Trygve Gulbrandsen is senior researcher at Institute for Social Research in Oslo, Norway, and professor of sociology at Department of Sociology and Human Geography at the University of Oslo.
European family businesses are less unionised than their non-family counterparts. This is not a good strategy for family businesses in a competitive landscape, says Trygve Gulbrandsen, who finds Scandinavia a model for change in the field
In a forest machinery manufacturer on the south coast of Norway, owned by four brothers, none of the workers were unionised. The ownership had made clear to the workforce that they believed dealing with a trade union would take valuable time away from securing business contracts and managing the firm. But no sooner had the leading brother retired and handed over the chief executive role to a non-family manager, a union group was established and the majority of the workforce joined.
This is a familiar story across European family businesses as succession has rolled over, and one that has created an image of family businesses or founder-led firms as sceptical towards unionisation among their workers. This image is unfortunate for the family businesses, as it may weaken its standing in both the political and business communities, which in turn are key to business success.
Being opposed to unionisation is in wide circles – particularly professionalised, corporate circles consisting of many publicly-quoted firms – looked on as a sign of outdated paternalistic capitalist management, or as a follower of raw capitalism, neither of which have much truck in Norwegian society, even among conservative politicians. Such an attitude towards unions can make it difficult for family businesses to find understanding with political authorities for their particular needs, and can reduce credibility among other non-family business people.
But is this image correct? Do founders and owners of family businesses really avoid unions? Last year I set out to find an answer to this question, examining the percentage of employees that were unionised, in a representative sample of Norwegian private businesses. About half of these companies were owned by one person or a family who held a minimum of half the share capital.
The research found that family ownership and management made a negative impact on worker unionisation, as only 25% of staff joined up in these companies; in non-family businesses, 50% of employees were unionised. The difference between non-family businesses and family business led by professional managers was, however, negligent. These differences held good even when comparing firms of the same age, in the same industry, identical size, region, and with the same percentage of female, part-time and skilled workers.
Across Scandinavia in general, and in particular Norway, professionalised co-operation between employers and employees is an important part of the corporate governance system and set of operating values. Based on the 1972 Company Act, employees and their organisations are represented on the board and at the corporate assembly of firms with at least 30 employees. Moreover, through the Work Environment Act of 1973 and formal agreements between the main partners in the labour market, various bodies have been established inside firms where representatives of both management and employees meet in order to discuss and find solutions to specific production problems or challenges. There is also extensive informal contact in many companies between top management and workers' representatives, afforded by unionisation. To a large extent, this industrial relations system presupposes the presence of trade unions that elect various employee representatives and organise discussions in the interests and claims of workers.
In the Norwegian economy, unionisation is widely accepted and unions are looked on as legitimate and useful business partners, by both employee and employer. In an international context, unionisation in Norway is fairly high, holding at 53% in 2000. On a national level, co-operation between the main organisations representing capital and labour has successfully contained industrial conflict, and has also produced economic results beneficial to all parties involved, and to the nation as a whole.
But what of my findings regarding the low acceptance of unionisation among family businesses? Do these findings simply confirm the image of founders and family owners as being out of touch? An employee's right to organise trade union membership is firmly established in the legal framework of the industrial relations systems in Norway. Moreover, a worker who wants to start or become a member of a union usually receives considerable support from national trade organisations. Against this background, why should employees of owner-managed firms somehow be exempted from this?
There are two possible, but divergent answers. The first option is that owner-managers are authoritarian capitalists who actively work to prevent their employees from becoming union members, for example, by attempting to convince or even intimidate them into not becoming members of a union. The second option is that owner-managers are benevolent paternalists, who take care of their employees in ways that promote commitment and are strong enough to mitigate the need for a union. In a previous study, I found that employees in owner-managed firms are more committed to their firm than employees in other enterprises – an indication of the possible validity of the second explanation.
In the present statistical study there was no support to be found for either explanation. Further case studies of family businesses revealed that the picture is more complex. There are several different reasons why unions have problems with gaining a foothold among owner-managed family firms. There are undoubtedly several examples of founders and family owners who are reluctant to see unions operate in their plants. In these cases, the owner-managers prefer to be strongly at the helm of their companies and not 'share' any power with a union. They do not recognise the need for unionisation at their firm. In their opinion, the employees are well-cared-for, and in most cases salaries and working conditions are perceived as competitive with what is prevalent in other firms.
Having probed the causes and effects of this attitude to unionisation among family firms, these owners would do well to reconsider their position. Even if they feel aggrieved about the costs associated with unionisation and time spent in co-operation with union representatives, they should look also to the benefits that such co-operation can produce. Accepting unions and using them actively as partners may be a very useful way of mobilising workers to improve productivity and developing the enterprise for which they work. In the family-owned forest machinery manufacturer we talked about earlier, the new chief executive – along with his support for unionisation among the workers – also started to work out systematic budgets and introduced new management principles. Altogether, the promotion of more formalised co-operation with the workers ended up being a significant driver of a strategy to professionalise the management and that in turn created better efficiency and profitability.
In other cases, however, a lower degree of unionisation is not at all a result of any union-avoidance activities on the part of the founder or the owner. Rather, it is the result of a particular interplay of benefits that take place between the owner-manager and his employees that can only be understood in the context of the distinct local 'ecology' of the owner-managed family businesses. In many communities, small or medium-sized family businesses are the main providers of jobs and employment opportunities to the local population. This situation quite often fosters a symbiotic relationship between the local community and family businesses. The family owners feel responsibility for the community, and the community and its local authorities in turn back 'their' family businesses. One way that owner-managers have shouldered this responsibility is to operate the family business with a larger workforce than strictly necessary, or by retaining the same number of hands during recessions. Abstaining from joining a union may be the workers' way of reciprocating the owner-manager's contribution to local employment and the health of the local community. Or rather, the workers in this context do not feel the same need for a union to protect themselves as workers in other firms, since there is a sort of contract of understanding between the staff and their management.
Are unions, then, unnecessary in businesses owned by these 'democratic capitalists'? Certainly not. Most of the owners of these family businesses prefer to go on as they have with their businesses, in the communities where they have long lived. But they cannot ignore the fact that they, like everyone else, are pressed by increasing global competition, rapid technological development, and in Norway especially, rising operational costs. Since workers and trade unions share a common interest in servicing continuing economic growth with a backdrop of healthy local business governance, trade unions could become significant partners in helping family businesses to survive. Both sides should explore this possibility for alliance across the traditional divide between owners and workers. In individual firms, unions may offer wage and cost restraints, and increased efforts to improve productivity. On a national level, trade unions can act as spokesperson for family businesses, for a better tax system, for better access to research and development centres and sources and for more favourable opportunities to finance new investments.