4.Part Four: Power, Policymaking and Negotiation

- If these ideas are put into practice, Jock, they'll work for management, you'll see. But if the MD puts these ideas into practice there'll be trouble. And I cannot put off my appointment.
- An analysis of the power systems within which employment hierarchies work. Unless the situation is fully understood, joint policymaking won't feel real. The source of authority of a managing director is derived from three power groups. Any of these groups have the power to inhibit change and close the company down.
- Different groups interact through the chief executive. Factory managers are accountable to the managing director. Your union's policies through the local shop affect any policy I might want to introduce.
- Joint shop stewards committees are unstable. Negotiation, rather than majority voting, is likely to take over when issues arise. Every time one sees a committee constitution which lays down that members shall represent different groups of people with differing interests, then one has potentially an unstable committee.
- Simple negotiation occurs when unanimous agreement between parties is not necessary. Complex negotiation arises when all parties must agree. The most common example is in the employment hierarchy. If each group negotiates separately with management, that is where chaos starts.
- Is he asking us to give up the right to strike? No. Nobody could conceivably take away that right unless Parliament passed a law to that effect with severe penalties. A strike is a breach of the council constitution. One veto stops change.

Speaker A Can't see what you're complaining about. Welf now we've been asked to see three of these show. Now we've got the sense to understand them. We'll know as much about them as Brody himself. Sp..

Speaker A Can't see what you're complaining about. Welf now we've been asked to see three of these show. Now we've got the sense to understand them. We'll know as much about them as Brody himself.

Speaker B My complaining. Jock, I'm worried.

Speaker C So he brody.

Speaker B This guy devious. He'll not come me into taking his ideas.

Speaker A That's what he's trying to do.

Speaker B Well, of course he is. There's a catching it somewhere, you'll see.

Speaker A Maybe. All right. He hasn't said he's going to start anything. And if he doesn't, he works from those ideas. He cannot very well do it without a wide measure of agreement, as he said. Sounds okay until we share the same mental models.

Speaker B That's what the lecturer man said. If these ideas are put into practice, Jock, they'll work for management, you'll see. Now why else will Brody be taking them up?

Speaker D Well, I can think of a few.

Speaker A Reasons besides that one. I'll guess he's been festered in it'd. Be your man Roberts. Mr. Wee enthusiast, that one. Give him a good bone to worry and he'll keep at it until he's cracked it. And I'll say this then, scythe is a good bone to crack.

Speaker E I don't agree with you.

Speaker C How can these ideas possibly be playing into the hands of the Judea?

Speaker A Give them an OT. If I hadn't sat with you, I'd.

Speaker E Not believe you'd seen even one of these cassettes. These ideas only make what's actually happening explicit and offer ways of structuring it.

Speaker B So it seems like, eh? But if these same ideas are put into practice, it'll be playing into the.

Speaker C Hands of the unions. You haven't seen enough yet.

Speaker E I wish you'd put up your appointment. Come along and see this one works.

Speaker B Councils. I'm telling you, if the MD puts these ideas into practice there'll be trouble. And I cannot put off my appointment. I'll tell you this Jot, if Brody takes about those ideas, there'll be trouble.

Speaker A Well, I'm telling you Wolf, just listen to the man on the screen. Watch Brody and think before you speak.

Speaker C In part three of this series we established the inevitability of representative systems, whether or not they are recognized. But what I want to discuss now is participation, an expression which frightens many managers. It has this effect because it has become fashionable and is being sloganized. Terms like workers control and industrial democracy give the impression that managers are going to have to scurry around getting agreement from all sorts of people and committees before any decision can be made. On the other hand, shop stewards and even staff representatives wield so much power in some companies that threat of strike action has almost created just that situation. There is therefore a need for institutions which take realistic account of both the power position of representatives and the need to confirm managerial authority to make essential decisions. Now the key to solve this apparent dilemma stems from our definition of work.

Speaker D The exercise of discretion towards an objective within prescribed bounds created by policies.

Speaker C Precisely. The exercise of discretion towards an objective within prescribed bounds created by policies. I suggest that the area in which people want participation is not in the discretionary, but the prescribed area of work. They want to take part fully.

Speaker B Discretion prescribed bounds.

Speaker E Hang on a moment. Okay.

Speaker C They want to take part fully in making of policies which bound the discretion of managers. And taking part fully means negotiation and getting agreement. I propose to make now, Mr. Sands.

Speaker B Discretion policies which bound the discretion of managers.

Speaker E As a draftsman, you make all kinds of decisions about the tooling you design, but you can't use inch sizes because the policy laid down is that dimensions used must be metric. That policy bounds your discretion.

