Enterprise Performance and ‘Decent Work’: the case of Occupational Safety and Health - Ian Vickers, CEEDR


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  • Builds on our previous work on OSH – other work on: SMEs in a low carbon economy, for BERR/BIS Cleaner ProductionBetter Regulation and EnterpriseGrowth strategies of environmentally-motivated social enterprises’ SMEs (micro/small firms in particular) a growing focus of OSHresearch and policy attention reflecting concern as to how they can be encouraged to adopt good OSH management practices and be compliant with regulatory requirements (e.g. Walters, 2002). The theory of Total Loss Control has long asserted to managers the significance of control of loss through accidents and ill-health as a route to reduced costs and improved enterprise profitability, often as an alternative to growth (Kjellen, 2000). Central argument - a major aim of regulation is to internalise externalities + to repair ‘market failure.’ Such repair can only be accomplished when the costs are smaller than the welfare gains. Business regulations expected to grow in the near future as a consequence of the emergence of a “(world) risk society.” Risks related to terrorism, climate change, and financial crises, for example. Increasingly, the decisions and actions of some bring about risks for many under globalization. Controlling these risks implies managing the world through high-quality regulation.
  • Concept of Decent Work (ILO in 1999) defined as opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity (ILO, 2002). FOCUS : OSH + HRM practices, wages, working time,training. Croucher, R., Stumbitz, B., Quinlan, M., Vickers, I. (2013) Can better working conditions improve the performance of SMEs? An international literature review, International Labour Office, Geneva: http://labordoc.ilo.org/record/459303Focus on enterprises/workers in more vulnerable positions/informal economy + gender-related influences and issues affecting women.Lit on OSH in smaller firms = rich/highly developed but mostly from high income developed countries, with far less from lower income and developing contexts and little on gender issues. Small firm OSH studies which attempt to establish robust links to positive business outcomes are extremely limited. To address gaps: academic peer-reviewed sources + reports by reputable national and international agencies . SMEs defined in various ways. EU definitions describe Medium as 250 employees and less, small as 50 or less and micro as 10 or less. These latter definitions are close to those used in much of the literature, although the EU’s financial turnover criterion is inappropriate in most developing world contexts.
  • ....where state budgets for regulation/enforcement are contracting in high income countries, and where regulatory capacities are already very limited as in many low income/developing countries.Influential on UK policy has been the Hampton review which highlighted the danger of ‘over-compliance by nervous businesses’ as a result of ‘regulatory creep’ causing unnecessary admin costs (Hampton 2004, p.6, para. 1.8).
  • The Myth of the Month series ran from April 2007 to December 2010. Throughout this period, HSE attempted to dispel some of the most widely believed health and safety myths…ButDept of Work and Pensions has recently asserted that the "burden of excessive health and safety rules and regulations on business has become too great" and that a "damaging compensation culture is stifling innovation and growth" https://www.gov.uk/government/policies/improving-the-health-and-safety-system (accessed 16-9-13).
  • BUTOfficial statistics known to be substantial underestimates - subject to under-reporting…Strong evidence of negative impact on productivity particularly at national/macroeconomic level + some at firm level (e.g. Dorman, 2000; Kessler and Stang, 2006; Mayer, 2001; Ridge et al., 2008; Shalin, 2009). High costs not necessarily incentivising improved OSH outcomes: global variations in compensation/benefit systems - not all countries place the same value on workers’ health and well-being; even in high income countries the financial costs largely borne by workers and the community rather than employers; cost/benefit calculations cannot be taken for granted even amongst larger employers and are even less likely to occur in SMEs (Dorman, 2000; Frick et al., 2000; Quinlan et al., 2010; Matthews et al., 2012; Cagno et al., 2013). Gender barely considered –women’s OSH issues (e.g. Choi, 2005; ILO, 2013a; Islam et al., 2001; Willness et al., 2007). Choi(2005) found in both developing (SE Asia) and developed (Canada, Singapore) problems related to longer hours of work (double workday), gtr involvement in shift work and caring role for family and friends. Probsmore specific to DCs :insufficient legislation to protect women’s rights and poor access to training and protective equipment. Problems that were more specific to the developed country context included obesity, smoking and women’s issues not being included in health research. Sexual harassment in workplaces, largely experienced by women, is also a prevalent and costly occurrence associated with negative outcomes for physical and mental health, as well as decreased job satisfaction and reduced organisational commitment (for a meta-analysis of the mainly US empirical literature, see Willness et al., 2007).
