The supermarket chain Tesco is the largest private sector employer in the UK with over 280,000 staff. Their corporate website sums up their approach to the marketplace by stating that ‘our success depends on people: the people who shop with us and the people who work with us…. If our customers like what we offer, they are more likely to come back and shop with us again. If the Tesco team find what we do rewarding, they are more likely to go that extra mile to help our customers’. In relation to employment, their central value is ‘treat people as we like to be treated’, a statement reflected in a set of core beliefs:

• Work as a team.
• Trust and respect each other.
• Listen, support and say thank you.
• Share knowledge and experience.
• ... so we can enjoy our work.

Commensurately, Tesco’s corporate website claims that they ‘offer a market-leading package of pay and benefits’ such as childcare vouchers and two share schemes, rewarding staff for their hard work and commitment with free Tesco shares as well as an award-winning pension scheme. Tesco also have numerous mechanisms through which employees can share their views – such as staff question time sessions and employee feedback surveys – and promote strong internal labour markets.

Most significantly, Tesco in the UK reports having a good relationship with its ‘union partner’ – the Union of Shop, Distributive and Allied Workers (USDAW). The TESCO/USDAW partnership is the biggest single trade union agreement in the private sector and has contributed significantly to the good employment practice in Tesco and serves as recognition among senior management that employee involvement and participation in decision-making can contribute to the achievement of strategic goals.

In 2006, Tesco entered the American marketplace, opening supermarkets under the name ‘Fresh and Easy’. Given its reputation in the UK for good employee relations and corporate responsibility, The United Food and Commercial Workers’ Union (UFCW) – the counterpart union to USDAW in the U.S. – had expected to enter into a similar partnership agreement to that which existed in the UK. However, in June 2008, the UFCW published a report entitled’ the Two Faces of Tesco’ to ‘tell British investors, politicians, employees and shoppers why we think that the Tesco they know and admire as a business, with a great track record on community and employee relations, can be a very different organisation when it operates away from British shores’. The report details how, in the eyes of the UFCW, Tesco has, ‘Instead of engaging positively with community partners, it refuses to meet with them. Instead of offering partnership, it accepts conflict. Instead of defending freedom of association, it actively pursues a policy to keep out trades unions’.

The primary concern of the union is that Tesco refuses to extend its principle of partnership to all of its employees outside the UK (UFCW also cite union avoidance activity in Thailand and Turkey) and claim that Tesco’s U.S. management refuses to even meet with the UFCW. In 2006 a job advertisement for the employee relations director listed ‘maintaining non-union status’ and ‘union avoidance activities’ among the post-holder’s responsibilities. Tesco later claimed that this advertisement had been a mistake.

Questions

1. Why has Tesco chosen not to extend its domestic employee relations practice to workers outside of the UK?
2. Given Tesco’s guiding strategic principles, what might be the implication s for business success in their U.S. ventures?

Oyamada Industries is a Japanese multinational corporation that develops and produces a range of consumer electrical products including televisions, MP3 players and computer games consoles. It has recently moved into the personal computer market, producing a range of notebooks, PDAs and peripherals. It has 46 subsidiary operations worldwide (the majority of which are in South-East Asia) with approximately 8000 employees. In 2000, Oyamada opened a greenfield plant producing LCD and plasma televisions for the European market in Bremen, Germany. After an extensive decision-making process, Oyamada chose to site the plant in Bremen to benefit from the available skills in the local and national labour markets and because it felt that, within a European context, Germany would represent a good ‘cultural fit’ with the Oyamada approach to labour relations and production. This was based on an assumption of similar degrees of collectivism which contrasted with its principal alternative option of building a plant in England.

When the plant first opened, Oyamada Bremen had a workforce of 250 employees. All production workers at the plant were German and recruited primarily from the local labour market. Many workers had previously been employed at a recently closed German producer of electrical equipment for the automobile industry. Production at the plant is organised in a typically Japanese manner with self-managed and cross-functional teams responsible for particular aspects of production. While some line manager roles were filled by German workers with previous supervisory experience, the majority of these were filled by Japanese workers brought in from other Oyamada subsidiaries. Originally, all the senior managers at the plant were Japanese and had previously worked at other subsidiaries or at Oyamada headquarters in Kyoto. All research and development activity continues to be done at the company headquarters.

