingly there is more evidence that the unions and other social reformers have woken up to the bankruptcy of existing modes of intervening in the economy. The so-called social movement unionism in the United States has identified two problems to be faced in order to renew trade union organization in a context of fragmented capital. First, unions have to find new ways to bring workers into unions, and second they (p.284) have to develop countervailing power that strikes where the power in the employment relationship actually lies. Amy Dean, from the South Bay AFL-CIO in California, characterizes the issue as follows:

We know that I may go to work under one roof, sitting next to somebody who is employed through some kind of intermediary institution. Although we are all under the same roof, we have multiple employers. People may be working for the same employer but spread out across the world. Therefore, redefining what constitutes legitimate communities of interests for the purpose of bargaining collectively, whether we work individually or we work under one roof, is an important reform. (Dean 2002:148)

The union strategy in the United States has been to mobilize groups disenfranchised by the old system of unionization—the immigrant Latino workers in particular—and to found the campaign on the wider issue of social justice, not upon narrow workplace objectives. Another novel aspect is the lobbying of client organizations. The Justice for Janitors campaign in California sought to persuade clients not to employ non-union contracting companies (Johnston 1994; Zabin et al. 2001; Erickson et al. 2002). Social movement unionism has also been influential in its support of living wage campaigns. Over the 1990s, various US states have enacted living wage laws requiring all those organizations receiving government funds to pay living wage levels—that is, minimum wages set much higher than either the Federal or the state minimum wages (Figart et al. 2002). These living wage ordinances have been gradually extended to more and more organizations, providing a labour market, rather than a firm level, basis for promoting improved terms and conditions.8

In the United Kingdom there has also been some momentum behind a living wage campaign. The East London Community Organization (TELCO) launched a campaign in 2001 with support from UNISON and some thirty-seven local political, religious, and community groups to persuade public sector hospitals, schools, universities, and local authorities to introduce a ‘fair wage clause’ into their market tenders for contracting. Also, since many of the companies which contract with the public sector also have contracts with the large corporate firms in East London, a second target of the campaign has been to demand a living wage from the private banks and financial services companies in Canary Wharf (Grimshaw 2004). However, while there have been some successes at individual organizations,9 it is more difficult in the United Kingdom than in the more decentralized US to get acceptance of higher minimum wages at a local or regional level. Indeed the unions supporting local living wage campaigns are wary of the effect that these local campaigns may have on the system of national collective bargaining in the public sector.

12.5 Conclusion: reconnecting employment and organization

The main argument we have made in this study of fragmenting work is that new or renewed connections need to be made across a variety of boundaries. The (p.285) first connection is between inter-organizational relations and the organization of work and employment. Too often, the importance of work has been neglected in studies of inter-organizational relations, which assume that synergies and mutual gains are inevitably associated with the revival of network forms of organization. Work, we have argued, is becoming more fragmented, through the subdivision and contracting out of processes, but at the same time it is being reconfigured through inter-organizational mechanisms of collaboration and control. By focusing on the complexities of work in the context of inter-organizational relations, we have exposed the limitations of approaches that divided inter-organizational relationships into those which are market-mediated and others that are cooperative and relational contracts. Our findings demonstrate relations within and across boundaries contain elements of the cooperation/ conflict dilemma that also lies at the heart of both employment relationships and inter-organizational relationships. We need to appreciate the dual layers of cooperative and control relations that are apparent across both organizational boundaries and the management/ labour divide.