  • Grtr physical risks faced in SMEs than in larger enterprises – 82% of all occupational injuries, rising to about 90% of fatalities (EU-OSHA, 2011)Vulnerability factors commonly identified related to nature of SF org and work cultures + contexts in which they operateinc….+global changes to work organisation over past three decades, inc greater use of outsourcing and temporary (including agency) and self-employed workers. Evidence shows these changes have led to deteriorating OSH outcomes (e.g. Benach et al., 2007; Quinlan and Bohle, 2008). A disproportionate share of precarious workers, women, ethnic minority/migrant workers and both older and younger workers are to be found in SMEs (Legg et al., 2009; Lamm et al., 2013). BUT – danger of oversimplifying, given SF heterogeniety ….? Some evidenceformore positive psychosocial work environment in smaller firms (Sorensen et al., 2007); that occupational stress is more often reported in large organisations (Smith et al., 2000a and b); and that a significantly greater proportion of employees in small businesses express high or very high levels of job satisfaction (Cully et al., 1999; Forth et al., 2006).
  • Few attempts to provide robust econometric evidence by utilising large and reliable datasets. Sheikh et al 2006: Multi-industry approach and existing input-output evidence to assess relationship between OSH activity undertaken by firms of various sizes and sectoral economic performance(see also Kessler and Stang, 2006, who primarily focus on the US corporate sector and draw similar conclusions). Hence, despite evidence of –ve impacts on productivity, it is not clear (even in larger enterprises) that reducing injury/illness will automatically lead to productivity gains; - persuading employers to recognise and acknowledge any OSHBB link can be difficult.= NOT SURPRISING? ..... given data limits +business/context heterogeneity …..?
  • Key issues: need for a good level of co-operation between management and employees in order to ensure the success of OSH interventions and related increases in productivity; potential negative and sometimes contradictory outcomes of efforts to increase productivity through OSH (e.g. Goetzel et al., 2003; James, 2006); how best to evaluate OSH measures in terms of increased productivity and potential economic benefits (e.g. Cagno et al., 2013; Cutler and James, 1996; Lahiri et al., 2005; Oxenburgh, 1991; Oxenburgh and Marlow, 2005). examples include health promotion programs (dealing with fatigue, obesity or lack of exercise) that take no account of work organisation, work hours/timing or financial incentives to work in an unhealthy way (e.g. Buxton et al., 2009; Chatterji and Tilley, 2002; Goetzel, 2004; Johns, 2011).AGAIN – evidence is inconclusive and points to complexity + data limitations…..Givencomplexity – need for multi-disciplinary approach and for OSH policy/practice and productivity gains to be placed within the context of changes in the business environment, drawing on insights from the sociology and organisation of work and productivity (Bohle and Quinlan, 2000).
  • Are smaller firms at a competitive disadvantage due to the costs and time of compliance with regulations? (e.g. Chittenden et al., 2000; Lancaster et al., 2001; Wright et al., 1999) Construction and manufacturing, both higher risk sectors, were most likely to report specific benefits and to have performance measures and targets in place to support such judgements. NOTEnot all studies have found the compliance costs for SMEs to be proportionately greater and behaviour can also be shaped by ignorance of regulation or even a calculation that non-compliance will not be detected and brings competitive advantages (Mayhew and Quinlan, 1997). Haefeli et al. (2005)evidence from medium and large organisations in various UK sectors revealed that only about 25% of organisations had attempted to measure accident costs, none had systematically quantified work-related illness costs, and most were unaware of the cost of OSH failures to their business. Accident costs per se were not perceived as a primary motivator for health and safety. However, a further research phase involved organisations collecting real time records of accident/incident and work-related illness cost data, with 40 individual case studies illustrating the immediate costs incurred by the organisations. Follow-up interviews demonstrated that participation in this phase had been instrumental in changing perceptions and behaviour with regard to incident costing in some organisations. Haslam study funded by UK HSE part of context being its recently initiated ‘Ready Reckoner’ (RR) distributed to around half a million SMEs across the UK (HSE, 2002), developed to help them calculate the costs of OSH failures (as well as similar aids/tools available from other organisations). Also -few cases of occupational illness were reported within SMEs; large organisations were more likely to cite such cases and were concerned with potential resulting public relations issues.Less than a tenth of SME representatives were aware of the HSE’s RR tool, supporting that the availability of such tools and related educational/promotional measures does not guarantee their wider adoption.
