Cultural approaches to comparing HR between contexts tend to assume that countries do not readily change their defining cultural identities, and this will exert long-term effects on work and employment relations. While institutional approaches also assume some degree of embeddedness – that is that certain generally accepted ways of doing things are likely to persist – the recent literature on institutions has highlighted the manner in which institutional frameworks and associated rules can and do change. Such changes may be incremental, or they may involve significant ruptures at key historical moments from past forms of regulation and associated rules of conduct. In practical terms, this means that continuity cannot be always assumed in comparing work and employment relations within and between contexts.
At the same time, major ruptures are relatively rare, and often carry over elements of the past order; changes in national systems are more commonly so incremental as to be invisible to all but a close observer. In the 1980s, Mercedes-Benz’s plant in East London, South Africa, was characterised by high levels of conflict. According to then HR Manager, Ian Russel, ‘The union did not recognize management’s right to manage. We had no structures to institutionalize conflict, no procedures, no recognition agreement’ (quoted in Desai, 2008). Reflecting on events, then head of Mercedes-Benz South Africa (MBSA) Christoph Kopke acknowledged that ‘Supervisors used to clock in and then lock themselves in their offices for the whole day. They didn’t dare go out on the assembly lines.’ By the late 1990s, the situation had completely transformed. Reflecting this, in 2009, the plant was awarded the JD Power IQS gold quality award for the plant with the fewest defects and malfunctions of its product of any car plant in the world serving the US market, a feat that was repeated in 2010. ‘To receive such an award despite the relentless pressure and stresses of the global recession over the past two years, points to the brilliant quality of our people and processes,’ said company representative Hansgeorg Niefer. In 2011 a worker at the plant of 30 years standing, Francois Waters, received Daimler’s Laureate of Quality Excellence 2011. Waters said: I felt honoured to receive this award, and humbled to be rewarded for coming to work every day and just trying to achieve the best that I possibly can. It really is a combined effort as teamwork is critical to quality standards and we depend heavily on each other’s strengths. It is important that everyone has the same mindset regarding quality, and that our targets are clear to everyone who has any input into the production process. Our processes are benchmarked, and it is vital that each employee ensures that they work strictly according to set standards, day in, day out. What can account for the changes that took place in the Mercedes-Benz plant in South Africa? And is this anything to do with institutions? Can we compare institutions and associated HR practices not only between countries, but also within the same country at different points in time?
So, although in looking at institutional approaches to comparing HRM, we tend to look at comparing different countries. However, it is also possible to look at how institutional changes have affected HR practices within a particular country. South Africa underwent dramatic changes in both governmental structures and in terms of informal accepted rules of conduct as part and parcel of the end of apartheid in the early 1990s. Under apartheid, work and employment relations followed what is often called racial fordism, which may be defined as classic methods of mass production combined with institutionalised racism. Buoyed up by substantial gold revenues from the 1950s until the 1970s, the apartheid government had the financial resources to engage in both an active industrial policy and massive social engineering. Under apartheid, the South African domestic market was heavily protected. Moreover, the government provided a mass of subsidies to support sectors of manufacturing. Finally, large-scale infrastructural projects, including the electrification of the railway system and the expansion of port facilities greatly helped industry. Apartheid was, in many respects, a contradictory system, which incorporated elements both to advance poor whites and to help big business, above all that which was Afrikaans-owned. However, the greatest contradictions concerned the usage of black labour. On the one hand, the apartheid regime had the long-term ambition of banishing the black majority to the rural periphery.
