lorenzo bordogna, roberto pedersini between the … · lorenzo bordogna, roberto pedersini between...

Lorenzo Bordogna, Roberto Pedersini

BETWEEN THE “BLACK HOLE”AND INNOVATIVE LABOR RELATIONS

AND HRM PRACTICES IN SMALL SIZE ENTERPRISES.

THE ITALIAN EXPERIENCE OF LATE ’90SIN COMPARATIVE PERSPECTIVE

DSS SOC 8-01

INDICE

1. Introduction ............................................................................... Pag. 5

2. The sample ....................................................................................... 11

3. Industrial relations pratices ........................................................... 14

4. HRM initiatives ............................................................................... 19

5. Small-size companies: more than a “black hole” ........................ 23

6. A few concluding remarks ............................................................. 28

References ........................................................................................ 35

Paper prepared for presentation at the 6th European IIRA Congress, Oslo,25-29 June 2001.

Bordogna-Pedersini 5

1. Introduction

Over the last 20 years, a large body of literature has developed on the

so-called ‘high performance work organizations’ or ‘high performance work

and human resource management’ practices (for an important review article

at mid-nineties, Ichniowski et al., 1996; for a recent contribution, Osterman,

2000; for a critical assessment of this literature, Storey, 1995; Guest, 1997;

Godard and Delaney, 2000, with the reply by Kochan, 2000). As it is

known, by these expressions a model of people management is meant which

includes a number of ‘innovative’ HRM practices, such as accurate

selection procedures, intensive training and development, internal

promotion, flexible job descriptions and assignments, team work, some

form of individualized and contingent reward systems (as performance

related pay), communication and employee involvement programs, etc. -

although the list is rather unstable and changing from one study to another.

This literature comprises several, somehow interconnected, streams of

research, concerning the actual diffusion of these new practices, the reasons

for their adoption on the part of the employers, their effects in terms of both

organizational performance and employees’ benefits, their implications for

the traditional industrial relations as a reality and as a field of study. In its

first phases of development it suffered several methodological and

theoretical weaknesses, which prevented comparison and the possibility of

cumulative results (Ichniowski et al., 1996; Guest, 1997). At the beginning

of the 1990s Sisson (1993) underlined that it was even difficult “to come up

with an adequate definition of HRM”, at least in the UK context, suggesting

that it could just be an “essentially ideological project masquerading for

greater individualization and work intensification”. A few years later Guest

6 Bordogna-Pedersini

(1997) again stressed relevant uncertainties, for instance in defining what

high performance work practices precisely are and which indicators to

utilize to identify them, in defining and measuring performance, in

specifying the nature and the rationale of the relationships between the two

variables. Despite these early, and at times still persisting difficulties (also

in the present paper), studies on the subject have become more sophisticated

in their research design and techniques of analysis, allowing to reach more

accurate results at least in some of the above-mentioned streams (as, for

instance, in the longitudinal analysis reported in Osterman, 2000, which

replicates his 1992 survey, largely as a follow-up to the same establishments

that had then been interviewed).

However, this body of research has often been focused on medium and

large companies or establishments based in the United States or, less

frequently, in Britain and Canada, disregarding generally the small business

sector and national experiences other than the Anglo-Saxon ones. In Italy,

in particular, systematic quantitative analyses specifically devoted to this

topic and based on nation-wide samples covering also the small firms sector

are rare, if existent at all, while they would be of great interest given the

extreme relevance that such a sector has in the overall Italian economy1. As

a result, the world of employment relations in small size enterprises is a

largely unknown object, so that often impressionistic and imprecise pictures

still prevail, at times just rooted in the cultural and political preferences of

1 According to comparative estimates, at mid-1990s the persons employed in

establishments with less than 100 employees were in Italy about 70% of totalemployment in manufacturing industry, against about 40% in UK and much less inGermany and USA; while those employed in establishments with more than 500employees were a little over 10% in Italy, against about 25% in UK, over 30% in USAand about 50% in Germany (Traù, 1999, p. 90, Fig. 3).


the authors. The debate has long been polarized around the old, opposite

stereotypes of the ‘sweatshops’ on one hand, versus the ‘small is beautiful’

on the other hand. The first vision identifying the small size with the

survival of characteristics of technological and cultural backwardness

typical of the early phases of development of the factory system, associated

with low wages and forms of intensive exploitation of the employees as the

main road to competitiveness. While the second one, in reaction to the

bureaucratization and alienation features often ascribed to large-size

organizations by the post-weberian literature, used to stress the advantages

of small businesses in terms of more interesting and varied job contents,

direct communications, informal and satisfying social relations, workers’

motivation, etc., in turn associated with greater flexibility, capacity of

innovation and rapidity of reaction to market demands and broader

environmental changes.

Both visions shared the drawback of considering the world of small

enterprises as a homogeneous and undifferentiated reality, while within it

different categories should be clearly singled out (among others, Scase,

1995). This is what has been done in Italy by the literature on industrial

districts, to which we owe the beginning of a rich season of studies on the

Italian small business sector (for all, Bagnasco, 1978 e 1988; Brusco, 1989;

Trigilia, 1986 and 1990). Despite these developments, however,

comprehensive, quantitative analyses on the subject which interest us here -

industrial relations and human resource management practices- have

remained rather infrequent, and the existing ones often suffer limitations in

terms of sectoral and territorial coverage (regional or local), firm size

(usually only above 50 employees), width and scope of the issues object of


inquiry, or a combination of them2. A lack of empirically grounded analyses

which is greater the smaller the size of the firms considered -while in a

country like Italy, where the average size is particularly small, it would be

necessary to cover firms not only below 50 employees, but even below 203.