A second (re)connection places the employment relationship within the wider context of changing patterns of inter-organizational relations. In strict legal terms, the employment contract itself remains confined within the box of the single employer–employee relationship, yet the experience of the employment relationship for a growing number of workers may be very different. It is not just external customers that exert influence and pressure on workers—as has been recognized in the service work literature (Leidner 1993; Korcynzski 2001; Sturdy et al. 2001)—but also the clients, subcontractors, franchisers, and partners of the employer. As the focus for understanding the employment relationship becomes broader, so too does the need to develop a wider understanding of a range of employment issues. Limiting the focus to the legal employing organization—whether for understanding commitment and efficiency issues or for concerns over employment rights and voice—is becoming increasingly indefensible and inappropriate. By looking at the intersections between organizations and their impact on employment relations, we have identified the need to reconnect the study of employment to the institutional organization of the wider societal system and environment in a way that invites consideration of the formation of communities of interests and modes of social organization that can foster the effective development of new forms of countervailing power.

This brings us to the third connection, which is perhaps at the heart of our endeavour. Effort is required to make new connections between disciplinary subjects in order to achieve a more integrated analysis in which discussion of the changes explored in this book moves beyond the boundaries of single academic disciplines and narrow, internal debates. These academic divisions allow policy-makers to separate out economic or efficiency considerations from broader social and community interests. They also allows practitioners to embrace new forms of organization without considering wider ramifications concerned with imbalances in power relations that occur through contracting or the effects of the new forms of organization on the actions and motivations (p.286) of workers—even though their impact remains critical in determining productivity and performance outcomes. A clearer and more holistic understanding of the changes taking place in organizations and in employment will emerge only if we can build bridges across traditional academic divides.

A more holistic approach to analysis would, in our view, lead to a rethinking of lines of accountability to be capable of offsetting trends in inter-organizational relations that diffuse responsibility and obscure power relations. This concern underlines the focus on the policy implications of our study, and was implicit in the discussion of our empirical material on which this book is based. There are two main themes to this issue of accountability. First, we have to find ways of countering severance of the democratic link between citizens and the providers of public services that tends to occur when public sector reforms result in the outsourcing of activities to third parties. Second, and more generally, we have to move beyond the consideration of organizations and employers as standalone, independent entities. This approach has allowed accountability and responsibility to be passed down the contracting chain in ways that have tended to inhibit employee voice by excluding workers or their representatives from engagement in the design and operation of the inter-organizational contracting arrangements which shape the terms and conditions under which their work and employment is organized. Our research has shown repeatedly that the fragmenting of employment and organization raises major problems for workers in terms of fair treatment. Rather than employers and policymakers being sanguine about such developments, we believe they ought to be equally, if not more, concerned about the effects of losing workers' skills, commitment, and voice for the long-term performance of both individual organizations and the economy as a whole.


(1.) Several studies of job insecurity identify the role of mergers and takeovers (Burchell et al. 2002) and ‘environmental factors’ such as the greater exposure of the workforce to market forces (Doogan 2001). Our evidence demonstrates that it is not the ‘blind force’ of the market which shapes insecurity but employer strategy in adapting the boundaries of their organizations, thus leading to transformations in labour market structure.

(2.) The need to share in refinancing profits arises from the practice among private sector contractors to negotiate the PFI contract on the basis of high risks at the early stage (with high interest borrowing rates), but subsequently to refinance loans at lower rates of interest as the income flows come in.

(3.) For example, one firm, ISS, controls 18 per cent of all outsourced services in the NHS and a good part of this reflects its success in winning PFI contracts; ISS has a 14 per cent share of all PFI facilities management services in the NHS (UNISON 2003a: 2).

(4.) (p.287) Interlink Express Parcels Ltd v. Night Trunkers Ltd [2001] EWCA Civ 360, a case concerning the Goods Vehicle (Licensing of Operators) Act 1995)

(5.) There is less evidence of trade union pressure for involvement in private sector mergers and takeovers but the Transport and General Workers' Union in its intervention over the competitive bidding for Safeway supermarkets, argued in favour of Sainsburys on the basis of its support for the food and farming industries through its treatment of suppliers (T&G 2003).

(6.) The 2003 Queen's speech suggests that the pension bill will include improved protection for pensions under TUPE transfers more generally (The Guardian 29 November 2003).