On the other hand, large areas of industry and the mines were heavily dependent on cheap black labour. In practice, what happened was that the government sought to control the influx of black workers into the cities, linking temporary urban residential rights with employment. Moreover, job protection meant that many skilled trades were reserved for whites. In terms of labour legislation, blacks were denied access to the statutory industry-wide collective bargaining structures set up in the 1920s. Finally, the best universities and technical training institutions were reserved for whites. In practice, this led to the large-scale employment of black labour within inherently inefficient industries; institutionalised racism and low pay ensured that productivity generally low, and quality often poor. Official propaganda notwithstanding, the African majority actively resisted the imposition and operation of apartheid through successive waves of resistance. There were many attempts to organise black workers in trade unions prior to the 1970s, but these failed to make much headway owing to a reliance on a few key activists and counterwaves of state repression. In the early 1970s, the situation changed dramatically. There were two reasons for this. First, the collapse of Portuguese rule in the southern African states of Mozambique and Angola led to the apartheid government seeking to wean itself off its reliance on ultra-cheap migrant labour from neighbouring states. High gold prices allowed for modest – but still significant – wage increases to entice greater numbers of black South Africans to work on the mines. This led to waves of spontaneous strikes in the urban centres of both Durban and East London, as workers sought similar wage increases for manufacturing jobs.
Quite simply, after a long period of ‘little hope’, some change in material conditions finally seemed possible. Second, groups of liberal student activists established a number of worker services organisations, which soon developed into trade unions. Unlike earlier attempts at organising black workers, they adopted strong structures of shopfloor democracy, based on the British shop steward model. The South African motor industry is concentrated in the Eastern Cape region. This was on account of the region’s roughly equidistant location to the major urban centres of Cape Town, Durban and Johannesburg. In practice, a number of motor manufacturers set up plants to assemble knock-down kits in the Eastern Cape’s port cities of Port Elizabeth and East London. As the apartheid regime gradually raised protective tariffs, most moved over to an ever-expanding of manufacturing activities. Mercedes-Benz even set up an engine manufacturing facility, at the time, the only Mercedes engine plant outside of Germany. Rather more sinisterly, its truck manufacturing facility supplied lorries and truck chassis that were used by the apartheid military. High local content helped circumnavigate sanctions. Within the rural periphery, the apartheid government set about transforming the tribal reservations into ‘independent’ countries, with the ultimate aim of taking away South African citizenship from black South Africans. Adjoining East London, this involved the setting up of an ‘independent’ state apparatus, which transformed a particularly impoverished reserve into what ultimately became the ‘country’ of Ciskei, ruled with an iron fist by kleptocratic members of the Sebe family. Conveniently, for manufacturing firms in East London, a new township was established in the south-eastern tip of Ciskei within, albeit long, commuting distance of that city. Pass laws meant that workers would have to endure long hours on public transport to return to the ‘homeland’ every evening. And, unencumbered by the remaining judicial checks and balances and civil society organisations in South Africa, the Ciskei authorities were free to brutally ‘discipline’ workers seen as troublemakers; the latter included union activists. On the one hand, the Mercedes-Benz plant in East London was relatively unusual on account of the relatively higher wages offered and the relative quality of its products (most other locally made cars could charitably be described as unreliable rust buckets up until the mid-1980s!).