  • Increasing attention to forms of private and non-governmental labour regulation (Barrientos and Smith, 2007; Locke et al., 2007; Oka, 2010a and 2010b). Also need for stable regulatory environment and a social context (inc media scrutiny, governance and public expectations) motivating clients to value good OSH. Global supply chains – few studiesCosts of compliance and obtaining certification tend to be borne by suppliers rather than being shared with buyers and better compliance often does not translate to more business and (Oka, 2012; Ruwanpura and Wrigley, 2011; Stigzelius and Mark-Herbert, 2009). Reputation-conscious speciality retailers (i.e. in garment sector) have better compliance performance than mass merchandisers, with former preferring rigorous selection, giving higher margins and favouring long-term relationships (Oka, 2012).Oka (2012) examines supplier firms’ ability to attract and retain buyers through achieving compliance in Cambodia’s garment sector. For buyers, considerations of labour standard compliance were found to be more prominent at the pre-order stage than at the post order stage, i.e. once orders were placed non-compliance rarely affected buyers sourcing decisions. Better labour standard compliance found to be necessary but not sufficient condition for producing for reputation-conscious buyers – with compliance with OSH standards and respecting labour rights increasing the likelihood of a supplier being retained. Buyer’s decisions were particularly driven, however, by criteria such as price, quality, and delivery time, with diverging practices apparent between different types of buyers.
  • Vickers et al. (2003, 2005; also Baldock et al., 2006) utilised evidence from a broad cross-section of small UK firms (< 50 emps) inc‘hard to reach’groups. The multi-method approach included a telephone survey (n=1087) of firms in five broad sectors and 8 ethnic groups (inc a `White British' control group) + interviews with owners/managers, employees, inspectors and business intermediaries. Binary logistic regression analysis of the survey data (Baldock et al., 2006) confirms marked variations in behaviour, underlining the heterogeneity of small firms and their varied exposure to external pressures. Main ‘cultural’ influence on OSH attitudes and behaviour found to be the organisational culture that typifies many small businesses, reflecting less formal approaches to management, the preference of owners/managers for autonomy and the closeness of employer/employee relations. Ethnic background an important second order influence in some cases. Other statistically significant influences were previous management experience, educational/skill levels, and gender on some dimensions. All these influences, however, need to be understood in the context of the resource constraints faced by small businesses and the key role of a number of external influences. Also revealed by the interview evidence were some cases of ongoing poor OSH practice (resulting in injuries/illness in some cases) which employees in particular attributed to a lack of effective regulatory pressure and employee ‘voice’.
  • Avoiders/Outsiders – low profile and often non-compliant on a range of issues, driven by short-term imperatives and with low paid and vulnerable workers;Reactors – the majority of small firms, with the sub-categories of (a) Minimalists and (b) Positive Responders reflecting different levels of responsiveness to OSH failures and external interventions. Proactive Learners – often higher profile compared to other categories, with valued and empowered workers, good practices embedded in organisational routines and good OSH provision associated with productivity and other business benefits.