The purpose of this paper is to overcome -at least partly- these

weaknesses, by utilizing the information collected by probably the main

large scale quantitative survey available at national level (see section 2) to

analyze the state of labor relations and human resource management

practices in Italian manufacturing enterprises. The attention will be focused

first on the small size businesses (with 20 to 100 employees), contrasting

then the results reached by this analysis with those of larger enterprises. As

a way of control, a few further considerations will also be developed on the

basis of a smaller survey carried out on a sample of small-size

metalworking firms of one of the largest and highly industrialized province

in the North of Italy. Section 3 is devoted to traditional industrial relations

2 Reviews on the state of the research on labor relations in small firms at early and mid

1990s can be seen in Perulli (1990) and Accornero (1996). Quantitative analyses atregional, sectoral and/or local (provincial) level are in Rossi, Sestito (2000), Lizzeri(2000), Negrelli and Pedersini (1999), Checchi and Flabbi (1999), Regalia andTerragni (1997), Regalia and Ronchi (1988-92), most of them covering onlyestablishments with at least 50 employees. Several studies on the specific issue of theso-called ‘participatory wage’ (salario di risultato), allowed/promoted in companylevel collective bargaining by the important tripartite agreement of July 1993, havebeen recently carried out by a number of labor economists, among which Del Boca,Kruse and Pendleton (1999), Manera, Paolucci and Rossetto (1999), Casadio (1999),Biagioli (1999). The few quantitative analyses on a national sample are mainly basedon a (almost) annual survey carried out by Cesos (see infra) on firms with at least 20employees; see Baglioni and Milani (1990), Baglioni (1991), Pellegrini (1995),Bordogna (1997 and 1999), mainly devoted just to labor relations and collectivebargaining issues, with the exception of the last one which includes also HRM issues.

3 A very important threshold for our topic would be in fact 15 employees, the size overwhich, according to the Statuto dei Lavoratori (law 300/1970, art. 19), trade unionrepresentation rights are recognized and employees have the right to form a collectiverepresentation body.


practices, section 4 will deepen HRM initiatives, section 5 will combine

both the dimensions and finally section 6 will draw a few concluding

remarks.

As a general frame of reference, to facilitate comparison4, we will

utilize the classification of policy choices facing organizations suggested by

Guest (1995) and Guest and Conway (1999), based on the four broad

options identified in the figure below.

Fig. 1. Employment relations policy options

Industrial Relations PriorityLow High

HRM PriorityLow The Black Hole Traditional Collectivism

High Individualized HRM The New Realism

Source: Guest, 1995, and Guest and Conway, 1999

The types in the lower row are the closest to the above-mentioned

‘high performance work organizations’ which would have spread out in the

North-American economy in the 1980s and 1990s, on which several

scholars have focused their attention. This seems especially so for the one

labeled individualized HRM, which according to Guest and Guest and

Conways would imply an extension of practices applied to managerial and

professional employees to the whole work-force, aimed at promoting

individual attitudes of high commitment to the organization, not mediated

through any form of workers’ collective representation body. In contexts

where a trade union tradition is established, this type can give way to the

new realism one, although the question remains whether this combination

4 Comparison will be possible however only to a limited extent, due to the differences of

the unit of analysis in the two surveys, as well as of the indicators utilized to identifyHRM practices.


would be an intentional and deliberate integration between the two kinds of

policies, or just an inevitable and mechanical coexistence. The types in the

higher row, instead, represent situations in which the employers assign low

or no priority to HRM practices and policies. Where trade unions are strong

and well rooted, this can coincide -both in the British and Italian

experience- with the persistence of an industrial relations and collective

bargaining model typical of the 1970s, not by chance labeled by the authors

as traditional collectivism. Finally the black hole type describes a context of

absence both of trade unions and HRM practices, where employment

relations policies are largely a unilateral prerogative of the employer,

outside any form of joint regulation with the trade unions as well as free

from not arbitrary HRM practices. A picture that would best correspond to

the ‘sweatshops’ vision, where one could expect the prevalence of low-

wage low-skill jobs, the adoption of elementary forms of pay for

performance (like traditional piece-rate systems), the diffusion of sub-

standards employment contracts, little job security, a modest degree of

individual involvement and commitment to the organization.

Now, is the black hole type the situation that we can expect to

predominate in small size Italian enterprises? Or is the landscape more

differentiated? Or may the picture of rather wide diffusion of ‘high

performance work organizations’, mentioned by Osterman with reference to

the US context, fit also the Italian experience? Moreover, what is the

relevance of the size factor from this point of view? Can systematic

differences be detected between small and large size enterprises with

respect to the employment relations policies adopted by the employers?


2. The sample

The main analysis will be carried out over a sample of some 300

manufacturing companies (actually, plants) with up to 100 employees. This

is a subset of a wider database used for the Collective Bargaining Survey

for the years 1995 and 1996 which is conducted by Cesos on behalf of Cnel

(Consiglio Nazionale dell’Economia e del Lavoro) on an (almost) annual

basis since 1984. The original sample is representative of units with at least

20 employees at national level and it is stratified as for sectors and size5.