On the other hand, the relatively progressive reputation of management and the large workforce made it an attractive target for union activists. Soon the plant established a reputation for strike proneness, with unions using the wage increases forced at Mercedes as a bargaining chip against employers elsewhere in the region. The brutality, greed and general antics of the Sebe family, and, more generally speaking, Ciskeian ‘independence’, further radicalised the East London workforce at large. Reforms tabled in 1979 by the apartheid government derecialised centralised bargaining. This was with the intention of co-opting increasingly effective unions, and drawing union leadership away from rank and file. On the one hand, this attempt generally failed: unions used centralised bargaining as a source of strength. On the other hand, workers for firms that already had a reputation for good wages naturally were suspicious of wage setting on industry lines. This led to ongoing tensions between union officials and the radicalised Mercedes-Benz workforce. These tensions came to a head with the 1990 Mercedes-Benz strike. What happened was that groups of workers demanded that the firm withdraw from centralised bargaining, and rather bargain at plant level. Groups of workers occupied the plant, in defiance of union officials. After nine weeks, the occupiers were forcibly evicted by the police, with the overt support of management, and to the relief of the union. While spectacular, this occupation represented only one example of ongoing trench warfare between management and workers. This included threats of violence against foremen, the adoption of fake military garb (complete with fake weaponry) by sections of the workforce, and the large-scale theft of company property. Entire areas of the factory were reduced to no-go zones for management. Meanwhile, entire completed engines were going missing from the engine plant, and at least one finished motor car appears to have been mislaid. The South African domestic market for luxury cars was not very large, and sanctions precluded sales to most other African states. Finally, during the 1980s, the South African economy experienced a deep recession. Given all this, the parent company in Germany seriously contemplated abandoning the enterprise in its entirety. However, whether because of altruism, a commitment to the region, and/or perhaps even guilt on having produced trucks employed by the apartheid military, Mercedes decided to stay in East London. In addition to further investment in workforce skills development, the somewhat disparate collection of factory buildings (interposed with public roads) was entirely enclosed into a large single walled complex. Not only did this reduce endemic theft, but it helped create a more uniform identity that was also helped through initiatives to beautify the factory environment and its surrounds. And, as growing numbers of Ciskei-based manufacturing firms collapsed (despite lavish state subsidies), jobs at Mercedes became increasingly desirable, not only owing to the good pay but also through the growing dearth of meaningful alternatives. However, relief arrived for the Mercedes plant from an unexpected quarter. The last hardline apartheid president, the dangerously stupid and narrow-minded P.W.
Botha, suffered a stroke. Tired of his incessant bullying, a cabal of cabinet ministers ousted the temporarily incapacitated president. He was replaced by F.W. De Klerk, who, although having a conservative reputation, lacked Botha’s close ties to the security establishment. Exiled to the political wilderness, Botha largely recovered from his stroke just in time to see his life’s work being undone. On opening parliament in February 1990, De Klerk astounded the world by ending apartheid, and starting negotiations with previously banned black resistance organisations, most notably the African National Congress (ANC). While undeniably an act of great political courage, De Klerk was prompted by the fact that weak minerals prices meant that the apartheid government was running out of money. Cautious neo-liberal reforms were accelerated when, following democratic elections, the ANC came into power in 1994. Essentially, this included the abandonment of a range of subsidies for inefficient industries, privatisations and an end of most protectionist measures. All this led to wholesale job losses in manufacturing. However, the ending of the tensions caused by apartheid and the inefficiencies imposed by largely racial divisions of labour – and the ongoing skilling of the African labour force – meant that successful manufacturing firms could have far leaner staffing. In the end, all this meant that South Africa experienced a growth without jobs. At Mercedes, many of the tensions of the past dissipated with the end of apartheid. The skilled Mercedes workforce valued the prestige and high pay that came with the job in an area of by now very high unemployment. Freed from racial discrimination governing where one could live, many workers could enjoy comfortable middle-class lifestyles.
Furthermore, significant numbers of shop stewards moved into junior management positions. While Mercedes had recognised unions for many years, employee participation and involvement had now broadened to a new level. Employees directly or via their representatives had a say in the organisation of work, the introduction of new technology and a range of quality issues. Communication was much improved, supplemented by mature, centralised collective bargaining at industry level. Productivity rates soared, with a strong mutual commitment by all parties to the future of the enterprise. Over 20 years since the end of apartheid, Mercedes in East London are today a model plant. The quality of production and the productivity of the workforce are among the highest of any car plant in the world. So many Mercedes cars are exported from the East London plant that an entire new car terminal had to be constructed, necessitating a major expansion of East London harbour.
Questions
1 What happened at Mercedes-Benz in East London? What is the relationship between changes in the plant, and broader institutional transformation?
2 What are the limitations of cultural approaches to comparative HRM for understanding what happened at Mercedes-Benz?
3 Did the fact that the plant was owned by a large multinational have any effect on outcomes? If so, what were these?
