Thames Water

Thames Water transformed by partnership

Partnership has helped Thames Water achieve challenging business targets and transformed the way the organisation works – from pay negotiations to shift working arrangements to managing fundamental restructuring.

Thames Water Utilities is the largest UK-based water and waste company. It recognises four trade unions – UNISON, GMB, AEEU (now Amicus) and the T&G.

At the end of the 1990s, Thames Water’s business targets came under pressure from various quarters. For example, in 1999 water regulator Ofwat set even tougher terms than anticipated and the Competition Act was extended to cover the water industry (ending monopoly status for commercial supplies). At the same time, the company had set demanding internal targets for improving quality and service. The company could not continue on a ‘business as usual’ basis if it was both to remain competitive and satisfy shareholders.

“The original suggestion to look at partnership came from the trade unions, with which relations had generally been good, if a little traditional. Having decided to examine this further, the first step was to evaluate and understand what a partnership approach would mean. We contacted anyone we thought could help, including academics, other companies, the DTI and the Involvement and Participation Association (IPA). We set up working groups involving people from the company’s human resources department, the unions and line managers to study different aspects and test various scenarios,” says Julia Cherrett, HR Director of Thames Water UK.

“Then we gauged reaction to the prospect of moving to partnership. Among the queries raised were managers’ concerns that it could mean giving up their decision-making responsibilities, while from employees we heard questions such as ‘What’s the catch?’ and ‘Do we really have a choice?’” Julia remembers.

The company and the unions put great efforts into communicating with employees, including 180 joint roadshows over a five-week period. More than 50 people from management and the unions delivered presentations and listened to what staff had to say in response. “We wanted to set out the business challenges facing Thames Water and hear employees’ views on partnership and what it should address. We also explained up-front that the process would involve significant changes to terms and conditions of employment,” says Julia.

The partnership proposals went out to a full ballot of the 5,000 employees of Thames Water Utilities – a first in itself – and gained 70% backing (on a 52% turnout). “On the basis of this mandate, we then agreed key areas on which to focus – based on six partnership principles,” says Julia. The principles are:

• Business success – mutual recognition that the success of the business is paramount, and that everyone has a part to play.

• Openness – one of the most effective levers for change, but a big challenge for managers and employees in a company where knowledge had tended to be seen as power.

• Employment security – the company could not guarantee job security, in fact “we were clear that the existing trend of job losses was likely to continue, as productivity and efficiencies continued to improve” says Julia. But the company made a commitment to retain people by redeploying them to other areas of the business, if possible, and otherwise offer skills to boost employability, together with outplacement support.

• Terms and conditions – “we still had legacy issues from our public sector history, including working practices, pay scales and benefits, which limited our flexibility and added to overall employment costs,” says Julia.

• Quality of life – achieving work-life balance in the context of a culture of long hours and a strong customer-services ethic was not going to be easy.

• Employee development – by organising training and development more efficiently and getting better value from the existing training and development budget.

Approach

The company’s partnership structure has a Partnership Forum at its centre, composed of seven elected union representatives and seven directors. However, much of the work takes place outside formal meetings, by people putting partnership into practice in their day-to-day activities. There is also a forum in each of the company’s four business units.

The partnership approach has meant employees playing a greater role in discussions than previously, when they tended to be led by full-time trade union officials. In the new way of working ideas are developed and many more decisions are taken by open discussion involving managers, unions and staff.

To help managers and other staff adjust to these changes, a programme of two-day training workshops was developed with the GMB national college. This enabled participants to develop and enhance their personal skills and understand the theory and processes of partnership. Over 300 people have so far attended in business unit teams, with plans in place for a further 400 to attend by the end of Summer 2002.

Benefits

“We are already seeing the benefits of partnership coming through,” says Julia.

For example, partnership has helped to transform the annual pay deal. Previously it involved a series of claims, offers and counter-claims. The lack of any common understanding or shared commitment meant that the process took many months and hours of managers', HR and union time.

In 2001 the continuing and detailed dialogue about the state and progress of the business that had been taking place meant the unions could have an informed debate when they formulated their claim. The unions submitted their claim in writing, which required clarity and focus. A joint meeting then heard the company’s response, and a date was fixed for negotiations – which were concluded within two days. “What we discuss at pay negotiations now is not the size of the pay pot, as that is already identified through an open business planning process, but instead how the money should be allocated across our four performance ratings,” says Julia.

This dramatic improvement was achieved because both parties were much closer to a common position before they started negotiations – indeed they were already talking about the following year’s business plan. There were some difficulties, such as management concerns about confidentiality. But in practice this has not proved an obstacle, and trust has remained unbroken. “An important factor is being clear about which information can be disclosed more widely, and which cannot,” says Julia.

Partnership has also helped Thames Water to address shift working – an issue that had been studied for years with little effect. A complex set of 50 local arrangements covered 26 sites and more than 300 employees. Managers needed to improve control over the £1 million overtime bill and run shift patterns more effectively.

For the first time, shift workers themselves took part in discussions, facilitated by union representatives and managers, about changes to shift terms and conditions. Over a three-month period, they developed a framework for shift work that would also enable arrangements to be agreed locally. This framework was communicated to employees through a series of joint presentations – and has helped cut costs by £380,000 a year. “Now managers have better control of both the budget and shift patterns. At the same time, some employees have been able to move to hours they prefer. In some places, for example, they chose 12-hour rather than 8-hour shifts, to help with work-life balance,” says Julia.

The change in approach can also be seen in the way the company tackled a reorganisation that involved the merger of two business units and the loss of 220 posts. Rather than managers simply informing the unions of their plans, both parties worked together to agree a process and procedures. They agreed to emphasise redeployment and reskilling, along with a recruitment freeze.

Consultation on the planned new structure enabled the unions to influence the outcome, redesigning business processes and team structures, although the final decision remained with management. In addition, joint efforts helped to find new roles for employees being displaced. “In the end only 80 people were displaced, fewer than we might have expected, and full consultation led to a more transparent, open process that gained wide acceptance,” says Julia. The reorganisation, which took effect on 1 October 2001, is already bringing business benefits.

Looking to the future

Partnership is becoming established as part of the culture of Thames Water, not least because it has brought benefits in terms of the company’s ability to be considered for contracts outside its core utility business, a key area for future growth.

“At the level of senior management and company-wide union officials, everyone is totally behind the partnership arrangements and have embraced the new culture. Now we face the challenge of driving this partnership culture down through the organisation, to middle managers and the equivalent union officials,” says Julia.

“Partnership is very much ‘work-in-progress’,” says Greg Thomson a UNISON full-time officer and lead negotiator. “We still have further progress to make if we are to enjoy full partnership working. However, we have created a more balanced agenda within the company and the focus on training, work-life balance and security of employment is bringing benefits both to employees and to the company. From the unions’ point of view, partnership is a welcome recognition of the positive role we have to play.”

At the end of April 2002 the latest staff survey was being sent out within the largest business unit. “The results of that survey will tell us whether staff feel we are getting it right,” says Julia.

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Last revised: 25 February, 2003