The State Owned Enterprise and the Electricity Group

The strength of an organisation depends on its capacity to adapt to a changing environment. The PSA was to find this out in the years following the election of the Labour Government in 1984, which established some government trading departments as State Owned Enterprises with the characteristics of private sector companies

This story is about how Electricorp (the SOE replacing the NZ Electricity Department) managed the change to SOE status and how the PSA dealt with it. It is contributed by Tony Dennehy at the time employment relations manager of the Generation Group of Electricorp and Bill Thomas at the time personnel manager of the Project Group of Electricorp. Dennehy had been an elected official and Thomas a paid official of the PSA. They were led by David Bedford, Electricorp employment relations manager who had had extensive experience in the private sector and a very clear idea of what he wanted

From 1987 Electricorp took the initiative on structural and financial changes. Four business units – Generation, Marketing, Transmission and Projects – were created along strictly commercial lines. Activities without a commercial return (such as employing apprentices) were heavily reduced or eliminated. The Public Service Determinations covering pay and conditions were to be replaced by industrial agreements. Unions are generally very suspicious of employer initiatives, having learnt that they usually involve sacrifices for the workers and in any case the PSA was bristling with opposition to the creation of SOEs. Negotiations were bound to be difficult and tetchy. Though it may not have been obvious to the PSA, Electricorp did not want to alienate the workforce or its employment representatives, just to maximise the commercial operations and financial returns of the organisation.  

The union was jolted out of its comfort zone and suggested working parties to manage the changes, but Electricorp rejected any obstruction of its management prerogative – a position that further irritated the PSA who were used to being involved in management policies and practices. Electricorp did, however, give an undertaking that the restructuring was not aimed at causing redundancies and that the transfer of existing conditions to Industrial Agreements would be on the basis of ‘no-loss, no-gain’ in pay and conditions. The PSA reluctantly joined the party and so began months of drawn out negotiations. The employer side was trying to make progress while the very suspicious union seemed determined to debate every point, searching for duplicity and trying to keep the employer honest.

As negotiations dragged on and progress was made relations between the PSA and Electricorp improved, or at least became less hostile. One moment of high humour was when a union delegate complained that the employer was trying to ‘suck us off’, meaning ‘rip us off’. Everyone kept a straight face, until the next adjournment. The ‘no-loss, no-gain’ principle meant that the PSA could not lodge salary claims until the process was finished and so eventually the agreements were completed and salary and conditions negotiations begun. We saw a lot of each other and the union representatives over those years. No sooner had we got over one hurdle than another appeared and relationships were up and down.

Nothing excites union antagonism more than redundancies and the PSA developed a case that because Electricorp was the new employer then all employees of NZED had been made redundant from the public service. The SOE Act stymied that but nevertheless as the restructuring went on it was found that some jobs had disappeared and some redundancies were inevitable. Because of the commitment that jobs would not be lost this caused serious management problems. In the Project Group, for example, make-work tasks were created for those without real work and a number of them were located in an office on Thorndon Quay which became informally known as ‘the leper colony’ – a detrimental situation which carried on until the restructuring was completed.

The next salary round in which each business unit negotiated separately with the PSA featured redundancy provisions. The redundancy provision was relatively easily – it was the previous Public Service one – except that we asked the PSA to agree as part of the settlement that there would be no redundancy claims based on the removal from the Public Service, which was a bitter pill for the union to swallow, but swallow it they did. If it was not easy for the union to negotiate four separate agreements there were problems for the employer as well. Having got separation on the basis of providing different conditions for different units we could not be seen to be offering the same salary increase for all, but somehow we got reasonable settlements.

It had taken about four years to get to that point. Seldom do employment relations people get an opportunity to be involved in such significant processes of change and it was a demanding experience for those of us on the employer side. The key to our success was that we had a united team working towards clear targets. As former union activists, Dennehy and Thomas knew that the PSA had a hard row to hoe and they believe they brought insights into the process which helped maintain harmonious relationships and avoid drastic industrial action. The PSA was endlessly responding to initiatives they did not approve of or like, but they never lost their own solidarity and never stopped challenging the employer. They proved their worth to their membership in the resilience and persistence they showed in the face of major challenges.

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