  • Evidence for a strong link across a range of organisations is lacking, due to the difficulty of quantifying outcomes and that the processes and linkages involved are complex and highly context-dependent. Moreover, there are data limitations around the long-term nature of the issues with some benefits (particularly health) only unfolding over time and not amenable to capture by the existing research. Further complicating the picture (and under-addressed by most studies that have sought to evaluate firm-level outcomes) is the highly heterogeneous nature of SMEs, their differential resources, capabilities, owner-manager perceptions and motivations, and the diversity of the markets and associated regulatory/institutional contexts that condition competitive advantage and enterprise survival. O/Msoften lack awareness of the cost implications of accidents or work-related ill health, and tend to be reactive rather than adopting preventive approaches. Where positive attitudes towards OSH are reported, studies are often limited to relatively small samples, often in specific sub-sectors, and subject to ‘self-selection’ bias – i.e. it is the better OSH performers (or those that are more exposed to regulatory pressures and committed to addressing specific OSH failures) that tend to participate.In circumstances where management commitment and regulatory, employee or other stakeholder pressures are limited or non-existent, the reverse case may continue to be pervasive - minimal investment in OSH perceived as necessary in order not to compromise survival and competitive advantage.
  • Where such characteristics apply - alongside a consistently enforced regulatory framework and effective employee voice - owner/managers are more likely to associate good OSH with positive business outcomes or be more receptive to messages that seek to build on such a link (e.g. from regulators and intermediaries). Businesses that adopt avoidance or minimalist approaches to OSH, on the other hand, are likely to remain undetected and unchallenged in the absence of effective regulation and stakeholder pressures. Are current approaches fit for purpose? recent policy development in some high income developed countries driven by concerns around the alleged burden of excessive regulation, involving more limited enforcement activity and a greater reliance on education and voluntary measures, as particularly evident in the UK. Such ‘light touch’ approaches to regulation have been contested on the grounds that their influence tends to be restricted to higher profile operators and those that are already motivated and receptive towards good OSH practice, with others being unaware of or ignoring the lessons, undermining the possibilities for developing consistent regulation in ways that support quality businesses and more sustainable practices
  • Proactive measures may be more appropriate, taking full account of sector specific differences. Moreover, rather than focusing on costs, adopting a wider approach which highlights the ‘human impact’ of workplace injury and ill health may be effective in some cases (Haefeli et al., 2005; Haslam et al., 2010).Although the informal sector poses a considerable challenge, it is possible to point to positive developments. A report for the World Health Organisation (Benach et al., 2007) documented examples of mobilisations by informal sector workers (notably domestic workers) and broader community alliances to improve OSH (including obtaining workers compensation) in Brazil, as well as identifying a series of policy initiatives to improve OSH in SMEs. Similarly, a global OH&S Forum (Finnish Institute of Occupational Health, 2012) pointed to growing attention to OSH and failures amongst low income countries as well as initiatives from global agencies (like WHO, the ILO, international union federations and NGOs) and supply chain initiatives (mostly via corporate social responsibility or CSR) to address these problems. Lessons for future interventions (ILO, p.42) include the importance of developing institutional co-ordination in support of a unified approach (although this can be difficult to achieve in the sort of contexts involved); the importance of being able to provide strong evidence in the field of working conditions and productivity gains in order to ensure the buy-in of donors, partners and targeted beneficiaries; and that multiplier