Speaker B That's management stuff and all that.

Speaker C No.

Speaker E Last month the company made an agreement with your union about holidays.

Speaker A We did.

Speaker E That's a policy. Managers can't take a decision that deviates from it. It bounds their discretion.

Speaker A So you're saying that a recent agreement and overtime working is a policy?

Speaker C I would.

Speaker A What's wrong with agreement?

Speaker B Yes, what's wrong with agreement?

Speaker E There are a host of limitations on management decisions. Marketing policy, product policy about capital investment and so on. And agreements made with you about working conditions. Policies are good, general word to cover the lot.

Speaker A So you're saying that we help to make the firm's policies?

Speaker C I would.

Speaker A And you're saying that policies prevent managers from taking some decisions?

Speaker C Of course.

Speaker B Including the policies that we have a hand in making.

Speaker E Naturally, I just said so. But it also gives managers the authority to take decisions within the bounds or limitations of those policies or agreements. And that goes for all policies?

Speaker B I wouldn't put it that way myself.

Speaker A Then try to wolf It's not all that difficult to understand. He's just said something. I've been plugging our foreman for years.

Speaker E OK, Mr. Sands, I propose to make.

Speaker C An analysis of the power systems within which employment hierarchies work. Unless the situation is fully understood, joint policymaking won't feel real to those who seek it. First. I'll define power on the one hand and authority on the other as the two terms are usually confused.

Speaker D Authority is that quality of a role which allows the occupant to use resources to act on his decisions and to instruct others, all within defined limits.

Speaker C No man has natural authority over his fellows, but many acquire it by taking up a role which has authority. There is a linkage between power and authority because in a democratic society, the source of authority is the law, which in turn derives from people who have power.

Speaker D Power comes from those qualities of a person or a group of persons which enable them to prevent others from acting or to cause them to act.

Speaker C Power then is linked with persons or groups. The stronger the cohesion of a group, the greater the power. For example, trade unions or a group of citizens who well, organized could prevent a motorway being driven through their town. Now, having defined and linked power and authority, it will be seen that the source of authority of the Prime Minister is Parliament, originating from the power of the people, expressed through the vote. The members of his union are the source of authority of a trades union general secretary. But the source of authority of a managing director is complex, for it is derived from three power groups.

Speaker D The first power group is the association of Shareholders, formed to set up a trading company. They elect and are represented by a board of directors who in turn appoint a chief executive who sets up an employment hierarchy to do the work for which the company has been brought into existence.

Speaker C So you will see that it's the shareholder power group which initially invests the chief executive with authority. He will be bounded by their policies as interpreted by the board.

Speaker D These policies are specially concerned with dividends, financial stability, capital appreciation and so on. The authority of the chief executive is matched by his accountability to the board, who in turn have legally to account to the shareholders.

Speaker B Everyone knows it's the board that takes the decision. Shareholder power is just a bloody myth. They're only interested in their dividends and the directors appoint themselves.

Speaker F There's some truth in that. But if I can remember the quote, the authority derived from their power will be there. All right.

Speaker E The fact that it isn't often used shows that most boards manage to keep their shareholders reasonably content.

Speaker B And if those shareholders were a bit more interested in the men who actually.

Speaker A Make the money for them no, keep to the point, Wolf. Now, if you ever take a real look at the Financial Times, you've got to keep in touch with what the other side's doing. Now, you do find cases of shareholders getting annoyed and chucking out the directors.

Speaker E Using their legal authority?

Speaker A Aye, well, I'll not say I approve of the system, but I'll accept that shareholders have power and sanction authority.

Speaker F Mr. Sands. Let's get on.

Speaker C The second group is the customer or consumer group.

Speaker D This group also sanctions authority. It is amorphous in that consumers seldom act as a group, but they have the power to stop buying and thereby close the company.

Speaker C The sales organization can be looked upon as the institution continuously employed in getting customer sanction as to policy on price, quality, specification and delivery time.

Speaker D The third power group is the representative system. When fully formalized, this group will consist of representatives of every group and strata of the employment hierarchy.

Speaker C Representatives give priority concern to continued employment, work conditions, earnings, holidays, pensions, safety and a range of psychological factors affecting the individual.

Speaker D Any of these groups have the power to inhibit change and in the final analysis, close the company down.

Speaker C It must be quite clear from this that whether or not the existence of this power system is appreciated, the chief executive of any employment hierarchy must get the agreement of the power groups if he wishes to introduce policies which lie outside the ambit of those previously agreed. At the least, any action must be tolerated by a consensus of opinion in each of the three systems. If one of the power groups will not tolerate the change, they can stop it. But there are further limits upon the operation of the hierarchy and its power groups.