Owning to some problems in data collection, which resulted in an

incomplete coverage of the whole sample, the theoretical representativeness

has been somewhat weakened and biased in favor of medium-to large-size

enterprises. However, with an amount of valid interviews of about 650

cases throughout 1990s (on an original sample of about 1000 units), we can

consider it as a very important source of information on industrial relations

and HRM practices at company-level and probably the most relevant one

providing national data on the Italian experience. The whole sample (650

cases) will be used to perform comparisons between small companies and

medium- and large-size ones.

5 The classes on which the Cesos sample is constructed are three: small (20-99

employees), medium (100-499 employees) and large (500 and more employees). In thepresent analysis, in order to investigate in deeper detail the world of small businesses,a higher number of classes will be utilized, so that the representativeness by size canbe weakened. For further details on the Cesos survey, see infra and Bordogna, 1997.


Table 1. Cesos sample composition by sector (units and employees). 1996

20-100 employees Over 100 employeesSector Units % Employees % Units % Employees %Chemicals 57 20.4 3.078 21.9 76 21.5 40.281 20.0Metalworking 82 29.4 3.957 28.1 151 42.7 103.593 51.3Textiles 51 18.3 2.668 18.9 51 14.4 22.132 11.0Printing and Publishing 24 8.6 1.340 9.5 27 7.6 16.008 7.9Food 27 9.7 1.372 9.7 24 6.8 14.056 7.0Wood and cement 38 13.6 1.669 11.9 25 7.0 5.733 2.8Total 279 100.0 14.084 100.0 354 100 201.803 100.0

The Cesos survey collects data on the company (size, sector, industry-

wide agreement, employers’ association affiliation, etc.), on industrial

relations (union membership, union representation, industrial conflict,

company-level collective bargaining, etc.), and HRM practices (variable

pay, training, TQM, forms of direct participation, etc.). The two years

included in the analysis (1995 and 1996) are the latest for which data are

available. Yet, they probably represent the central period of the first wave of

company-level agreement renewals after the tripartite agreement of July

1993, which introduced a two-tier bargaining system based on industry-

wide agreements, on one side, and a decentralized level (either company or

territorial), on the other. The former define the general regulatory

framework and set the basic sectoral wage levels. Decentralized bargaining

covers topics expressly identified by national bargaining, which do not

duplicate or overlap industry-wide provisions; among them, of particular

importance is some sort of performance-related pay (at times also called

‘participatory wage’, linked to productivity, quality and competitiveness

results).


Table 2. Sample composition by number of employees. 1996

Employees Units %(only firms up to 100 employees: 279 cases)

%(all)

20-35 94 33.7 14.836-50 65 23.3 10.351-100 120 43.0 19.0101-250 178 - 28.1251-500 88 - 13.9Over 500 88 - 13.9Total 633 100.0 100.0


3. Industrial relations practices

As far as industrial relations in small-size firms are concerned, an

important starting point is to see whether union membership and union

representative bodies are present at all. In fact, the idea of the small

enterprise as a “black-hole” rests upon the assumption that the entrepreneur-

manager is the sole actor of labor relations. As a consequence, no collective

forms of regulation are present (apart from the law, of course) and unilateral

action is the only available option. The positive link between company size

and the diffusion of industrial relations is well known; however, the impact

of collective representation on labor relations in small businesses is far from

negligible.

The presence of union members is reported in over 75% of units and,

quite interestingly, the mean union density in the relevant cases slightly

decreases with size (table 3), suggesting that, when unions gain access,

proselytism is more effective in smaller firms than in larger ones. This

feature may be consistent with the fact that “free-riding” is more viable in

large groups. Union representative bodies are active in the great majority of

cases (over 70%). However, there is a marked relation with size: while

union bodies are lacking in almost 40% of firms with 20-35 employees, the

same is true for only 13% of units with 51-100 employees.

Having ascertained that the diffusion of collective representation is

highly significant even in small-size businesses, it is important to take into

consideration an indicator of the effectiveness of such representation. In

pluralistic industrial relations systems, the most important outcomes are

probably collective agreements. In 1995 and 1996, company-level


agreements involved slightly more than 20% of units. Again, the influence

of size is remarkable: decentralized bargaining coverage passes from 10%

in the smallest class to over 30% in companies with between 51 and 100

employees.

Table 3. Industrial relations in small-size enterprises (1996)

Employees Union members(% of units)

Union density*(mean)

Union bodies(% of units)

Collectiveagreements**

20-35 70.2(94)

53.2(66)

60.4(91)

10.6(94)

36-50 75.4(65)

44.9(49)

64.5(62)

21.5(65)

51-100 81.7(120)

46.1(98)

86.7(120)

31.7(120)

Total 76.3(279)

48.0(213)

72.9(273)

22.2(279)

In brackets, the number of units (valid cases) in the relevant class is reported.* Only cases with union members are included** Reached in either 1995 or 1996

