Legislating for best practice HRM: the New Zealand approach.

Reforms in the New Zealand public sector in the 1980s meant economic objectives became a priority for public sector employers. This threatened the for, met objectives of social justice and equity, as well as the public sector's status as a model employer. To lessen this threat and ensure a balance was maintained between commercial objectives and the needs of employees, the state decided to intervene by legislating for best practice HRM in the public sector. Section 56, subsections (1) and (2), of the State Sector Act 1988, titled the "Good Employer Obligation," provided a mandate for all public sector employers to develop and implement policies aimed at promoting best practice HRM in the four functional areas of health and safety, training and development, equal employment opportunity (EEO), and recruitment and selection.

The impact this directive has had on the HRM function remains largely unknown. Whilst commentators are sceptical about the worth of this directive, (1) without a comprehensive study examining its impact, its contribution and value to HRM remains purely speculative. The purpose of this paper is to fill this gap. The first section of this paper provides a background to the inception of the "good employer" obligation, the directive itself is then outlined, and the state's intended objectives for this directive are discussed. The second section reports results of a series of analyses examining the impact of this directive.

Historical Background

Over the past 20 years, the New Zealand labor market has experienced considerable change. Previously, New Zealand was predominantly a welfare state. Trade tariffs and barriers afforded protection to businesses, thus sheltering the country from high unemployment and the need for strategic HRM practices aimed at enhancing efficiency and effectiveness. (2) Increasing public debt, along with technological advancements and the advent of a globalized economy prompted changes in the New Zealand economy. (3) These changes involved deregulating business, and providing a legislative framework that afforded managers more autonomy and control over the way work was managed. (4)

The 1984 Labor government introduced significant changes to employment relations at this time. From 1894, private sector legislation provided compulsory arbitration for interest as well as rights disputes if negotiation and conciliation failed to reach a settlement. The availability of compulsory arbitration was withdrawn in 1984 and in 1987 the Labor Relations Act was introduced, which encouraged collective bargaining and explicitly made strikes and lockouts legal under certain conditions--a radical change from nearly a century of compulsory arbitration. The public sector, during the whole of this time, had operated under a totally different legislative system based primarily on periodic wage adjustments to keep approximate relativity between the sectors. Kelly (5) characterized the nature of public service employment as "... the concept of a lifelong career and the ideal of professional devotion to the public interest, though somewhat eroded in practice, were still animating principles. Wage fixing mainly took the form of annual adjustments ..."

The State Sector Act of 1988 radically changed all that and legislated that the Labor Relations Act of 1987 would also apply to the public service, thereby ensuring that for the first time both sectors operated under the same legislative framework. (6)

In addition to the changed legislative framework, a different style of management, commonly referred to as "New Public Management" (NPM), was introduced in the public sector, paving the way for a new model of HRM. (7) NPM was heavily influenced by managerialist principles and promoted competition, encouraged "efficiency and effectiveness," and was seen as the best possible solution to removing perceived inefficiencies in the public sector. (8)

The drive to make the public sector more accountable and efficient resulted in moves to significantly decrease the size of the workforce in this sector. In contrast to other countries, the public sector workforce in New Zealand is now very small, (9) with only 18 percent of the total workforce being employed by the state. Indeed, the effects of NPM on employment in this sector were clearly evident when one considers that during the 1990s when employment in this country grew by 16-17 percent, public sector employment decreased by nearly 20 percent. The Labor government in New Zealand, in an attempt to silence some of the critics of NPM (namely unions), and to protect its role model status, thus ensuring some of the core values associated with traditional public sector personnel management (namely, social equity and equality) were retained, decided some form of intervention in HRM was necessary.

State Intervention in HRM

There are three dominant means by which the state can intervene in order to encourage best practice HRM. First, it can impose general regulations or statutes, (10) such as those for equal pay, anti-discrimination and minimum entitlements for wages and holidays. Second, the state can require desirable HRM practice by use of the contract compliance approach. This approach, which is used in a number of countries, (11) sees desirable practices required in the public sector extended to the private sector by requiring the use of these practices to be prerequisite for the procurement of government contracts. (12) Contract compliance is defined as "... the use of public sector purchasing power as a means of achieving various policy objectives, through the medium of clauses inserted into contracts, with which prospective or actual contractors and public bodies must comply." (13)

The United States' use of this concept has been influential and its implementation has been justified on the basis that "... the government is free to fulfill its sovereign duty to further national economic and social objectives through the procurement process as well as via other means at its disposal." (14)

The third approach is the statutory requirement for employers to be "good employers." This approach was the one adopted by the New Zealand government. (15) In contrast to general regulations that penalize or prohibit negative behavior, the good employer approach is a positively framed directive. Informed by the literature on best practice HRM, the New Zealand government introduced [section] 56 of the State Sector Act of 1988--the good employer obligation. It saw this as a means to force employers to balance commercially oriented business objectives with the social objectives of equity and equality. The directive was also seen as a means for the state to maintain its role model status. The assistant commissioner of the State Services Commission (SSC) wrote: (16)

... the nature and expression of the good employer principle in the

State has reflected the convergence of the dual role of Government

in industrial relations matters as legislator and

employer--specifically, Government's desire to be seen, as an

employer, as a good employer and its ability to legislate for this

end. This has served two broad aims:

1. To enable Government to make a clear statement of its intentions

to the wider public and act as an example to the private sector;

and

2. To enforce a specific accountability on its component employing

agencies or in areas where it has a significant interest or

involvement.

The Good Employer Directive

The obligation to be a good employer is first mentioned in the title of the State Sector Act 1988 where it stipulates that the purpose is, "To ensure that every employer in the State Services is a good employer."

It is further defined in [section] 56, subsections 1 and 2, which read as follows:

General Principles

1. The chief executive of a Department shall operate a personnel policy that complies with the principle of being a good employer.

2. For the purposes of this section, a "good employer" is an employer who operates a personnel policy containing provisions generally accepted as necessary for the fair and proper treatment of employees in all aspects of their employment, including provisions requiring:

* Good and safe working conditions,

* An equal employment opportunities program,

* The impartial selection of suitably qualified persons for appointment and recognition of:

a. The aims and aspirations of the Maori people,

b. The employment requirements of the Maori people,

c. The need for greater involvement of the Moari people in the public service,

d. Opportunities for the enhancement of the abilities of individual employees,

f. Recognition of the employment requirements of women, and

g. Recognition of the employment requirements of persons with disabilities.

Arguably the requirements of this directive could be seen to be already established in common law principles surrounding appropriate employment practice. However, an analysis of the judiciary's mobilization of this mandate finds evidence to suggest this was not the case. For example, Goddard C.J. (chief judge of the Employment Court in New Zealand) in Armstrong v. Attorney-General [1995] at 69 described the purpose of [section] 56 as being one that brings "... the State sector under the same rules that govern employment in the private sector, but subject to safeguards necessary to preserve the character and traditions of the civil service.... While all employers are required to be 'good' only those subject to [section] 56 are expressly required to implement policies to achieve this."