Speaker D Limits are prescribed by law, company law, tax law, the Trade Descriptions Act, merchandising laws, trade union law, the Factory Acts, and other legislation.

Speaker C This fully built up diagram is not a new scheme of organization, but an attempt to display the role of the power groups. I think it will be obvious that the three systems interact via the chief executive. He is constantly involved in negotiation with each of the power groups. Before taking this thinking further in relation to employment hierarchies, I want to make a series of statements concerning the nature of the different types of institutions in use by groups of people in decision making.

Speaker A I take the point that different groups interact through the chief executive. But in fact, you're not the only manager we negotiate with. Departmental managers negotiate as well.

Speaker C Yeah, that's true.

Speaker E We bit off a point.

Speaker A Why?

Speaker C Because it's the chief executive at the.

Speaker E Point of interaction that we're talking about. It's not how his policies are carried out. Factory managers are accountable to the managing director. So what they negotiate mustn't defend the company policies he's made if those company policies are tolerable to the board and not offensive to the customers. And if those departmental policies are within company policies, all will be okay.

Speaker A On a way, we have a similar situation. We can't agree changes which don't fit into union policy. I see what he's getting at.

Speaker F So in turn, your union's policies through the local shop affect any policy I might want to introduce.

Speaker C Let me remind you of the definition of an association. It is simply a voluntary coming together of people who share common objectives and are prepared to accept some common rules of behavior to achieve them. There are broadly two forms all members.

Speaker D Of a simple association have a common objective to have their affairs managed for them. They elect representatives who form a committee. The feature of a simple association is that all the association members take part in the election of all members of the Committee of Management.

Speaker C The committee carries corporate responsibility. It makes its decisions by majority vote precisely because no member of the committee represents any specific sector of the association. All represent the whole.

Speaker D A complex association, by contrast, contains a number of subassociations which will be referred to as constituencies. The different constituencies share the overall objects of the association, but each has also subsidiary aims and objectives. Each constituency elects its own representative. They form an unstable committee. It uses majority voting to reach decisions.

Speaker C If the individual objectives of one of the constituencies become more important to it than the total interests of the association, then the representative of that constituency will refuse to be overruled by a majority of other committee members.

Speaker D That is, when negotiation replaces majority decisions.

Speaker C Thus the term unstable committee. They are very common, though unrecognized as such. I wonder how many members of the TUC consider that body to be a stable committee. But it isn't. Joint shop stewards committees are unstable. Bodies like the professional institutions are often governed by groups elected by student members, associate members and members, and fellows unstable committees. Every time one sees a committee constitution which lays down that members shall represent different groups of people with differing interests, then one has potentially an unstable committee. Negotiation, rather than majority voting, is likely to take over when issues arise which bear on the different entitlements of the groups represented. Now that takes us to the problem of negotiation.

Speaker B Sense is there in being so damn particular about committees anyway? We know where we stand when we meet.

Speaker A You could say that the man's quite right when he says that joint shop stewards committees, by his definition, are unstable ones. At the last meeting, when the Tngw stewards were outvoted, they wouldn't have it because it cut across Tngw policy. So we had to negotiate, as the man said.

Speaker F I wish it were a committee. Then it might speak with one voice. I think this is useful. I meet my managers every week. It's called the management committee, but they can't outvote me. So it isn't a committee of any sort, it's a meeting. Now I haven't consciously realised that before.

Speaker B Okay, well maybe it's good for managers. They never seem to understand committee procedure anyway. But it's teaching Granny to suck eggs to tell us that stuff.

Speaker E You may have a point there, Mr. Sands, about managers.

Speaker C That takes us to the problem of negotiation. There are different forms of negotiation, but little attention has been given to making these forms explicit. They exist but are not recognized.

Speaker D Simple negotiation occurs when unanimous agreement between parties is not necessary, because agreement to proceed can involve some associations whilst others contract out.

Speaker C Several trade unions or trade associations may feel that there could be merit. In amalgamating there is no pressure to agree other than self interest. 1 may opt out, the others agree on terms, or they may find the whole idea impracticable. Nobody's won, nobody's lost. When people talk about negotiation, they generally have in mind simple negotiation. But there are other forms.

Speaker D As I said, complex negotiation arises when all must agree or there is no agreement at all. Opting out by some parties makes action by the others impossible.

