Good CEOs can take advantage of Gillard’s new IR laws: Gottliebsen

Australian boards need to look hard at the capacity of their chief executives and top management in light of Julia Gillard’s industrial relations legislation.

Australian boards need to look hard at the capacity of their chief executives and top management in light of Julia Gillard’s industrial relations legislation. The legislation has been set up to allow Australian companies to deliver the enormous increases in productivity required by Kevin Rudd, but only if their CEOs and top managers are tough enough.

I fear that such management teams are in a minority. For those companies that do not have chief executives able to take advantage of the Gillard legislation, they then face a potentially miserable time dominated by unions. And so my message to all directors is that if your CEO and management begin to complain about what Julia Gillard has done, you need to start looking for a new CEO.

I am indebted to Ken Phillips of the Independent Contractors Association for his insights on this material. In essence Julia Gillard has inserted massive numbers of clauses covering enterprise agreements and in almost every nook and cranny there is mention of a union.

Employer groups are protesting wildly and seeking changes, but their case is hopeless because union involvement is too deeply ingrained in the structure of the legislation. You could remove union involvement from one part but it does not help because it is everywhere else.

Employers shouldn’t even contemplate going down the enterprise bargaining route without working with a union. This won’t be an easy choice for many companies. Those who occupy sectors with tough unions and strong competition will have no choice but to lump it.

On the other hand companies going through tough times with a CEO on board who understands the issues will be able to refuse clauses in enterprise agreements that interfere with their capacity to manage.

But for those companies that have more modern CEOs, Gillard inserted what I call the “productivity booster” clause. Under the legislation it is possible not to have employees employed under an enterprise agreement but rather to be employed under what are called “industrial flexible clauses”. The agreements under these clauses are really individual contracts and they must be genuinely agreed to by each employee and there are clear minimum conditions. In these agreements no third parties (that is, unions) need to be involved.

No company should contemplate such agreements if they have an old style HR department, because it requires a totally different management culture to manage lots and lots of agreements. Those that manage such a structure must have excellent relationships between management and staff and need to be able to cope with some employees who are part of a union agreement.

Some HR departments will tell their CEO that it can’t be done. That’s total rubbish – they are merely protecting their jobs and their culture.

Gillard has given a productivity boost to the cream of Australian chief executives. Those that can take advantage of her offer should be paid top salaries. As for the rest – just don’t complain.

Julia Gillard has placed enormous responsibility on Australian boards that will need to find CEOs capable of using her legislation to achieve Kevin Rudd’s productivity targets.

This article first appeared on Business Spectator