If we bring these three dimensions of collective representation

(membership, union bodies, and collective agreements) together, we can

build a sort of industrial relations indicator. Table 4 shows how the size

factor affects essentially the two extreme positions: that is, an increase in

the number of employees reduces the percentage of units with no collective

representation at all and increases the proportion of firms with a score of

three. About 20% of units with up to 35 employees has no collective

representation; the same is true for only 3% of units employing between 51

and 100 workers. At the same time, the quota of firms with all three

industrial relations dimensions rises from around 9% to almost 30%. A

steady 70% of units remains in between, basically covered by the less

stringent presence of either union members or union bodies or both. The


analysis of size effects highlights another important feature which refers to

the comparison of industrial relations in small firms with those in large

ones. In fact, data indicate that the general picture does not change

significantly if we consider units with more than 100 employees or even

above 500 workers. Actually, if units with no collective representation at all

progressively disappear, the percentage of cases with “full score” increases

only slightly and does not depart from around 30%. Besides, some 70% of

units still remains in an “intermediate” position. The only evident change is

that the proportion of cases with only one dimension of collective

representation diminishes to almost 10% from a level of more than 20%.

Two are the insights that can be drawn from the analysis, so far. First,

though company size does have a significant impact on the diffusion of

industrial relations, forms of collective representation, notably union

membership and union representative bodies, appear to be widespread even

in small firms. Second, the “size threshold” which marks the shift to more

fully developed industrial relations, as far as traditional “pluralistic”

indicators are concerned, is rather low and can be situated below the

traditional boundary of small-size enterprises (100 employees).

Table 4. Industrial relations indicator (IR): percentage of units by score

Employees 0 1 2 3 N20-35 20.9 24.2 46.2 8.8 9136-50 14.5 24.2 43.5 17.7 6251-100 3.3 20.0 50.0 26.7 120101-250 1.7 13.1 60.8 24.4 176251-500 1.1 10.3 57.5 31.0 87Over 500 0 13.8 56.3 29.9 87Total 5.8 16.9 53.8 23.6 623


The overall picture changes slightly if we consider other indicators of

the content and institutionalization of industrial relations (Table 5). Regular

meetings between the company management and union representatives are

reported in more than 80% of cases. The percentage increases steadily from

55% in units with up to 35 employees, to 73% in companies with a number

of employees ranging between 51 and 100, to almost 98% in the largest

ones. Forms of union and worker involvement in decision making are

present in half of the sample. Here, the percentages are 23%, 48% and 71%

respectively. The same linear influence of company size can be identified in

consultation practices over two specific issues: training and TQM

initiatives. In companies that implemented those initiatives, for both cases,

the quota of units that do have forms of consultation/negotiation rises from

20-30% to about 70%, passing from one end to the other of the size scale.

Finally, some elements on the institutionalization of industrial relations.

First, the presence of specific organizational structures (on the employer’s

side) devoted to industrial relations is practically non-existent in small and

medium size companies and it becomes of a certain relevance only over 250

employees. Second, around half of the largest units has formal dispute

resolution mechanisms, and this quota diminishes progressively to 10% in

the smallest ones.

Therefore, when we try to assess the scope and depth of industrial

relations at company-level, we find that the impact of size is more evident

than for the more “traditional” indicators analyzed above. The continuity of

union-management relations, the presence of consultation practices and

involvement in decision making, as well as the institutionalization of

dispute resolution is significantly linked to the number of employees. Yet, it


is important to stress that, if we leave aside institutionalization (which is

traditionally weak in Italy, even in large companies), even “advanced”

industrial relations practices are far from marginal in small companies. In

over half of the smallest units in the sample (between 20 and 35 employees)

there are regular meetings between the company management and trade

unions. Moreover, consultation practices and involvement in decision-

making are present in around 20% of those firms. This means that the

difference between small companies and large ones is more a matter of

degree than a real “divide” between the “rule of unilateral action” and the

“reign of industrial relations”.

Table 5. Institutionalization and “advanced” forms of industrial relations by companysize: percentage of units (1996)

Employees Regularmeetings with

unions

Forms ofunion

involvementin decision-

making

Prior unioninformation/consultationon training*

Unionconsultation/

negotiation onTQM*

IR dept. Formaldispute

resolutionprocedures

20-35 54.9(71)

23.3(90)

27.5(40)

18.1(22)

2.2(92)

10.5(86)

36-50 67.9(56)

28.1(64)

34.3(35)

20.0(30)

3.1(64)

11.5(61)

51-100 72.8(103)

48.3(118)

51.8(56)

40.4(52)

4.2(120)

21.7(106)

101-250 88.0(167)

58.0(174)

58.3(96)

53.6(84)

7.5(174)

19.6(158)

251-500 92.7(82)

65.9(88)

70.0(70)

64.9(57)

12.5(88)

34.5(84)

Over 500 97.6(83)

70.9(86)

75.0(72)

70.9(55)

33.7(86)

47.0(83)

Total 81.1(562)

51.0(620)

57.2(369)

50.7(300)

9.9(624)

23.9(578)

In brackets, the number of units (valid cases) in the relevant class is reported.* In the units where these initiatives are present


4. HRM initiatives

As far as HRM is concerned, the traditional view on small-size firms

would suggest a substantial lack of any “innovative” practices. We will

proceed as in the case of industrial relations to find out whether this

description is accurate or not. Training initiatives were present in 1996 in

almost 50% of small businesses; a percentage that was higher than 40%

even in the smallest units taken into consideration. “Total quality” systems

are reported in as much as 20% of units with up to 35 employees and in

more than 40% of the firms employing between 51 and 100 workers6. In the

great majority of cases, these initiatives have involved the whole company

(90-80%). This quota declines as size increases, probably because the

greater organizational complexity allows focusing quality initiatives on

specific areas. Meetings between the company management and group of

workers on the company objectives are reported in more than a third of all

small companies, regardless of their size.