effects are highly dependent on a ‘training the trainer’ approach, with training often the biggest component of capacity building projects.Regarding gender issues, Choi (2005) argues that improving women’s occupational health would be best attempted via measures that include mobilising partners, monitoring and generally improving women’s occupational health status, given women’s lower socio-economic status in developing countries (e.g. low education, low occupational status and low income - horizontal occupational segregation). Women are also under-represented as policy makers and decision makers in many sectors of society (vertical occupational segregation). Other research indicates limitations with voluntary codes and CSR-related initiatives, including those imposing minimum labour standards as part of contract conditions in global supply chains. Some studies (such as the Thai study by Kongtip et al., 2008; the Cambodia study by Oka, 2012) identify a positive effect on OSH from export/supply chain or customer pressures. However, a series of studies have found that such initiatives offer a fragmented (i.e. limited coverage) and often inadequately monitored/enforced remedy that fails to empower workers by affording them a role in monitoring or enforcement (De Haan and Van Dijk, 2006; Sobczak, 2003; Lum, 2003; Pattberg, 2006; Barrientos and Smith, 2007; McDonald, 2007; Newell and Frynas, 2007).Compliance with voluntary codes (even those devised by NGOs) can also be undermined by ‘official’ suppliers subcontracting the work to an informal supplier, or avoiding critical scrutiny with the active connivance of local government officials (Jenkins, 2001; Locke et al. 2007; Utting, 2007; Lum, 2003). Although voluntary codes are of some value, especially in terms of initiating international protocols, the extant evidence calls into question the extent to which such codes offer an alternative to mandated standards due to serious limitations in their coverage and compliance (Sobczak, 2003; Pattberg, 2006). Examples of the arguably superior option of mandatory supply chain regulation can be found at both national and supra-national level (e.g. the REACH initiative in the EU, Walters 2008) but these are rare and have tended to be confined to high income countries (see also Weil, 2009; Rawling and Kaine, 2012). The growing awareness amongst policy makers of the need to address supply chains as part of a strategy to improve OSH, and supporting research as to its efficacy, offers some hope that such measures will gather momentum and gain traction in low income and developing countries (EU-OSHA, 2012; Safe Work Australia, 2011).
  • Enterprise Performance and ‘Decent Work’: the case of Occupational Safety and Health - Ian Vickers, CEEDR

    1. 1. ERC ‘Enterprising Regulation?’ Workshop, 8th November 2013 Enterprise Performance and ‘Decent Work’: The case of Occupational Safety and Health Ian Vickers Centre for Enterprise and Economic Development Research Middlesex University Michael Quinlan Professor at School of Organisation and Management University of New South Wales Richard Croucher Professor of Comparative Employment Relations Middlesex University Business School
    2. 2. Aims and approach • Key questions: 1. Is there a link between enterprise performance and good OSH provision in SMEs ? - as reflected in outcomes such as improved productivity, profitability, staff commitment/ satisfaction and innovation. 2. Under what circumstances is the ‘business case’ for owner-managers to invest in OSH strongest? 3. What are the implications for policy and practice? • Systematic literature review to inform Decent Work Agenda of International Labour Office (Croucher et al. 2013).
    3. 3. Policy context • Regulatory reform agendas - linking business/national competiveness with aim of improving or removing regulations (e.g. BRTF, 2000; Hampton 2005; LBRO 2012; OECD 2003, 2010). • ‘De-centred regulation’ - other economic/civic actors + voluntary approaches (Black 2005; Braithwaite 2006; Hutter 2011). • OSH business benefits (OSH-BB) - attractive as a promotional tool, esp. given shift of public resources from enforcement/investigation to education etc... • Is ‘lighter touch’ regulation better ? ..... or deregulation for narrow short term gains at expense of wider economic/social sustainability…? (James et al. 2013; Tombs and Whyte 2012; Vickers 2008).