Speaker C But the associations involved are not seriously damaged by lack of agreement. They merely fail to make some possible advance. Complex negotiation is more common than might generally be assumed. Each year a number of international agreements are achieved by meetings at The Hague. Most of the agreements involve some sacrifice of national sovereignty by the nations involved. They cover such subjects as oil pollution, safety at sea, regulations about crossing frontiers, use of radio frequencies and so on. If a single country refuses to give up the right to do whatever it chooses, no agreement can be made in effect. Therefore, each nation has the right of veto or putting it in another way, they must come to unanimous agreement.

Speaker B Look, you told me this was about us joining with management in policymaking. Now I don't want to hear about The Hague.

Speaker E It is important. But don't we all want to understand the institutions we're using when we get involved with each other? Well, you're all so damned exact when you talk about manufacturing processes, but the social processes are just as important. And that's what these cassettes are all about. Jock says that the Shop Stewards Committee isn't a committee in these terms. But he'll also now realize that it's using the institution of complex negotiation. Unless every union representative agrees, the Shop Stewards Committee can't make a move. Now isn't it important to realize that? Shouldn't that be an explicit part of the constitution of those meetings?

Speaker B Well, you're wrong, because the foundry members of the engineering union were outvoted two weeks ago.

Speaker E Don't I know it. Over staggered times for tea breaks and there was chaos until a compromise was reached. Unanimously.

Speaker A Unanimously. He's perfectly correct, Wolf. Well, you know well that we've got to get the support of every union.

Speaker D Requisite negotiation arises when all parties must agree. Failure to agree damages the interests of all the associations concerned.

Speaker C When a number of associations are linked together in some common endeavor, the success of which demands agreement on changes from time to time, requisite negotiation will arise. An international example is the EEC. If it cannot from time to time agree on change, it will disintegrate. But the most common example is in the employment hierarchy. The associations involved are the management who reflect the degree of tolerance for change, of the shareholding power group and the customer power group, and the trade unions and staff representatives. All must agree. And change is the lifeblood of a commercial company. This sets out in generalized form the situation which exists in every company. While staff grades often don't elect official representatives, they exist, as I explained in part three, five representative power groups are shown. There may be more or less, but note that consistent all over policy is very difficult to achieve if management has to negotiate separately with five groups representing employees. For example, it's almost impossible to achieve agreement on a sound policy for differential earnings amongst all the employees of a company. If each group negotiates separately with management, that is where chaos starts. But we might do much better if, recognizing that we are involved in requisite negotiation, we build a new institution as here, the setting up of that council with right of veto over proposed changes institutionalizes the power of representatives and thereby puts them into the same constitutional position as the other power groups. They would achieve constitutional authority to prevent change instead of having to use strike action or threat of strike action.

Speaker E The unanimous voting council. There's a big issue involved here now, as you could see, it has to have on it representatives of every rank of employee as some may never be unionized. That means nonunion and union representatives sitting together.

Speaker F Could you swallow that?

Speaker A If that resulted in staff conditions like wages, holidays, pensions and so on coming out into the open, that might be worth considering. That'd be very interesting.

Speaker F That's a very difficult issue. Staff wouldn't give up their relatively better.

Speaker C Conditions, nor were my draftsmen and engineers.

Speaker A Well, I'm not asking for equality, but a down good reason for the existence of deferentials.

Speaker E There'd be no change without unanimous agreement.

Speaker C The management member of the council would have the same constitutional right to veto change proposed by representatives. He could not, of course, agree changes unless he felt sure that the board would agree. Nor could he agree changes which might lead to the loss of customers. So we get in that council an indirect interaction of the three power groups. Let us now look at the main features of the council constitution.

Speaker D One the council shall consist of the chief executive or his nominee and at least one representative of any recognized trade union or stratum of the employees. Two any council member shall have the right to cause any matter to be the subject of a council debate except that issues shall not appear on the council agenda until it is clear that they cannot be agreed at a lower level of negotiation. Three until changes are agreed, the status quo must continue to operate. If unanimity is not achieved at one meeting then debate shall continue at special council meetings until modifications and compromise lead to agreement. Four ordinary meetings of the council are held at times which will enable any employee to attend and watch the proceedings without right of intervention. If this is done, the work of the council will be greatly facilitated. Five all agreed policies and changes affecting employees must appear in written form readily available to all employees. Six managers shall be trained in the formal content of agreed policies and in the spirit in which they must be interpreted. Seven a formal appeals procedure shall be set up by the council so that individual employees can contest before successively higher levels of managerial authority managerial decisions which appear to contradict the letter or the spirit of agreed policies.