Table 6. HRM in small-size enterprises (1996)

Employees Training TQM Meeting with workers oncompany objectives

20-35 41.9(93)

21.5(93)

35.9(92)

36-50 58.5(65)

46.8(62)

37.1(62)

51-100 50.4(117)

43.1(116)

39.3(117)

Total 49.5(275)

36.5(271)

37.6(271)

In brackets, the number of units (valid cases) in the relevant class is reported.

6 These figures are to be taken with some caution, however, due to a possible

misunderstanding of the question (the percentages of firms which report “qualitycircles” are in fact lower than those with TQM systems).


We can use these three dimensions to build an “HRM indicator” as in

the case of industrial relations, in order to investigate the difference

between small firms and larger ones. Table 7 illustrates a different situation

than the one we have found for collective representation. Company size

apparently has a more definite impact on HRM practices than on the

presence of industrial relations. The most evident effect is still on the two

ends of the scale, that is a progressive reduction of cases with no HRM

practices and a corresponding increase of those presenting all three

dimensions, but the rise is far from complete in units with up to 100

employees. In the best situation, the percentage of small companies with a

full score does not reach 20%, a level which is half that of largest firms.

Besides, there is a substantial increase also in units with at least two

dimensions. Actually, the proportion of companies with at least a score of

two on the HRM indicator surpasses 50% only for companies with more

than 100 employees. It may be useful to point out that, for the IR indicator,

this is true even for the smallest companies. Though this may be the effect

of a bias in sampling procedures (see above), there seems to be a certain

divergence between small and large firms as far as HRM are concerned.

Table 7. HRM indicator (HRM): percentage of units by score

Employees 0 1 2 3 N20-35 33.3 43.3 13.3 10.0 9036-50 20.0 36.7 26.7 16.7 6051-100 26.5 32.7 23.9 16.8 113101-250 24.7 22.8 24.1 28.5 158251-500 11.3 21.3 32.5 35.0 80Over 500 6.3 19.0 35.4 39.2 79Total 21.6 28.6 25.3 24.5 580


As to investigate deeper this difference, we can take into account an

important element of HRM, that is wage policy. The diffusion of variable

pay may be considered an element of a more developed incentive systems,

while more generic economic incentives, especially individual ones, are

probably closer to the view of a predominant role of unilateral (and maybe

episodical) decisions on the part of the manager-entrepreneur. Such an

interpretation finds some support also in the survey results, as individual

incentives do not seem to be linked to the development of either industrial

relations or HRM. The analysis shows, in fact, that they are present in at

least 50% of companies, regardless of their score on either the IR or HRM

indicator. Instead, collective incentives and variable pay are significantly

linked to an increase in either of the two indicators. For example, the

percentage of firms that report to use variable pay increases from 17% to

80% if we move from the lowest to the highest grade on the IR scale, and

from 36% to 73% if we consider the HRM index.

In some respects, the traditional view on small-size companies is

supported by the analysis, though some caution is suggested by a possible

overlapping between the three items (basically between variable pay, on one

side, and the other incentives, on the other). In small companies the tool of

individual incentives is predominant over other incentive mechanisms.

However, collective pay and even performance-related incentives are

present in around a quarter of cases. Moreover, if variable pay becomes the

main element of company-level wage policy as the firm size increases,

individual incentives remain important throughout the sample and involve

almost 60% of even the largest units. This probably means that individual

bonuses, in the form of one-off payments or ad-hoc wage increases, are a


relevant part of the wage policy of Italian companies and are not being

replaced by performance-related schemes. Rather, the latter added to the

former.

Table 8. Wage policy according to company size (1996)

Employees Variable pay Collective incentives(blue-collar workers)

Individual incentives(blue-collar workers)

20-35 25.0(92)

31.3(83)

58.8(85)

36-50 35.4(65)

30.9(55)

59.6(57)

51-100 44.4(117)

45.0(109)

48.1(108)

101-250 55.8(172)

51.3(152)

58.3(163)

251-500 70.9(86)

67.1(79)

53.8(80)

Over 500 86.4(88)

51.9(81)

59.8(82)

Total 53.4(620)

47.4(559)

56.2(575)

In brackets, the number of units (valid cases) in the relevant class is reported.

Finally, we can consider the company initiatives in the field of health

and safety, equal opportunities and “welfare” benefits. The impact of

company size is substantially confirmed. Only in the case of health and

safety initiatives we find a substantial presence of small-size firms. Here,

however, the effect of health a safety legislation is particularly stringent.

Even in the field of equal opportunities there is a specific law to support

affirmative actions, but its provisions do not introduce mandatory initiatives

and are essentially of a promotional character. The other benefits are

apparently a characteristic of large-size companies and are probably part of


the “benefit packet” they offer to their employees; small companies seem to

be less incline to provide such kinds of incentives.

Table 9. Other HRM initiatives by company size (1996)

Employees Health and safety Equal opportunity Pension schemes Other benefits(health insurance,scholarships, etc.)