    4. 4. Red Tape Discourse – Health and Safety Myths? Source: HSE http://www.hse.gov.uk/myth/index.htm
    5. 5. Costs of OSH Failure: Individual / Social / Economic • Worldwide/annually over 2.3m deaths + 317m accidents, often resulting in extended absences from work (ILO 2013). • In the UK 2011/12: o 1.1m people suffered from work-related illness o 173 killed at work o 27m working days lost to work-related illness and injury o £13.4 billion – estimated cost of workplace injuries/ill health (excluding cancer) to society in 2010/11 (HSE 2013)
    6. 6. Small firms and ‘structures of vulnerability’ • Resource-constrained - less able/willing to invest in OSH measures • Informal approaches to management • Short-term planning and decision-making – esp. in highly cost-competitive conditions • Often bottom of supply chain – disempowered/intense competition • Low profile - little fear of lost business from adverse publicity / regulatory attention • Worker insecurity + lack of formal representative participation + growth of outsourcing/precarious work and informal sector (e.g. Nichols 1997; Quinlan and Bohle 2008; Walters 2001, 2002; Wright 1998; Walters et al 2011)
    7. 7. What is the evidence for OSH-BB link? (1) • Health and Safety Management and Business Economic Performance: An Econometric Study: Sheikh et al (2006) Cambridge Econometrics for the HSE. • Does greater OSH regulation/ stringency lead to: o a fall in output and productivity as firms struggle to meet stricter regulatory requirements? o OR does it stimulate productivity and innovation? (the ‘Porter hypothesis’ - Porter and van der Linde, 1995). • Study is inconclusive – data limitations + complexity of underlying processes and linkages…
    8. 8. What is the evidence for OSH-BB link? (2) • Some strong evidence in other studies, but often small scale/narrowly based: o focused on ergonomics, occ. medicine/health promotion progs o often involving larger/sympathetic businesses in high- income/developed country contexts o complexities and sometimes contradictory outcomes (e.g. Cagno et al. 2013; Goetzel et al. 2003; Oxenburgh and Marlow 2005) • Evidence remains “tenuous and difficult to quantify”, particularly in relation to whether benefits are short-term or long-term (Massey et al. 2006; Lamm et. al. 2007)
    9. 9. OSH compliance costs and perceptions • Lancaster et al. (2003) survey (n=2,015) confirm costs to be disproportionate across different sizes - large UK orgs more likely to report benefits • SMEs less likely to have OSH measures/targets + rely on intuitive perception of costs/benefits (also Haefeli 2005). • Only 10% of SME (56% large orgs) perceived injuries to be a substantial business cost + most uncertain about costs of work-related illness (Haslam et al. 2010). • Benefits of examining costs of failures only recognised by 12% of SMEs (2/3rds of large orgs) + half unreceptive to use of cost information in OSH promotions. • SME OSH investments driven by both cost reduction and ‘human costs’ (Haslam et al. 2010).
    10. 10. Supply chains / sub-contracting • Competitive pressures drive cost-cutting and poor OSH in small sub-contractors (e.g. in construction - Jensen et al., 2010; Yung, 2009). • OSH requirements in tendering processes - some use of: o OSH performance incentives o limiting tiers/layers of subcontracting o establishing a regular/preferred chain of subcontractors (e.g. Jensen et al. 2010; Manu et al. 2012; Underhill and Quinlan 2011) • Global supply chains some (limited) progressive measures, confined to a few reputation-conscious speciality retailers (e.g. garment sector - Oka 2012).
    11. 11. Under what circumstances is OSH-BB link strongest? • Multiple levels of influence: o firms’ resources, capabilities, motivations and cultures o diverse market/institutional contexts (Barrett et al. 2013; Baldock et al. 2006; Vickers et al. 2003). • Particularly associated with a propensity to make OSH improvements are (Baldock et al. 2006): o enforcement activity by reg. officials o use of OSH external assistance o size and growth performance o management training and experience o membership of sector/business associations
    12. 12. Framework for differentiating small firm responses (1) AVOIDERS/ OUTSIDERS (2) REACTORS (a) Minimalists (b) Positive responders (3) PROACTIVE LEARNERS Awareness of regulations Poor to non- existent Poor to non-existent Some, often obtained from external agencies (regulatory or supply chain) Relatively good Attitude and behaviour toward regulation Avoidance and evasion An unnecessary burden; will respond under compulsion but may subsequently relapse Greater acceptance + responsive to intervention, but need clear guidelines Acceptance of OSHBB Policy/practice embedded in routines Employment characteristics Poor conditions – low pay + vulnerable workers Poor-average typically less skilled/qualified workers Average-good Some skilled/qualified Good training/dev + highly qualified/skilled staff
    13. 13. Conclusions • OSH-BB link shaped by competitive conditions in diverse regulatory/institutional contexts. • Need for OSH interventions that are sensitive to the characteristics of enterprises and circumstances faced. • OSH-BB message needs to be developed alongside (rather than substituting for) effective enforcement and sanctions to deter bad practice + support and encouragement for good practice.
    14. 14. Thank you - Questions ? Ian Vickers Michael Quinlan Richard Croucher i.vickers@mdx.ac.uk