(7.) Estates and maintenance staff are excluded from the ROE model. Also, some ancillary services are not automatically covered by the ROE model, but instead have to make a value for money case. These are switchboard and patient reception services, central sterile supply service departments, medical/patient records and IT systems/payroll (UNISON 2003b:5).

(8.) These high minimum standards have the advantage of extending protection to all employers in a supply chain and cannot be avoided through fragmentation. For example, in San Francisco the living wage in 2001 was $10 an hour or $11.25 if no medical insurance was provided compared to $6.25 at the state level and $5.15 as the Federal minimum. At San Francisco airport, a site with over 100 employers, the living wage requirement was implemented across all the employers, coordinated by the SF Airport Commission. The SF Airport Commission was also able to use the higher minimum wages to improve on quality standards at the airport as turnover rates among pre-board screeners dropped from 110 per cent in 1999 to 25 per cent in 2001 (Reich etal. 2001).

(9.) One major success resulting from the TELCO living wage campaign was the agreement in 2003 by the north-east London Strategic Health Authority that all private sector contractors providing services to the local hospitals (around fifteen in total) should pay their staff equivalent terms and conditions to collectively bargained rates for NHS staff, allowing contractors to phase in changes by April 2006 (Grimshaw 2004).



(1.) Several studies of job insecurity identify the role of mergers and takeovers (Burchell et al. 2002) and ‘environmental factors’ such as the greater exposure of the workforce to market forces (Doogan 2001). Our evidence demonstrates that it is not the ‘blind force’ of the market which shapes insecurity but employer strategy in adapting the boundaries of their organizations, thus leading to transformations in labour market structure.

(2.) The need to share in refinancing profits arises from the practice among private sector contractors to negotiate the PFI contract on the basis of high risks at the early stage (with high interest borrowing rates), but subsequently to refinance loans at lower rates of interest as the income flows come in.

(3.) For example, one firm, ISS, controls 18 per cent of all outsourced services in the NHS and a good part of this reflects its success in winning PFI contracts; ISS has a 14 per cent share of all PFI facilities management services in the NHS (UNISON 2003a: 2).

(4.) (p.287) Interlink Express Parcels Ltd v. Night Trunkers Ltd [2001] EWCA Civ 360, a case concerning the Goods Vehicle (Licensing of Operators) Act 1995)

(5.) There is less evidence of trade union pressure for involvement in private sector mergers and takeovers but the Transport and General Workers' Union in its intervention over the competitive bidding for Safeway supermarkets, argued in favour of Sainsburys on the basis of its support for the food and farming industries through its treatment of suppliers (T&G 2003).

(6.) The 2003 Queen's speech suggests that the pension bill will include improved protection for pensions under TUPE transfers more generally (The Guardian 29 November 2003).

(7.) Estates and maintenance staff are excluded from the ROE model. Also, some ancillary services are not automatically covered by the ROE model, but instead have to make a value for money case. These are switchboard and patient reception services, central sterile supply service departments, medical/patient records and IT systems/payroll (UNISON 2003b:5).

(8.) These high minimum standards have the advantage of extending protection to all employers in a supply chain and cannot be avoided through fragmentation. For example, in San Francisco the living wage in 2001 was $10 an hour or $11.25 if no medical insurance was provided compared to $6.25 at the state level and $5.15 as the Federal minimum. At San Francisco airport, a site with over 100 employers, the living wage requirement was implemented across all the employers, coordinated by the SF Airport Commission. The SF Airport Commission was also able to use the higher minimum wages to improve on quality standards at the airport as turnover rates among pre-board screeners dropped from 110 per cent in 1999 to 25 per cent in 2001 (Reich etal. 2001).

(9.) One major success resulting from the TELCO living wage campaign was the agreement in 2003 by the north-east London Strategic Health Authority that all private sector contractors providing services to the local hospitals (around fifteen in total) should pay their staff equivalent terms and conditions to collectively bargained rates for NHS staff, allowing contractors to phase in changes by April 2006 (Grimshaw 2004).