20-35 48.4(91)

2.2(91)

4.3(92)

3.3(92)

36-50 52.5(59)

1.6(63)

6.2(65)

4.7(64)

51-100 63.8(116)

5.1(118)

5.1(117)

5.9(118)

101-250 66.7(171)

6.9(173)

4.6(173)

11.6(172)

251-500 78.0(82)

9.6(83)

11.9(84)

18.8(85)

Over 500 82.4(85)

27.4(84)

7.1(84)

44.0(84)

Total 65.7(604)

8.5(612)

6.2(615)

14.0(615)


4. Small-size companies: more than a “black-hole”

The picture that emerges from the separate analysis of industrial

relations and HRM in small-size enterprises is quite different from the

traditional one. Collective representation is fairly developed even in very

small companies and the shift to a more effective presence of trade union

representation (basically consisting in the conclusion of company-level

collective agreements) can be situated in companies with more than 50

employees, within the traditional limit of small-size companies (100

employees). As far as HRM is concerned, the situation is a bit different,

since the size factor apparently exerts a stronger and more linear influence,

with large firms showing a consistently higher presence of HRM practices.

However, HRM initiatives are present to a significant extent in small firms

too. And this is true also for important features such as training, TQM,

variable pay and meetings on company objectives.

Now, if we put the two composite indicators (IR and HRM) together,

we can assess the extent of the “black-hole” image of labor relations in

small-size companies. Taking a very strict definition of the “black-hole”

situation (that is, no IR coupled with no HRM), we find a very marginal

presence of units: only 3.5%. If we consider the presence of only one

element of both scales as the conventional limit for a substantial absence of

both industrial relations and HRM practices, we can label around 20% of

units as belonging to the “black-hole” of employment relations. Therefore,

80% falls outside this configuration. The great majority of these units is

somewhat “locked” into a “traditional” system of industrial relations


without the development of significant HRM initiatives (44%). A

percentage of slightly more than 20% counterbalances the “black-holes”,

while a minority of companies is apparently trying to foster human relations

without the presence of collective representation.

Table 10. IR and HRM in small-size companies (1996)

IR0-1 2-3 Total

HRM0-1 20.5 44.4 64.5

(166)

2-3 13.3 22.2 35.5(91)

Total 33.8(87)

66.2(170)

100.0(257)

What is the picture for medium- and large-size companies? The basic

difference is that industrial relations are almost invariably and significantly

present: only 13% of units has a low score on the IR dimension, against

33.8% in small firms. This is a quite straightforward conclusion. But there

is another difference which is more interesting. Almost 70% of small

companies with a relevant presence of trade unions (that is 44% of the

66.2% which has a score of at least 2 on the IR index) does not develop a

corresponding important HRM system. On the contrary, only 37% of

medium and large firms with a developed industrial relations system

remains in the situation of the “traditional collectivism”. Over half of those

units, in fact, present an advanced employment relations system, with a

significant presence of both industrial relations and HRM. It is possible to

advance two hypotheses on this apparent “difficulty” of small enterprises to


develop HRM practices. First, it may be not a real difficulty, but rather a

lack of need: that is, the organizational and economic situation is not

perceived by the manager-entrepreneur as requesting “innovative” forms of

labor relations or worker involvement. This brings us to the second possible

explanation: such a perception on the part of the management of small

companies could be linked to a limited understanding of the potential for

company performance of HRM practices. The positive role of HRM may

become evident when there are external pressures, such as market

competition, which could push the manager-entrepreneur to adopt new

initiatives. Possibly, the 13% of small firms that show signs of

individualization of labor relations may fall into this situation.

Table 11. IR and HRM in large-size companies (1996)

IR0-1 2-3 Total

HRM0-1 6.0 32.3 38.3

(120)

2-3 6.7 55.0 61.7(193)

Total 12.7(40)

87.3(273)

100.0(313)

A more accurate analysis of IR and HRM combinations by firm-size

confirms the picture that has emerged so far, and notably the two main

results that have been drawn. On one hand, the most significant

concentration of “black hole” cases can be situated within the boundaries of

small companies. Their proportion decreases from a level of 37% among

units with up to 35 employees to less than 10% of those employing between

51 and 100 workers. On the other hand, the actual possibility to develop


full-fledged employment relations seems to be reached only after the limit

of 100 employees has been crossed, since the percentage of “new realism”

cases more than doubles passing from the 51-100 employees class to the

largest firms. However, a notation can be added: despite this “difficulty”,

there is a large share of small-sized firms (over 40% of units employing

between 36 and 100 workers) where the role of HRM is recognized.

Table 12. IR and HRM by company size

Type “Black hole” Traditional collectivism Individualization New realism N20-35 36.8 40.2 9.2 13.8 8736-50 17.5 38.6 19.3 24.6 5751-100 9.7 49.6 13.3 27.4 113101-250 8.3 39.1 6.4 46.2 156251-500 3.8 29.1 3.8 63.8 79Over 500 3.8 21.8 10.3 64.1 78Total 12.7 37.5 9.6 40.2 570

An important factor that can help explain the different features of

employment relations in small-size companies is whether the firm belongs

to a wider group. In particular, if this circumstance occurs, the percentage of

“black hole” cases diminishes remarkably and the development of both

industrial relations and HRM practices becomes more common.