Over the 1990s, Oyamada saw significant growth in global market share in its core areas of operation. In particular, it saw its presence grow considerably in key markets in the USA and Western Europe. During much of this decade, the majority of its products were produced in its largest subsidiaries in other parts of South-East Asia, particularly in China. At the time of its opening, Bremen represented one of its largest investments outside of Asia. In all of its subsidiaries, Oyamada has sought to impose its core approach to HRM, albeit tailored to fit with local legal requirements. Senior managers take the perspective that organisational culture can override national cultural differences and, therefore, it has largely not responded to differences in cultural norms in its management style, approach to employee relations and the organisation of work. The reason for this is that senior management feel that the high levels of productivity which Oyamada achieves, particularly in comparison with its Western competitors, is partly a question of culture which reflects the inculcation of traditional Japanese values in its workers. For this reason, an exportive approach to HRM has been adopted, consistent with Oyamada’s global business strategy and tight HQ control over subsidiary decision-making and target-setting. Initial worker training was done by Japanese trainers from other subsidiaries or HQ who stayed on site for three months until the plant was up and running. Production supervisors go to Japan every six months to learn new techniques, to discuss developments and to disseminate these in the German plant. Some workers on highly specialised machinery spend some considerable time in Japan learning associated techniques, and this practice continues. There are, however, some areas of moderate local adaptation in labour management. In Japan, Oyamada would typically select school leavers to work as operators, whilst in Germany most were older workers with some experience, along with a handful of apprentices. School leavers in Germany were regarded as being unreliable and not ‘team players’, which could contribute to problems of absenteeism and a lack of work ethic.

Despite some reservations about the manner in which the dominant approach to HRM at Oyamada and the German principles of co-determination and works councils might work together, senior managers were initially surprised by the degree of cooperation in worker consultation (for example, over substantive issues of work design). After six months, however, the company was forced to recall a number of the televisions produced at Bremen because of a safety fault. Upon investigation, the production manager attributed the problem to having emanated from a single operator on a highly specialised piece of machinery having ‘informally’ trained a colleague to operate the machine, unbeknownst to management. Both workers were reprimanded but complained that workers should be trained across machinery rather than rigidly sticking to single areas of operation. Quality initiatives such as total quality management and quality circles were also blamed for the quality problems. These have been implemented wholesale in the German plant but are deemed to have been unsuccessful, not least because workers feel that they conflict with the role of the works council. Moreover, quality circles often take place outside of normal working hours and involvement is unpaid. Meetings are, therefore, poorly attended.

A subsequent decline in the demand for Oyamada televisions produced in Bremen also saw the need for the plant to cut costs in order to maintain the levels of efficiency demanded by headquarters. Senior managers decided that the only way to achieve this was to make a number of workers redundant. The quality problems also saw the escalation of a number of employee relations problems at the plant. The operation of the works council became more conflictual with managers and union representatives failing to come to an agreement over a range of issues. The HR director felt that the union was simply being obstructive and argumentative and wanted to punish management for the mistakes of workers. Markus Acher, the local union representative, responded by claiming that whilst Oyamada was happy to adhere to the fundamental principles of Japanese employment when it suited them, it rejected them where it acted to benefit workers (for example, in a strong commitment to long-term employment security). He also claimed that the company failed to understand the basic principles of German employment relations and simply wanted the union to be passive and for the works council to simply ‘rubber-stamp’ managerial decisions.

Questions

1. Drawing on the typologies of cultural difference discussed in Chapter 5, discuss why Oyamada has experienced HR difficulties at its Bremen plant. Why might managers have assumed Germany to have been a good ‘fit’ for the company?
2. Drawing on an understanding of Japanese and German employment relations, how might we account for the differences in opinion over the operation of the works council? How might the changed attitude of the Japanese senior managers towards the works council be explained?
3. Why might the profile of the operator workforce in Germany represent a problem for the Japanese approach to HRM, compared to that which is found in many of Oyamada’s plants in Japan and South-East Asia?
4. How might Oyamada have avoided the problems detailed in the case study? How might the company now address these problems?