Speaker C The setting up of this institution has, elsewhere in industry produced great changes in the attitude and behavior of all concerned.

Speaker B Well, well, that sounds like a recipe for stalemate to me. If we all get the veto, particularly in the case of the management member.

Speaker E We got stalemate two years ago in a strike. It's three weeks of no production and no pay. If we'd got stalemate in a council, at least work would have gone on while we debated.

Speaker F Let's get one point clear. In the end, in order to finish the strike we had to get unanimous agreement of our four unions, one staff group and management.

Speaker E I want to make a point, Mr. Sands. People prolonged the strike for an additional week over the differential issue would again.

Speaker B To get fair play. What's your point?

Speaker E The point is, if we'd had a council, you'd simply have held the council up from deciding instead of shutting in a factory for an extra week. But that's the point.

Speaker A I couldn't comment seriously on this without official agreement from our district committee, an agreement from our members in the shops.

Speaker E Naturally, there'd have to be a whole series of conferences and so on. This would have to be a very big change.

Speaker F I'd have to get board agreement and that might prove very difficult.

Speaker B Still. Wait. We couldn't sit around a table with non union members. What do you say, Joe?

Speaker A Well, the notion of vetoing some manager's silly ideas instead of calling the lads out is not unattractive.

Speaker B Sitting down with people who won't support.

Speaker A A union you're not thinking deep wealth. But think what this means. Now, Mr. Brody accepted this, then he accepts that he will abide by the status quo until we all agree. My union's been after that with the employers for years. It's the issue that bust the York agreement.

Speaker B But this veto is the catch. This is the big con.

Speaker F I'm not imposing it on you, am I?

Speaker C The setting up of this institution has, elsewhere in industry produced great changes in the attitude and behavior of all concerned. As long as negotiation is conducted within the constitution of the council then the possession of the veto by each member of the council equalizes power. That reduces tension and hostility. Nobody can force change on others. Discussion has to go on until clarification and modification of ideas makes them acceptable to all. The main work of the council will, I think, inevitably be legislative and character. That is, the joint determination of the policies which set boundaries to the authority of the executive. Though joint policies define the authority of managers they don't necessarily reduce it. Without agreed policies, there is a growing tendency for representatives to challenge almost any managerial decision. But explicit policies agreed with representatives give managers defined authority. They will be expected by at least the majority of employees to take decisions implementing those policies. It will take time, after setting up a unanimous voting council to achieve that change of attitude to the role of managers. But it will come because democratic establishment of law accompanied by executive implementation and right of appeal by the individual is the pattern of our national cultural heritage. Let me close by emphasizing that the requisite negotiation process is not new. It takes place all the time in every employment hierarchy. What is new is the institutionalization explicit institutionalization of the process. That, as I said in part one, is what will eventually change the behavior of all from suspicion and hostility towards cooperation.

Speaker F Well, there it is.

Speaker A Well, I have some reservations, but as you say, it's only for thinking about. So I'll mention only one. Is he asking us to give up the right to strike?

Speaker E Can I pick that one up?

Speaker C No.

Speaker E Nobody could conceivably take away that right unless Parliament passed a law to that effect with severe penalties. And that won't happen. No, the point is that a strike is a breach of the council constitution. If you strike, you know you endanger that constitution, you put the whole setup in danger. Besides, the temptation to use force will be much reduced because you can stop any changes your members don't want with a single abstention from an affirmative vote at a council meeting.

Speaker B Suppose we want a pay increase and the management? Sorry, the management member of the council. We do.

Speaker F It a very important point. I can't see that situation arising over increases negotiated for the industry at national level. But it could and probably would arise over internal differentials.

Speaker E That's just the point. There's a very important principle of negotiation involved here that the lectures just don't mention. If one group of employees in a company gets a rise, then relative to them, all the others have lost out. The principle must be that internal differential increases must be agreed by representatives of all groups. And that could be done at a council meeting.

Speaker A But a national agreement would never mind. There is one we point not enlarged on. There was some mention of appeals. Now, could you tell me something about that?

Speaker C Well, I could, but there's a whole.

Speaker E Cassette on the subject as a next.

Speaker A I'd like to see it.

Speaker C Why not?

Speaker B Okay. I'll buy all that on one condition. That it's not all canceled on the day that the worker members of the committee outnumber the managers.

Speaker E You don't understand. The actual numbers on a council don't matter. One veto stops change.

Speaker F These films are based on the results of research carried out in the Glass Metal Company Limited, which have been in practice in the company for many years and which are described in detail in Lord Wilfred Brown's book Organization.

Glacier Institute of Management

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