Table 13. IR and HRM in small-size companies (20-100 employees): ‘independent’ firmsand firms belonging to a group

Type “Black hole” Traditional collectivism Individualization New realism NIndependent 25.7 43.3 14.4 16.6 187Group 7.1 45.7 10.0 37.1 70Total 20.6 44.0 13.2 22.2 257

Now it is important to spend a word of warning on the results of the

analysis on small-size companies. As already mentioned, the actual data

collection has weakened the original theoretical representativeness of the


Cesos sample, probably introducing a bias in favor of larger and unionized

firms. This can be seen by comparing these results with those of a similar

research carried out in small-size metalworking firms of one of the largest

and highly industrialized province in the North of Italy7. The comparison

cannot be conclusive, but it can provide some insights in the direction of the

bias and on the distribution of small firms. The research was carried out on

a sample that included very small companies (below 15 employees). If we

consider only those with over 15 employees, we find that the “black hole”

involves as much as 55% of remaining units (49). “Traditional collectivism”

is the second commonest situation with 29% of cases. The “new realism”

involves 10% of firms, while in the rest there are signs of an

individualization of labor relations (6%). This outcome, despite all its limits

(specific sector, particular area, very small sample which includes firms

with less than 20 employees), suggests caution in generalizing the results of

the analysis developed on the Cesos sample. However, some conclusions

are supported: the “black-hole” does not represent an accurate picture for all

small-size companies. In fact, industrial relations are developed in a fairly

significant proportion of them. HRM initiatives, on the contrary, find it

more difficult to emerge in companies with less than 100 employees,

although they are not entirely absent. “Traditional collectivism” is therefore

the usual outcome for firms escaping the “black-hole”. However, there are

also attempts at developing HRM initiatives, even when a company-level

system of industrial relations is lacking.

7 This survey, covering a total of 119 cases with at least 6 employees up to 100, has

been carried out in 1999 by the authors on a questionnaire partly similar to that of theCesos survey, and has been sponsored by the Ordine dei Consulenti del Lavoro of theProvince of Brescia.


5. A few concluding remarks

With reference to the questions raised at the end of section 1, in the

light of the results reached by our analysis we can try to draw a few simple

and tentative conclusions.

First, although it is difficult to make definite propositions on the

diffusion of the “high performance work organizations” in the Italian

manufacturing industry, given the absence of appropriate terms of

comparison and the uncertainties we have recalled about the

representativeness of the sample, we can notice that the percentage of cases

displaying significant HRM practices (at least as we have defined them

here), in conjunction or not with traditional industrial relations institutions,

is not just a minority, neither in large firms nor in the smaller ones (in this

latter case, 35% in the Cesos sample, and 16% in the Brescia one).

Conversely, those with no or at most one HRM practice are no more than

half of the whole Cesos sample, covering firms with 20 or more employees

(respectively 22% and 28%; Table 7 above). As far as such a comparison

may be relevant here, in his last survey on US private for-profit sector

establishments with 50 or more employees, Osterman (2000: Tab. 2) found

about 15% of cases which adopted none of the four innovative work

practices investigated (off-line problem solving groups as quality circles;

job rotation; self-managed teams; TQM), 14% which adopted at most one,

32% two, and about 40% which adopted at least three out of four. In turn,

Guest and Conway (1999, p. 372-74 and Tab. 1), adopting a different unit

of analysis (individual employees rather than establishments or firms) and

utilizing individual reports collected in telephone interviews to a national

sample of about 1000 British employees in organizations (not only


manufacturing) with 25 or more staff, found that about 46% of the sample

worked in “high human resource practices” organizations (that is, adopting

at least seven out of the ten practices investigated).

Second, contrary to what is often suggested by the HRM literature,

especially the one based on the US experience, in the large majority of cases

of the Cesos survey in which HRM practices are found (230 out of about

285), they are in conjunction with traditional industrial relations

institutions. These findings are consistent with the results already found in

UK at the beginning of the 1990s by the third Workplace Industrial

Relations Survey (Millward et al., 1992), stressed by Sisson (1993), as well

as with the outcomes of previous surveys on the Italian experience,

although not based on national samples (Regalia and Ronchi, 1992;

Negrelli, 1995; Regalia and Terragni, 1997; Regini, 1995). The question

remains, however, whether this double presence means a conflict between

the two dimensions, a mere coexistence between them but along clearly

separated and non-communicating channels, or finally the development of

synergic and integrated relationships. As for Italy, due also to legal

regulations of the employment relations which impose basic standards even

in rather small firms, it is likely that HRM practices, perhaps more often

than in Britain (Sisson, 1993), are not simply the expression of a unitary,

monistic view of the firm, aimed at challenging and weakening traditional

industrial relations. From the point of view of trade unions, there is the

possibility that they use their conditional support to the diffusion of HRM

practices as a strategy of survival and development, as suggested by Guest

(1995). Although a distinction should also be made, especially relevant in


small firms, between ‘innovative’ human resource practices and forms of

more or less benevolent paternalism (Scase, 1995). Further research is

needed to deepen these last features.

Consequently, and this is the third remark, some support was found, as

already noted, for the Guest and Conway idea that the “black hole” type

does not exhaust the employment policies adopted even by small firms in

the Italian experience. This holds not only for the larger (and probably

partly biased) Cesos sample, which excludes firms with less than 20

employees, but, to a lesser extent, also for the Brescia survey (which

includes firms with 15 to 100 employees). It is true that in this latter case

the percentage of firms falling into the “black hole” cell is much higher,

even the absolute majority (55%) and nearly three times as much as in the

Cesos sample. Still, also almost half of the Brescia sample reveals the

adoption of IR-HRM policy options which fit one of the other three types,

although among them “traditional collectivism” is the most frequent case. In

addition, in the same survey some relevant features of the ‘sweatshops’

pattern are lacking, namely the high degree of ‘precariousness’ of

employment contracts and the low level of job security. In particular, the

employment ‘precariousness’ is rather low both in terms of stock and of

flows, as suggested by the scarce diffusion of various types of contingent

workers (fixed-term, temporary, apprenticeship, work/training contracts);

while job security is apparently challenged not so much by the ‘freedom to

fire’ of the employers, but rather by the very high employees’ mobility in

search for better jobs, as suggested by the rate of turn-over of about 40% of

total employment in 1996-97 period, almost entirely due to voluntary


resignations. A context of very fluid, sellers’ market, certainly linked to the

economic peculiarities of the province under exam, but probably common to

many Northern regions of the country. A context which makes hardly

viable both autocratic and paternalistic employment relations (Scase, 1995),

and in which granting permanent jobs on the part of the employers is a form

of incentive in the competition to attract and retain employees. We conclude

that small firms are not simply synonymous of “sweatshops” and that the

landscape is more differentiated, although the picture which emerges is less

rosy than the one highlighted by Bacon et al. (1996) (at the very least, the

reality of the black economy cannot be ignored, especially in the South).

Again, as far as such a comparison is pertinent here, Guest and

Conway (1999, Tab. 1) found that one third of their national sample of

about 1000 British employees worked in “black hole” organizations (in term

of firms the percentage would probably be higher).

Fourth, and last, the size factor confirms its importance in influencing

both industrial relations and HRM practices, although with different

intensity and according to a different pattern, as shown in section 5. If clear

cleavages are to be found between small and larger firms, the threshold is

significantly lower with reference to traditional industrial relations

institutions than to ‘innovative’ human resource practices. In the Cesos

sample, union membership and union representation bodies are rather

diffused even in the smallest class of firms (around or over two thirds of the

cases )8, to become the almost universal rule not only in the largest

8 As already mentioned, 15 is the threshold established by the 1970 law (Statuto dei

Lavoratori) over which employees have the right to promote the constitution ofcollective representation bodies within firms.


companies but already in the class between 51 to 100 employees (above,

Tab. 3, and Bordogna, 1999, Tab. 3). A similar pattern is displayed by the

Brescia survey, although on the whole with lower percentages of diffusion.

Collective bargaining and the conclusion of formal collective agreements,

probably the most significant component of traditional industrial relations

institutions, is much less frequent, covering on the whole Cesos sample only

about 28% of cases in 1995-96 (Bordogna, 1997, Tab. 12). But it also

shows a strong connection with the size factor, more than doubling its

diffusion in firms with 36 to 50 employees with respect to the smallest

class, and three times as much in firms with 51 to 100 employees; after this

threshold the diffusion still increases, but at a lower pace, up to about 40%

of cases in the largest companies (500 and more employees)9. In conclusion,

as for traditional industrial relations, 50 employees seems to be the relevant

cleavage: over that threshold, irrespective of their actual size, firms

apparently do not differ so much with regard to the presence of union

members, collective representation bodies and (to a lesser extent) the

likelihood to have collective agreements, although this last institution is far

from covering the totality or even the large majority of firms.

A partly different pattern is displayed by HRM practices, whose

diffusion is also tightly connected with the size factor, but which tend to

show up in significant terms only in firms above a higher threshold. In small

firms they are less frequent, either because they are less needed, being, so to

say, naturally built-in in that reality, or because it is more difficult to detect

9 In a survey carried out by Istat (1999) on a sample of 8000 firms, representative of the

universe of firms with at least 10 employees, a similar cleavage is found in theindustrial sector between firms with 20 to 49 employees and those over 50 employees,but the diffusion of collective agreements keeps increasing with company size, up to65% of companies with 500 or more employees.


them, being less formalized, or finally because forms of more or less

benevolent paternalism prevail. But the rather diffused presence of unions

prevents this situation from precipitating into the “black hole” or “bleak

house” scenario even in small firms, probably more often in Italy than in

Britain.

Finally, to conclude, a methodological remark. The findings we have

reached, although improving our knowledge about the characteristics of IR

institutions and HRM practices in the Italian industrial firms, are only partly

satisfying from the point of view of comparative analysis and of the

possibility to reach cumulative results. Some of the methodological and

theoretical weaknesses we have underlined in section 1 affect also our

work. We have often made reference, as terms of comparison, to inquiries

carried out in Britain and the US, namely by Osterman, Guest and Conway,

Bacon et al.. But we cannot neglect that all these studies, including our

paper, utilize different lists of items to identify HRM practices, only to a

limited extent overlapping. At the very least, definitional problems still

persist. To carry out sound comparisons and reach genuine cumulative

results further work is needed, with a research design specifically dedicated

to the subject under exam, apt for replication.


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